Talk... and strategise as you eat.
Clayton Christensen's Value Chain Evolution theory is, like all good theories, as simple as it is useful; it states that companies should control every activity, or combination of activities, within the value chain that determines performance on the dimensions that matter most to consumers and increase their willingness to pay; when functionality and reliability are important to consumers, companies need proprietary and integrated solutions to try to achieve a good enough level; when product functionality and reliability exceed consumer needs, then convenience and customisation become the aspects that are no longer good enough.
familyandtrends believes that the theory explains well the trend that is changing the food sector and its distribution, and that family capitalism has to deal with it because many Made in Italy brands are linked to food and the retail distribution system in Italy is dominated by family businesses.
The big food multinationals have already entered a crisis and reacted to very unsatisfactory economic trends with corporate reorganisations. In '23 Kellogg, with a turnover of 16 billion, split into Kellanova (snacks, 13 billion) later bought by Mars and WK Kellogg (cereals, 3 billion) by Ferrero; at the time of the split the company was worth about 20 billion, the two splits were bought for about 39 billion. In '25 came other transactions: Unilever (personal care, home care, sauces and beverages, 60 billion) split Magnum Ice Cream, 8 billion; Kraft Heinz 25 billion, after a merger orchestrated in '15 by none other than Buffett, in '26 it will split into two: Global Taste Elevation (ketchup, mayonnaise, sauces, 15 billion) and North American Grocery (processed meats, packaged cheeses and cold cuts etc, 10 billion). Also this year, Keurig Dr Pepper, which in '18 merged soft drinks and portioned coffee for 18 billion, will split into Keurig, which will first acquire JDE, creating the world leader in coffee (15 billion) and Dr Pepper which will be a US player in carbonated soft drinks (11 billion).
The industry as a whole is changing, total margins are decreasing and distribution is retaining an increasing share. In '24, in the USA, the industry's profit pool, about 760 billion, went 47% to distribution and 53% to producers; the proportion ten years earlier was 33% and 67%. In Italy, 41% of the sector's approximately 8 billion profit went to distribution and 59% to producers.
All this is happening because the consumer is changing. Functionality and reliability used to be the dimensions that increased willingness to pay, think for example of the reliability of canned products, e.g. tuna, coffee, for which the producer with his brand name was the guarantor of quality and integrity from the factory to the table, or the functionality of a taste enhanced by additives used for flavour, texture, colour, preservation or palatability.
