SPC factory circa 1925
If ever you needed convincing that investing for the long haul in a brand was worth the time, energy, risk, and money, there is evidence aplenty in the remnants of the Australian food industry.
It has been reported that the Peters Ice Cream brand is on the market, again, and being scrutinised by the losers in the WCB takeover by Canadian Saputo, Bega Cheese and Murray Goulbourn.
This makes absolute sense as ice cream is a great product in which to store the value of that highly perishable raw material, Milk, almost irrespective of its consumer profit margins. Way, way better than cheese and milk powder, those other value stores currently favoured by Bega and MG
Peters was clearly going to be for sale at some point, having been bought and sold many times over the last 25 years. It is currently owned by a Private equity group, who bought it from Nestle, who bought it from National Foods, (themselves later flogged off to Japanese brewer Kirin) who bought it from Pacific Dunlop, who bought it from Adsteam, and so on. A venerable Australian company started in 1907 by Fred Peters, but passed around like a like a turd in a game of corporate pass-the-parcel.
Through all that ownership turmoil, restructures, factory rationalisation, re-engineering, asset stripping, and a whole bunch of other cliches, the brand still holds a very significant place in the billion dollar Australian ice cream/ice confection market.
Similarly, while SPC the company goes to the undertaker, SPC the brand now owned by Coke in Europe has a significant place in European food markets based on the heritage of canned fruit from the Shepparton region. From almost the formation of the company in 1917 to 1973 when Britains entry into the EU locked out agricultural imports, SPC built a brand that 35 years later is still worth a marketer the calibre of Coke resurrecting. Now of course, SPC branded product in Europe is grown and packed in Spain and North Africa.
If Australia is to be a serious player in the provision of sustainable long term food supplies for ourselves and export, we desperately need to recognise the role of branded value adding. We need the vision and commitment, emotional, technical, managerial and financial to stop just flogging the tradeable commodity, as we will never be the least cost producer, the only ones who survive in a commodity race to the bottom of the price scale.
Consumer behaviour is largely built around “value for money” (i.e., cheapest price products), especially in the mass-market, where we have a cosy duopoly happy to squeeze suppliers, while building their own brand products…. A brand strategy built around added value will struggle unless consumers are willing to invest in growing the brand. Nobody can argue that we don’t/can’t produce high-quality products, but will consumers pay higher prices, when imported cheaper goods of equal if not better quality are available?
Hi,
Absolutely right about the necessity to deliver “value for money”, but I disagree with the assertion that it is about the cheapest product. price is an extremely important factor in the value equation, but only one factor, and not always the dominant one, otherwise we would all be buying Korean cars.
My basic premise is that we desperately need to reduce the overhead cost base of our operating environment. This does not mean reducing wages, (but sometimes that will be a component) but it does absolutely mean that we need to increase the productivity of the capital, both fixed and working, invested.
Removing uncertainty, multiple levels of approval and regulation, operational inefficiency, and increasing the velocity and finality of decision-making would make a huge difference.
I am aware of an fairly significant (overseas funded) investment recently made in a piece of processing infrastructure, about $30 million. The original plan allowed a generous 12 months for all the necessary approvals, but ultimately it took over 2 years, and the cost had blown out by the delays, extra reports that suddenly appeared that needed to be prepared. I know if the protagonist had his time over, the investment would not have been made.
That is all the crap we need to remove, which will bring costs down, and we need the marketing balls and skills to build the value in consumers eyes, so that the bit extra is worth it, at least for sufficient consumers that the investment can deliver competitive returns.
Sorry, a bit long, do I hear a hobby horse??
Absolutely true. Important message for all in the produce industries.
Spread the word Richard!
Even after all this time, the message still has a long way to go before it has sunk in.
Thanks John,
I believe passionately that simply being a supplier of commodity products, grain, raw wool, bulk frozen meat, milk powder, et al is the easy short term choice our children will condemn us for.
The harder one is to find ways to add value to consumers, carve out a defensible market position, and innovate.
Valuable insight into interesting dilemma. Will spread