Summary
Food firms are continuing to do business in the old model, and have yet to lock in to the changes that will affect agriculture for the next 20 years. Certainly hedging against price increases is a valid strategy which won't change. However it isn't the only or even the most important strategy that should be considered. The game of food procurement, processing and selling it as value added has changed but the models have not. A new brand strategy, focused on the consumer is needed to ride out the new realities that the new volatility environmental changes have introduced into procurement costs.
Analysis
The trend toward healthier more energy friendly food supplies mean using the brand as an umbrella, not as a coat.
While not a food brand, the current hot brand, Apple, did this by dropping the word "computer" from their company. They are now the hottest brand out there. Let this be a lesson for other companies to avoid at their peril.
By allowing licensing of the brand to more products, produced to a very local taste and segment, will grow the equity of the brand while reducing costs to the manufacturer.
The era of traditional processed food manufacture, made in huge facilities and shipped nationwide, is over.
Locally sourced, locally manufactured and locally shipped with local recycling of waste will be the new paradigm that food companies will need to embrace. Computerized quality control systems and efficient print on site packaging systems will make this not only cost effective, but improve shelf life and reduce manufacturing waste.
Energy, Water and Waste will be the new challenges for food manufacturers to calculate. These costs have increased but their real cost increases are yet to come.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
