Tightening belts

FOOD INDUSTRY

Agathe and Camille

TIGHTENING BELTS[1]

The economist, April 12. 2006 p67

I.                    Facts

The text deals with the crises from the retailer side. Inded the crisis touched the retailing sector.

In 2007, prices on edible commodities[2] have been increased and it was the same on fioul and electricity. So processinf of distribution become more expensive. It existed a problem : price rise but not the purshasing power (because of the high unemployment and inflation). Changes in consuming patterns, people take care their money => it hurts smaller companies (they don’t have the benefit of economies of scales) and they have to go bankrupt .

II.                  Examples

Netslé : sales : +7% contrary to the food industry’s sales : +1,8%. Adoption of new measures to cope[3] with the crisis : bought raw materials in advance, buy milk directly from farmer (without intermediaries) and reduce the amount of milk in their recipes (recettes)

Macdonald’s : become more and more popular because of their low prices which are very attractiv in crisis period. One new menu with items at 1$ with an advertising campaign named « dollar menunaires » (dollar millionnaire). Rivals (Starbucks, Burger King) have followed this new strategy.

Wal Mart : people are more and more afrad of consuming, they focus on low prices. Strategy : working with food producers to come up with lower prices.