Professional Documents
Culture Documents
● External factors (macro-environment) that impact on food product development, including the:
- Macro-environment: broad external environment that influences a company and is
largely out of the company’s control, such as the level of interest rates.
- Economic environment
- The state of the economy can affect food product development
- A great new food product idea may work well when consumers have a high
income level and the economic outlook is prosperous, but the idea may fail in
tougher economic times.
- All economies experience changes in the level of activity and these are
described below:
- Recession: occurs when the economy of a country declines, resulting in
less disposable income, lower capacity to pay for goods and services
(especially imported items) and decreased employment.
- Expansion: During periods of expansion, the economy grows in terms of
production, employment opportunities and introduction of new
products.
- Boom: A boom occurs when consumers spend more money, eat at
better restaurants and try more new products. People travel more and
buy more luxury products, while companies become sufficiently
confident to expand their operations and product ranges.
- Contraction: Contraction occurs in the economic cycle with effect similar
to, but less severe than, those during periods of recession. Disposable
income, consumer spending, business activity and new product
development are all adversely affected during contraction.
- The following economic factors may affect food product development:
- Changes in inflation rates: These cause changes in costs of ingredients,
equipment, wages and processing, Manufacturers may pass extra costs
of increased inflation on consumers by raising their prices
- Changes in interest rates: companies frequently need to borrow money
to enable them to buy new equipment and technology or to upgrade
existing operations in other ways. To cover these higher costs, the
producer may raise the price of its products.
- Exchange rates: Australian food manufacturers frequently import
materials and technology from overseas. If the Australian dollar is
stronger than foreign currencies, the imported goods cost less visa
versa.
- Tax rates: Company taxes can change, usually more often when a new
government is elected at either state or federal level. Changes affect
company profit margins and are reflected in prices paid by customers
- Import and export tariffs: These tariffs may be altered by federal
governments and this can affect the retail prices of food products. It is
important to not such changes by overseas governments also occur and
can affect food prices in Australia.
- Wage agreements and salary levels: If a food manufacturer has to pay
its employees higher wages, these costs are usually passed on to
consumers. On the other hand, as consumers earn more they have
more disposable income to buy food
- Level of unemployment: Low levels of unemployment place less strain
on government social services, and taxes can remain low, so many
consumers have more disposable income to buy food.
- Drought: Australia is a very dry continent because of its low rainfall and
the arid nature of many areas of the continent.
- We experience periods of drought that lead to a decline in
agricultural and horticultural production.
- This decreases the availability of many foods and ingredients
- Increases prices for these commodities
- Importation of water for watering of crops and livestock
- Natural disasters: crop and animal production in australia are
sometimes disrupted by natural disasters, including floods, hail storms,
cyclones, which devastate the production of specific commodities such
as fruit, vegetables, and grain crops.
- Political environment
- Australian manufacturers, producers and distributors of food are all subject to
regulations made by federal, state, and local governments.
- At the federal level, the most prominent regulatory body is Food Standards
Australia New Zealand (FSANZ)
- Coordinates and oversees food regulation throughout Australia and
New Zealand.
- Legislation labelling is looked at when creating a new product (allergies,
weights, ingredients)
- Hazard Analysis Critical Control Points, follow HACCP
- Is a systematic approach, the aim of which is to determine the hazards
related to food, to identify critical control points (CCP), and to put them
under control.
- For the food industry, the HACCP program is currently recognised as the
best approach to control food safety.
- Local government deals specifically with local issues relating to foods such as
zoning laws, planning permits and health inspection matters.
- Government give money towards research, example new packaging techniques
→ can develop something such as edible packaging (e.g Lindt, CSIRO)
- Tariffs on imports, which affect the cost of imported machinery needed for a
new product
- Competition and consumer laws and codes of conduct such as not making false
or misleading claims about a product
- It is essential food manufacturers understand and comply with their legal
requirements when developing new food products - failure to do so can be
costly not only through legal fined but loss of customer confidence
- E.g debating about labelling (milo health star rating) and GMO new food
product development (strawberries)
- Ecological environment
- Ecological environment includes:
- Air we breathe
- Food we eat
- Our waterways
- Biodiversity in both plant and animal species
- Land itself
- Presently there is a concern about endangerment of species and environmental
damage because of issues such as pollution, land degradation, inadequate
waste disposal, and conservation of natural resources
- These issues affect consumer attitudes to such things as recycling,
biodegradability of packaging, pollution of the atmosphere and waterways, use
of pesticides and waste disposal.
- Environmental quality and its conservation are addressed by many international
conventions and treaties, such as the Kyoto Protocol, which Australia signed in
2007.
- New packaging types such as sugar cane, corn starch break down by themselves
and don’t take up space in landfill
- Packaging covenant is a voluntary covenant, they do everything possible to help
the environment → most companies are signed up to say they do everything to
help the environment
- Companies have developed a range of strategies to address consumer concerns
and enhance the marketability of their products.
- These strategies include the use of biodegradable and recyclable packaging,
better air pollution control, environmentally friendly processing and transport
for their products, and more efficient energy use and waste disposal in their
processing operations.
- This needs to be supported by the development of new products, packaging and
processing technology.
- Recycled paper in products (boxes), Paper straws, Crushable plastic water
bottles
- Organic farming → uses less pesticides and creates and easy target market
- Australian grown ingredients to reduce pollution in food milage
- Technological environment
- Changes in science and technology affect the development of new food
products.
- These include new processes such a:
- Extrusion techniques: a method of processing where a viscous liquid is
forced through a narrow opening and becomes a solid in the shape of
the opening.
- Ultra-high temperature (UHT) processes
- New packaging technologies such as modified atmosphere, computer control in
food processing, automated equipment
- Improved distributions systems
- Genetic engineering: involves incorporation of genetic material from one
organism into another to develop living organisms with more desirable
characteristics
- Technological developments lead to new foods and food components.
- This includes food additives, such as those contributing to food flavour and
texture, fat and sugar replacements and processing aids → anticaking stops
from lumping, vegetable gums change the thickness
- Microwavable foods: Lite N’ easy, microwavable broccoli, chicken in a plastic
bag, small cups of rice, quinoa (individual serves for busy people)
- Dual ovenable tray → plastic can be heated up in oven or microwave
- BPA chemical / toxin from plastic bottles can leach into the water
- One of the biggest technological issues in food industry is genetically modified foods.
- GM plants and animals offer advantages such as increased yields, improved
handling and processing properties, greater disease and insect resistance,
higher growth rates and improved sensory properties (such as aroma, flavour,
texture)
- Changes in food technology, whether it be the introduction of new GM foods or simply
better automation in the factory.
- May have some disadvantages such as decreased employment rates
- Result in employees needed retraining to operate advanced processing and
storage facilities
Strengths:
1. Golden arches - one of the most recognizable logos
2. Community orientated - little athletics
3. Socially responsible
4. Fast production/service
Weaknesses:
1. Test marketing for pizza failed
2. High employee turnover
Opportunities:
1. Healthy hamburger
2. Hot specialist coffees
3. Not only secure sales
Threats:
1. Reputation for unhealthy food
2. If consumers decide to be healthier
3. Government changing legislation for companies to show all ingredients etc
4. Major competitors such as; burger king, wendy's, starbucks, taco bell, KFC
Reasons for and types of food product development:
- Societal changes including increasing ageing population, single person households and
longer working hours
- Health and diet related issues is increasing
- When people have no time consuming more home delivered meals (uber,
deliveroo)
- Eating outside the home more
- Consumers are more aware of the environment
- Australia is a multicultural society → lots of opportunities and trends
- Levels of change in consumers physical activity → altered levels of physical
activity for exercise / changing lifestyle
- Busier lifestyles allow less time for food preparation
- More people are living alone, houses are becoming smaller (people choosing
not to be married, divorce rates)
- Me toos:
- Me-too products are essentially direct copies, or with minor modifications, of
existing products available on the market and manufactured by other
companies.
- Direct copies of minor modification of an original food product
- E.g. AussieMite & vegemite
- New to world
- Completely new products, have not been in the market before
- Developed as a result of:
- GM technology
- Packaging developments
- Extrusion technology
- Appliance technology - e.g microwave, new
- Multipurpose oven, nutribullet, cold press blenders
- Using:
- Gm ingredients
- Food additives
- Traditional foods such as bush foods
Examples Include:
- Heston bush food line for coles
- Cassava crunch, avocado chips, almond butter
- Cricket Pasta, Chips containing cricket powder → crickets are high in protein
- Sipaah, Kale chips, Cashew Milk, Shine+
Marketing plans:
- Marketing plans identify target market, predict demand for the product and organise the
activities of the marketing mix. - product, price, promotion, place
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ave a basic list price or suggested price based on the break even point
- Break even point is the point at which total revenue equals total costs or
expenses. At this point there is no profit or loss
- Pricing strategies:
- Penetration pricing ? Launch of a Me-too
- The product price is below that of competitors for long enough
to obtain a foothold in the market.
- This pricing tactic is used when a company enters a new market
segment for the first time when a me-too product is being
launched, or when it is hoped the product will be around for a
long time.
- Price skimming ? New to the world or Line extension (if it has no other
competition)
- Where a product or service is sold at a relatively high price at
first, and then the price falls over time
- It is used when the product is:
- New to the world or a line extension that has no other
competition
- The only one on the market and without substitute
- ‘Positioned’ as an exclusive, high-status brand.
Consumers assume that a high price means high quality
- Not expected to have a long life cycle
- Competitive pricing / status quo pricing? Line extension
- The price is set to match that of the competition
- This pricing strategy is used by market leaders and at places like
Paddy’s markets where all the fruit and vegetable sellers charge
much the same price for their goods.
● Place and distribution system
- Place in the marketing mix refers to where the product will be sold
geographically and to the kinds of outlet in which it will be sold.
- Place is where the target market lives, works, plays and shops
- Marketers have several tactics to consider when placing a product to
reach the target market
- Intensive distribution - means when products are available at
every possible outlet
- For example: chocolate bars are sold in small shops,
serviced stations, grocery stores, newsagents, bakery
shops, vending machines, and online)
- Selective distribution: this is when there is a wide but not
intensive distribution
- For example: some types of cheese are available at
delicatessen chains such as Cut Price Delis rather than
woolworths or coles)
- Exclusive distribution: Limited supply. Sold only in certain
outlets due to expensive ingredients, high technology
- For exam2ple: handmade chocolates - has an elite
image in the consumers mind
- Retailers:
- Company that sells something to the consumer by telephone,
mail, vending machine, on the internet or face to face is making
a retail sale.
- The main function of a retailer is to sell goods and services to
consumers who will use the products for their own use.
- Retail food stores may be small-scale or large-scale operations,
depending on the volume of sales. Ownership may be:
- A corporate chain - e.g. coles
- An independent owner - e.g. sole proprietors corner
store
- Groups of voluntary associations of independent
owners
- A cooperative. A cooperative is a business that is
owned, controlled, and used by its members for their
own mutual benefit. Primary producers such as farmers
and fishing operators sometimes form cooperatives.
- Distribution refers to the process of moving the product from the producer to
the consumer.
- Once a company has chosen its placement strategy, the physical
distribution of the product takes place
- Distribution involves moving the product from the manufacturer to the
point of sale
- The longer the distribution chain the less efficient it is
- Warehousing:
- The correct storage of goods means the consumer
receives the product in the best and safest possible
condition
- Materials handling
- Refers to forklifts, conveyor belts and other methods
that move the cartons of product from the storage area
to pallets ready for shipping
- Inventory control
- Essential because it ensures the quality of the product
and quick filling of orders
- Holding to much stock is expensive, risk of theft, fire,
and water damage
- A recent development concerning checking the quality
of food is the practice of taking digital photos of
rejected produce which can be emailed to growers
within hours
- Order processing:
- Involves the handling and filling of orders, processing of
accounts and collection of credit payments
- Portable data, entered by retailers, identifies when
stock is low and automatically reorders the product
- Transportation
- The type of transportation used - air, water, rail or road
- depends on the type of product, the urgency of the
delivery, the distances to be covered, and the nature of
the product.
● Promotional program
- Promotion informs consumers about new products and persuades customers to
buy a new product or buy more of an existing one.
- The types of activity include:
- Advertising
- Personal selling
- Publicity and public relations
- Sales promotions (sample testing, sales, giveaways)
- To select the right type or combination of activities to promote a product a
company has several important considerations:
- The promotion budget
- The size and maturity of the target market
- The stage of the product’s life cycle
- Advertising:
- Magazines, newspapers, television, radio, internet
- The marketing team uses market research to identify the physical and
buying behaviour of its target market, then selects the media outlet that
best delivers the advertising message to the consumer
- When choosing a magazine in which to advertise a product, a company
can choose different categories of magazines that have different
markets:
- Consumer - for example, Australians Women’s Weekly
- Class - e.g a magazine for a select group interested in a
particular item, such as gourmet cooking
- Trade - for example, hospitality industry magazines such as
Open House
- Technical and professional - for example, the monthly
publications by the Australian Institute of Food Science and
Technology
- To promote a product consider:
- The size and maturity of the target market
- The stage in the product sales ultimately peaks, then slows as the
product becomes popular and competition is increased with other
introduced products by different companies.
- Sales, promotions and demonstrations:
- Contests
- Free samples
- Cash back offers
- Exhibitions
- Personal Selling
- Retail sales - assisting customers to choose a product over another
product
- Publicity and public relations - Celebrities wearing product company
logos, Using products in their shows,