It’s Good To Be King!


That’s true for consumers–the kings of the global food market. As Jay Poole of the Altria Group said at the recent Farm Journal Forum in Washington, D.C., “The hand that pushes the grocery cart rules the world.”

So what do people think about when they’re pushing grocery carts? Certainly international trade and the promise of technology are not at the top of the list. Yet increased trade and better technology are the very things that provide consumers with so many of the choices they do have–and they are the keys to the future for U.S. food producers, in the New Year of 2005 and beyond.

With less than 10 percent of disposable income going for food, the public demands great value. Clearly consumers could pay much more. We just don’t expect to. With baby boomers still dominant, the problems or concerns of health begin to dominate choices. Also as the population ages we arguably become more attuned to the pulses of nature and prefer our food providers to do the same. Consumers want to know where it comes from but brands can give them the warm fuzzies they need in that regard more than country of origin on the label.

Brands are where the power is because brands are where the value is. The notion of authenticity is entwined with the sense of being able to count on a brand or having grown up a brand. It’s pretty simple stuff. As retailers, food service and brand companies jostle for market share, the consumer benefits from segmenting market channels and differentiating products. If choice is what we want, then choice is what we’re getting.

And we’re more discerning about the message and messenger these days. The cacophony of noisy advertising in generalized formats is not working well any more. According to the old quote from John Wanamaker (father of the department store concept), “Half of all advertising is wasted. I just don’t know which half.” Today, unless we’re talking a rollout or brand development effort, much more than half is wasted on a public that uses the TIVO or the clicker to tune out the ads. According to Gene Kahn of General Mills, “Word of mouth drives the market.”

Another expectation is for any food any time. Seasons don’t exist when sourcing is global. While this has become a huge consumer value issue, there is a price to pay in the production sector. Trade is vital to meet this expectation, but competitiveness becomes more difficult as new players in certain food categories can deliver expected quality at very low prices.

It can also lead to protectionism. Consider the shrimp market. Over the last five years, foreign shrimp prices have dropped by a third and importers swallowed 90 percent of the U.S. market. After a massive lobbying effort by the Southern Shrimp Alliance, the government imposed onerous duties which will likely go into effect in 2005. Similar stories could be told with beef and sugar.

So while various producers want a protected position in the marketplace, consumers expect more for less. Is this creating an impossible position for U.S. producers? Perhaps not–if the producers look to technology for competitive answers.

Technology has played an enormous role in U.S. economic growth since the 19th century. Interestingly, the shift toward U.S. dominance simultaneously lifted Europe’s per capita GDP nearly as rapidly. How is this possible? Well, it seems that relatively open trade and information channels meant that technology transferred rapidly and the markets expanded to take advantage of the new productivity.

Today, the United States and Europe face an emerging dominant player in China. If that tide raises all boats, the next years may be quite good. But they won’t be if we retreat into protectionism.

How we respond to the challenges of global trade may determine our destiny. For the past two centuries, the ace in the hole for Americans has been our lead in technology. Today, the primary enablers of our competitiveness are biotechnology and information technology–we must keep pace in these areas. And by welcoming trade and technology, we respond effectively to consumer demands.

Consumers have been kings for only a short time, but it looks like their reign will be long. They’ll reward those who deliver what they demand and punish the rest. We can embrace the bright possibilities or simply start to turn out the lights.

Reg Clause raises cattle, corn and soybeans on a fourth generation family farm in central Iowa.

Reg Clause

Reg Clause

Reg Clause is the fourth generation to manage the Clause Family Farm Jefferson, Iowa. The operation raises corn, soybeans, cattle and grandkids.

Reg volunteers as a board member for the Global Farmer Network and is currently serving as Chairman. Reg has extensive experience in business consulting, specializing in business development including feasibility studies, business planning and financial structuring for clients as diverse as biofuels, wineries, meat processing, niche marketing and many more. His work has allowed him to travel extensively around the world to conduct in-depth analysis of agricultural production systems.

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