Food Marketing
The
performance of all business
activities involved in the flow of
food products and services from
the point of initial production
until they are in the hands of the
consumers.
Two views of marketing
Macro
marketing
 Big
picture focus on the agricultural
and food marketing system
Micro
marketing
 Decision
maker level choices faced by
individuals in food production,
processing and consumption
Food marketing challenges
Food
distribution to consumers
What to produce
How to process
Where to distribute
Reasonable
returns to farmers
Price / profit signals from consumers
Profit margins beyond the farm
Marketing functions
Create
utility by transforming a
food item along one of the four
dimensions
For example,
 Production,
storage, transportation,
grading, processing, packaging etc.
Marketing Functions
Facilitating Functions
Physical Functions
Exchange Functions
Buying and Selling
Transportation
Reading assignment
Food
and Agricultural Policy:
Taking Stock for the New Century
Chapter 1. The Evolving Food and Agriculture
System
http://www.usda.gov/news/pubs/farmpolicy01/fpi
ndex.htm
Traditional Marketing Channel
Consumer
Retailer
Wholesaler
Processor
First Handler
Producer
Inputs
Food market structure
Consumers (US)
Retail
Grocery
Restaurants
Wholesalers
Processors
Producers
287 million
589,000
186,000
403,000
41,000
21,000
2.2 million
Emerging Marketing Channel
Customers
Retailers
Wholesaler
Processor
First Handler
Producer
Inputs
Food Marketing Channel
Increased complexity
 International trade
 Increasing concentration
 Direct marketing
 Vertical integration
 Non-market transactions
 Grocery and food service
You
can cut out the middle man but not
the function he performs
First Handler
Processor
Wholesaler
Retailer
Consumer
Producer
Inputs
U.S. Population, Percent by Sector
1900
1950
1990
Farm
39.3
15.5
1.9
Nonfarm Rural
21.0
20.5
22.9
Urban
39.7
64.0
75.2
Ag & food sector, 2001
Food
& Fiber
17% of employment
16% of GDP
Farming
1% of workforce
<1% of GDP
13
off-farm jobs for each on-farm job
Food expenditures, 2000
Consumers
spent $661 billion
Excluding imports and seafood
 11% of disposable income
 Farmer’s share 18%
 Off-farm share 81%
Food Marketing Bill, ($Billion)
Labor
Packaging
Pretax Corp Profits
Net rent
Transportation
Advertising
Depreciation
Business
Fuels & Elec.
Net Interest
Repairs
Total M arketing Bill
Farm Value
Consumer Expenditures
1980
81.5
21
9.9
6.8
13
7.3
7.8
8.3
9
3.4
3.6
182.7
81.7
264.4
1990
154
36.5
13.2
13.9
19.8
17.1
16.3
15.7
15.2
13.5
6.2
343.6
106.2
449.8
2000
252.9
53.5
31.1
26.7
26.4
26.1
24.2
23.5
23.1
16.9
10.1
537.8
123.3
661.1
US Food Marketing Bill, 2000
Labor
Farm Value
Packaging
Pretax Corp Profits
Net rent
Transportation
Advertising
Depreciation
Business
Fuels & Elec.
Net Interest
Repairs
http://www.ers.usda.gov/publications/FoodReview/septdec00/FRsept00e.pdf
Consumer Food Expenditures
700
600
Billion $
500
400
300
200
100
0
1980
Farm Value
1990
Labor
2000
Non-Labor Marketing
So what???
 Labor
is the largest single share
of the food bill
 Farm value was 2nd in 2000 at
half of labor cost
 Food cost and food policy
involves more than agriculture
Changing Food and Ag System
Shift
from raw bulk commodities to
food products
Diverse consumer
Globalization
Industrialization
Technologies
Environment
Drivers of change
Consumers
Food and services are normal goods
» More income - Less time
» Demand more choice and convenience
» Food away from home
New products and outlets
» 12,000 new products/year
» Process verified, branded, labeled
» Niche markets
Household income and food
spending
1998
Dollars
Household pretax income 42,584
Annual food / person
2,037
Food at home
1,211
Food away from home
826
1990-98
%Change
28
17
18
15
Food at Home spending
Meat fish eggs
Fruits & Veg
Cereal
Miscellaneous
Dairy
Beverages
Sugar sweets
Fats oils
1998
Dollars
313
219
187
174
133
102
51
33
1990-98
%Chg
15
22
22
25
9
11
34
18
Drivers of Change
Globalization
Capital markets, information, expectations
» Sales by US affiliates of foreign firms
» Sales by foreign affiliates of US firms
» US imports
Ag trade in 2000
Exports, 2000
Imports, 2000
$64 B
$133 B
$32 B
$Billion
% of total
$50.8
$38.9
7.2
3.3
Drivers of Change
Technology
Traditionally production tech
» Lower costs
» Increased profit to early adopters
» Lower prices for consumers
New technologies
» Cost reducing and value enhancing (biotech, precision ag)
» Consumer oriented (food safety, health)
» Information
Drivers of change
Diversity
of producers
Structure
Enterprise
Cost of production
Method of production
Selected Ag Trends
1970 1980 1990 1997
Farms Mil.
3.0
2.4
2.1
2.0
Farm pop %
5
3
2
2
Avg acres
373
427 461 471
Assets $1000 89.5 403.1 395.4 497.1
Output/input1 150
174 233 255
1/1950=100
Selected Ag Trends
1970 1980 1990 1997
Farm prices1 106
238 264 298
Income $B
58.8 149.3 196.4 238.2
Percent of farm income from
Nonfarm
55
64
85
88
Government
11
2
5
3
1/1950=100
Agricultural Producers
1999
Sales
Rural
Intermediate Commercial
Residence
Farms
Farms
LT $100K $100-250K
GT $250K
Number
1,356,047 655,812
Produce $B
13.7
42.0
Avg sales $
10,074
64,117
NFI $
2,310
12,998
Off-farm $
70,754
36,343
175,091
120.2
687,065
115,832
35,017
Farm Ownership, 1997
Percentage
Farms Acres Sales
Sole Prop.
86
63
52
Partnership
9
16
18
Corporations
Family
4
13
23
Nonfamily
0.3
1
6
1/Annual
average sales $1,000
Average
Acres Sales1
356
62.4
881 209.7
1571 603.0
1507 1395.0