Food Value Chains: Creating Shared Value To Enhance Marketing Success

A new model of organization is beginning to pop up in the agribusiness sector that seeks to merge social mission objectives with core business operating principles. Known as food value chains, these business arrangements are distinguished by their commitment to transparency, collaborative business planning and exchange of market intelligence and business knowhow among chain partners, and their interest in developing business strategies and solutions that yield tangible benefits to each participant in the system. External factors that have contributed to the rise of food value chain enterprises in recent years include the growing segmentation of the consumer market, escalating demand for specialized, highly differentiated food products—even at higher price points—and the increasing appeal of food items that are produced in accordance with desired social or environmental welfare standards. The advent of low-cost communications technology has made possible new collaborative approaches to business management and oversight that operate according to a set of shared operational and ethical principles, founded on the idea of maintaining steady and open communication among all chain partners. As suppliers of highly differentiated—and highly sought after—food products, producers in food value chains typically have the opportunity to exert significant influence in price negotiations with buyers and retain a greater share of retail food spending than their counterparts in conventional supply chains. They also benefit from ongoing exposure to information about consumer purchasing habits and preferences from their downstream supply-chain partners. Meanwhile, aggregators and receivers in food value chains benefit from the provision of specialized products that can command higher prices in the marketplace and reduce their risk exposure through advance planning and price negotiations. The collaborative partnerships also provide natural opportunities to build on previous business successes by exploring and successfully executing innovative product launches and marketing strategies and evaluating opportunities for waste reduction and improvements in efficiency. This document is designed to provide guidance on how food value chains are initiated and structured, how they function, and the benefits they provide to participants, with the intent of encouraging their adoption where the opportunities for successful collaboration exist among organizations with compatible principles and complementary areas of expertise. It addresses which characteristics are desirable—and not—when seeking appropriate value-chain partners, and provides examples of how participation in a food value chain can be advantageous to all members. Special attention is devoted to exploring how values-based operating principles are defined and maintained in a food value chain and how these values are successfully communicated to buyers and to the public. The document also addresses the issue of shared leadership and succession-planning strategies within value-chain partnerships.