Production dynamics are still tough. Low prices, tight margins, political and regulatory uncertainty, atomization, low bargaining power, etc. And here we are, nevertheless, having a stark competition against each other.
‘Farmers from a same tiny village in Spain (just to put things into perspective), growing their produce for two or three different trading companies to access the very same market.’
But the world is changing and will force us to change with it. There is a growing understanding that greater business success can be achieved through participation in a strategically aligned value chain.
Innovating as a chain not only results in market-oriented improvements in products and services, but also enables businesses to streamline operations within and between themselves – resulting in higher levels of efficiency than would otherwise be possible. This model also creates competitive advantages hardly matched by competitors.
Nothing really new. It already happened to global industries like the automotive. And it is happening to ours just before our eyes, but we can’t see it. The old business model of independent companies competing against other companies is slowly being challenged by distinct value chains competing against other value chains for market dominance.
However, agri-food companies operate with very different cost structures, not many widely adopted standards, uncoordinated actions with key suppliers and key customers and no sharing of experience. The necessary capabilities to innovate in line with the market’s demands require skills, human and financial resources, and marketing that are not usually linked to agri-food companies.
All that together creates higher costs, inefficiencies and inability to face the complexity and uncertainty brought by competition, environmental challenges and the continuous evolution of consumer needs
The new competition model between global supply chains entails that we will have to chose and join one of these supply chains, led by a modern, global distribution chain (the same as car parts producers did with big car manufacturers).
In the future, we will collaborate with companies in our immediate environment (and other, farther ones), we will share information and develop products jointly in order to serve the interests of every player in the supply chain, but absolutely coordinated with supermarkets’ strategies. Choosing won’t be easy. We will have to choose the supply chain that granted us growth and innovation, and that was genuinely concern about our survival as members of their base producers.
Whether we like it or not, this is the future coming. We will collaborate with each other (and with key suppliers like biotechnology companies) or we will be forced to do so. As for me, I decided to play an active role in this new world, hoping that we will achieve to generate a healthy business, based on open, sincere collaboration.
*This contribution was originally published by Revista Mercados for the Fruitlogistica edition.