Download marketing management in food manufacturing

MARKETING MANAGEMENT IN FOOD
MANUFACTURING
 Food processors are quite adept at using all of the 4ps in
developing value added products that will improve their
competitive positions in the marketplace by better
satisfying consumers needs and wants.
 They practice market segmentation, target marketing,
product differentiation, and positioning of their value
added, branded products.
 Positioning refers to the image in the consumers mind
that a firms marketing strategy gives to its products their
value for customers.
Product Strategies
 The goal of marketing management in food processing is to
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transform an undifferentiated, low profit commodity into a
differentiated, branded, high value added, profitable food
product.
This is not magic, but neither is it an easy, inexpensive
task.
The marketing strategies employed by food processors are
numerous.
They are easily observed by reading any publication with
food advertisements or by visiting the grocery store.
In their product strategies, food processors attempt
incorporate all relevant aspects of the product bundle of
attributes into their marketing strategies.
 Branding is probably the most important product
strategy of food processors.
 A brand is a name, term, symbol, or design that
identifies the seller and differentiates the product from
those of competitors.
 Branding permits the food manufacturer to certify the
quality of products, transfer the goodwill of the firm to
new products, and otherwise differentiate the product
from competitors’ offerings.
 A well known and trusted brand can earn the food
processor brand loyalty from customers.
 Three types of innovations have been important for
food manufacturers
 (1) new marketing methods and techniques which
often increase operational efficiency
 (2) new products or services which add more
consumer value to products and
 (3) new business organizations such as the
cooperative food processor, joint ventures between
firms, or new market channels.
Pricing Strategies
 Food processors may employ a number of pricing
strategies.
 For example, one processor may use a gourmet strategy,
with a high quality high price mix, while another may use a
value pricing strategy with a lower price and quality
appeal. An important lesson in marketing is that not
everyone wants the highest quality product and almost
everyone is willing to sacrifice some quality for a lower
price.
 Psychological pricing riders to a situation where a higher
price, along with status advertising, encourages consumes
to purchase products. Food manufactures also may package
a product to a specific price point(e.g.,Tk 499) or use price
discounts (cents –off, 2 for 1 sale) to attract consumers.
Place/ Distribution strategies
 Place or distribution strategies for food processors
include selling though conventional food stores,
selling foods in nonfood stores, selling to the food
service market, selling in vending machines, mail or
catalog selling, home delivery, and even selling foods
door to door by high school or scouting organization.
 While most food manufacturers prefer the sales
volume they get from mass outlets, they may also
include more selective place strategies in their
marketing mix.
 Again, marketing teaches that there is no one best
strategy for reaching consumers, and multiple
strategies are often preferred to a single approach.
 Food processors must also select a sales approach.
Larger processors usually have their own sales offices,
warehouses, and personal sales force. Smaller firms
may sells their products through food brokers
 Processors may choose to market their products in
many alternative ways.
 The three principal markets for food processors are
industrial customers, foodservice firms, and consumer
markets.
 These may involve local, regional, national, or
international sales.
 Many processors operate their own sales offices and
wholesale operations but few are engaged in retailing
directly to consumers.
 The large processors with a relatively full line of
product will often operate its own warehouse and
wholesaling system.
 If on the other hand, the line of products is limited,
the processor will often have the sales work done by a
broker. Industries vary in the directions they have
taken.
 The meat packing industry, for example, has largely
become its own wholesaler.
 It is handling a perishable commodity with wide
fluctuations in volume.
 In order to keep such a product moving effectively,
many packers consider it imperative that they have
control of the distribution channel to the retailer and
operate their own wholesaling establishments.
 Many dry goods manufacturers, on the other hand,
rely own brokers to distribute their products to
wholesalers and retailers
Promotional Strategies
 Food manufacturers have many choices to make here
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in selecting
the goal of the promotion,(to remind, inform or
persuade);
The theme or appeal(price, quality etc.) of the
promotion,
the type of promotion, (advertisement, sales
promotion etc.)
which media (print, broadcast, direct mail, point of
purchase, etc.) will carry the promotions and who the
promotion will be
targeted to (the user, the buyer or the influence).
 The major food processors differentiate their
products through mass media advertising,
coupons, free samples, cents off deals,
promotions trade allowances, and point of
purchase merchandising materials.
 Food processing firms are among the matins
leading advertisers, and food products are the
most heavily advertised consumer products.
 Food products lead in expenditures for
advertising, discount coupons, contests, and
other forms of promotion.
 Food manufacturers advertising expenditures
average about 3 percent of their sales, and in recent
years these advertising costs have amounts to 1.5
percent of consumers food.
 This advertising is important to the competition
between food processors for the consumers favor.
Food their part, consumers receive from this
advertising and promotion some useful and some
not so useful information, numerous persuasive
messages that may influence their behavior, and
perhaps some entertainment.
MANAGEMENT PROBLEMS AND FACE
CHALLENGES OF FOOD PROCESSORS
 Food processors experience problems and face challenges in
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two major areas; processing operations and buying
operations.
Processing operations
Food processing involves significant investments in plant and
equipment.
In order to operate efficiently, these facilities should be used
to full capacity year round, every year. This is difficult to
achieve when there are wide variations in farm product
supplies front year to year and within seasons.
Because of the short harvest season and perishability of many
farm products, food processing plants may operate at above
capacity rates for a few months of the year and at below
capacity rates for the rest of the year.
 For example, livestock slaughter and processing plants
typically operate at close to 90 percent if capacity
utilization year round while fruit and vegetable caning
plants may average 60 percent capacity for the year.
 These variations can significantly influence food
processing costs.
 Expanded storages of the product at harvest for later
processing, and extension of the processing season by
manufacturing no seasonal food items have
contributed to the solution to this problem.
 Processors face a dilemma when deciding on the
number and size of plants to build.
 Replacing a single, large plant with several smaller ones
reduces some assembly and transport costs but may
require sacrificing the operational efficiencies of larger
scale centralized plants.
 A major thrust of food processors in recent years has
been the replacement of human labor with machines
and equipment.
 The continuous increase in labor costs has given added
incentives for mechanizing and automating food
processing operations.
 Investment in new plants,
equipment, product
development, and technologies is important to the
progressiveness and productivity of an industry.
 Food processors spend a relatively small share of their
budget for research and development.
Buying operations
 Food processors are major buyers of farm products.
 The value of farm commodities purchased represents 26
of the food processor sales dollar.
 The procurement decisions must consider how to handle
many of the marketing functions, including storage,
transportation, risk bearing, financing, and market
intelligence.
 Because of variations in output and prices of farm
products, the buying and pricing decisions of
processor affect the division of risk shares between
food procures and processors.
 Food processors have developed elaborate market
information financing, and grower
programs to better manage their function.
assistance
 The buying power of food processors is generally
greater in procurement markets than in their sales
markets.
 Food processors utilize a wide variety of ways to
procure their raw product materials from farmers.
 Most processors do not produce their own raw
product supplies but purchase these from farmers.
 Some purchase directly from producers at the farm,
other marketing agencies, another
associations for suppliers and prices.
bargaining
 Processor contracting for farm product supplies is an
increasing trend for many products. These contracts
may contain a wide range of specifications, including
the time and method of price determination, the
delivery terms, the quality required, and even
production practices
 These processor contracts reallocate risk and
financing between the producers and buyers of
farm products.
 Market orientation requires that processors more
carefully coordinate their procurement activities
with their processing and selling operations.
 The improved scheduling and coordination of
such practices can reduce processors, supply and
price risks, contribute to more successful
marketing strategies and improve profits.