Scenario Planning for Food Chains
Marcos Fava Neves
01 Mar 2012 09:09
Marcos Fava Neves, special for China Daily, 02/02/12
This article shares a method for scenario planning of food and agribusiness chains. It may be useful to exercise how will, for instance, the coffee chain, sugar chain, poultry chain look like in 2022 and how a company operating in this particular food chain can better position itself.
A food chain is an integrated network of companies operating in the flow of products, services, communications, payments and information required for a specific product to be built (transformed) and to reach the final consumer. An example will help to clarify: when talking about the coffee chain, we consider the agents coming from the input suppliers (fertilizers, farm machinery and others) towards the final consumer of coffee. In the middle of the chain we have coffee farmers, coffee roasting and processing industry, distributors, supermarkets, coffee shops and other agents.
The same applies to other food or agribusiness chains like poultry, beef, soybean, sugar-cane, orange juice, paper and pulp, leather, ethanol, tobacco and others. This method based on three phases is designed to predict how the chain will look like in a certain amount of time.
Phase 1 requires a design/description of the chain to understand how it looks like and who are the participants in each of its levels.
Phase 2 would involve the vision of the future. Here we should come backwards, starting the analysis from the final consumer (1), distribution (considering retailing, wholesaling, foodservice and other channels (2), food industry (does the secondary processing, more marketing activities – 3), agro-industry (primary processing level – 4), farming (5) and finally the input suppliers (6). Some chains have different organizational schemes, and even may have other level of participants. The thinking process is the same.
Some questions dealing with consumers are: How will the consumer look like? What will be value for them? How new products can affect their behavior? What are the trends in income (effects in developing and emerging countries)? Which changes will occur within buying behavior (conscious, environment, sustainable)? How demographic (urban, older, lonely) trends will affect consumption? How preferences (flavors) will change? How will be the acceptance to GMO’s and other technologies?
Some questions dealing with distribution are: What are the trends in retailing? Will retail concentration and global operation movement continue? What to expect from private labels? Which will be the effects of technology and price transparency? Which will be the policies toward supply chain (purchasing)? How competition among retailers will affect the chain? What will be the role of foodservice?
Some questions dealing with food industry are: Which will be the speed of new product development (NPD)? How will consolidation look like? How will costs margins and profitability of product-lines look line? How will be the relationship with retailers and agro-industry? What are the roles of regional companies? Who are the new players diversifying to this market? Which is the growth expectation for this industry? How to solve the logistics problems to supply the emerging markets?
Some questions dealing with agro-industry are: How industry will be the structured? Will the agro-industry be concentrated? The agroindustry would operate in global scale? How would be the logistics to the clients and purchasing behavior? Who will be new players? Where they may come from? What will be the degree of own production of inputs? How will operating costs and margins look like?
Some questions for future farming activities are: How production will be structured? How will concentration happen? Will it be more professional? What will be the most competitive areas in the world? Which are the growing areas and declining areas? What will be the role of cooperatives and associations? Crops will be substituted in some areas? How plagues and diseases will affect the chain? How to expect from regulation changes? How production costs will look like?
Finally, questions dealing with input industries are: What innovations will come to market? What movements upward the supply chain will be done? How will the selling and distribution channel structure look like? The concept of offering integrated solutions for farmers will be the most suitable one? How will the situation of genetic modified organism (GMO) be?
Phase 3 would be suggested if a particular company wants to use this food chain scenario built in steps 1 and 2 to have their vision of opportunities, challenges and how to position itself towards this future scenario. I hope this method can contribute to chain participants and to individual companies and strategists for their planning activities.
The author is professor of strategic planning and food chains at the School of Economics and Business, University of Sao Paulo, Brazil (www.favaneves.org) and international speaker.
