Everything but the squeal

In 2013 the UK food and drink exports to China were up 82% with demand for Pork and Salmon products particularly strong.

Much of the pork will be in the form of parts that are popular in China but not with British diners, such as offal and trotters.

China is the most lucrative grocery market in the world and this is just another signal of the growing emergence of China in the international commodity markets.

That influence continues to grow as Chinese import demand tied to population growth and increased annual income broadens into corn, meat, nuts, and dairy and other food products.

China is the leading producer of many agricultural commodities, supplying more than half of the world’s pork; one-third of the world’s horticultural products, rice and cotton; and close to 20 percent of the world’s wheat, corn and poultry.

With about one-fifth of the world’s population, China is also the largest consumer of many agricultural products; its current share of global pork consumption is 50 percent, 40 percent for cotton, 30 percent for rice and more than 25 percent for soybeans and soybean oil.

A burgeoning middle class population and a shift in dietary patterns will combine to produce widespread buying of agri products.

Consequently sales to this destination will become a rapidly increasingly important price determinant in the coming years.

 

A rose by any other name

Following the financial crisis of 2008 there was much talk of a collective reigning in and return to the principles of sound business.

However memories are short and it is never long before the blurring starts again and risky practices again become more and more the norm.

There is now a concerted move afoot to rehabilitate the image of leverage.

This was the mechanism which more than any other precipitated the disaster in the financial system.

Companies no longer speak of leveraged deals but are now taking on “sponsor finance”.

This re-branding has in-built danger as witnessed previously, complacency has resulted in the demise of numerous organisations.

As George Santayana commented “those who cannot remember the past are condemned to repeat it”.

The high cost of complacency

One recurring theme from the analysis of losses made in the financial sector is that management were totally unaware of the risks which their institutions were running.

To be effective, risk management and risk controls rely on the people operating them.

As has been well documented all too often corporate culture is dominated by fear and greed and these together make for a toxic combination.

When strategies fail and trading positions spiral out of control these two elements come very much to the fore.

Fear can often lead to individuals embarking on an even more reckless course of action in the misguided belief that it will all come right – the gambler’s doubling up mentality.

At the same time recklessness is often driven by greed; the larger the risk the greater the reward should it prove to be a successful course of action.

Against this background it is incumbent on management to ask the uncomfortable questions and not merely rely on the assurance that all is well and going to plan.

It is always worth remembering that if something looks too good to be true it invariably is.

 

Getting ahead of the game

 

As evidenced by the rise of the discount grocery retailers such as Lidl and Aldi consumers are seeking value for money as never before.

Domestic budgets continued to be squeezed with the resulting knock on effect for businesses across the board.

This is an appropriate time to conduct a thorough analysis of your business.

Undoubtedly there are areas which would benefit from some radical adjustments and or change of direction.

The consequence is not acting now could have very negative effects in the coming months.

Now is the opportunity to tackle difficult issues rather than adopting an ostrich "head in the sand" attitude. There is undoubted value in a pre-emptive strike.

When trying to explain the outcome of a failing strategy to either your shareholders or bankers there is little merit in trotting out the tired old defence that “it seemed like a good idea at the time”.

Plus ça change

 

It is over five years since the world was caught up in a financial tsunami the consequences of which are still being felt today.

The irony of the situation is that the architects of the crisis have by and large remained insulated from the results of the problems they created.

They are benefitting from the cover provided by the “too big to fail” position which they occupy.

Following the fall out in summer 2008 the widely heard mantra was “never again” and the banking community was told to put its house in order and build up sufficient reserves to support itself.

In reality the banks knew that whilst paying lip-service they could carry on very much as before in the knowledge that they had a safety net i.e. the tax payer. As an example, this year Barclays Bank paid over 400 of their bankers bonuses in excess of £1 million.

The reality is that despite the rhetoric banks continue to be afforded protection by the “too big to fail subsidy”.

In the UK for the financial year 2011-12 this subsidy amounted to £66 billion. The IMF have now warned that plans to reduce bailout costs for a bank in distress “may not be viewed as effective and that announcements to eschew bailouts are not considered credible”.

Driving your sales

There are some basic but proven tactics which companies can employ to increase sales.

Companies that are increasing their sales turnover usually have an attractive staff incentive system in place. Make sure you keep track of what type of “carrot” your competitors are offering to their sales force.

Upselling is a cost effective way to boost bottom line returns.

Essentially, upselling involves adding related products and or services to your sales portfolio and making it convenient and necessary for customer to buy them. Crucially when upselling the customer has to be persuaded of the benefit.

Give your customers the inside track.

Try to stay ahead of the competition by having up to date brand and market information combined with technical back-up. For example if a new product launch is imminent it is better to keep the customer’s interest “warm” rather than push them into a purchase which they shortly will become dissatisfied with.

Differentiate your customers.

There should be a clear and obvious difference between your regular customers and others – a difference that your regular customers perceive as showing that you recognise and appreciate their value.

Repeat business is the life blood of any sales force.

Loyalty cuts both ways and becomes meaningless if all customers are treated as “someone off the street”.

 

Diversification – sometimes silver bullet, often poisoned chalice

 
Without doubt one of the most difficult challenges a business confronts is to diversify.

Often a company is faced with the dilemma of diminishing revenue returns and a tired business model which is either irrelevant or obsolete.

Diversification is seen as the solution to these problems.

However, the mechanism for achieving this objective can be particularly difficult. The first step is examining why the current business model is not working. This requires an honest appraisal from management in respect of their performance.

Then the areas of diversification have to be closely considered. It is a common mistake for people to plunge into businesses in which they have little knowledge or experience and the results pretty quickly show up these deficiencies.

Thirdly one should always respect geography, it may be very tempting to consider that there are opportunities just waiting to be picked up but to underestimate the advantage of local knowledge and conditions can again prove costly.

In essence diversification can provide the answer to a company’s need for increased revenue but without a clearly defined strategy it can equally provide another drain on an already embattled balance sheet.