How changes in consumer
behaviour and retailing affect
competence requirements for food
producers and processors
Klaus G. Grunert
MAPP - Centre for Research on
Customer Relations in the Food Sector
The Aarhus School of Business
Denmark
© MAPP
Overview
1. Trends in consumer food choice and in food
retailing
2. Implications for the attainment of sustainable
competitive advantage and for competencies to
be developed by food producers and processors
3. Implications for the organisation of the food
chain
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Dynamic, complex and heterogeneous
consumer demands
hedonistic attributes
increasing
importance of
convenience
attributes
hedonistic + health
attributes
hedonistic + health +
process attributes
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Importance of quality
dimensions of food
18
16
14
G-93
G-96
F-94
F-98
GB-94
GB-98
12
10
8
6
4
2
0
Taste
Health
Organic/naturalnes s
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C onvenience
Consumer food quality
perception





Dominated by experience and, increasingly,
credence characteristics
Increasingly multidimensional
Perceived trade-offs and incompatibilities
between dimensions
Cultural differences
Different consumer segments
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Example of subjective trade-offs
happinessand inner harmony
quality of life
long, healthy life
look good
enjoyment
less healthiness
healthiness
wholesomeand natural product
good quality
and taste
high fat content
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Example of cultural differences
1,2
1
0,8
0,6
0,4
0,2
0
-0,2
-0,4
-0,6
-0,8
Denmark
Finland
USA
not enriched
omega-3
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oligosaccharides
Example of segments
2,0
F.UI
D.CO
UK.CO
UK.UI
1,5
F.CO
1,0
DK.CO
D.RA
,5
F.MO
UK.RA
D.UI
F.RA
0,0
UK.CA
DK.UI
DK.TE
-,5
D.CA
F.HE
-1,0
D.AD
DK.EC
DK.IM
DK.AD
UK.AD
-1,5
-2,0
-2,5
-2,0
-1,5
-1,0
-,5
0,0
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,5
1,0
1,5
2,0
Food retailing: What does the
private label trend mean?
Finland
France
Volume
Value
Spain
Netherlands
Germany
Belgium
UK
Switzerland
0
10
20
30
40
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50
60
70
The private label trend



Changes in channel dominance
A higher proportion of value creation
An increased emphasis on positioning in the
mind of the consumer
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Quality of
product
Fish
Relative
imp ortance
in %
13
Product price
8
Consistency
6
Market
information
Traceability
6
Sufficient
quantities
Promotion
16
Wide range
5
Long-term
relationships
Reputation
17
National/
foreign
10
11
2
6
Average part worths
Average
-.84
-.10
(vector)
Average
-.34
No
-.34
No
-.65
No
-.93
Average
-.10
Average
-.30
No
-1.02
Average
-.37
Foreign
without
sales
office
-.63
Above
average
.15
Premium
.69
Cheese
Relative
imp ortance
in %
12
10
Superior
.34
Yes
.34
Yes
.65
Yes
.93
Superior
.10
Superior
.30
Yes
1.02
Superior
.37
Foreign
with sales
office
-.05
6
6
12
17
3
5
18
6
National
.58
© MAPP
7
Average part worths
Average
-.74
-.11
(vector)
Average
-.34
No
-.33
No
-.66
No
-.95
Average
-.16
Average
-.30
No
-1.02
Average
-.35
Foreign
without
sales
office
-.44
Above
average
.13
Superior
.34
Yes
.33
Yes
.66
Yes
.95
Superior
.16
Superior
.30
Yes
1.02
Superior
.35
Foreign
with
sales
office
.09
Premium
.61
National
.35
Changing criteria for retailers‘
choice of suppliers


More emphasis on own branding function
implies responsibility for product development,
quality control, market communication
Importance of product-specific consumer
knowledge
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Implications for the attainment
of competitive advantage
Complex, difficult
to imitate
competencies
Lower relative
costs
Competitive
advantage
Superior customer
value
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Implications for the attainment
of competitive advantage




Dynamic, complex and heterogeneous
consumer demands create new opportunities
for creating superior customer value...
…but also increase the likelihood for failure
Retailers‘ urge to have a larger share of
overall value creation in the food chain puts
producers under pressure…
…but opens up possibilities for creating
superior customer value in cooperation with
retailers
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Market-related competencies
Relative
costs
Perceived
value
Productionrelated
competencies
Marketrelated
competencies
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Market orientation as a key success
factor
“ Market orientation is the organisationwide
generation of market intelligence, pertaining
to current and future customer needs,
dissemination of the intelligence across
departments, and organisation-wide
responsiveness to it”
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Market orientation as a key success
factor





Market orientation implies the understanding of
buyers, both at the retail and the consumer level
Market orientation implies the development of
market-related competencies
Market orientation allows the development of more
value-added products
Market orientation establishes customer
relationships
Market orientation increases increases switching
costs for customers and imitation lags for
competitors
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Deficit
index
1.46
1.37
1.37
1.30
1.30
1.28
1.26
1.20
1.19
1.19
1.17
1.15
1.13
1.11
1.11
1.09
1.07
1.02
1.00
0.98
0.94
0.89
0.83
0.80
0.80
0.78
0.78
0.76
0.66
0.61
0.57
0.57
0.54
0.52
0.39
0.31
0.15
0.02
-.39
Competence elements
Following up on marketing activities
Benchmarking
Training and education of sales force
Systematic and continuous surveillance of suppliers
CompanyΥs brand image
Marketing competence, having a marketing department
Fast dissemination of information about competitors or customers
Ability to develop products with a high degree of newness
Logistics management
Ability to develop good product concepts
Emphasize communication with selected partners (relationship management)
Systematic and continuous surveillance of comp etitors
Ability to reduce development time
Achieve balance between quality and costs
Improve processes and activities (BPR)
Ability to achieve cost reductions
Ability to exploit economies of scale
Use information on customers and competitors in strategic planning
Cross-functional co-operation in product development
Collecting information on consumers
Planning and executing promotional activities with external partners
Culture that promotes the achievement of goals
Strategic planning
Analyses of customer satisfaction with own and competing products
Customer knowledge of sales force
Cross-functional co-operation on changes in p roducts and services
CompanyΥs image
Promotional activities
Managing the sales force
Quality control systems
Co-operation with external partners in product development
Target marketing to specific customer segments
Reacting to changes in customer demands in a satisfactory way
Fast response to customer wants concerning changes in p roducts and services
Regular meetings to discuss market developments
Co-ordination of production processes
Ability to commu nicate visions
and values by internal marketing
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Management of suppliers
Insight into changes in direct customersΤ needs and wants
Three market-related key
competencies



Understanding consumers
Development of new products
Managing relationships
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Understanding consumers



Understanding the formation of consumer
preferences
Concentration instead of spreading in the
selection of markets
A core competence: To be developed in-house
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Development of new products


High failure rates
Comprehensive research on key success
factors in new product development provides
guidelines for



Management and organisatio of NPD
Market orientation of NPD
Contingent development of physical product
and communication
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Managing relationships



Downstream: joint value creation with
retailers, becoming an indispensable partner
Upstream: The higher up in the value chain
differentiation and adding value occurs, the
higher the need for traceability, segregation
and information flow from end users
Changing governance structures for food
chains
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Matching raw material characteristics
and end user demands
End- user heteroge neity
Low
Low
High
Little need for MOC
MOC ma inly
downstream
Raw-material
heterogeneity
High
Info rmation flow
MOC im portant
throughout cha in,
throughout cha in
responsivenes s to
end use r needs
mainly up stream
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The orange juice example
heterogeneity
Farm
homogeneity
FOJC
industry
heterogeneity
bottler
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retailer
consumer
Major messages



Changes in consumer food choice create new
possibilities for gaining competitive advantage
by differentiated, value-added products
Exploiting these possibilities requires marketoriented competencies, especially consumer
understanding and new product development
These competencies are complex, difficult to
imitate, and develop slowly
© MAPP
Major messages



Changes in food retailing create new
opportunities for long-term partnerships with
food retailers
Exploiting these opportunities requires
competencies in managing relationships as
well as competencies in developing
differentiated, value-added products
An increased emphasis on differentiated,
value-added food products will have to change
the governance structure of the food chain
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