Commodity.Branding

Branding of agricultural commodities/products – Challenges : 

Branding of agricultural commodities/products – Challenges Suresh.B.P FPRM 6th batch

Situation in Agriculture : 

Situation in Agriculture Agriculture accounts for 17.8 % (2008-09) of GDP (CSO) compared to 50 % in 1947. Engages about 56 % of the work force (Jain 2001). Indian farming changed due to green revolution, larger marketable surplus. Shift from subsistence to commercial agriculture.

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Due to economic growth, increase in income levels. The demand for the agricultural commodities and value added products are increasing. Abbot (1987) says, as consumers income rise, demand becomes more discriminating, i.e. a wider variety and a higher quality are sought, particularly by expanding groups of higher income groups in urban areas. Scope in International market. Changes in the form and degree of government intervention in agricultural markets.

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An efficient marketing sector has been described as the most important multiplier of economic development (Drucker 1958). The producer share in consumer rupee. Food grains- 55 to 65% Fruits- 30 to 40% Vegetables- 40 to 50% http://www.indiaagronet.com/indiaagronet/Agri_marketing/AgriMark.htm

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Food items contributed 72 percent more to the incremental fast moving consumer goods value in 2004 as against 2000 (study by CII, AC Nielsen and Org-Marg). Most of the growth came from packaged basics like cooking oil, wheat flour, rice, and ghee, indicating an overall upswing in the commodity branding movement.

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Aaker and Joachimsthaler (2000) stated that the development of brands was the only way to remove oneself from commodity status and price competition. Brandless commodities cannot easily survive the ups and downs of the markets. Commodity marketing , not much rewarding to farmers.

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Proper grading of products ensures that the farmers/producers would receive prices of their products according to its quality and the proper grading also provide safeguard to consumers against adulteration. Due to lack of facilities the middleman will be the only gainer (Rais Ahmad 1998).

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Marketing for agricultural products has often been left up to a single desk producer boards that have focused on increasing production efficiency, price competitiveness and product quality in order to develop a competitive advantage (Crocombe et al, 1991). Lichenthal and Long (1998) stated that it was no longer sufficient for agribusiness to produce a technically superior product.

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Miles et al (1997) stated that agribusiness would need to adopt strategic planning models if they are to be successful in the future. These models will need to address the development of strong brands , a unique selling proposition, the formation of close relationship throughout the supply chain and the development of market orientation.

Agriculture marketing – Def by The National Commission on Agriculture : 

Agriculture marketing – Def by The National Commission on Agriculture As the process which starts with a decision to produce saleable farm commodity and it involves all aspects of market structure or system both functional and institutional, based on technical and economic considerations and includes pre and post harvest operations, assembling, grading, storage, transportation and distribution.

Agriculture marketing – Def by ICAR : 

Agriculture marketing – Def by ICAR As involving three important functions assembling (concentration) preparation for consumption (processing) and distribution

Marketing as defined by American Marketing Association (AMA) : 

Marketing as defined by American Marketing Association (AMA) “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large” (AMA Oct 2007).

Commodity definition : 

Commodity definition Kotler and Keller (2006) define a commodity as a product that is presumably so basic that it cannot be physically differentiated in the minds of the consumer. Theodore Levitt (1980) in his classic article titled, 'Marketing Success Through Differentiation - of Anything', states "There is no such thing as a commodity. All goods and services are differentiable.”

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Levitt (1960) explained products are always tangible and intangible. To the potential buyer, a product is a complex cluster of value satisfaction. Customers attach value to a product in proportion to its perceived ability to help solve their problems or meet their needs. “The product is the total package of benefits the customer receives when he or she buys”.

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There is a need to narrow the gap between producer prices and consumer prices through proper marketing support. Farmers need to be facilitated to take up value addition such as processing of agricultural produce, horticulture, pisciculture, poultry and development of non-farm rural enterprises. (India economic survey 2009)

Why should one brand a commodity? : 

Why should one brand a commodity? Is a way to escape from merely competing on volume and price alone. Brands help to differentiate products as they enhance their value beyond their functional attributes. They build preferences versus competing products and therefore create long-term sustainable competitive advantage.

Branding of commodities? : 

Branding of commodities? The answer is yes but, There is a cost associated with building such a differentiated market position. It is essential that this be weighed against the benefit of increased market share and price premium opportunities.

Consumer positions any brand - by ref to three sets of considerations : 

Consumer positions any brand - by ref to three sets of considerations The functional aspects of the brand. What is the product? What does it do? How is it offered? Why is it needed? “These aspects are almost invariably over-emphasized at the expense of other important components,” The evaluative issues. How well does the product perform? How can it be judged and on what evidence? The psychological components. Which of the consumer’s basic motivational needs does the brand relate to? How does the consumer feel about using the product?

Continuum depicting value added and differentiation : 

Continuum depicting value added and differentiation markets begin with commodities, they eventually evolve into brands which will later dominate the sector. Mass marketed and commingled commodities Differentiated but not branded commodities Branded commodities products

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In commodities marketing the consumers can be segmented into 3 distinct categories (McCunne 1998) Gold standard customers (5 to 25%) Potentials (30 – 45%) Incorrigibles (50% +)

Brand- definition : 

Brand- definition “ a name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers” (AMA 2006). Gardner and Levy (1955) defined brand as a complex symbol that represents a variety of ideas and attributes. It tells the consumers many things not only the way it sounds but more important, via the body of association it has built up and acquired as a public object over a period of time. Definition of a brand varies by context and discipline (Aaker1991; Keller 1998).

How to turn commodities into branded goods : 

How to turn commodities into branded goods Carving up the market from every angle and to identify those customers who are responsive to differentiation. To have an intense focus on creating true economic value for those customers who are willing to pay for it and a brand strategy based on product, delivery or service differentiation. Differentiating the offering in one or more of the six "generic" dimensions of differentiation Bundling several differentiations into a brand and communicating the same consistently and strongly. Aligning the business capabilities to reinforce and to defend the brand and the underlying sources of differentiation.

six "generic" dimensions of differentiation : 

six "generic" dimensions of differentiation (Sam Hill, Jack Mc Grath and Sandeep Dayal cited by Adhye Amol 2008)

12 main elements among broad range of definitions of brand in the literature : 

12 main elements among broad range of definitions of brand in the literature legal instruments logos company communication shorthand risk reducers identity systems images in consumers’ minds value systems having personalities parties to a relationship adding value and evolving entities. These include various aspects of the company’s activities and the consumers’ perceptions. ( De Chernatony and Dall’Olmo Riley 1998) The elements referred to brands in terms of their role

Branding to marketer : 

Branding to marketer Easy for the seller to track down problems and process orders, Provide legal protection of unique product features, Branding gives an opportunity to attract loyal and profitable set of customers, It helps to give a product category at different segments, having separate bundle of benefits It helps build corporate image, It minimizes harm to company reputation if the brand fails.

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Brands serve as markers for the offerings of a firm, They play an important role in determining the effectiveness of marketing efforts such as advertising and channel placement, and are An asset in the financial sense. (Keller and Lehmman 2005)

Brand to Consumer : 

Brand to Consumer For the final customer, a brand helps to ease the buying decision by giving information and catalyzing information processing, in addition, as a signal of quality (O’Shaughnessy 1995). brands can reduce search costs and can help to lower the risk of making a bad bargain. Furthermore, brands can impart a sense of an event or adventure helping to create a certain self-portrayal for customer (Homburg & Krohmer 2003).

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For customers, Keller and Lehmman (2005) says, brands can simplify choice, promise a particular quality level, reduce risk, and/or engender trust. Brands are built on the product itself, the accompanying marketing activity, and the use (or non-use) by customers as well as others. Brands thus reflect the complete experience that customers have with products.

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As a member of the WTO, India has enacted (with effect from 15th Sep 2003) Geographical Indications of Goods (Registration & Protection) Act, 1999 Geographical Indications of Goods(Registration & Protection) Rules, 2002 Geographical Indication Registry, Intellectual Property Building,G.S.T. Road, Guindy, Chennai - 600 032Phone: 044 – 22502091-93 & 98, Fax : 044 – 22502090 http://ipindia.nic.in/girindia/ About 106 GIs registered in India

What is a Geographical Indication? : 

What is a Geographical Indication? It is an indication, It originates from a definite geographical territory , It is used to identify agricultural, natural or manufactured goods, The manufactured goods should be produced or processed or prepared in that territory, It should have a special quality or reputation or other characteristics. Though GI is a kind of IPR, it is not connected with patent or trademarks.

GI as a brand building tool : 

GI as a brand building tool Function of GIs is similar to trademarks except that they point to the place of origin and not to the owner of the goods. On other legal aspects such as assignment, they differ from trademarks. GI registration is only the first step towards capitalizing on your GI. It should be followed by brand promotion/ awareness creation and commercial exploitation.

Brand Equity : 

Brand Equity Brand equity is defined the added value with which a given brand endows a product (Farquhar 1990). Biel(1992) suggested, brand equity is the value “ beyond the physical assets associated with its manufacturer or provision”. Brand equity consists of awareness, recognition and top of mind awareness of the product amongst consumers; positive brand associations; perceived quality and brand loyalty, trade cooperation and joint marketing efforts and pride ownership among the company (Aaker and Joachimsthaler 2000).

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Customer based brand equity is defined as the differential effect that the brand knowledge has on consumer response to the marketing of that brand (Kotler and Keller 2006) According Aaker (1991) brand equity results from brand loyalty, name awareness, perceived quality, brand associations and other properiety brand assets (e.g. patents, channel relationships). There are many models for capturing brand equity.

Brand Equity – Advantages : 

Brand Equity – Advantages Reduced marketing costs Trade leverage Can charge a higher price Can easily launch brand extensions Can take some price competition Aaker (1991) says, “Brand associations reduce the primacy of price upon the purchase decision”, potentially allowing higher prices to be charged and larger profit to be achieved.

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When a commodity becomes a brand, it is said to have equity. There are many studies on the factors that influence brand equity in consumer goods that are not commodities The question whether it is possible to develop brand equity for commodities such as agriculture produce.

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It’s hard to imagine a more basic commodity than water. If water lends itself to marketing differentiation through brand strategies, then any commodity can be branded (Matt Michel 2008). Nestle around 60 brands in water. Why so many brands? Each brand is designed to occupy a different position.

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1924 1970 2007 1914, 1921, 1933, 1941, 1956, 1968 1848 http://www.mortonsalt.com/

Pilgrim's Pride Corporation : 

Pilgrim's Pride Corporation The largest poultry company in the world. Fortune 500 company with $7.6 billion in annual sales and 55,000 employees. Exports to more than 80 countries. Eggs Plus, the revolutionary eggs that look, cook and taste just like ordinary shell eggs, Have ten times more Vitamin E, They're an economical source of Omega-3 Essential Fatty Acids - the “good fats”. http://www.pilgrimspride.com

Chiquita Brands International : 

Chiquita Brands International The company grows, procures, markets, and distributes bananas and other fresh fruits and vegetables . Sales in 70 countries worldwide. 57% of total sales is Banana, also sell whole citrus fruits, melons, grapes, apples, and tomatoes. Fresh Express - RTE salads in North America. http://www.chiquita.com/

: 

The Vidalia® Onion Committee 1980s, farmers united to seek both state and federal protection of the growing region and the Vidalia name. Southeast Georgia’s mild climate, the area’s sandy, low sulfur soil, exclusive seed varieties, and precise farming practices make this original sweet onion mild and flavorful.

Commodity Brand : 

Commodity Brand Salt Wheat flour Rice Basmati Rice Non Basmati Edible oil Milk

Traditional thinking of commodity marketers : 

Traditional thinking of commodity marketers Price is a given. Volume is what counts. Sales people : market share. Production people : keeping the plant busy. The competition wants the same tons as us. The customer only cares about price. (Ahlberg Johan et al, cited by Adhye Amol 2008)

Challenges in developing brands : 

Challenges in developing brands Long-term commitment –thinking in terms of years rather than months. Identification of the segments. Pricing competitively. Positioning of the brand. Promotion of commodity as a category. What makes the product special? Past associations. To reach economies of scale.

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Collecting and appreciating the signals of consumer requirements. Counterfeit threat. Threat from the private labels.

Challenges in developing farmers owned brands (FOB) : 

Challenges in developing farmers owned brands (FOB) Forming producer groups with common goals. Limiting supply. Hiring and managing professionals. Market intelligence.

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Discussions and Suggestions.

Thank You : 

Thank You

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(Keller and Lehmann, 2005)