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Berglund, Sofia (2002) Functional foods as a strategic area for food producers. Other thesis, SLU.

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Abstract

This study comprises an analysis of how French dairy producers use functional food products in order to strengthen their position toward the retail industry. Its considerable proportions, its excellence and its international orientation motivate the choice of the French dairy industry. Functional food is a group of food products that, in addition to their nutritional values, include a value added, consisting of a documented health effect. They are designed to be consumed as every day products and they are either a food product of a beverage. The theoretical base in the analysis consists of Michael Porter's framework on strategic competition. A considerable number of stores have been investigated in the Paris area and interviews with executives in the French dairy sector have been conducted to account for the empirical material. According to this study it seems that functional foods (pff, physiologically functional foods) may be a valuable strategic area for food manufacturers. There is an established and growing market for pff, which entirely is dominated by the manufacturers who are unequivocally superior to the retail industry in developing and marketing pff. All together 115 dairy products were studied observed in the investigation, where of seven were identified as pff. More than half of the 108 conventional products are sold as private brands. However, none of the seven pff-products belong to any of the private brands. It seems possible for producers to increase their bargaining power against the retailers by using pff. On the shelves in the stores' dairy sections, manufacturers' pff-products have a far stronger position than what their products have in the dairy segment as a whole. Retailers' private brands make up for about one quarter of the entire turn over in the dairy section, but not for one single pff-product. Pff call for higher prices than corresponding products without a value added promoting health. The price difference is more prominent the more explicitly a product's health effect is communicated through packaging and campaigns. In other words, the industry has been able to negotiate higher prices for these value added products, thus they include a strategic value for the manufacturers. Pff are produced by four manufactures; Danone, Nestlé, Lactalis and Yakult Honcha. These are all multinational companies that have developed their pff themselves in two of the cases (Danone and Yakult Honcha) or acquired the products from another company (Nestlé and Lactalis). Actimel and Bio by Danone are clearly the dominating pff-products. These are being sold in all retail chains, included in the investigation. The retail chains show considerable interest in pff but have yet not succeeded in launching any such products. However, most of the chains present private brand substitutes to the pff, which are all far from being equally good, considering primarily the health value. The conclusion is that pff may offer to the manufacturing industry strategic values, and may strengthen manufacturers position toward the retail industry.

Item Type: Thesis (Other)
Keywords: Functional food, Food industry, Dairy Industry, Market Strategy, Retailing, France, Porter
Subject (faculty): Faculty of Natural Resources and Agricultural Sciences > Dept. of Economics
Divisions: SLU > Faculty of Natural Resources and Agricultural Sciences
Depositing User: Jerker Nilsson
Date Deposited: 11 Feb 2005
Last Modified: 18 Aug 2015 09:33
URI: http://ex-epsilon.slu.se/id/eprint/423

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