How changes in consumer behaviour and retailing affect competence requirements for food producers an

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How changes in consumer behaviour and retailing
affect competence requirements for food producers
and processors

• Klaus G. Grunert
• MAPP - Centre for Research on Customer Relations
  in the Food Sector
• The Aarhus School of Business Denmark

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Overview

• 1. Trends in consumer food choice and in food
  retailing
• 2. Implications for the attainment of sustainable
  competitive advantage and for competencies to be
  developed by food producers and processors
• 3. Implications for the organisation of the food
  chain

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Dynamic, complex and heterogeneous consumer
demands

• hedonistic attributes
• hedonistic health attributes
• hedonistic health process attributes

• increasing importance of convenience attributes

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Importance of quality dimensions of food
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Consumer food quality perception

• Dominated by experience and, increasingly,
  credence characteristics
• Increasingly multidimensional
• Perceived trade-offs and incompatibilities
  between dimensions
• Cultural differences
• Different consumer segments

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Example of subjective trade-offs
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Example of cultural differences
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Example of segments
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Food retailing What does the private label trend
mean?
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The private label trend

• Changes in channel dominance
• A higher proportion of value creation
• An increased emphasis on positioning in the mind
  of the consumer

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Changing criteria for retailers choice of
suppliers

• More emphasis on own branding function implies
  responsibility for product development, quality
  control, market communication
• Importance of product-specific consumer knowledge

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Implications for the attainment of competitive
advantage
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Implications for the attainment of competitive
advantage

• Dynamic, complex and heterogeneous consumer
  demands create new opportunities for creating
  superior customer value...
• but also increase the likelihood for failure
• Retailers urge to have a larger share of overall
  value creation in the food chain puts producers
  under pressure
• but opens up possibilities for creating superior
  customer value in cooperation with retailers

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Market-related competencies
Competitive position
Relative costs
Perceived value
Production-related competencies
Market- related competencies
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Market orientation as a key success factor

• Market orientation is the organisationwide
  generation of market intelligence, pertaining to
  current and future customer needs, dissemination
  of the intelligence across departments, and
  organisation-wide responsiveness to it

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Market orientation as a key success factor

• Market orientation implies the understanding of
  buyers, both at the retail and the consumer level
  
• Market orientation implies the development of
  market-related competencies
• Market orientation allows the development of more
  value-added products
• Market orientation establishes customer
  relationships
• Market orientation increases increases switching
  costs for customers and imitation lags for
  competitors

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Three market-related key competencies

• Understanding consumers
• Development of new products
• Managing relationships

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Understanding consumers

• Understanding the formation of consumer
  preferences
• Concentration instead of spreading in the
  selection of markets
• A core competence To be developed in-house

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Development of new products

• High failure rates
• Comprehensive research on key success factors in
  new product development provides guidelines for
• Management and organisatio of NPD
• Market orientation of NPD
• Contingent development of physical product and
  communication

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Managing relationships

• Downstream joint value creation with retailers,
  becoming an indispensable partner
• Upstream The higher up in the value chain
  differentiation and adding value occurs, the
  higher the need for traceability, segregation and
  information flow from end users
• Changing governance structures for food chains

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Matching raw material characteristics and end
user demands
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The orange juice example
heterogeneity
Farm
FOJC industry
bottler
retailer
consumer
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Major messages

• Changes in consumer food choice create new
  possibilities for gaining competitive advantage
  by differentiated, value-added products
• Exploiting these possibilities requires
  market-oriented competencies, especially consumer
  understanding and new product development
• These competencies are complex, difficult to
  imitate, and develop slowly

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Major messages

• Changes in food retailing create new
  opportunities for long-term partnerships with
  food retailers
• Exploiting these opportunities requires
  competencies in managing relationships as well as
  competencies in developing differentiated,
  value-added products
• An increased emphasis on differentiated,
  value-added food products will have to change the
  governance structure of the food chain

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