MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 1

FOOD CONSUMPTION, MANUFACTURING, AND MARKETING

Food consumption patterns

Demographics and trends

International comparisons

Issues in food markets

Food marketing choices

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 2

Food Consumption Patterns Increasing

consumption—so far… Pork Chicken Turkey Fish Cheese Fresh fruit Frozen vegetables Flour and cereal

products Soft drinks

Declining—so far… Beef Eggs Whole milk Sugar Coffee

No evident trend Ice cream Butter, margarine Fruit juices Lamb Fresh potatoes

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 3

Possible Effects of Adkins Diet

Increases: Beef Butter Cream Nuts

Declining Sweetener Frozen potato

product Fresh fruit,

vegetables

Low fat diets Increases

Chicken Fish Low fat dairy Fruit Vegetables

Decreases Beef, lamb Eggs Sweetened

products

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 4

Definition

Demographics: the description of a population in terms its size, distribution, and structure

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 5

Issues in Demographics

Population size: number of

individuals distribution

across a geographic region

rural, urban, or suburban

Structure age economic

stratification occupational

distribution status/social class

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 6

Demographics helps

Understand current markets--demand for products explained in terms of personal characteristics

Predict future markets

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 7

U.S. demographic trends

Population increasing (due to immigration) Increasing average age More small households Delay in marriage and children Fewer children per couple High rates of divorce Increasing levels of education Increasing ethnic diversity High rates of female workforce participation;

dependence on dual incomes

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 8

Japanese Demographic and Social Trends

Zero or negative population growth Low levels of immigration Graying population More one child families Significant delays in marriage and children High incomes in nominal terms but lower purchasing

power Prolonged economic stagnation Intense competition for jobs and colleges Relatively even income distribution Low regard for many foreign products, but also some

desire for “mystique.” Increasing rates of workforce participation among

younger women

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 9

Chinese Population Trends

Wide variations across geographic regions

Population growth slowing in most regions due to “one child policy” children become “little emperors”

Highly cyclical economy with generally high growth rates; increasing group of affluent consumers

Migration toward cities China’s entry into WTO may open the

way for agricultural imports

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 10

German Demographic and Social Trends

Shrinking population High tax rates put pressure on income Trend toward later marriages and fewer

children Distrust of immigration Imports from other EU countries

preferred High female workforce participation; dual

income essential High levels of welfare and government

programs

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 11

Demographic and Political Trends in the Middle East

High birth rates Economies heavily dependent on price of

oil; limited economic growth Large disparities in income in some areas Limited ability to grow food in desert

environments Food imports dependent on political

considerations Female workforce participation varies

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 12

U.S. Food Consumption and Demand

Typical family spends 9-11% of income on food

Decreasing percentage spent with increasing income, but more absolute dollars spent (income elasticity <1)

Immigration has influenced both food preferences and retail formats

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 13

Comparative Food Spending Percentages, 1994

Philippines: 56% India: 51% Mexico: 25%

(modest incomes, relatively high prices)

South Africa: 28% Japan: 18% (very

expensive food but high incomes)

West Germany: 17%

Denmark: 15% (25% sales tax!)

France: 15% Netherlands: 11% U.K.: 11% Canada: 10%

Percentages of total expenditures—includes non-consumer spending such as government and industry. U.S. figure: 7%

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 14

Some Common U.S. Food Outlets

Supermarkets Neighborhood food

stores Convenience stores Drug and discount

stores Gas stations Vending machines Food stands, street

vendors

Restaurants Cafeterias Specialty food stores Door-to-door sales Online and catalog

orders

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 15

Some International Characteristics

Japan: Strong emphasis on neighborhood stores, vending machines

Europe: Large food stores are available, some may deliver; government protection of smaller retailers

Developing countries: Food often bought at open markets

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 16

Some Food Demand Issues Income elasticity Price elasticity

Normal vs. “inferior” goods

Cross-price elasticity “Trading Up” within

select categories Increased interest in

convenience foods Conflict between demand

for healthier and “junk” foods

Unplanned purchases and consumption

“Functional” foods

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 17

Some Functional Foods

Fortified foods “Health” foods

Cranberry juice Green tea Soy based foods

Organic foods

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 18

Away-From-Home and Prepared Foods

48% of food expenditures on items eaten away from home (1999)

Large part of restaurant meals is for non-food costs Labor Ambiance Facilities

Increase in take-out foods from restaurants and stores

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 19

Public Food Programs

Food stamps were created mostly to promote demand for farm products (thus only American products)

Only a limited amount of food stamp value goes toward increased consumption (cash is diverted elsewhere)

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 20

Some Food Marketing Issues

Branding Innovation

Brand extensions and improvements to existing product categories

New product categories Consumer brand loyalty: The ability to

resist promotional efforts of competitors—not consistent choice of brand

Multi-brand loyalty

MKTG 442 FOOD CONSUMPTION, MANUFACTURING, AND MARKETING Lars Perner, Instructor 21

The Four Ps of Marketing Product

Differentiation from competitors

“Me too” products tend to be unsuccessful

Pricing Price positioning of

the brand Low Value High (prestige)

Consistency of pricing

Distribution Options available Intensive vs. selective

distribution Promotion

Advertising for brand building

Some other options: Samples Price promotion Coupons Trade promotion