FOOD CONSUMPTION, MANUFACTURING, AND MARKETING

1. FOOD CONSUMPTION, MANUFACTURING, AND MARKETING • Food consumption patterns • Demographics and trends • International comparisons • Issues in food markets • Food marketing choices

2. Increasing consumption—so far… Pork Chicken Turkey Fish Cheese Fresh fruit Frozen vegetables Flour and cereal products Soft drinks Declining—so far… Beef Eggs Whole milk Sugar Coffee No evident trend Ice cream Butter, margarine Fruit juices Lamb Fresh potatoes Food Consumption Patterns

3. Adkins Diet Increases: Beef Butter Cream Nuts Declining Sweetener Frozen potato product Fresh fruit, vegetables Low fat diets Increases Chicken Fish Low fat dairy Fruit Vegetables Decreases Beef, lamb Eggs Sweetened products Possible Effects of

4. Definition • Demographics: the description of a population in terms its size, distribution, and structure

5. Population size: number of individuals distribution across a geographic region rural, urban, or suburban Structure age economic stratification occupational distribution status/social class Issues in Demographics

6. Demographics helps • Understand current markets--demand for products explained in terms of personal characteristics • Predict future markets

7. U.S. demographic trends • Population increasing (due to immigration) • Increasing average age • More small households • Delay in marriage and children • Fewer children per couple • High rates of divorce • Increasing levels of education • Increasing ethnic diversity • High rates of female workforce participation; dependence on dual incomes

8. Japanese Demographic and Social Trends • Zero or negative population growth • Low levels of immigration • Graying population • More one child families • Significant delays in marriage and children • High incomes in nominal terms but lower purchasing power • Prolonged economic stagnation • Intense competition for jobs and colleges • Relatively even income distribution • Low regard for many foreign products, but also some desire for “mystique.” • Increasing rates of workforce participation among younger women

9. Chinese Population Trends • Wide variations across geographic regions • Population growth slowing in most regions due to “one child policy”  children become “little emperors” • Highly cyclical economy with generally high growth rates; increasing group of affluent consumers • Migration toward cities • China’s entry into WTO may open the way for agricultural imports

10. German Demographic and Social Trends • Shrinking population • High tax rates put pressure on income • Trend toward later marriages and fewer children • Distrust of immigration • Imports from other EU countries preferred • High female workforce participation; dual income essential • High levels of welfare and government programs

11. Demographic and Political Trends in the Middle East • High birth rates • Economies heavily dependent on price of oil; limited economic growth • Large disparities in income in some areas • Limited ability to grow food in desert environments • Food imports dependent on political considerations • Female workforce participation varies

12. U.S. Food Consumption and Demand • Typical family spends 9-11% of income on food • Decreasing percentage spent with increasing income, but more absolute dollars spent (income elasticity <1) • Immigration has influenced both food preferences and retail formats

13. Philippines: 56% India: 51% Mexico: 25% (modest incomes, relatively high prices) South Africa: 28% Japan: 18% (very expensive food but high incomes) West Germany: 17% Denmark: 15% (25% sales tax!) France: 15% Netherlands: 11% U.K.: 11% Canada: 10% Comparative Food Spending Percentages, 1994 Percentages of total expenditures—includes non-consumer spending such as government and industry. U.S. figure: 7%

14. Supermarkets Neighborhood food stores Convenience stores Drug and discount stores Gas stations Vending machines Food stands, street vendors Restaurants Cafeterias Specialty food stores Door-to-door sales Online and catalog orders Some Common U.S. Food Outlets

15. Some International Characteristics • Japan: Strong emphasis on neighborhood stores, vending machines • Europe: Large food stores are available, some may deliver; government protection of smaller retailers • Developing countries: Food often bought at open markets

16. Some Food Demand Issues • Income elasticity • Price elasticity • Normal vs. “inferior” goods • Cross-price elasticity • “Trading Up” within select categories • Increased interest in convenience foods • Conflict between demand for healthier and “junk” foods • Unplanned purchases and consumption • “Functional” foods

17. Some Functional Foods • Fortified foods • “Health” foods • Cranberry juice • Green tea • Soy based foods • Organic foods

18. Away-From-Home and Prepared Foods • 48% of food expenditures on items eaten away from home (1999) • Large part of restaurant meals is for non-food costs • Labor • Ambiance • Facilities • Increase in take-out foods from restaurants and stores

19. Public Food Programs • Food stamps were created mostly to promote demand for farm products (thus only American products) • Only a limited amount of food stamp value goes toward increased consumption (cash is diverted elsewhere)

20. Some Food Marketing Issues • Branding • Innovation • Brand extensions and improvements to existing product categories • New product categories • Consumer brand loyalty: The ability to resist promotional efforts of competitors—not consistent choice of brand • Multi-brand loyalty

21. Product Differentiation from competitors “Me too” products tend to be unsuccessful Pricing Price positioning of the brand Low Value High (prestige) Consistency of pricing Distribution Options available Intensive vs. selective distribution Promotion Advertising for brand building Some other options: Samples Price promotion Coupons Trade promotion The Four Ps of Marketing