Prof. Sigismundo Bialoskorski Neto fearpp.br/cooperativismo sigbial@fearpp.br

1. P(09)3371:2 Cooperatives Marketing Strategies in a New Global Food Marketing Prof. Sigismundo Bialoskorski Neto www.fearp.usp.br/cooperativismo sigbial@fearp.usp.br Full Professor and Vice-director University of de São Paulo - School f Economics and Business at Ribeirão Preto Academic Coordinator Research Program on Cooperatives Organizations University of São Paulo – USP and Brazilian Cooperatives Organization – OCB Cooperatives Socio-economics Observatory

2. Introduction • Long term perspectives and challenges • the cooperative organization should think about the future, • should invest now thinking in the future, and • should prepare the organization to the future market success and survival • Which will be changes in productions? • Which will be changes in production geography? • Which will be changes in consumers and markets?

3. The new changes in the global food commerce • The global weather and population growth changes • and could influence the investments and production On the long term future 1 For the processing food cooperatives, probably the agricultural raw material, inputs, could have others origins and costs. 2 For the producers others regions could be more effective to agricultural activities 3 In function of the different rates of population growth, the main consumers could be in another part of the world, maybe in the today developing countries How these questions should appoint nowadays the best cooperative investment ? How these questions should appoint nowadays the best food processing decisions for the long term future of the cooperatives ?

4. Introduction • Short term perspectives and challenges • In short time the global financial crises affects the markets, organizations and producers • Than, it is important to consider: • What changes, in financial markets, in credit, in agricultural politics, in organizations and • in the food consumers behavior, are definitive or not ? • With which intensity ?

5. The new changes in the global food commerce • The global financial crises, could create: • A new order in world economy ? • A new financial coordination in agribusiness organizations ? • and • A new consumers behavior ? How to prepare the cooperative organizations and the rural producers, coops owners and patrons, for these challengers?

6. Global Financial Crises The Impact on the Agricultural Commodities Prices

7. The financial crises and the economic GDP slowdown, have pushed food prices to lower levels by decreasing demand for agricultural commodities for food, feed, and fuel. Capital becomes scarcer and more expensive, the expansion of agricultural production to address the food crisis has been cut short. Because the two crises are interconnected, a coordinated response is needed … Braun, J 2008 Decreasing demand Food prices in lower levels Slowdown technology investments expansion of agricultural production

8. Grain prices bubble HRW Futures Prices Sept. 1998 through Dec. 2008 1 ? 2 3 Source: Kansas City Board of Trade (In Thompson, R. 2009) The grain prices bubble occurs in function of economic bubble, The question: What level the commodities prices will be established in the future?

9. The new changes in the global food commerce • The global financial crises ? WTO 2009 The past forecasts for the long term food prices nowadays is not reliable

10. The new changes in the global food commerce - Scenarios • Low economic growth is likely to have negative second-round effects for investment and productivity, with direct ramifications for food prices and food security around the globe. • International Food Policy Research Institute • analyses to 2020 to compare a scenario of continued high economic growth and maintained productivity and investments in agriculture (baseline scenario) with two recession scenarios Scenario 1: economic growth is reduced by 2 to 3 percentage points depending on world regions, and agricultural productivity and investments are maintained by wise policy. Scenario 2: economic growth is reduced as in Scenario 1, and agricultural investment and productivity also decline, in line with the reduced economic growth - the unfortunately more likely scenario. International Food Policy Research Institute. Von Braun (2008)

11. The implications of a recession and investment for cereal prices 2020 International Food Policy Research Institute, 2009 Scenario 2, the prices of major cereals will increase significantly. In 2020, maize, wheat, and rice prices will be 27, 15, and 13 percent higher, respectively than under the baseline scenario. Braun, J 2008

12. The Demand and the Consumer Behavior After Global Financial Crises

13. World population, growth and income Source: Population Reference Bureau. 2008 World Population Data Sheet, based on U.N. Population Office and U.S. Census Bureau analyses. (In Thompson, R. 2009) The world population growths with more intensity in low income societies and improves a special consumers behavior to agribusiness

14. Middle Class Evolution Developing Countries Developed countries (ex US) *Middle class households (millions) with incomes of $20,000/year or more; Source: Global Insight, USDA The middle class number evolution is projected to increase 70 percent by 2020 in Developing Countries - This middle class will be the new consumers class Tracy, 2009

15. World food demand could double by 2050 50% increase from world population growth – all in developing countries 50% increase from broad-based economic growth in low income countries The World Bank estimates that the number of people in developing countries living in households with incomes above $16,000 per year will rise from 352 million in 2000 to 2.1 billion by 2030 How many presently low income consumers are lifted out of poverty will be the most important determinant of the future global demand for food Thompson, 2000

16. Consumers Behavior

17. The global financial crises changes the consumer and the organizations • The consumer changes and will have different needs Example of Coffee Outlook 2009: Demand for Coffee Developed country markets 58% of world consumption Shift in types of coffee consumed (“downtrading”) Out-of-home to in-home Higher price to lower price with possible impact on market for specialty coffee Effect on overall volume of consumption expected to be limited ICO 2009

18. The long term tendencies on the consumer and the organizations • The consumer changes the income and will have different needs Foodprocessing 2009

19. The long term tendencies on the consumer and the organizations • The consumer changes and will have different needs Specialty food continues to show strong mainstream movement and it singles out ethnic influences as part of the growth surge in the $35 billion product niche Brazilian Amazon Fruit Açaí Foodprocessing 2009

20. The long term tendencies on the consumer and the organizations • The consumer changes and will have different needs Since the 2004 start of its Good Life Food brand of organic processed items, sales have grown an average of 20 percent a year Foodprocessing 2009

21. The long term tendencies on the consumer and the organizations • The consumer changes and will have different needs The religious oversight of food encompasses food safety, health and wellness, ethnicity and spiritualism with one stamp Foodprocessing 2009

22. The long term tendencies on the consumer and the organizations Environmental and Social Consciousness Increasingly Influential: Concern about the environment and fair treatment of employees of food producers has become a much more significant consideration in product and store selection during the past few years, and this trend will grow stronger. There will be increased focus among fair trade products, eco-friendly products, and sustainable packaging that is recyclable, re-usable, and/or made of biodegradable materials. Foodprocessing 2009 Agribusiness Cooperatives, that make processing food, that know where and how the food is produced, and could certify to consumer the origins of food, have more advantage in new markets. Cooperatives are a special kind of organization, producers owned, that have a social responsibility. Then, a market responsibility too. Because their focus is in the human business not in the profit business only, the consumer could perceived and prefer this difference

23. The Organizational Challengers to the Cooperatives

24. The impacts on the cooperatives organization strategies • Then… • How is it possible to get new consumers with conjoint strategies and special products ? • The new world implies in new tastes and new exigencies to the developed countries cooperatives, that should be discovered on these new markets • In the future, cooperatives that will have just experience in the restrict developed countries market, probably won’t show an intense market growth • But if these strategies are doing in conjoint strategies, among cooperatives, • the success is more probable

25. The impacts on the cooperatives organization strategies • The new investments and the inter-cooperation among cooperatives The new strategies of investments in the new agricultural areas and in new consumers markets could be do with others cooperatives looking for inter-cooperation strategies between cooperatives in develop and developing countries. Advantages for the cooperatives of the developing countries Cooperatives in the developed countries that know the special kind of high income consumer needs, and distributions channels. Advantages for the cooperatives of the developed countries Cooperatives in the developing countries know the best agricultural areas and the low income consumers or the new middle class consumers needs and could adjust the best strategies in the new markets and in the new areas. The best strategies are: the strategic alliance among agricultural cooperatives, and strategic alliance among agricultural and consumers cooperatives

26. The impacts on the cooperatives organization strategies • The transnational strategies for the cooperatives A discussion of barriers to the internationalization of cooperatives is also important, such as spatial/geographic contradictions delocalization in cooperatives finance difficulties, governance, and cultural problems Options are given Strategic Alliances Commercial agreement among cooperatives

27. Cooxupé - Regional Cooperative of Coffee • Located in Guaxupé, MG • 11,000 members • Largest coffee cooperative in Brazil • Largest exporter of green coffee in the world

28. Cooxupé - Regional Cooperative of Coffee Investments in CHINA Shop CafeChocolat Located in Xi'na Partners: Belgian EPC Group and the Chinese Liu Jun The plan is to open a network of franchises to serve the Chineses A transnational strategy to find the new consumer

29. Cooperative Agroindustrial Lar Localized in Medianeira, PR Have activities in others MERCOSUL countries (transnational activities) Structure itself: collection, drying, storage and industrializacion 10 industrial units Aggregation of values Supermarkets Investment in trademark Billing 1,472 billion USD in 2008

30. Cooperative Agroindustrial Lar Cooperative LAR Export Chicken Hamburg to Mac Donald's in US Investments in export In reliable brand Strategy in no expensive value aggregate products to high quality fast food needs

31. Agricultural Cooperative Consortium • 15,000 members • 21 cooperatives • Saving of 10% in supplies • Gain of about US$ 25 million in 2008 • 17% of food production in the country • Acts in the promoted conjoint imports for the cooperatives The importance of conjoint strategies Why do not incentive transnational cooperatives strategies and alliances?

32. Conclusions

33. To the long term period is need to look for : On the supply point of view New geographic strategies to the agribusiness organizations and rural producers On the demand point of view New consumers in developing countries in the middle income class On the future of consumers needs New products with certified origins, social controlled, environmental controlled New tastes, new products and new consumers

34. How is it possible to practice these strategies ? Cooperatives are special organizations, producers owed, controlled, and managed Unique organization with a social and human focus oriented Cooperatives have values, doctrinal foundations, an International Cooperative Alliance and an International Social Movement They have an international identity with another kind of Economy and society development • Cooperatives have the advantage of the non-profit organization with: • Social justice • Income distribution function • Control of the food origins • Control of food quality

35. Cooperatives are social organizations with clear economics objectives that improve a best world dream in a new social economy This is the best competitive advantage of the cooperatives ! The consumer should perceive that cooperatives are different organizations with social responsibility, with values, ethics and compromises with a new economy and a new world. If the consumer perceives this advantage could decide to pay more for the best quality origin of food. The best strategy is to take the cooperative advantage and to build the same marketing image in the world, with the conjoint and inter-cooperation practices in all countries

36. References Cline, W.R. Global warning and agriculture. Center for Global Development. Peterson Institute for International Economics. 2009 Felder, D. The 6 Top trends in Food Processing. Food Processing. 2009. International Food Policy Research Institute, Climate Change. 2007. Jones, H e Bialoskorski Neto S. MERCOSUL’s Agricultural Cooperatives: an essay about internationalization strategies. PROLAN. 2008 Office for National Statistics. London. Consumers Trends. 2009 Osorio, N. Evolution of World Coffee Market . International Coffee Organization. Report to the International Coffee Council. 2009 The Organization for Economic Co-operation and Development – OECD. Annual Report. 2008. Thompson, R.L. Long-term Global Agriculture Supply & Demand Prospects. Farm Foundation Round Table. 2000. Tracy, A. Perspectives on a Wild Ride. US Wheat Association. Farm Foundation Round Table. 2009 United Nations Developing Program. Climate Changes. 2008 United States Department of Agriculture – USDA. Agricultural Outlook Forum. Global & Rural America in Transition. 2009 Von Braun, J. Food and Financial Crises. International Food Policy Research Institute. December 2008. World Trade Organization – WTO World Trade 2008 Prospective for 2009. Press Release March 2009.

37. Cooperatives Marketing Strategies in a New Global Food Marketing Prof. Sigismundo Bialoskorski Neto www.fearp.usp.br/cooperativismo sigbial@fearp.usp.br Full Professor and Vice-director University of de São Paulo - School f Economics and Business at Ribeirão Preto Academic Coordinator Research Program on Cooperatives Organizations University of São Paulo – USP and Brazilian Cooperatives Organization – OCB Cooperatives Socio-economics Observatory