Rural Delivery: GlobalCo should be first step in market teamwork

By GUENTHER MUELLER-HEUMANN*

With GlobalCo, New Zealand will finally have one, privately owned big player in international food marketing.

GlobalCo will be able to compete effectively against some of the much bigger international food companies such as Unilever, Nestle and Philip Morris/Kraft, and will be able to stand up firmly against the sometimes-tough demands from large, overseas importing retailers.

GlobalCo will have the economies of scale to further develop and market innovative and highly successful products such as Anlene (a natural, calcium-enriched milk formulation aimed at combating osteoporosis) and its more traditional lines of milk-based products such as Anchor butter in Britain.

However, considering that New Zealand fancies itself as a food-exporting nation, the formation of GlobalCo is only a first step.

The company will focus only on one product category, namely milk-based products. While other food categories, such as meat, are still battling with the problem of there being too many export players, there is still not one single substantial export organisation that represents a range of "Foods from New Zealand."

By comparison, GlobalCo's international competitors have much broader product ranges.

Unilever employs 246,000 people and in 1999 had worldwide sales of £27.3 billion ($NZ92.2 billion) based on its wide, diversified product ranges. As the company boasts: "From tea and ice cream to shampoo and toothpaste, we have got one of the most comprehensive portfolios of brands to meet everyday needs of consumers."

Unilever has long moved on from its origins in margarine and soap and spends £3.5 billion a year alone on marketing its brands - which roughly equates to the total current turnover of GlobalCo.

Nestle, the Switzerland-based international food giant (with board-controlled shareholding), has about 230,000 workers in 500 factories worldwide. It is Switzerland's largest industrial company, with sales of Sfr75 billion ($102 billion) from four wide product categories: beverages (28 per cent of sales); milk products, nutrition and ice cream (26 per cent); prepared dishes and cooking aids (27 per cent); chocolate and confectionery (14 per cent); and pharmaceuticals (5 per cent).

Philip Morris/Kraft, which sells food, tobacco, beer and financial services, is bigger than the whole New Zealand economy.

By comparison, even with the "huge" GlobalCo, we do not have a true "food" exporter, but just a larger "single food product category" exporter.

With each New Zealand food category being exported by one (as in the case of GlobalCo and Enza until now) or a number (meat, kiwifruit, soon apples and pears, wine, boysenberries, and so forth) of parallel, vertically organised companies, the New Zealand food-exporting effort will continue to suffer.

For a start, all these single food category exporters have their own overheads, which per dollar exported would be considerably lower if we had larger companies exporting ranges of food products.

Many of our single-category food exporters call on the same supermarkets overseas and sometimes compete with each other. Further, because of a lack of economies of scale, branding across categories is not possible. This dilutes the marketing effort, making it very hard to establish a broad consumer franchise, such as Kraft, for example.

GlobalCo will probably diversify naturally by adding profitable non-dairy food products to its range. But what about the rest of the lot? Food-marketing exporters should amalgamate across product categories to be able to offer a wider range of New Zealand food products overseas.

Only larger food export companies with wider ranges of products can create "Foods from New Zealand" brands, and establish broad consumer awareness and lasting positive attitudes towards these food brands.

* Professor Guenther Mueller-Heumann is emeritus professor of marketing at the University of Otago.