The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios, Rabobank, México
7 - 11 de Julio de 2008

The World

Redefining a coffee franchise: Being a trend setter and to a certain extent, an innovator, obviously, has its advantages. But it also has its disadvantages. Just ask Starbucks. They have, according to some analysts, changed the coffee market in the U.S. and are having an impact in other markets around the world. Yet, where at one time they were essentially alone in the U.S. market, their success has attracted new players into the market for standalone coffee shops. Also, players in other markets, e.g. fast food outlets, have improved and are promoting the quality of their coffee. And if that wasn’t enough, traditional beverage companies have launched coffee-based drinks. With competition increasing Starbucks also is feeling the effects of the slowdown in the general economy and rising costs. All this led to the thinking that Starbucks had lost its way and had seen its best days. Looking to get the company back on track they initiated a number of initiatives, some of which we have already discussed. As they move forward, however, there are questions as to what are the nature of Starbucks into the future, and the essence of the Starbucks brand.

They recently came out with a new coffee brew, Pike Place Roast, which has is milder and has a “smoother finish” than the traditional bolder Starbuck brews. The new brew and the marketing effort surrounding have increased sales, with most of the sales coming from new customers. This may seem all well and good, but it has alienated some loyal and longtime customers, who see Starbucks selling run-of-the-mill coffee. In an attempt to rationalize store locations, Starbucks announced that they will close some 600 outlets in the U.S. This suggests that the growth strategy based on aggressive – some say too aggressive – opening of new outlets has come to an end. At the same time they seem to see their future outside of their home market. They will open some 1,000 outlets outside of the U.S. this year.

M&A unabated: It seems as if Bunge wasn’t content last week with just acquiring CPI. Now they announced an agreement to acquire the marketing division of Tate & Lyle PC. This further diversifies and strengthens Bunge’s position outside of their traditional soy and fertilizer businesses. In the animal nutrition market, Smithfield, coming off the deal with Campofiro in Spain, said that they would “sell a 5% stake to COFCO Limited, China’s government-owned agriculture-trading company.” Of course the money is nice, but we also see this as part of a strategy to expand their presence in the Chinese market. Tyson, for their part the acquired a 51 percent stake in the Indian company, Godrej Foods. This represents a further step in the internationalization of the company. Del Monte Foods sold its underperforming seafood business to Dongwon, giving the Korean company an assured market for their seafood.

Mexico

Costing more to fill up your tank: Taking advantage of the weekend when people aren’t so attuned to the news, the government announced that it would increase the rate of the monthly increment in gasoline prices. As of now prices for regular gasoline will increase by MX$0.06 per liter per month. The increase for the premium will stay at MX$0.04 per liter. Because Mexico needs to import refined gasoline, this will reduce the budget outlay. It won’t, however, bring prices in line with the U.S. or Guatemalan markets. Nor does this mean that the energy is moving to free market pricing.