I believe Tyson Foods is indeed in a bad place. The meat industry is publicly pointed at as one of the leading contributors to global warming, and consumers are stepping away “en masse” from animal to vegetal proteins. As you correctly point out, it is at the same time also one of the industries that is directly affected by climate change through rising costs. The combination of these two factors lead me to believe that the whole meat industry, and especially its leading actors, are about to lose a significant share of their business to plant-based foods. In this context, their investment in Impossible Foods is an interesting route, yet also a very puzzling one to me. It looks like a desperate hedge for the future, compensating for management’s lack of inspiration to structurally fix their business’ (long-term) problems.
I fully agree with the two earlier comments that Walmart should steer away from becoming a “Made in the USA” ambassador. Historically, their business model has been built around delivering the best value (i.e. the cheapest) products to their consumers, and they have been extremely successful at this so far. International sourcing has been one of the key success factors in delivering on this value promise. If they continue capitalizing on this competitive advantage, I believe there is a good chance Walmart will be around for a much longer time than Mr. Trump and the protectionist school of thinking. If there is one route Walmart should take in this context, it is the lobbying route. Their sheer size and contribution to the US economy, in terms of taxes but especially employment, places them in a very strong position to become the ally of any political school of thinking – protectionist or not.
Thanks for this interesting read on how one of the world’s leading fashion players is doing its share in addressing climate issues. I am particularly struck by the tension between the push towards organic products and the need for reduced resource consumption, which you raise at the end of your article. For almost any crop, the single biggest priority for centuries in a row has been to achieve yield improvements, with the objective to feed an increasingly large population and to reduce resource consumption (per unit of output). More recently, we are witnessing a move towards organic production, mainly triggered by a “back to the roots” consumer trend. As you correctly indicate, the issue here is that such organic production eliminates much of the yield drivers we historically developed (e.g. synthetic fertilizers, pesticides) and hence tends to demand more resources. I am wondering if we aren’t fooling ourselves when associating “organic” with “sustainable”, especially in world that is designed to thrive on economic and population growth.
Underlying this article is the assumption that companies focused on branded, imported consumer goods operate in a more or less rigid environment, where their pricing power is limited and where production location is essential to their brand heritage.
I’m not sure this is truly the case.
When it comes to pricing, there have been numerous articles on how branded goods companies – especially in alcoholic beverages – have been driving prices up over the past years, now resulting in very strong margins. As a result, I think this created a strong enough margin buffer for these businesses to “weather out” trade wars, especially if these are more short term.
On the longer run, I believe imported brands have a lot of flexibility in terms of production location. The power of their brands relates to their foreign origin and the connotations that come with it. Not so much the fact that the product has been produced there. There are numerous examples of “imported brands” that have local production (e.g. Barilla).
Interesting to see how Ferrero is consolidating it’s IT system when it comes to purchasing. Beyond doubt, this will allow them to get efficiency
gains thanks to the increased transparency – especially if they want to use these investments to “collaborate with a global network of partners”. Clearly, this will require some IT investments on their side as well. What puzzles me, however, is how this matches their desire to increase the share of “smallholder farms” in their supplier base. Can they make the required investments? If not, what are the tradeoffs to be made, and are they worth it?