The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios, Rabobank, Mexico
September, 7 - 12, 2008

The World

Building the brand: Faced with a changing market and rising commodity costs many companies have focused on cost saving strategies. While Kraft is, of course worried about costs, for their international business, though, it appears that they are concentrating on revenue enhancement strategies. For Kraft this means not being all things to all consumers in all markets. They have defined a strategy around what they call five core categories: “biscuits, chocolate, powdered beverages, coffee and cream cheese”. Within these categories they pushing what they consider ten power brands. These brands “represent almost 40 percent of Kraft's international sales and more than 60 percent of [their] profits”. And if this is not single-minded enough for you, they are going further saying that will focus on those “markets where [they] can win”. Towards that end Kraft has identified ten markets - four they call “growth engines” and the others they consider “scale markets”. So far the company seems to be satisfied with the results. They have made some adjustments and acquisitions, e. g. “Danone’s biscuit and cereal business” last year. We expect that into the future they will be looking towards acquisitions to deepen their core categories while continuing to spend on building their power brands.

Moving digital: Food companies are always looking for higher returns and more efficiency with their media promotional strategies. In the past, media meant essentially print, TV and/radio. In the last couple of years, however, online promotion has come to play a more import role for getting one’s message across; yet mainstream food companies tended to see internet as an alternative that still needed to be tested. It now seems that it has passed the test. Kellogg is saying to the advertising world that their “return on online investment for the Special K breakfast cereal and associated brands has surpassed that of broadcast TV over the past 18 months”. What seems to be behind the success of their online promotion is the ability to interact with consumers. The website which promotes the dietary and health benefits of the Special K brand “offers customized plans for consumers…tips from a trainer and nutritionist and a point-of-purchase link”. There are still questions about online promotion but it seems clear that food companies will now be looking closely at how to incorporate it into their media strategy.

Mexico

Suspending meat exports – the start of a trade war? Saying that it is a voluntarily decision, the Mexican government “suspended shipments of meat and process poultry to the United States”. This came after an annual audit by the U. S. Food Safety and Inspection Service found “systemic problems with sanitation controls and recordkeeping”. What this implies is that the Mexican government stopped shipments before the U. S. stopped them. What is interesting is that shipments to other destinations, including the demanding Japanese market, continue. Now the Mexican government “is preparing to bar pork imports from at least three U. S. production facilities”. Maybe the Mexican government wants to remind the U. S. that they can also find problems with sanitation controls and recordkeeping north of the border.