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Food Marketing

Food Marketing. The performance of all business activities involved in the flow of food products and services from the point of initial production until they are in the hands of the consumers. Two views of marketing. Macro marketing

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Food Marketing

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  1. Food Marketing • The performance of all business activities involved in the flow of food products and services from the point of initial production until they are in the hands of the consumers.

  2. Two views of marketing • Macro marketing • Big picture focus on the agricultural and food marketing system • Micro marketing • Decision maker level choices faced by individuals in food production, processing and consumption

  3. Food marketing challenges • Food distribution to consumers • What to produce • How to process • Where to distribute • Reasonable returns to farmers • Price / profit signals from consumers • Profit margins beyond the farm

  4. Marketing functions • Create utility by transforming a food item along one of the four dimensions • For example, • Production, storage, transportation, grading, processing, packaging etc.

  5. Marketing Functions Facilitating Functions Physical Functions Financing Standardization Storage Processing Exchange Functions Buying and Selling Transportation Market Intelligence Risk Bearing

  6. Reading assignment • Food and Agricultural Policy: Taking Stock for the New Century • Chapter 1. The Evolving Food and Agriculture System • http://www.usda.gov/news/pubs/farmpolicy01/fpindex.htm

  7. Traditional Marketing Channel Consumer • Retailer Wholesaler Processor First Handler Producer Inputs

  8. Food market structure Consumers (US) 287 million Retail 589,000 Grocery 186,000 Restaurants 403,000 Wholesalers 41,000 Processors 21,000 Producers 2.2 million

  9. Emerging Marketing Channel Customers Retailers Wholesaler Processor First Handler Producer Inputs

  10. Food Marketing Channel • Increased complexity • International trade • Increasing concentration • Direct marketing • Vertical integration • Non-market transactions • Grocery and food service • You can cut out the middle man but not the function he performs

  11. First Handler Processor Wholesaler Retailer Consumer Producer Inputs

  12. U.S. Population, Percent by Sector 1900 1950 1990 Farm 39.3 15.5 1.9 Nonfarm Rural 21.0 20.5 22.9 Urban 39.7 64.0 75.2

  13. Ag & food sector, 2001 • Food & Fiber • 17% of employment • 16% of GDP • Farming • 1% of workforce • <1% of GDP • 13 off-farm jobs for each on-farm job

  14. Food expenditures, 2000 • Consumers spent $661 billion • Excluding imports and seafood • 11% of disposable income • Farmer’s share 18% • Off-farm share 81%

  15. Food Marketing Bill, ($Billion)

  16. US Food Marketing Bill, 2000 http://www.ers.usda.gov/publications/FoodReview/septdec00/FRsept00e.pdf

  17. So what??? • Labor is the largest single share of the food bill • Farm value was 2nd in 2000 at half of labor cost • Food cost and food policy involves more than agriculture

  18. Changing Food and Ag System • Shift from raw bulk commodities to food products • Diverse consumer • Globalization • Industrialization • Technologies • Environment

  19. Drivers of change • Consumers • Food and services are normal goods • More income - Less time • Demand more choice and convenience • Food away from home • New products and outlets • 12,000 new products/year • Process verified, branded, labeled • Niche markets

  20. Household income and food spending 1998 1990-98 Dollars %Change Household pretax income 42,584 28 Annual food / person 2,037 17 Food at home 1,211 18 Food away from home 826 15

  21. Food at Home spending 1998 1990-98 Dollars %Chg Meat fish eggs 313 15 Fruits & Veg 219 22 Cereal 187 22 Miscellaneous 174 25 Dairy 133 9 Beverages 102 11 Sugar sweets 51 34 Fats oils 33 18

  22. Drivers of Change • Globalization • Capital markets, information, expectations • Sales by US affiliates of foreign firms $64 B • Sales by foreign affiliates of US firms $133 B • US imports $32 B • Ag trade in 2000 $Billion % of total Exports, 2000 $50.8 7.2 Imports, 2000 $38.9 3.3

  23. Drivers of Change • Technology • Traditionally production tech • Lower costs • Increased profit to early adopters • Lower prices for consumers • New technologies • Cost reducing and value enhancing (biotech, precision ag) • Consumer oriented (food safety, health) • Information

  24. Drivers of change • Diversity of producers • Structure • Enterprise • Cost of production • Method of production

  25. Selected Ag Trends 1970 1980 1990 1997 Farms Mil. 3.0 2.4 2.1 2.0 Farm pop % 5 3 2 2 Avg acres 373 427 461 471 Assets $1000 89.5 403.1 395.4 497.1 Output/input1 150 174 233 255 1/1950=100

  26. Selected Ag Trends 1970 1980 1990 1997 Farm prices1 106 238 264 298 Income $B 58.8 149.3 196.4 238.2 Percent of farm income from Nonfarm 55 64 85 88 Government 11 2 5 3 1/1950=100

  27. Agricultural Producers Rural Intermediate Commercial 1999 Residence Farms Farms Sales LT $100K $100-250K GT $250K Number 1,356,047 655,812 175,091 Produce $B 13.7 42.0 120.2 Avg sales $ 10,074 64,117 687,065 NFI $ 2,310 12,998 115,832 Off-farm $ 70,754 36,343 35,017

  28. Farm Ownership, 1997 Percentage Average Farms Acres Sales Acres Sales1 Sole Prop. 86 63 52 356 62.4 Partnership 9 16 18 881 209.7 Corporations Family 4 13 23 1571 603.0 Nonfamily 0.3 1 6 1507 1395.0 1/Annual average sales $1,000

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