Although I am going to use fruit and vegetables by way of example, the theoretical base serves for any agricultural food product.
The two paths to be competitive.
When it is said that the product is more competitive, it is because for some reason or other the purchaser or consumer chooses it over its competition. This, Michael Porter, one of the great masters of business strategy, believes can only come from two origins: having lower production costs than the competition, enabling cheaper sales; or having some distinctive characteristic that makes this product unique, the first or the best in offering “something” significant for purchasers or consumers, something they recognise through the brand and which is reported to purchasers through commercial communication, which is not always advertising.
These are M. Porter’s two large general strategies for being competitive, the strategy of costs and the strategy of distinction, two strategies which are exclusive in principle (although Porter says that it is also possible to be competitive by focusing on a market segment), but that the Spanish sector, with the present concentration of commercial distribution, will have to be able to combine.
We have no other path.
At this stage, everyone knows that in Europe, apart from a few exceptions, it is very difficult and risky, if not even myopic, to invest in the fruit and vegetable sector to be cost competitive in a globalised economy and competing with nearby developing countries (without forgetting China). Furthermore, this competitive path implies that the prices we achieve will depend excessively on offer and demand and not on other intrinsic aspects of the product or the producer that give value. In this competitive environment where the most important thing is the price, products are bought and sold as generic: “apples”, “potatoes” or “watermelons”, and the brands are only known on the level of wholesale.
Furthermore, the present challenge is not to sell the whole of production and to be top of the ranking in the number of tons exported, but rather to sell at prices that pay for our farmers and commercialisers. Otherwise, if we continue along the dangerous path of dropping the sale price via costs, we will ruin our farmers, spoil our lands, plants and quality and may not manage to be more competitive, as products can always come from other regions or countries selling “the same” but cheaper.
Therefore and as a conclusion, we must not sell “the same”, but given the present European commercial distribution, it is necessary to have good prices but at the same time to fight for a bonus. It is key to be distinguished from the product and this means entering the world of R&D+i, of corporate social responsibility, of respect for the environment, of traceability, etc. and all of this has to be communicated and capitalised through our brands, so advertising is a strategic investment in the future as it is responsible for transmitting our distinction to the buyers and consumers.
Starting the process of distinction, analysis of the product-consumer-competition triangle:
The first thing that has to be decided in this process is in “what” we can be distinguished which gives value, but we must first know clearly “to whom” we wish to give value.
Therefore, on the one hand we will have to know what this “who” appreciates and requires and, on the other, we will have to be realistic about the capacity of our products to satisfy them. If after the pertinent studies we find something significant that we can develop or which our product already has and which might be appreciated by our purchasers and consumers and is not equalled by the competition, we will have started the process of distinction.
These two decisions, in which we are going to be distinguished and to whom or what market we are aiming are decisions of strategic marketing which imply defining the “strategic positioning” and the “market segment”, both of which are questions that condition the decisions of operative marketing with regard to the product, quality, price, distribution and communication. All of these must be coherently aligned.
To get all of this right, we must resort to a triangle of study and reflection:
On the first side of the triangle we will analyse our product, not as producers but as “marketinian” creators, looking beyond what is obvious, without limitations and conditions, bearing in mind what our target audience appreciates and what the competition provides at all times. In the case of Plátano de Canarias, what was a fault or a weakness for farmers and commercialisers, the spots on the skin, was a possible strength for me, a guarantee of origin, of flavour and the external appearance for identifying these bananas of which only 15% were labelled at the time.
The second side is followed by studying the competition and this changes depending on the competitive area that is contemplated.
For example, in agr! in the case of the fruit and vegetable and agricultural food sector, we contemplate four environments or competitive levels. These levels in turn define the types of promotional campaigns that can be done in the sector, and which in Agr! we call sector campaigns, generic campaigns, geographic campaigns and private brand campaigns.
- If we contemplate the food sector on the first competitive level, these compete with all artificial desserts such as yoghurts, ice creams, crème caramel, etc. and the vegetables with new fourth and fifth range products. We will call the promotional campaigns on this level sectoral campaigns, an example of which is that carried out by 5 a day where they promote the consumption of all of the products of the fruit and vegetable sector.
For these campaigns to work and prevent the fruit and vegetable from being displaced by their competition, a great deal of investment and time is needed on the one hand, and to get the message right on the other. Investment and time require the unitedness and vision of the whole sector, something which does not happen. And getting the message right requires professionalism.
- On the second level, a certain kind of fruit, oranges for example, compete to be chosen on the line with the rest of the fruit: bananas, pears, etc.
The campaigns on this level are called generic campaigns, as they make no mention of any origin or brand but just generally of the fruit in question. An example of this are the campaigns carried out by the inter-professional associations such as the inter-professional association of Spanish olive oil.
To be effective, a great deal of investment and continuity is also needed in each country or region in which it is done, as this is aimed at the whole population and lasts several months a year. I do not know any case in which this is fulfilled. Media investment is usually ridiculous to be effective because it wants to be in too many countries at the same time, because it wants to be politically correct and does not have the opinion of media professionals. In any case, as a general rule the appreciation positioning or argument which can be transmitted by a generic product is not sufficiently “strong” to achieve significant increases in the price or sales, unless the sector products have improved a great deal and this has not been reported, or we are faced with a new product.
- On the third level, one type of fruit or vegetable of specific geographic origin – Almería, El Jerte, Marruecos or Chile- competes against the same kind of fruit or vegetable from other regions and brands. Oranges from Valencia against others from Egypt, for example.
We will call the promotional campaigns on this level campaigns of geographic brand. These types of campaign already show the concept of brand and the generic communication disappears. The geographical origin operates as a brand and therefore transmits the distinctive advantages with respect to other equal products of other origins.
Almost all of the geographic promotional campaigns are aimed at distributing but, due to lack of budget, few massively and continuously reach the end consumers. An exception might be Rioja wine, Plátanos de Canarias or Walnuts from California. When a geographic brand decides to approach the end consumer, these campaigns are usually very effective, amongst other reasons because they find no advertising from the competition on this level and because the geographic brands are more specific about the benefits that the general or sector brands.
- On the fourth level a brand of one type of fruit compete against other brands of the same type of fruit (although the same brand may cover several fruits or vegetables) Fontestad Oranges against Solita Oranges, for instance.
On this level, we will call the promotional campaigns private brand campaigns and here a brand that is the property of some company or cooperative is promoted. There are few private brand advertising campaigns aimed at the end user (Chiquita, Fontestad, Zespri, Chico, etc.) and they are also usually very effective and ensure that the products sold under these brands fetch better prices than all of the others that fail to invest in communication.
The same company or sector can find competition on the four levels and can benefit from promotion on the same four levels: Fontestad advertises its brand of citric fruits, is interested in citric fruit from Valencia being promoted and the general consumption of citric fruits increasing, and finally that fruit consumption should increase over artificial desserts. On each of the four levels, there is a different strategic argument of attack and defence that has to be discovered and used.
The third side of the triangle is followed when we have decided what our target audience is to be: wholesalers, retailers, purchasers or consumers; what they think, what they want, what they appreciate, how many of them there are, who and how many know our product or brand, what their opinion is, etc. Market studies will be necessary to know where we are starting from in notoriety and image and where we are able to go with our strengths.
This is a key decision, for it is not the same to compete on the level of intermediaries (the habitual target in our fruit and vegetable sector) than on the level of the end consumer, for as we consider different things we will be obliged to develop or to focus on different competitive advantages that will have to be reported.
There will be more or less competitive companies or brands for a distribution purchaser, depending on their own values. These values differ from those of the end-user because more importance will be given to punctuality in service, seriousness, innovation, etc. whereas the consumer will focus more on values associated with the product: the origin of the fruit, the guarantee of flavour given by the brand, of respect for the environment of the farmers producing it, etc.
NB: in agr! we divide the brands of the fruit and vegetable and agricultural food area depending on two variables:
a) The level on which it is known:
b) The owner of the brand:
a) The level on which it is known:
Consumer brand: this is the brand of a certain fruit or vegetable known by most consumers on the markets where it is commercialised. When they are asked about some brand of this kind of fruit or vegetable, they generally name it and even associate it with the values forming the distinctive position. In other words, we are faced by a brand of fruit or vegetables which is known, such as the case of the Danone brand.
Distributor brand: that which is known by most distributors, whether these be wholesalers or retailers of the geographic market where it is commercialised and by practically no end user, incapable of remembering it or naming it. For the end-user, this kind of brand is no more than an adhesive on the product in question; in other words, they are purchasing a generic product according to its appearance and price, that which can be seen. If said fruit or vegetable has a distinctive value that is important for the consumer, such as the flavour, the origin, the fact of having no waste or belonging to a socially responsible company, but this value is not visible like the good appearance, it cannot be reported and therefore assessed and paid for. Examples: Morriña Bananas or Pardo Oranges, do you know them?
b) The owner of the brand:
Geographic brand: this is a brand owned by or whose use is permitted to a group of farmers and exporters related to the same geographic region, a region which gives its fruit and vegetables particular characteristics which the purchaser and end consumer are supposed to appreciate: Walnuts from California, Plum Dates from Ribera del Xúquer or Cherries from Jerte.
Private brand: this is one that belongs to an owner, company or cooperative and which may or may not be under the umbrella of a geographic brand: Chiquita, Fontestad or Morriña.
A geographic or private brand may certainly be distributors or consumers and vice versa.
Both the geographic and the private brands are no more than a promise of what the consumer is going to find. Before buying or consuming a product, consumers have expectations, criteria of value that define what is important to them as purchasers or consumers and what they believe to be quality. Having made the purchase and/or consumed the product, the good or bad experience will remain in their memory and the brand identifying the product will be related to it.