The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios de Rabobank, México
29 de Octubre - 2 de Noviembre de 2007

The World

Doing it their way in Japan: That is what appears to behind Wal-Mart’s offer to acquire the 49 percent of Seiyu, the Japanese retailer, which they don’t already own. The history of the two companies goes back to 2002. By 2005 they owned a majority of the Japanese retailer. Their experience in the Japanese market, though, hasn’t gone the way they had hoped it would, in spite of having already investing more than one billion U.S. dollars. Some analyst says that part of their problems were due to “cultural resistance because of [their] decision to lay off 25 percent of the headquarters staff”. Others say that the ‘always low prices’ strategy ran into problems because of the perception that low prices mean poor quality products. Arguing that they are not throwing good money after bad, Wal-Mart says that this reaffirms their commitment to Japan. We believe that they really didn’t want to be seen pulling out of another foreign market, especially one so important as Japan when their foreign operations are important to their bottom line: don’t forget that they pulled out of Germany and have put their Korean stores up for sale. By taking full control they feel that this will give them the “flexibility to invest in merchandising, store renovation, distribution and logistics” and make the changes that they want. The question is whether this flexibility will let them adapt the Wal-Mart market to Japan, or risk forcing Japanese consumers to adapt to the Wal-Mart model.

From carbon footprint to food miles: Just a couple of weeks ago we were talking about the carbon footprint concept, which measures the “environmental impact of manufacturing products, from the raw ingredient stage, packaging and to disposal.” Now, as sort of a short cut to estimate the environmental impact of food marketing, there is a tendency to use food miles, i.e. “the distance edibles travel from farm to plate”. Because it is a concept that consumers can readily understand, it “has become a metaphor for looking at the localness of food”. This is all well and good, but the concept of food miles has also been criticized as not giving an accurate reading of the true environmental impact, because, among other things, it doesn’t take into “consideration the mode of transport, methods of production” or packaging. What is important is not so much whether or not this is a realist measure, but that it reflects consumers wanting to understand and express their concerns for the environment. It also means that food companies should consider taking the lead in setting environmental measurement standards.

Mexico

Once again with the energy law: With the veto of the energy law Congress went back to work, rewriting the law, to take into consideration the president’s stated reasons for the veto. Responding to the objections the new energy law included the Secretary of Energy and the Environmental Secretary, defining their participation and responsibilities. The law does not prohibit the use of corn, but limits its use to when there is a surplus. The law contemplates the promotion of other feedstocks besides cane and corn. It also sets the rules for support. It doesn’t, however, impose a legal requirement for the use of biofuels, which is a major shortcoming.