Horizontal Integration In Fonterra Brands

Great Essays
Horizontal integration strategies
Horizontal Integration allows resource sharing at the same level of the value chain in similar or different industries (Investopedia, 2016). This allows potential competitors to merge. If this type of integration is used widely by competitors, it could result in a monopoly. This is due to these competitors having the same end goal of selling products. A horizontal integration within the organic dairy chain is the relationship between Fonterra and an American organic milk company called Organic Valley. When exporting to America, Fonterra uses Organic Valley’s distribution network (Luxton, 2016).
Nature and level of competition
The nature of competition within the organic dairy industry in NZ is a monopsony.
…show more content…
Minimal travel from collection to processing factory with more factories recently built around the country and more in the pipeline (Luxton, 2016). Fonterra Brands managing director Tim Deane said there was a growing demand for organic milk. “Demand has grown about 50% in the past year and as a result of that we’re very keen to provide consumers with that option because if we don’t provide it they’re going to go somewhere else” (Gibson, 2015). Fonterra’s research showed 72% of New Zealanders would buy organic milk if it was more affordable and a further 25% said if it was available at a supermarket it would also make a difference (Gibson, 2015). Fonterra saw an expanding market for the product and as a result were the first major producers on a national scale in NZ. Although there are many smaller operations. For example Bio Farms who are located in Palmerston North, which we visited, have a tiny proportion of the market share, so cannot compete with the likes of Fonterra (Tait-Jamieson, 2016). They produce specialised products and rely on consumer loyalty as well as a self-sufficient low input operation to remain profitable. There is also demand from baristas and others in food service for Fonterra’s organically produced milk, this is another example of a competitive strategy implemented, expanding Fonterra’s market share (Perger, 2015) . The target audience is people …show more content…
This has further incentivised farmers to continue to be organic in the recent tough climatic conditions and for regular farmers to make the switch, its making the industry more attractive and ensuring that supply can meet the continuous rising demand. Globally organic milk based products grow by 36% annually (Garibay, 2007), showing that NZ is expanding at a similar rate to the rest of the world, with massive consumption happening in the USA and UK especially, this further emphasises the demand for more suppliers of high quality organic milk in

Related Documents

  • Great Essays

    (Usda.mannlib.cornell.edu, 2010). It can be analyzed that in US, milk is produced in large amounts which means suppliers have increased. More the competition, the firms requiring milk would enjoy lower cost. With many suppliers in US, firms like Starbucks can prompt to take part into innovative ideas. Starbucks introduced coffee with hormone free milk which insisted its suppliers to supply organic milk only.…

    • 992 Words
    • 4 Pages
    Great Essays
  • Superior Essays

    B Corps Business Analysis

    • 1089 Words
    • 5 Pages

    I believe B Corp or a similar movement does represent a new phase of capitalism. The movement is driven by the lack of transparency in business of the past, the consumers increasing access to information regarding how products are produced, and the consumers increasing interest in supporting conscious companies. I have experienced a similar movement to B Corp first-hand through my family’s dairy. Our business model is built on community and advocating holistic agriculture. Our customers support us religiously; much like Gilbert described in the article “What are B Corps?” As a result, our dairy is sustainable and growing at a time when nearly all other dairies are bankrupt and going out of business.…

    • 1089 Words
    • 5 Pages
    Superior Essays
  • Improved Essays

    So packaging and advertisements were the main contributors to market growth. During 2014-2015, the competition became fiercer, especially in FF baby food and RTD tea with a combined value share of 54% of health and…

    • 1077 Words
    • 5 Pages
    Improved Essays
  • Great Essays

    Coconut Bliss Case Study

    • 1766 Words
    • 8 Pages

    On the basis of above explanations and information one can say that there is a lot of scope of growth in the dairy free organic frozen dessert industry in current situations. Many companies like Coconut Bliss have seen faster growth in recent years because of this growth and the quality of the product. However, there is a threat of decrease in demand because of people making their own ice creams at homes because of high cost of these products. A company can easily overcome this threat by keeping the comparable prices of product and promote the exoticness of the flavours of the company products through aggressive promotions and…

    • 1766 Words
    • 8 Pages
    Great Essays
  • Superior Essays

    survive on wholesale alone” (Hurwitz). This means that farmers need infrastructures and direct consumer buying. With this growing Push for healthier organic food local businesses and Corporations have become more and more popular. With new opportunities it is allowing business to start up and already established business to expand. It also allows business that have been around to have increase in sales.…

    • 1497 Words
    • 6 Pages
    Superior Essays
  • Great Essays

    Tirumala Case Study

    • 2586 Words
    • 11 Pages

    India’s milk production is estimated to jump by 6% about 140 million tons in 2013-14 fiscal year which showed good sign for farmers and the organization to meet the consumers demands. This also paves way for the quality and purity in the milk products which company is researching and is trying to imprint its image in the consumer’s mind for long time. Since liberalization in India many MNC’s have opened up various sectorial industries for mutual benefit purpose so that in the long run it can give scale to the economy. Today India is uniquely the leading milk producing countries globally. India believes in utilizing its natural resources purely and applies innovative techniques to upgrade their production standards to meet the consumer…

    • 2586 Words
    • 11 Pages
    Great Essays
  • Great Essays

    Olpers Milk Case Study

    • 1173 Words
    • 5 Pages

    It also aids in proper positioning of a brand in market through making it presentable and well-known to customers. The ideal brand positioning is achieved through marketing strategies (Herr, et al., 2000). Engro foods follow effective marketing strategies such as personal marketing, Email-marketing etc. to capture customer attention. LO2: Portfolio and hierarchy management of Olpers Milk Brand portfolio strategy aims at increasing strength of a brand.…

    • 1173 Words
    • 5 Pages
    Great Essays
  • Great Essays

    Chobani Case Study

    • 1447 Words
    • 6 Pages

    He took the time and tapped into the experience of an expert to ensure Chobani was the highest quality than any other yogurt on the market. The product created was in a class of its own and it needed to be promoted as such. Hamdi wanted Chobani to stand out on the supermarket shelves, so he created a cup with a wide opening and a colorful label to stand out against its competitors. Chobani was placed in large grocery store chains to be assessable to as many consumers as possible. To get the word out a very well received CHOmobile was done to provide samples of the yogurt across the country.…

    • 1447 Words
    • 6 Pages
    Great Essays
  • Improved Essays

    The recent changes in consumer toward butter are also reflected in sale. According to the Dairy Farmers of America, butter consumption is at its peak in the last 40 years. In 1997 Americans consumed 4.1 pounds of butter and in 2012 that amount increased to 5.6 pounds per capita. In 2013, volume sales were 5.3% higher than the previous year, and dollar sales were up by 5.9% (Weisenberger,…

    • 1828 Words
    • 8 Pages
    Improved Essays
  • Improved Essays

    Summary: General Mills

    • 1109 Words
    • 5 Pages

    Both GM and nestle operates in various different countries which is also an added advantage since they don’t have to begin from scratch. General Mills product quality and technology combined with Nestlé’s recognition, Brand Name and worldwide presence, CPW will be able to benefit big-time. Evaluate the international competitiveness of CPW compared to the Kellogg Company. CPW is the second in world’s cereal market, where Kellogg’s takes the lead. Kellogg’s was the world’s first cereal producer found in 1800, in order to serve people with special vegetarian dietary needs.…

    • 1109 Words
    • 5 Pages
    Improved Essays