lunes, 21 de julio de 2008

The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios, Rabobank, México
21 - 25 de Julio de 2008

The World

Making things easier for hard pressed consumers: We have seen that consumers are changing eating and purchasing habits as food prices rise and economies weaken. This has led Tesco, the leading British retailer, to say that they are losing market to what they call the “Aldi effect”, whereby consumers who want to save on their food bill have “defected to the German discounter.” What Tesco is planning to do is develop a new line of private label products. Right now they have private label products that are positioned in three distinct ranges. “Value at the budget end, Finest, a premium brand and standard products between.” It seems that consumers tend to cherry pick: 80 percent of their customers "regularly buy from the Value range, and 70 percent from the Finest range”. So what to do? Apparently, rather than develop a super or extra value range, they are “concentrating on ways to bring down the cost of [their] standard range significantly without compromising on taste.” While this seems to be directed specifically at the “Aldi effect”, they do run the risk of cannibalizing their Value range, without necessarily driving more traffic to their stores. Their option, in our opinion, is to significantly expand the number of products in their standard range, which would position the retailer as a destination of choice for the hard pressed British consumer.

Buying to add new processes to support the dairy oriented business: With the upheaval in commodity markets we have seen significant M&A activity as companies looked to revise strategies, rationalize product lines and realign markets. But we are also seeing firms undertaking M&A activity for other reasons. Tetra Pak, the Swedish packing company, announced that they acquired “Downer EDI’s process engineering groups Downer MBL Pty and Downer MBL”. This caps a 16 year relationship between Tetra Pak and Downer. While this will enhance their presence in the Oceania region, what they seem to be really looking for is “project management expertise for evaporation, drying, powder handling and whey processing.” Tetra Pak strong growth in sales -- 6.1 percent last year – according to analysts, is the result of their focus on emerging markets. What this acquisition – along with the expected completion of a new packaging material plant in China -- implies is that the dairy segment will continue to be an important part of their business strategy, particularly in the Asian emerging markets.


Rethinking how to drink: It seems that the economic situation has impacted on the sprits market. The most recent data on employment points to a seasonally adjusted increase in unemployment .11% between May and June. If that isn’t enough consumers looking for a drink are finding that they are paying more. According to Nielsen, between April and May the price of whisky and brandy went up 7 percent, while rum increased five percent and tequila one percent. This is causing consumers to cut back on most spirits and look for lower priced alternatives. Interestingly, whisky consumption has not contracted. It is not so much that consumers are switching to lower priced brands, but that whisky has slowly been repositioned as an “in” beverage which has worked to maintain consumption.

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