Our client has identified opportunities in the Mexican food ingredient sector. Competitors have already entered the market by purchasing a well-established Mexican company in a prime location. What should our client do? Are there still opportunities? If so, where do they lie and what is the best way of entering the market? Should they plan a green field entry, or are there alternatives with existing domestic candidates?
Approach:
We begin with a preliminary assessment of the opportunities in the different regions of Mexico, including a detailed analysis of demand and the relative competitive position of each major supplier. The analysis suggests that our client should focus on the region in and around Mexico City. Here demand is growing rapidly and opportunities for growth have not been exhausted although some of the key competitors are also in this region.
We then focus on the entry strategy. The views of the major buyers are sought, and we concentrate on the companies that are best placed to find their way into the more progressive and expanding branded food market. Distribution is critical and we quickly determine that none of the current players can adequately meet the emerging needs of this sector.
Promar Solution:
We conclude that our client will need to put considerable investment into appropriate processing technology and developing a more responsive and flexible distribution system. Our report outlines the options and key issues to be addressed:
The lack of suitable acquisition targets;
The target markets and their characteristics;
Key success factors in making a green field investment;
Potential location for such investment.
Market Research: Understanding attitudes to novel plant breeding methods
Issue:
Concerns over the products of novel breeding methods have constrained the use of a range of technologies in the agricultural and food industry. Communication policies that might more effectively reassure consumers and those engaged in supplying the product need to be developed. To be effective, communication strategies must be based on a solid understanding of the nature of consumer perspectives on food, agricultural technologies and plant breeding methods. This survey covers a range of markets that are resistant, neutral or supportive of the use of the new plant breeding technologies.
Approach:
This project brings together the expertise of three specialist research, communications and consulting organizations - Roper Media Research, Morgan and Myers, and Promar. Focus groups are undertaken to help develop concepts and semantics for the following quantitative survey among consumers. In-depth interviews are also undertaken with three key groups - the trade, government agencies, and trade associations. The results are used to develop communications approaches in the different market situations.
Promar Solution:
The findings underline the lack of success in communicating the safety or value of products in some leading markets. They also highlight the lack of understanding of the nature of agriculture and food supply to urban areas. Recommendations are built around strategies that are sensitive to consumer concerns and involve inclusive communications policies using message vehicles that were identified as objective. All interested organizations are advised to refine, repackage and re-present their evidence on the safety of the technology in those countries where concerns prevailed.
Policy evaluation: Evaluating possible risk management policies
Issue:
Recent US government farm policy has increased emphasis on ensuring that farmers have products available which allow them to manage a range of risks. The Risk Management Agency is responsible for various programs that promote the availability of risk management products. These cover a very wide range of products and the Agency needs to carefully research the design of each product before their launch. They have engaged Promar to research several product sectors and markets to confirm the potential effectiveness of each specific commodity program.
Approach:
Each project involves careful review of the economic circumstances facing farmers of the different products. This will assess the exposure to yield, price and income effect for the commodity under examination. Also, each project will involve a survey of producers to identify the range of economic circumstances that they face and their attitudes to the risks that they face.
Promar Solution:
Project reports outline recommendations on the attributes of individual crop risk management products.
Clarifying policy implications: Commercial impact of US dairy market regulations
Issue:
Our client wants to ensure that the costs of the regulatory framework covering the dairy sector are well understood by its target audience. Promar is invited to review past dairy policy and to elaborate the implications of a more competitive market.
Approach:
Our review initially involves collecting data on production, processing and distribution. There are many forces in operation, with substantial improvements in technology taking place and increasing economies of scale at the production level. Transportation costs are critical and changes in demand for industrial and liquid milk focus new pressures on the traditional location of the industry. We list barriers to competition and we itemize the benefits of overcoming these.
Promar Solution:
We recommend that the client develop its planning around the following core certainties:
The industry needs to agree upon the primacy of growth, efficiency and profitability objectives;
International competitiveness will become more critical with further trade liberalization;
Pressure will continue to mount for further structural adjustment, price deregulation and expanding presence in foreign markets.
Merger & acquisition support: Investment opportunities in feed ingredients
Issue:
Our client is seeking new acquisitions that fit into its goal to become a global player in the feed ingredient sector. Two companies are in play.
Approach:
We join the client's acquisition team. Promar's tasks are to independently check some of the market estimates, identify the strengths and weaknesses of the major targets, and identify the extent to which they might fit into our client's culture. We draw information from our existing database on the subject. Published data is sparse and so we begin an intensive trade interviewing and desk research exercise. The key issue is to understand how the target companies function.
Are their products good? Do they fill an existing need or one that must be developed?
What are the prospects for their products?
How are they organized to develop and market products?
Compared with competitors, how are they received in the market, and
What are their strengths and weaknesses?
Promar Solution:
After an extensive review of all options, Promar recommends focusing on one major player with higher value products and a well-established name. As next steps we:
Identify a clear rationale for proceeding with the acquisition based on opportunities in the market and the strength of this product against the competitors.
Support the acquisition as negotiations continue.
Strategy development : Assessing the value of market development investment in foreign markets
Issue:
The client is a government agency that provides funds for generic export market development to agricultural industry organizations. To galvanize support for the program, clear evidence of the effectiveness of the investment is required; in the past this evidence has been primarily anecdotal and not collected systematically.
Approach:
Our approach is to support the client in implementing Promar's Results-Oriented Management (R-OM) approach. The process will help those developing export plans to improve the precision of their objectives as a base for measuring progress. It involves:
Reviewing past trends, the competition, the changes taking place in the market, the structure of the industry, and key market access issues.
Identifying the most important constraints and/or opportunities in different markets and identifying where there is likely to be the most leverage.
Clarifying the key targets and the message(s) for changing their purchasing behavior.
Promar Solution:
As a result of the R-OM process, export development programs now clearly identify and measure progress. Systematic monitoring and evaluation provide learning and feedback which allow for the quality of the programs to be continually improved. Consequently, the program merits are better exposed to ensure support and continuous funding.
Market entry: Value-added opportunities along the value chain
Issue:
Demand is stagnant and access to opportunities to gain margin from downstream parts of the value chain is limited. What can our client do to maximize the leverage on its technical innovations?
Approach:
The first step is to identify the 'profit pools' along the value chain. Our analysis draws on our wide experience of all stages of the production and marketing chain and is directed toward answering the following questions:
What are the main drivers in the value chain?
Where are the margins and profits captured?
What is the likely impact of technology throughout the chain?
What is the impact of over-capacity and the very high levels of concentration at the processing stage?
Promar's view is that retailer concentration will change the balance of power downstream, and those who make waves will be those who respond to ever more individual consumer demands.
What will those demands be?
Where are the demand opportunities and what is their character?
How do these factors affect value-enhancing margins that can be created and distributed in the direction of our client?
Promar Solution:
Brand investment and partnership must be pursued, but identifying the right partner and terms is critical to success;
Partner/alliance search to be undertaken using strict criteria: culture, financial stability, vision, market leverage;
Initiate partner/alliance search;
Prepare short list for client;
Support the ensuing discussions and negotiations.
Market expansion: Identifying profit opportunities for new gene technologies
Issue:
Our client has identified the technologies to modify a plant so that it produces a significantly higher yield of a cholesterol-lowering component, among other beneficial characteristics. What are the market opportunities and how can they be captured?
Approach:
Promar's analysis of the key drivers at each stage of the value chain highlights the importance of gaining a premium for the higher value fractions of the crop in the key markets. Our review of major international markets reveals that previous estimates of demand have been optimistic. Despite this, there are considerable opportunities within the value chain. However, further investment will be required to shape raw material supply systems, crack processing constraints, and develop markets.
Promar Solution:
Our determination is that key partners are required to produce the crop and a commitment is required from a processor. Significantly, releasing the potential of the technology relies on a partner or acquisition which has the ability to leverage downstream margins. We recommend that:
Our client acts quickly, since its competitors are after the same prey.
The client reviews Promar's short list of candidates with an edge in the processing technology and close links with branded food companies. It selects one, and the venture is successful.
Organizational strategy : Identifying consensus on a long term strategy
Issue:
Our client is a major export organization mainly funded by farmers and other players in the industry. Its challenge is to develop a strategic plan that will unite the many diverse interests of the stakeholders.
Approach:
Initially, using our specialist expertise, we review market conditions and identify the major challenges facing the sector. Then we initiate a series of discussions with a range of players who represent the various stakeholders. Our market review and discussions identify a clear role for the organization and wide support for our client among both small and large exporters. However, the depth of support varies considerably. We then facilitate a series of open sessions involving all partners. We supply contextual information to help identify key issues and areas for strategy development.
Promar Solution:
The result is a revised process for developing the strategy which gives key players a sense of ownership of the program. In addition, we recommend specific steps to:
Implement a planning process that is efficient, and yet includes all key interests.
Prioritize systematic program evaluation so that those who finance the program are assured of sound stewardship of industry funds.
Promar International
333 N. Fairfax Street, Suite 202
Alexandria VA 22314 USA Tel.: (+1) 703.739.9090
333 N. Fairfax Street, Suite 202