Brand Leadership and Product Innovation as Firm Strategies in Global Food Markets Mark J. Gehlhar Anita Regmi Spiro Stefanou Barry Zoumas International Food and Agribusiness Management Association 15th Annual World Food and Agribusiness Forum,

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Brand Leadership and Product Innovation as Firm
Strategies in Global Food MarketsMark J.
GehlharAnita RegmiSpiro StefanouBarry
ZoumasInternational Food and Agribusiness
Management Association15th Annual World Food and
Agribusiness Forum, Symposium and Case
StudiesJune 25-28, 2005
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Competition in global food markets

• Competitiveness re-emerging issue of national
  interest in the United States
• U.S. is now a net importer of processed food
• Is innovation taking place and what are the
  motivations?

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New Drivers of Change

• The consumer -Aging, educated, affluent
  consumers in developed markets-Greater
  urbanization in developing countries
• Product design merging of food science and
  health awareness into products
• The retailers growing concentration in developed
  markets with global retailers now reaching
  developing countries

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Shift in balance of power

• Retailers pressuring manufacturers (quality and
  reliability)
• Margins on branded products under greater
  pressure more with private labels (store brands)
  
• Food products more difficult to differentiate
  with imitator manufacturers increasingly
  supplying retailers
• Branded manufacturers undergoing an identity
  crisis?

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New Food Products Introduced Globally
Number of products
Source Productscan
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Dairy products as share of all new food products
is rising
Dairy share of food products
Number of new dairy products (thousands)
SourceProductscan,2005
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New Food Products Introduced Globally by the H.J.
Heinz Company
A period of divestments but focused growth
Number of new products
Source Productscan, 2005
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New Food Products by Snyders of Hanover A
medium sized U.S. private company Americas
Pretzel Bakery
Number of new products
Source Productscan, 2005
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How does the branded manufacturer compete in the
changing environment?

• Marketing
• Quality
• Productivity

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Basic Orientations of Firm
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Types of firms and motivationfor innovation

• Previous study using case series approach Trail
  and Meulenberg 2002, Agribusiness
• Hypotheses-Every successful firm has a single
  dominant orientation either in product, process,
  or market -Successful branded manufacturers are
  predominantly product or market
  oriented-Privately owned companies are more
  likely to be product oriented than public
  companies-Cooperatives are less product
  innovative and expected to be more process
  innovative

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Firm orientations and competitive forces
Market orientation (produce what current market
wants)


Non-branded manufacturer
Branded food manufacturer
Process orientation (adopt efficient production
and distribution technology)
Product orientation (innovate products with
quality focus)
Traditional cooperative
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Our Approach

• Interview leading firms of different ownership
  types and sizes supplying in different product
  markets
• Discover their identity (or who they think they
  are) What makes them different ?
• What are they doing about securing growth and
  leadership?
• Who they are is revealed by their actions

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Leading Companies in Global Dairy Sales, 2003
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Case profiles of large public, medium private,
and international cooperative
H.J. Heinz Snyders of Hanover Fonterra Cooperative Group
Strategic resources (real or perceived) -High quality brand image since 1869-International expertise in condiments and sauces -Fine art of pretzel baking since 1909 -Family tradition and geographic brand -Deep knowledge of milk and dairy components -Brand image of clean environment and green pastures
Product orientation Packaging and innovation for healthier convenient products Niche marketer of high quality snack foods Improving dairy ingredients through technology
Process orientation Streamlining initiatives with sharper focus Flexibility and speed in adopting new ideas and products Foreign partnership and global procurement to reduce risk and improve operational excellence
Market orientation Educate consumer about health benefits of products Listen to new ideas and concepts from traveling abroad Educate consumers about benefits of products and ecological sound practices
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Case profiles of large public, medium private,
and international cooperative Company statements
H.J. Heinz Snyders of Hanover Fonterra Cooperative Group
Comments from management -Quality and innovation are the way forward -Brand growth will benefit greatly from sharper product focus, reduced bureaucracy and simplified business processes -Do not let consumers take you where you dont want to go -We want to be indispensable to our customers-Rather than innovate across the board, we are narrowing our focus to our highest-earnings brands
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Leaders recognize strategic resources and use
innovation to influence market for sustaining
profits and growth
Market orientation Influence
what market wants
Direction for sustaining superior profits


H.J. Heinz Make existing product
under Heinz brand healthier with convenient
packaging
Process orientation adopt processes using
strategic resources more effectively
Product orientation Innovate to differentiate
products using strategic resources
Snyders of Hanover Specialize in baking
tradition using product extensions of pretzels
Fonterra Use RD
extensively and promote wholesome green pasture
image to promote milk products and ingredients
Resource base Leaders recognize strategic
resources
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Summary

• A dominant orientation is not revealed in cases
  here, rather there is a balanced orientation
• A focused growth strategy using improved
  processes to enhance product innovation
• Leaders have clearer identity when recognizing
  their strategic resources
• Leaders try to steer the market with new products
  and consumer education