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SOLAR COLA MARKETING POLICY
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FOOD MARKETING CONSUMPTION and MANUFACTURING
Food Marketing. Food products often involve the general marketing approaches and techniques applied the marketing of other kinds of products and services. In food marketing, topics such as test marketing, segmentation, positioning, branding, targeting, consumer research, and market entry strategy, for example, are highly relevant. In addition, food marketing involves other kinds of challenges - such as dealing with a perishable product whose quality and availability varies as a function of current harvest conditions. The value chain - the extent to which sequential parties in the marketing channel add value to the product - is particularly important. Today, processing and new distribution options provide increasing increasing opportunities available to food marketers to provide the consumer with convenience. Markting, services, and processing added do, however, result in significantly higher costs. In the old days, for example, consumers might have baked their own bread from locally grown flour. Today, most households buy pre-manufactured bread, and it is estimated that the farmer receives only some 5% of the price paid by the consumer for the wheat.
Demographics and Food Marketing. The study of demographics involves understanding statistical characteristics of a population. For food marketing purposes, this may help firms (1) understand the current market place (e.g., a firm interested in entering the market for sports drinks in a given country, or worldwide, might investigate the number of people between the ages of fifteen and thirty-five, who would constitute a particularly significant market) or (2) predict future trends. In the United States and Germany, for example, birth rates are relatively low, so it can be predicted that the demand for school lunch boxes will probably decline. Therefore, firms marketing such products might see if they, instead, can shift their resources toward products consumed by a growing population (e.g., bait boxes for a growing population of retired individuals who want to go fishing).
Food marketers must consider several issues affect the structure of a population. For example, in some rapidly growing countries, a large percentage of the population is concentrated among younger generations. In countries such as Korea, China, and Taiwan, this has helped stimulate economic growth, while in certain poorer countries, it puts pressures on society to accommodate an increasing number of people on a fixed amount of land. Other countries such as Japan and Germany, in contrast, experience problems with a “graying” society, where fewer non-retired people are around to support an increasing number of aging seniors. Because Germany actually hovers around negative population growth, the German government has issued large financial incentives, in the forms of subsidies, for women who have children. In the United States, population growth occurs both through births and immigration. Since the number of births is not growing, problems occur for firms that are dependent on population growth (e.g., Gerber, a manufacturer of baby food).
Social class can be used in the positioning of food products. One strategy, upward pull marketing, involves positioning a product for mainstream consumers, but portraying the product as being consumed by upper class consumers. For example, Haagen-Dazs takes care in the selection of clothing, jewelry, and surroundings in its advertisements to portray upscale living, as do the makers of Grey Poupon mustard. Another strategy, however, takes a diametrically opposite approach. In at level positioning, blue collar families are portrayed as such, emphasizing the working class lifestyle. Many members of this demographic group associate strongly with this setting and are proud of their lifestyles, making this sometimes a viable strategy. An advertisement for Almond Joy, for example, features a struggling high school student being quizzed by his teacher remarking, “Sometimes you feel like a nut, sometimes you don’t!” Nowadays, by the way, social class is often satirized in advertising, as evident in the Palanna All-Fruit commercials while the matron faints because the police officer refers to the fruit preserves as “jelly.”
Demographics in the U.S. have significantly affected demand for certain food products. With declining birth rates, there is less demand for baby foods in general, a trend that will continue. Immigration has contributed to a demand for more diverse foods. Long working hours have fueled a demand for prepared foods, a category that has experienced significant growth in supermarkets since the 1980s.
Food Marketing and Consumption Patterns. Certain foods—such as chicken, cheese, and soft drinks—have experienced significant growth in consumption in recent years. For some foods, total market consumption has increased, but this increase may be primarily because of choices of a subgroup. For example, while many Americans have reduced their intake of pork due to concerns about fat, overall per capita consumption of pork has increased in the U.S. This increase probably results in large part from immigration from Asia, where pork is a favored dish. Consumption of certain other products has decreased. Many consumers have replaced whole milk with leaner varieties, and substitutes have become available to reduce sugar consumption. Beef and egg consumption have been declining, but this may be reversing as high protein diets gain increasing favor. Some food categories have seen increasing consumption in large part because of heavy promotional campaigns to stimulate demand.
International Comparisons. Americans generally spend a significantly smaller portion of their income on food than do people in most other countries. Part of this is due to American affluence—in India and the Philippines, families are estimated to spend 51% and 56% of their incomes on food, respectively, in large part because of low average incomes. Food prices also tend to be lower in the U.S. than they are in most industrialized countries, leaving more money for other purposes. Americans, on the average, are estimated to spend 7-11% of their income on food, compared to 18% in Japan where food tends to be very expensive. This is because food prices are relatively low, compared to other products, here.
http://www.ConsumerPsychologist.com
Food outlets. Food, in the United States, is sold in a diversity of outlets. Supermarkets carry a broad assortment of goods and generally offer lower prices. Certain convenience products—e.g., beverages and snacks—are provided in more outlets where consumers may be willing to pay higher prices for convenience. Distinctions between retail formats are increasingly blurred—e.g., supermarkets, convenience stores, and restaurants all sell prepared foods to go. A small number of online retailers now sell food that can be delivered to consumers’ homes. This is usually not a way to reduce costs—with delivery, costs are usually higher than in supermarkets—but rather a way to provide convenience to time-pressed consumers.
Internationally, there are large variations. In developing countries, food is often sold in open markets or in small stores, typically with more locally produced and fewer branded products available. Even in many industrialized countries, supermarkets are less common than they are in the U.S. In Japan, for example, many people show in local neighborhood stores because it is impractical to drive to a large supermarket. In some European countries, many people do not own cars, and thus smaller local shops may be visited frequently.
Food is increasingly being consumed away from the home—in restaurants, cafeterias, or at food stands. Here, a large part of the cost is for preparation and other services such as ambiance. Consumers are often quite willing to pay these costs, however, in return for convenience and enjoyment.
Government Food Programs. Government food programs, in addition to helping low income households, do increase demand for food to some extent. In fact, increasing demand for farm products was a greater motivation than helping poor people for the formation of the U.S. food stamp program. The actual impact on food stamps on actual consumer demand is limited, however, due to the fungibility of money. It is estimated that one dollar in food stamps increases the demand for food by 20 cents, but when food stamps are available to cover some food costs, recipients are likely to divert much of the money they would otherwise have spent to other necessities.
Food Marketing Issues. The food industry faces numerous marketing decisions. Money can be invested in brand building (through advertising and other forms of promotion) to increase either quantities demanded or the price consumers are willing to pay for a product. Coca Cola, for example, spends a great deal of money both on perfecting its formula and on promoting the brand. This allows Coke to charge more for its product than can makers of regional and smaller brands.
Manufacturers may be able to leverage their existing brand names by developing new product lines. For example, Heinz started out as a brand for pickles but branched out into ketchup. Some brand extensions may involve a risk of damage to the original brand if the quality is not good enough. Coca Cola, for example, refused to apply the Coke name to a diet drink back when artificial sweeteners had a significantly less attractive taste. Coke created Tab Cola, but only when aspartame (NutraSweet) was approved for use in soft drinks did Coca Cola come out with a Diet Coke.
Manufacturers that have invested a great deal of money in brands may have developed a certain level of consumer brand loyalty—that is, a tendency for consumers to continue to buy a preferred brand even when an attractive offer is made by competitors. For loyalty to be present, it is not enough to merely observe that the consumer buys the same brand consistently. The consumer, to be brand loyal, must be able to actively resist promotional efforts by competitors. A brand loyal consumer will continue to buy the preferred brand even if a competing product is improved, offers a price promotion or premium, or receives preferred display space. Some consumers how multi-brand loyalty. Here, a consumer switches between a few preferred brands. The consumer may either alternate for variety or may, as a rule of thumb, buy whichever one of the preferred brands are on sale. This consumer, however, would not switch to other brands on sale. Brand loyalty is, of course, a matter of degree. Some consumers will not switch for a moderate discount, but would switch for a large one or will occasionally buy another brand for convenience or variety.
The “Four Ps” of Marketing.
Marketers often refer to the “Four Ps,” or the marketing portfolio, as a way to describe resources available to market a product:
The Value Chain. A central issue in food marketing is the value chain, the process by which different parties in between the farmer and the consumer add value to the product. In an extreme case, the farmer only receives about five cents for every dollar ultimately charged for bread in the store. Part of the added cost results from other ingredients, but much of the value is added from processing (e.g., milling), manufacturing, distribution (transportation, wholesaling, and retailing) and brand building. The value chain provides an opportunity for many firms to add value to a product. This, of course, pushes up the ultimate retail prices of foods. However, these added costs usually result from consumer demand where consumers are willing to pay for additional convenience. In recent years, for example, there has been a sharp increase in the demand for prepared foods—from supermarkets or from dine-in or take-out from restaurants.
It is important to note that the value chain comes about in large part because a sequence of contributors allows each to specialize in what it does best or is most comfortable—and best qualified—to be doing. Farmers, for example, tend to be most interested in doing actual farming tasks and may be uncomfortable making deals with processors and manufacturers. Agents may specialize in this task. The costs of learning can be spread across many different farmers. The farmer may then be better off paying the agent and spend his or her time on farming instead . For the agent, having a large number of farmers as clients is profitable. Most farms would not have a sufficient volume to justify setting up milling operations, but large processors can take advantage of economies of scale by servicing many farmers. Large manufacturers can invest in brand building, and distributors can combine goods from many different suppliers to distribute and sell efficiently.
The Food Marketing Environment. The food market is affected by many different forces—e.g., sociological (fewer children mean less demand for certain products), government regulations, international trade conditions, science and technology, weather and other conditions affecting harvest conditions, economic cycles, and competitive conditions.
Food Markets
Food Marketing Efficiency refers to providing consumers with desired levels of service at the lowest cost possible. This does not necessarily mean to minimize costs after materials leave the farm. Services added later in the process may be very valuable to the consumer. Raw wheat would not be very valuable to most end consumers. The objective, then, is to add the needed value steps as efficiently as possible. Wal-Mart is extremely efficient in providing the retail (and effectively wholesale) part of the value chain even though that service ultimately costs money. Few consumers would want to drive a long distance to a bakery, and even if they did, the baker would then have to provide the retail services. The baker would probably have to spend more money on hiring people and maintaining the store than Wal-Mart adds to the cost by performing these services.
Characteristics of Food Products and Production.
Certain problems are introduced by the characteristics of agricultural production:
Problems in Agricultural Marketing. Farmers tend to face serious problems due to their limited control over market conditions. In the long run, farmers can to some extent control their own production levels, but they have no control over others. If other farmers increase their production, thus increasing supply and resulting in decreased market prices, there is nothing that the farmer can do about it. Another problem is that it takes time for the farmer to adjust his or her output. To increase production of hogs, for example, it is necessary to breed more stock. This takes time, and by the time the larger stock is available, prices may have reversed—i.e., the farmer decided to raise more hogs when prices went up, but by the time the stock is ready, market prices may have declined (either because of an increasing supply from other farmers or because of a change in consumer tastes). Farmers have low bargaining power in dealing with buyers.
Processors or manufacturers have many farmers to choose from. They do not need the product from any one particular farmer since commodities are seen as identical. Farmers, therefore, end up having to sell at a market price that may or may not be profitable at a given time. Farmers often face a “cost-squeeze” when market prices change. When market prices decline (usually due to supply conditions), prices paid to farmers decline. However, the farmer’s costs are unlikely to decline, leaving the farmer to absorb this loss. Such price fluctuations may change a crop from being mildly profitable to being causing significant losses.
Decisions on Marketing Efforts. Certain food product producers have decided to collectively promote their crops—e.g., Florida oranges, Washington apples, and beef growers. For a commodities product, it is generally not worthwhile for the individual farmer to promote. Thus, promotion efforts are typically undertaken by trade groups such as the Beef Council. If participation is voluntary, many producers would be likely to free-ride—that is, benefit from others’ efforts without contributing themselves. In many jurisdictions, participation in various programs in mandatory. In some cases, farmers can petition for a refund, but must then go through a great deal of effort.
Manufacturers frequently engage in brand building—e.g., Kraft promotes Kraft cheese as being of especially high quality. Here, the manufacturer benefits, and thus may have an incentive to spend money on these promotional efforts.
Trends in Agricultural Marketing. Science has allowed both for significant increases in productivity and for adapting products to market needs. For example, it is now possible to produce firmer fruits that are less likely to be bruised or spoil in transit. (This may happen at some cost in taste, however). Other research may be conducted to optimize tastes and appearances for one or more consumer segments. This research is often proprietary—sponsored by specific manufacturers and kept secret as a competitive advantage.
In order to meet the demands of consumers and manufacturers, there is now an increased need for growers, processors, and manufacturers to work together to create products that meet needed standards. It is also possible today to produce an increasing number of niche products—products that appeal to one particular segment of the market.
Competition is increasingly global, with both suppliers and buyers being spread increasingly across the world. Because of the increasingly complex marketplace, managers increasingly need more business and interpersonal skills in addition to technical knowledge. The food industry faces pressures not only in terms of nutritional value and safety, but also from environmental concerns.
Distribution: Food Wholesaling and Retailing
A large part of the food products value-chain is distribution— (1) efficiently getting the product (2) in good condition to where (3) it is convenient for the consumer to buy it (4) in a setting that is consistent with the brand’s image.
Distribution (also known as the place variable in the marketing mix, or the 4 Ps) involves getting the product from the manufacturer to the ultimate consumer. Distribution is often a much underestimated factor in marketing. Many marketers fall for the trap that if you make a better product, consumers will buy it. The problem is that retailers may not be willing to devote shelf-space to new products. Retailers would often rather use that shelf-space for existing products have that proven records of selling.
Although many firms advertise that they save the consumer money by selling direct and “eliminating the middleman,” this is a dubious claim. The truth is that intermediaries, such as retailers and wholesalers, tend to add efficiency because they can do specialized tasks better than the consumer or the manufacturer. Because wholesalers and retailers exist, the consumer can buy one pen at a time in a store located conveniently rather than having to order it from a distant factory.
Thus, distributors add efficiency by:
Channel structures vary somewhat by the nature of the product. A large restaurant chain might buy ketchup directly from the manufacturer. The simplest structure is the farmer selling directly to consumers. It is, however, usually inconvenient for the consumer to travel to the farm and for the farmer to sell small quantities to each of many buyers, but occasionally farmers like to supplement their sales by selling at farmers’ markets. Consumers may benefit from fresher products and possibly lower prices, but most of the value here is probably entertainment. Large buyers might be able to buy directly from the farmer—e.g., McDonald’s could buy cows directly in very large quantities and then sell burgers to retail customers. In most cases, however, a wholesaler is involved. This wholesaler buys things from several different manufacturers and delivers those to retailers. A wholesaler may, for example, serve many different retail stores with many brands of cereal, spices, and other food ingredients. The retailer than can buy many different products from the same source, increasing convenience. The wholesaler can buy thousands of cases of Morton salt from the manufacturer and just a few cases at a time to each retailer. The wholesaler will add a margin for this service, but this margin is usually less than what the manufacturer and/or retailer would have to spend in dealing directly with each other.
Manufacturers of different kinds of products have different interests with respect to the availability of their products. For convenience products such as soft drinks, it is essential that your product be available widely. Chances are that if a store does not have a consumer’s preferred brand of soft drinks, the consumer will settle for another brand rather than taking the trouble to go to another store. Occasionally, however, manufacturers will prefer selective distribution since they prefer to have their products available only in upscale stores.
Parallel distribution structures refer to the fact that products may reach consumers in different ways. Most products flow through the traditional manufacturer --> retailer --> consumer channel. Certain large chains may, however, demand to buy directly from the manufacturer since they believe they can provide the distribution services at a lower cost themselves. In turn, of course, they want lower prices, which may anger the traditional retailers who feel that this represents unfair competition.
We must consider what is realistically available to each firm. A small manufacturer of potato chips would like to be available in grocery stores nationally, but this may not be realistic. We need to consider, then, both who will be willing to carry our products and whom we would actually like to carry them. In general, for convenience products, intense distribution is desirable, but only brands that have a certain amount of power—e.g., an established brand name—can hope to gain national intense distribution. Note that for convenience goods, intense distribution is less likely to harm the brand image—it is not a problem, for example, for Haagen Dazs to be available in a convenience store along with bargain brands—it is expected that people will not travel much for these products, so they should be available anywhere the consumer demands them. However, in the category of shopping goods, having Rolex watches sold in discount stores would be undesirable—here, consumers do travel, and goods are evaluated by customers to some extent based on the surrounding merchandise.
Retailing. There are several ways in which retail stores can position themselves. One strategy involves low-cost, low-service. On the opposite side of the spectrum, others may offer high-cost-high-service. Generally, having a clear strategy and position tends to be more effective since "average" stores tend to face a greater scope of competition—e.g., Sears competes both "below" with K-Mart and "above" with Macy’s. K-Mart, in contrast, competes mostly laterally, facing Wal-Mart and Target.
Margins. Stores need to maximize their profits and must consider their margins to do so. Gross margins generally reflect the difference between what a store pays the retailer and what it charges the customer. On the average, this difference in supermarkets is about 25%. (Although there are large differences between product categories, as an illustration, a can that sold for $1.00 might have been bought on wholesale for $0.75). Net margins, in contrast, take into account the allocated costs of running the store—wages, rent, utilities, insurance, and "shrinkage." In grocery stores, these margins are usually less than 5%. Margins can be considered at the unit level—you make $0.35 on a package of salt—or as a percentage of sales—35% if the salt sold for $1.00. Sometimes, it may also be useful to consider margins per unit of space to best allocate retail space to different categories.
There are two theoretical forms of retailing. The "High-Low" method involves selling products at high prices most of the time but occasionally having significant sales. In contrast, the "everyday low price" (EDLP) strategy involves lower prices all the time but no sales. In practice, there are few if any EDLP stores—most stores put a large amount of merchandise on sale much of the time. It has been found that offering lower everyday prices requires a very large increase in sales volume to be profitable.
Slotting Fees. Since retailers are offered many more products than they can carry, they often have a great deal of bargaining power with suppliers. Retailers are often reluctant to accept a new product that may or may not be successful. Often, when a new product is introduced, manufacturers are asked to pay a “slotting” fee to get access to the retailer’s shelves. This may seem unfair at first, but two facts should be considered: (1) The retailer is taking a risk by putting out the product, possibly replacing an existing product on which it has at least broken even. (2) Slotting fees may compensate the retailer for given space to a slow-moving product category. If the retailer could not charge a slotting fee, it might decide to devote most of its shelf-space to major national brands that would “turn” more quickly. That is, on a given “slot,” you might sell fifty packs of Nabisco cookies per day, but only seven of the smaller brand. Ultimately, of course, the slotting fee is at least in part passed through to the consumer, but the slotting fee both allows the retailer to protect itself from risk and maintain a unit selling at lower volumes. It should be noted that price competition in the retail field is intense with very low margins. The money received from slotting fees is part of the store’s total revenue. If no slotting fees were charged, prices on the slow-moving and new products may be lower, but it is unlikely that overall store prices would be lower. Retailers would simply have to charge higher prices on other products and would likely be tempted to drop many low share brands.
Increasing power of retailers. As more and more products compete for space in supermarkets, retailers have gained an increasing power to determine what is "in" and what is "out." This means that they can often "hold out" for better prices and other "concessions" such as advertising support and fixtures. A significant trend in recent years has been toward manufacturers’ "private label" brands—that is, the retailers' own brands competing against the national ones. For example, Del Monte peas may now have to compete against Ralph’s brand of peas in those stores. Although private label brands sell for lower prices than national brands, margins are greater for retailers because costs are lower. For example, it is more profitable to sell a can of peas $1.00 when it cost $0.60 to supply than it is to sell a name brand can at $1.25 when that cost $1.05 at wholesale.
"Wheel of Retailing.” An interesting phenomenon that has been consistently observed in the retail world is the tendency of stores to progressively add to their services. Many stores have started out as discount facilities but have gradually added services that customers have desired. For example, the main purpose of shopping at establishments like Costco and Sam’s Club is to get low prices. These stores have, however, added a tremendous number of services—e.g., eye examinations, eye glass prescription services, tire installation, insurance services, upscale coffee, and vaccinations. To the extent these services can be added in a cost effective manner, that is a good thing. Ironically, however, what frequently happens is that "room" now opens up for a "bare bones" chain to come in and fill the void that the original store was supposed to have filled! New stores can now come in and offer lower prices before additional, costly services "creep" in. Note that upscaling over time may be an appropriate strategy and that the owner of the "rising" chain may itself want to start another, lower-service division (e.g., Ralph’s may want to own another chain such as Food 4 Less).
Retailing polarity. A number of retailers have tended to go to one extreme or the other—either toward a great emphasis on price or a move toward higher service. Rapid economic growth has made high service retailers more attractive to a growing number of affluent consumers, and less affluent consumers have become more accustomed to intense price competition between different retailers.
Scanner Data. Retailers and manufacturers today are able to make strategic decisions based on information from price scannings at checkout counters. Wal-Mart, for example, has looked at which products tend to be purchased together. At Wal-Mart supercenters which carry both food and traditional products, it was decided to put bananas both in the produce and the cereal sections. Many consumers would get to cereal and realize that they needed bananas. Not all were willing to go back and get them, but bananas will be bought if located next to cereal.
In some cities, a group of consumers agree to participate in a scanner data “panel.” These consumers receive a card much like the loyalty cards available to members of Vons Club. Their purchases are tracked and correlated with media exposure and demographics. This makes certain analyses possible:
International Markets
Background. The United States exports much of its food supply and in turn imports certain goods that are (1) more economical to grow in other countries, (2) serve niche markets, or (3) perceived to be better if made in certain countries (e.g., Irish whiskey or Belgian chocolate). Exchange rates come in two forms:
Measuring country wealth.
There are two ways to measure the wealth of a country. The nominal per capita gross domestic product (GDP) refers to the value of goods and services produced per person in a country if this value in local currency were to be exchanged into dollars. Suppose, for example, that the per capita GDP of Japan is 3,500,000 yen and the dollar exchanges for 100 yen, so that the per capita GDP is (3,500,000/100)=$35,000.
However, that $35,000 will not buy as much in Japan—food and housing are much more expensive there. Therefore, we introduce the idea of purchase parity adjusted per capita GDP, which reflects what this money can buy in the country. This is typically based on the relative costs of a weighted “basket” of goods in a country (e.g., 35% of the cost of housing, 40% the cost of food, 10% the cost of clothing, and 15% cost of other items). If it turns out that this measure of cost of living is 30% higher in Japan, the purchase parity adjusted GPD in Japan would then be ($35,000/(130%) = $26,923. (The Gross Domestic Product (GPD) and Gross National Product (GNP) are almost identical figures. The GNP, for example, includes income made by citizens working abroad, and does not include the income of foreigners working in the country. Traditionally, the GNP was more prevalent; today the GPD is more commonly used—in practice, the two measures fall within a few percent of each other.)
In general, the nominal per capita GPD is more useful for determining local consumers’ ability to buy imported goods, the cost of which are determined in large measure by the costs in the home market, while the purchase parity adjusted measure is more useful when products are produced, at local costs, in the country of purchase. For example, the ability of Argentinians to purchase micro computer chips, which are produced mostly in the U.S. and Japan, is better predicted by nominal income, while the ability to purchase toothpaste made by a U.S. firm in a factory in Argentina is better predicted by purchase parity adjusted income.
It should be noted that, in some countries, income is quite unevenly distributed so that these average measures may not be very meaningful. In Brazil, for example, there is a very large underclass making significantly less than the national average, and thus, the national figure is not a good indicator of the purchase power of the mass market. Similarly, great regional differences exist within some countries—income is much higher in northern Germany than it is in the former East Germany, and income in southern Italy is much lower than in northern Italy.
Protectionism:
Although trade generally benefits a country as a whole, powerful interests within countries frequently put obstacles—i.e., they seek to inhibit free trade. There are several ways this can be done:
Justifications for protectionism:
Several justifications have been made for the practice of protectionism. Some appear to hold more merit than others:
Variations in Food Taste Preferences. Our food preferences tend to be “learned” early in life. It is likely that we will continue to prefer the kind of food we ate growing up. U.S. agricultural interests lobbied successfully to have wheat included in food aid to Japan after World War II. The intent was to develop a taste for this product among the next generation—a very forward looking strategy! Chinese people today do not generally like the taste of U.S. fast food. The younger generation can “endure” this while the taste is very unpleasant for older Chinese. Children now growing up and being exposed to this food may appreciate the taste more.
Religion has some impact on food preferences since certain religions do not allow the consumption of certain foods. There may be significant cultural context to food consumption. Banquets, for example, are a very important part of the Chinese culture. Food Diffusion. Food products often spread to other countries. Often, this a process that takes considerable time. Chinese food is believed to have become popular in the U.S. because of Chinese immigrants who started restaurants here. Mexican food has spread to households of other ethnic groups. Some products are significantly modified in adopting countries—e.g., U.S. pizza is much more elaborate than the traditional Italian dish.
Food Positioning. A country of origin may affect the image of a food product either favorably or unfavorably. When an association is favorable (e.g., French cheese or wine), the country of origin may be emphasized. Sometimes an origin may be implied when it actually does not exist. In this practice, which raises serious ethical questions, packaging text may be written in French, for example, even though the product is made in the U.S. and is intended for sale here. A product name may also imply foreign origin—e.g., Häagen-Dazs ice-cream. An alternative strategy, when the association is not believed to be seen positively, is to obscure national origin. A wine made in Germany and a beer made in France use this approach.
Food may also need a different type of positioning based on usage occasion. Tang, for example, is positioned as a cheap and convenient drink in the U.S. In Brazil, real orange juice is cheaper and readily available on the streets. Thus, such a positioning would not work. Instead, a pineapple flavored drink was promoted as a special treat. In China, prepared food is available from street vendors much cheaper than McDonald’s food. Thus, the American position of convenience and low cost are not viable. Instead, McDonald’s is positioned on its Western mystique.
Food Adaptation. Food often needs to be adapted to be successful in a new country. The Japanese tend to like food less sweet than do Americans, so KFC uses less sugar in its potato salad there. Some McDonald’s sandwiches are much spicier in China. Serving size may also have to be adjusted. Americans often eat larger portions than people in many countries. Packaging is often more important in some countries. Products exported from the U.S. to Japan often need a significant upgrade to packaging materials where the container is seen a s a reflection of the quality of the product.
Promotional Decisions. A large part of most U.S. food products’ marketing is accomplished through television. However, in many countries, ownership of TVs is much less common than in the U.S. In most of the World, people watch less TV than Americans do, and some countries either do not allow or limit TV advertising. Other media, then, may have to be used in certain countries. Billboards are often more common in India, for example. Certain other promotional tools may also be unsuitable. There may not exist an adequate infrastructure for coupon redemption. Free samples may not be cost effective in countries with low incomes. Low income individuals who cannot afford to buy the products might endure long lines for a free sample.
Government Export Assistance. Both the U.S. government and several states have programs to promote agricultural products abroad. Some programs involve financial assistance, such as low interest loans. Others assist in making connections with foreign buyers or paperwork.
Price and Competition
Basic Economics. The notions of supply and demand are fundamental to economics. The general logic here is that consumers will be willing to |