Balancing Supply and Demand

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Balancing Supply and Demand

• Rick Antle
• May 10, 2007

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Supply and Demand Influencers - Historical

• Weather
• Seasonality
• Promotional Activity
• Acres Planted
• Transportation Availability
• Export Demand
• Consumption Growth Trends

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Supply and Demand Influencers Contemporary
Additions

• Contracts
• Food and Diet Fads
• Alternatives
• Consumer Food Safety Concerns

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Historical Perspective
High
Demand
Low
Low
High
Supply
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The Perfect World

• ? Promotion increases demand
• Higher Prices reduces demand
• Supply and Demand in balance

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Product Demand Characteristics
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Consumer Expectations
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Demand Perspective
USDA Shipment Data
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Demand Perspective - Lettuce
1,800,000
1,700,000
1,600,000
1,500,000
Cartons
1,400,000
1,300,000
1,200,000
1,100,000
1,000,000
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35
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Week
Weekly Average Volume
2000-2006 Average Volume
USDA Shipment Data
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Demand Perspective - Celery
1,000,000
900,000
800,000
700,000
600,000
Cartons
500,000
400,000
300,000
200,000
100,000
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Week
Weekly Average Volume
2000-2006 Average Volume
USDA Shipment Data
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Demand Perspective - Strawberries
USDA Shipment Data
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Implications and Strategies
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Implications for Constant Demand Products

• Price reductions do not increase volume to
  maintain total Retail Gross Margin dollars
• Display size and multiple displays lift sales
• Promotions lift sales

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Strategies for Constant Demand Products

• Becoming heavily contracted
• Little promotional activity
• Contracts increase price volatility

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40 Contracted Example
Volume contracted and pricing strategy must
consider the volatility of supply in order to be
profitable.
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Implications for Seasonal Demand Products

• Price influences demand only at extreme highs or
  lows.
• Key to sales is having sufficient volume to
  satisfy demand.

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Strategies for Seasonal Demand Products

• Consumption based demand Growers must be
  cautious of their ability to overproduce.
• Seasonality based demand Growers and Retailers
  must create sufficient demand for the crop.

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Implications for Promotable Demand Products

• Price reductions generally do not increase volume
  sufficiently to maintain total Retail Gross
  Margin dollars
• Increased supply generally occurs with lower
  production costs providing opportunities to
  increase portion size
• Maintaining the retail price with a larger
  portion provides consumer value and retailer
  margin parity

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Strategies for Promotable Demand Products

• Price is constant
• Opportunity is consumer value

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Opportunity is Consumer Value
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What is Tanimura Antle Doing?

• Contracts
• Promotion

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Contracts

• Contract commitments are balanced with total
  sales needs
• Contract pricing must reflect actual costs, not
  the optimum projected costs
• Contract management
• TAs broad line production supports
  one-stop-shopping and contracts generally require
  purchasing support beyond the contracted items

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Fathers Day Promotion

• Historically no holiday has been associated with
  iceberg lettuce
• Strawberries for Mothers Day
• Avocados for Super Bowl
• Cabbage for St. Patricks Day
• Asparagus for Easter
• Celery for Thanksgiving

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Fathers Day Promotion

• TA is starting a Fathers Day promotion with 10
  US and Canadian retailers to promote iceberg
  lettuce, barbeque and baseball

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Fathers Day Promotion Details

• TA is providing aggressive prices and ad
  materials
• Printing wrap film with baseball threads and
  iceberg wedge salad recipe
• Retailers are promoting iceberg in weekly ad
  circulars and with in-store displays
• Contests for best ads and display designs

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Thank You

• Rick Antle