Agribusiness Review - Vol. 10 - 2002

Publication Reviews
ISSN 1442-6951

Research Publication Reviews

• Consumer Trends and Changing Food Retailing Formats
• Prospects for the Australian Native Bushfood Industry
• Identifying Consumer Characteristics Associated with Japanese Preferences Toward Milk Products

Book Reviews

• Leading Change
• Competitive Performance: Australian food producers and processors achieving success through innovation and business strategies

Research Publication Reviews

Consumer Trends and Changing Food Retailing Formats

Jean Kinsey and Ben Senauer,
American Journal of Agricultural Economics, 78 (December 1996): 1187-1191.

Analyzed in this paper are US consumer trends that lead to new ways to deliver food, and the US retailers' responses to these changes. As in Australia, significant demographic and life-style changes are occurring in the US. The population is growing slower and is aging. Ethnic diversity is increasing. More women are in the labour force. Income growth is slowing but disparity in income distribution is widening.
These changes imply that growth in total food sales will be slow. Instead, consumers will increase their demand for meals to eat or, at most, assemble at home, rather than ingredients to cook. A greater variety of ethnic foods will be consumed. Demand for healthy nutritious food will increase, especially from the elderly.

Traditional supermarkets are facing serious new competitive challenges from supercenters at the price-conscious end of the market, and from 'home meal replacement' providers at the convenience-oriented end. Supercenters usually average about 150 000 square feet in size, and devote about 40 per cent of their space to grocery items and the rest to discount general merchandise. Traditional grocery sales are stagnant, but food service sales in grocery stores are experiencing quite steady growth.

Consumers are increasing their demand for convenience, or time savings. 'Convenience' usually means the reduction of preparation before eating. From a shopper's viewpoint, convenience also means the increase in the number of tasks that can be accomplished during a single shopping trip, and the reduction in the time required to shop. To meet shoppers' demand for 'one-stop' shopping, supermarkets have been incorporating new services, such as banks, florists, pharmacies and video rental. To making shopping easier and quicker, supermarkets are changing their interior designs and floor layouts to allow for easier access and to improve the overall ambience. There are also new developments and growing popularity in home shopping in which consumers order by phone, fax, or even via their home computer after looking at a catalogue or visiting a web-site.

Food retailers are using point-of-sale scanner data more effectively. Scanner data are now being used for the automation of reordering and the elimination of excess inventory and excess variety. Ideally, a seamless flow of data back to vendors and food manufacturers and a paperless payment system can save millions of dollars in transaction costs. On the marketing side, scanner data can be used in conjunction with electronic frequent shopper or loyalty programs for sophisticated database marketing, which targets products to consumers, based on their purchase patterns and demographic characteristics.

The food system has shifted 180 degrees from being producer driven to being consumer driven. The power in the system is at the retail end as retailers are first to receive the information about consumers' preference. This information gives them power to compete with other retailers, to negotiate with vendors and to respond to consumers. The food system is in a very dynamic period. The changes are being driven by fundamental shifts in consumer wants and needs, by the availability of information technology, and by a quest for profits over volume. Macroeconomic and social forces that coincide with these changes are lower inflation, slower population growth, wider income distribution, and sharper ethnic and philosophical distinction.

Prospects for the Australian Native Bushfood Industry

Caroline Graham and Denis Hart (1997),
RIRDC Research Paper No 97/22

This report evaluates the prospects of the Australian native bushfoods industry, as a basis for identifying and discussing the industry's research and development needs. The report aims to provide information for current or potential industry participants. Although the report focuses mainly on plant-based foods, it also gives an overview of animal bushfoods, and on complementary industries such as wine and tourism.

Fourteen plant species and their end uses are considered; chosen because of their definable farmgate or wild-harvested values. These plant species are: bush tomato, Illawarra plum, Kadadu plum, lemon aspen, lemon myrtle, muntries/Munthari, native herbs, native mountain pepper, quandong, riberry, Warrigal greens, wattleseed, wild lime, wild rosella, and Davidson plum.

The structure of the report reflects the natural progression of a native food through the production-marketing chain. Separate chapters cover the production sector, processing sector, mainstream food manufacturers, wholesale/retail sectors, complementary industries, food standards, SWOT analysis, and industry research and development.

The report highlights various issues of importance for the industry:

Production issues :

• lack of genetically improved cultivars of most species;
• lack of cost-effective and environmentally sound management practices to support production;
• apparent over-planting of some species that may result in lowered prices unless demand is increased;
• farmgate prices that are unlikely to be acceptable to larger scale market outlets and the food industry;
• lack of product quality and food safety information.

Processing issues :

• the supply of several species currently traded as raw produce, by bushfood processors, appears to exceed likely demand;
• the high cost of some raw produce reflects the high cost of collating the produce from the wild;
• seasonal variability and the consequential need to warehouse supplies incurs significant costs;
• there is a need to better understand growth potential and market-share for both domestic and export markets; and
• there is an urgent need to promote bushfoods and educate people, organizations and businesses about their use.

Issues for mainstream manufacturers :

• Australian bushfoods would be more acceptable if offered to mainstream manufacturers as a puree, ground/dried product, essence or flavor;
• consistency of quality and supply must be guaranteed with specified minimum quantities as determined by individual manufacturers;
• price per kilogram must allow a competitive shelf price – novelty alone is not enough;
• the produce or product supplied must be appropriate and safe for food use; and
• promotion and education are needed if demand is to be increased.

Wholesale/retail issues :

• a variety of packaging and shelf lives are required to cover varied end-uses;
• being an Australian product is not enough to justify high prices in Australia – indeed it may mitigate against such prices;
• Australian bushfood value added product is positioned within the top 4 per cent of retail sales pricing: this is limiting in some markets;
• determining in which market to position a product must be done with care so as to avoid placement in one market damaging placement in another; and
• being a unique and exotic Australian product is not necessarily always helpful in marketing. The perceptions and requirements of a given market must be determined before promotion and marketing starts.

The report noted the following order of priority of R&D:

• safe food, toxicology and food standards;
• industry, promotion and consumer education;
• genetic improvement of cultivated species;
• agronomy (including pest, weed and disease management);
• marketing images;
• food technology; and
• post-harvest handling and packaging.

Identifying Consumer Characteristics Associated with Japanese Preferences Toward Milk Products

Yasuhito Watanabe, Nobuhiro Suzuki and Harry M. Kaiser Hart (1997),
Agribusiness, Vol. 13, No. 4, 357-363

This study investigates how socioeconomic, attitudinal and demographic characteristics influence Japanese consumers' preferences towards milk products. A better understanding of this relationship is important in devising promotional and advertising strategies for milk and dairy products in Japan as well as other Pacific Rim countries.

The study uses data from interviews conducted by the National Milk Promotional Association of Japan with 4 688 consumers of age 13 years or older. The quantification of preference of milk and dairy products is based on four key questions: (1) What are your favorite beverages (can be more than one of thirteen types)? (2) How frequently do you drink milk? (3) How much milk do you drink each day? (4) How frequently do you consume cheese and yogurt? The study applies a quantification procedure called Quantification Theory Type III (QTTIII) which is similar to principal component analysis but is more appropriate for categorical data.

White milk, green tea, and coffee are the most popular beverages among the respondents. The least popular beverages include mineral water, yogurt beverages, and sports beverages and soda drinks. The QTTIII procedure suggests that respondents who like yogurt and acidophilus milk drinks tend to dislike soda and alcoholic drinks.

Interestingly, the procedure also suggests that white milk and soda are substitutes, and that the demand for white milk increases in the hotter months. Younger people, people with larger families, and those with calcium concerns, tend to prefer white milk. People who like white milk also tend to like cheese and yogurt products.

Three indicators of consumer preferences are identified: (1) degree of preference for milk beverages versus soda drinks, (2) degree of preference for white milk, and (3) degree of preference for cheese and yogurt. Using these indicators, respondents are classified into seven segments using cluster analysis. These groups are (1) strongly pro-white milk, milk beverages, and dairy products group (25 per cent of respondents); (2) pro-white milk and milk beverages group (29 per cent of respondents); (3) pro-white milk group (17 per cent of respondents); (4) pro-white milk and soda drinks group (18 per cent of respondents); (5) anti-white milk group (3 per cent of respondents); (6) anti-white milk and dairy products group (4 per cent of respondents); and (7) anti-white milk, yogurt and acidophilus milk drinks, and dairy product groups (5 per cent of respondents).

There are contrasts in the demographic and socioeconomic factors between the two extreme groups, i.e. Group 1 and Group 7. For example, Group 1 has the highest percentage of women of all groups; while Group 7 has the lowest. The proportion of housewives in Group 1 is almost three times larger than that of Group 7. Group 1 has the highest percentage of respondents who indicated that they ate breakfast everyday while Group 7 has the lowest percentage.

Overall, the results suggest that stronger health concerns increase demand for milk and dairy products. Housewives' knowledge and attitude on health and nutrition are especially important as they control food for family members in Japan. The analysis also shows that Japanese men consume less milk products than women: which is opposite of the patterns found in most high-level milk consumption countries, for example US and New Zealand. The habit of skipping breakfast contributes much to the decreases in demand for milk and dairy products since breakfast provides the best opportunity to drink milk compared with other meals during the day.

Book Reviews

Leading Change

John P. Kotter.
Harvard Business School Press, Boston, Massachusetts, United States Of America, 1996, pp 187. ISBN 0-87584-747-1. RRP $US 24.95.

John Kotter is the Konosuke Matsushita Professor of Leadership at the Harvard Business School where he has been a faculty member since 1972. Leading Change is his seventh book and brings together Professor Kotter's extensive experience as an academic and a business consultant.

The author's style is relaxed, and the reader senses a feeling of being engaged in a conversation rather than tackling an academic thesis. This easy to read writing style is complemented by a well structured chapter sequence.

Leading Change is divided into three parts. Part 1: The Change Problem and its Solution is an introduction to the problems commonly associated with the implementation of change within an organization and the author's solution to overcoming these problems. Part 2: The Eight Stage Process then treats each aspect of this solution in more detail. Part 3: The Implications for the Twenty-first Century then discusses the relevance of this process to the future generation of corporate leaders.

In Chapter 1, Kotter identifies eight common errors that leaders make when trying to change organizations:

• they allow too much complacency among fellow managers and employees;
• they fail to create a sufficiently powerful guiding coalition that owns the change process;
• they underestimate the power of vision;
• they under-communicate the vision;
• they permit obstacles to block the new vision;
• they fail to create short-term wins;
• they declare victory too soon; and
• they neglect to anchor changes firmly in the corporate culture.

Chapter 2 revisits the factors that are forcing change on organizations – particularly the globalization of markets and competition – and in doing so reinforces the fact that these forces are with us for the long-term. Kotter then outlines his solution to avoiding the eight most common errors in implementing change, by addressing each of them in turn. Finally, the author stresses the importance of co-ordination of the various activities in the change process and particularly the role of executives in showing leadership as opposed to merely managing the process.

The next eight chapters, which constitute Part 2 of Leading Change , flesh out Kotter's solution to the problem of successfully implementing change. Each of these chapters is relatively brief as the author gets straight to the nub of the problem and clearly articulates his solution. A feature of these chapters is the frequent use of Exhibits to highlight and summarize the important points being discussed. In developing each of the chapters, Kotter takes the reader inside a corporation, not in the sense of using examples from specific firms, but by describing the organizational setting in which the problems arise and his solutions are offered.

In Part 3, Kotter returns to the theme he introduced in Chapter 1 – change is inevitable and it is occurring at an increasing rate. In Chapter 11, the author describes the characteristics of an organization in the twenty-first century and on page 172 compares these characteristics with those of a typical firm operating in the twentieth century. The conclusion he draws is that incremental change within organizations will not ensure their viability into the next millennium.

In the final chapter, the author outlines the role of leadership in the firm adapted to the needs of the twenty-first century. Kotter contends that competitive drive and the capacity for lifelong learning will be the hallmark of the leader of the future.

Leading Change should be required reading for agribusiness managers, who will benefit from the insights Kotter offers on leadership and its role in the management of change.

Competitive Performance: Australian food producers and processors achieving success through innovation and business strategies

Edited by Ray Collins, Deborah Gifford and Liz Hall.
Morescope Publishing, East Hawthorn, Victoria, Australia, 1997, pp 230. ISBN 0 642 27158 5. RRP $29.95.

In 1988, the Federal Government introduced the 'Marketing Skills Program' (MSP) with the objective of increasing the involvement of Australia's food and fiber producers in the development of export markets. The Prime Minister's 'Supermarket to Asia' initiative superseded the MSP in 1996.

Competitive Performance was commissioned by the Department of Primary Industries and Energy to capture the experiences of successful food projects supported under the Marketing Skills Program. The objective was to provide a series of case studies which demonstrated how Australian agribusiness managers faced decisions about becoming internationally competitive. As the Minister for Primary Industries and Energy, John Anderson, and the Chairman of Supermarket to Asia Limited, Malcolm Irving, say in their foreword: 'By learning from others, some of the cost of trial and error inherent in innovation and change can be avoided'.

The thirteen selected case studies illustrate a good coverage of the variety of the industries, ownership structures, and managerial experience that typifies Australian agribusiness firms. One of the major benefits of presenting such a range is to encourage readers to look outside their own industries for ways of improving their competitive position. While the majority of case studies involve firms in the horticultural industry (persimmons, wine, fresh fruit and juice, mushrooms, and table grapes), they are sufficiently different in the issues that each covers to make Competitive Performance relevant to all agribusiness managers.

The case studies have been grouped into three sections by the editors:

• Competitiveness and Productivity
• Quality and Food Safety, and
• Market Access and Development.

This is a quite arbitrary and unnecessary subdivision since there is considerable overlap in the management themes and business strategies covered in the case studies. This is demonstrated by the editors in the tables which they present in the Introduction.

The structure adopted for the presentation of each case study is excellent. Each contains a brief description of the industry background and the issues facing the individual case study firm, the strategy adopted, the outcomes and lessons learnt, and the implications for the future.

Each case study is preceded by an editorial comment and a check-list of the management themes and business strategies addressed in the case. At the conclusion of the case there is a summary of the key lessons arising from the discussion.

In a final section to Competitive Performance , the editors include two additional chapters which cover:

• Case study lessons and business concepts, and
• Case study review questions.

The first of these chapters serves a very good purpose in bringing together the managerial issues raised in the case studies under headings such as:

• critical success factors,
• operational issues,
• managerial skills,
• information and communication needs,
• market entry,
• financial capacity, and
• competitive analysis.

The positioning of the review questions away from the actual case study, is in my view an editorial mistake. From an educational perspective, review questions are of more benefit when they are reflected while the contents of the case study are still fresh in the reader's mind.

Competitive Performance is well worthwhile for the agribusiness manager and student alike. It captures some of the wealth of agribusiness management experience that is available in Australia