Maybe it’s because it’s autumn, and folks are refocusing their attention, but in my recent travels it seems that discussions have centered on change, trends and the future.
One of the messages: Future success in the pork industry requires a business culture that encourages creativity and innovation, and views change as opportunity.
That’s a tall order – especially the part about change. Certainly you’ve been through enough of it already in the past 5, 10 or 15 years.
You likely can think of several companies that have been blindsided by change – Montgomery Ward, Polaroid, IBM are just a few. Increasingly, the changes and trends occurring in the general business world impact agriculture. To avoid being blindsided, you need to understand the changing environment and how it impacts not only your business, but the entire food system. Here are some points to consider:
The rate of change is accelerating. Today, 95 percent of Sun Microsystems’ revenue comes from computer software products that were not commercially available just 18 months prior. It’s estimated that 80 percent of the technology that we will use daily just 10 years from now has not yet been invented.
It’s hard to imagine, but you can expect the rate of change to increase. That means, in order to thrive, businesses must change and re-invent themselves and their products.
Technology continues to explode. Computer processing power doubles every 18 months, and that rate is expected to continue for at least another decade. Bandwidth or communication power increases three times as fast – it doubles every six months.
Computers have already dramatically changed pork production from feeding and ventilation systems to reproduction processes to how research is conducted. The computer’s biggest impact has been its contribution to recordkeeping and analysis. There would be no 1,200-sow units without computerized records.
Concentration and coordination will increase. Larger businesses and larger market shares – aka. concentration – is evident everywhere. For example, the total market share (not just food sales) of the 10 largest U.S. supermarkets increased from 33 percent to 45 percent between 1995 and 1999. Market share of those Top 10 is expected to increase to at least 55 percent by next year.
In the pork industry, vertical integration is a reality in part because of operations like Smithfield Foods, Premium Standard Farms and Seaboard Farms. But there are others, some involving companies and some involving more traditional producers.
The adoption and evolution of production and marketing contracts have had a tremendous impact. Less than 17 percent of all U.S. market hogs are sold via open bids today.
Regardless of whether you think contracts are good or bad for individual producers, they are good for the product and the pork chain. Contracts provide a more coordinated system, which ensures that pork will be produced under specified parameters with the goals of consistency in quantity, quality and price.
In the not-so-distant future, this concentration and coordination will lead to improved animal identification and origin traceback.
They don’t know it and likely will never realize it, but consumers have been and will continue to be the big winners in terms of product consistency, quality, safety – and they’re getting it all at a lower price than ever.
Give ’em what they want. The whole system begins and ends with the consumer. You have to accept that he/she will never be as knowledgeable about your product as you’d like.
Consumers seek out certain attributes – price, convenience, healthfulness, safety and a responsibility from you in terms of the environment and how the animal was raised and handled. That may mean changing the way hogs are raised or pork is processed.
Believe you can get better. The point here is that you have to have passion, desire, interest to do better, work smarter, be open to new ideas and make changes. Because if you don’t do those things, someone else will, and they’ll have the competitive edge.
The best way to avoid being blindsided is to recognize, respond and commit to changes that impact not just your business, but the entire food system.