The Agribusiness World Today

Ken Shwedel

Investigador de Agronegocios de Rabobank, México

1 - 5 de Septiembre de 2008

The World

Branding sustainability: Facing the concerns from consumers about sustainability we have see companies develop different strategies to communicate their commitment. Now we are seeing something similar taking place with at the country industry level. As oil palm production has grown it has increasingly been criticized for destroying virgin forests. It has reached a point now that under a proposed EU directive “production of biofuels will be encouraged from those vegetable oils that have been grown without causing damage to the environment.” As a major producer of palm oil, the Malaysian industry foreseeing a possible loss of an interesting market. In response the Malaysian Palm Oil Council (MPOC) has decided to start branding their palm oil. Of course country branding is not new. Often it is used to guarantee quality and food safety. In this case, the idea is that “the brand will give an assurance that the palm oil produced… comes from plantations grown on legally approved agricultural land in Malaysia.” The success will depend on the confidence that the market in the MPOC, and to the extent that they are successful, we expect to see more generic brands incorporating sustainability in their promise to consumers.

Yes we have bananas and a lot more: That is what Chiquita is trying to do. In this case it is not necessarily a decision driven by a desire to move into the value added market, but rather to move from the source of what they consider has “battered Chiquita’s stock price”. They attribute some of their past problems to the volatile and political banana industry. The option that they are perusing is to turn away from the emphasis on bananas and shift to a consumer-products company. This involves extending the brand by moving into segments that take them away from a fresh commodity focused market. Along these lines they have expanded into “portable snacks and drinks”. They have also acquired Fresh Express, the prepackaged salad company, which while a fresh product it is focused on convenience and easily lends itself to branded promotions. Looking to further their new positioning strategy, they are “associating [themselves] with other brands, most notable in the fast-food arena. For example they are a major supplier of Burger King’s Fresh Apple Fries.

Mexico

Rethinking GDP downwards: That is the word that is coming out of Banco de Mexico (BANXICO), the central bank. The slowdown in the economies of Mexico’s trading partners is impacting negatively on the outlook for the Mexican economy and, according to the BANXICO, will extend through the first quarter of next year. Even recognizing the less than favorable outlook for economic growth, the central bank continues to be concerned about the inflationary threat. In fact they seem to be more concerned about the impact of rising inflation: BANXICO has re-estimated the CPI this year upwards to 5.5%, well above the 3% target. The concerns about inflation means that BANXICO will most likely not given in to pressure to lower interest rates, which will, in effect, also work to keep economic growth in check. If you are worried, take heart. The Treasury Department, in what looks like rebuke of the central bank, says that Mexico’s economy will turnaround in the fourth quarter of the year, and the growth in the 2009 budget will assure the economy’s continued expansion next year.