Parmalat's product and brand management in the dairy and packaged food industries

Consumers and technology are driving constant invention and innovation. Few sectors are closer to change than Fast Moving Consumer Goods (FMCG). Here, results are immediate. Ideas and strategies quickly translate into products on shelves, messages in the media, response from consumers, growth in the business. Companies have to be proactive rather than reactive in order to exploit new channels of business, and harness the opportunities the consumer market has to offer. In a world of such uncertainty, consumers are increasingly putting their trust in brands. Accordingly, in many sectors major multinational corporations seem to share the same trend in administrating their businesses: the passage from an approach focussed on products/categories to a brand-centred one. Particularly in the packaged food industry, where products can be easily and cheaply imitated and “me too” strategies represent an everyday phenomenon, a strong brand stands for a powerful defensive screen against competitive threats. Brands and logos are gaining more and more consideration as “intangible values” within the business portfolio of global producers and marketers. The shrinkage in the level of differentiation of manufactured goods, the restriction of product lifecycles and the raise of communication expenditures’ thresholds, all together result inevitably in an evermore relevant shifting towards brand building activities.
In connection with that, this working paper aims at eviscerating the abovementioned process with reference to one of the world’s biggest food corporations and, in all likelihood, the Italian company with the largest presence in the international entrepreneurial panorama. To start with, let us clarify what this project is and, above all, what is not. First of all, the study of an actual company case does not entail the implementation of a traditional scheme of review, which adapts a series of theoretical models to a concrete context. On the contrary, we decided to set the firm as a starting point, and then recall the most fitting links with academic literature as the various subjects are under discussion. We opted for such approach in line with the undeniable recognition that, at these dimensional levels, the influence of companies’ conduct on managerial sciences often overcomes the relevance of the opposite flow. Therefore, the thesis proposes an in-depth investigation of Parmalat’s approaches to the management of its product assortments and brand ranges, both at strategic and operational levels, and through a systematic and considerable inside data collection. A significant limit of this work is the temporal restriction of its reliability.
In fact, although strategically it is our purpose to draw some general lines of foodproduct management, most of the instruments of analysis utilised (and consequently some of the following observations) express the “state of affairs” of a given moment in time, and may not be valid any longer in a few years. Moreover, and in line with the aforesaid question, the working paper does not reflect Parmalat’s underway financial reorganisation following the liquidity crisis occurred in November 2003 (we dedicate a postscript at the end of the work), after the company deferred a scheduled US$ 150 million bond repayment bringing to light an astonishingly disastrous debit-balance status. Indeed, we cannot deny that these negative events will strongly affect Parmalat’s marketing strategies both globally (downsizing of the company’s perspective) and in the under-discussion domestic setting (potential handover of the Australian branch). Nevertheless, Parmalat’s restructuring is an ongoing process whose final outcome is, to date, far from being exhaustively foreseen. Consequently, we believe it would be counterproductive and totally deficient to entirely revise the spine of the project at this moment in time, and decided to stick to the multinational’s strategic standpoint investigated prior these problems have become manifest.
From a “geographical” point of view, the picking of the marketplace has a threefold foundation with regards to the objectives of our analysis:
• the Australian dairy market is an extraordinarily mature setting, where the major competitors have been forced to develop a number of marketing tools in order to stay afloat. The limited size of the consumer market induces the major players to undertake a harsh competition based on product differentiation, where brand power and company’s reliability are of paramount importance for long-term success;
• the overseas dairy market is part of a fully deregulated industry, where domestic manufacturers as well as foreign entrants compete to share a relatively small pie. With reference to that, and in view of the ongoing process of liberalisation of the world’s markets under the direction of the World Trade Organisation, it will be interesting to take into account some industrial mechanisms and marketing practices that will probably become essential across Europe in the forthcoming years;
• the main reason why Parmalat entered the Australian market was to exploit Australian managers’ knowledge about the consumption attitudes of the Asian consumer. In fact, if apparently nineteen million Australians are not reason enough for considerable investments, the preferential access to some of the most promising countries in the world in terms of growth in packaged food consumption provides the company with an opportunity to further extend its international presence.