Marcos Fava Neves & Marcia Dutra de Barcellos

VALUE CREATION, CAPTURE AND SHARING MODEL FOR FOOD COMPANIES, CHAINS AND NETWORKS (VCCS MODEL)

Symposium honouring Klaus Grunert, AU, Arhus,

17th January 2013

Outline of the Presentation

Introduction

Creating and sharing value in companies and food chains: the cases of Nestlé, Nutreco and McDonald’s

The Value Creation, Capture and Sharing model (VCCS model)

Conclusions

Introduction

The creation of value is of the utmost importance to any company’s survival, especially in agricultural markets

(Lindgreen & Hingley, 2008, Kotler & Keller, Vieira at al. 2011).

Real value creation – and long-term growth and profitability can be achieved when the company offers unique benefits to customers and more recently, to society. (Doyle, 2000;

Lindgreen & Wynstra, 2005, O'Malley, 1998)

Value creation, capture and sharing imply the complete understanding of the company’s network.

Introduction

Basically, our VCCS Model involves a trilogy:

A redesign of activities towards an attempt to increase its

margins

A differentiation of its products and

The ability to strategically collaborate with other agents,

adding more value to the entire structure.

Introduction

From a systemic point of view, this trilogy relates to the

concept of shared value (Porter & Kramer, 2011).

The idea behind the concept is to generate greater innovation and growth for companies – and also greater benefits for

society.

It means that companies will benefit not only by creating and capturing value, but also by sharing it with the other food

chain stakeholders.

Three stories (cases) illustrate this systemic view

Nestlé

The world's largest food and nutrition company

More than 280,000 employees and factories or operations in

almost every country in the world

Nestlé Corporate Business Principles

“it is only possible to create long-term sustainable value for shareholders if the company’s behaviour, strategies and operations also create value for the communities where they operate, for their business partners and of course, for their consumers”.

This strategy is called “Creating Shared Value” (CSV)

Nestlé

To operationalize the CSV concept, Nestlé has analysed its value chain and determined three areas of top potential for joint

value optimisation with society. These activities are now core to its business strategy and operations, and Nestlé joint programmes with over 100 organisations around the world in these three areas:

• Water: because the quality and availability is critical to life, the production of food and to Nestlé’s operations.

• Rural development: because the overall wellbeing of

farmers, rural communities, workers, small entrepreneurs and suppliers are intrinsic to their ability to do business in future.

• Nutrition: because food and nutrition are the basis of

health and of its business – it’s the reason why Nestlé exist.

Prize Winner CSV Nestlé 2012

The 2012 Nestlé Prize in Creating Shared Value was awarded to Fundación Paragaya de Desarrollo y Cooperación for its 'Self

Sufficient Agricultural School' model, which ensures students receive technical and business training on top of their normal academic curriculum.

The project has already reached more than 500 students in

Paraguay. The school has been financially self-sufficient for more than five years, selling the agricultural products they produce.

Nutreco

Nutreco is a Dutch based multinational company operating in the feed industry.

In 2012 it published the report “Nutreco Feeding the Future: How we can contribute to feeding 9 billion people in a sustainable way: Vision 2020”.

The company aims to create, capture and share value in several different activities via INTEGRATED CHAIN APPROACH.

Nutreco splits its 2020 vision into four major areas: ingredients, operations, commitment and nutritional

solutions.

Nutreco

Nutritional solutions via animal and human health:

Providing alternative technologies that improve animal health and performance supporting customers’ needs to reduce the use of antibiotics.

Nutreco

Sustainable sourcing of ingredients

Via round table initiatives, auditing supplier engagement, extended supply chain coordination, promotion of the demand for responsible ingredients, communication with suppliers and measurement of the results.

McDonald’s

McDonald’s’ launched a competition “Best of Sustainable Supply 2012”.

The aim was to stimulate suppliers to submit their best practices. 400 best practices were sent by suppliers; 51 of these were selected by six experts from the company and NGO’s based on criteria of measurable results and innovation.

The areas where value was created and shared were: employee welfare, waste, climate/energy, animal welfare, water, raw materials and community impact.

McDonald’s Cargill – Reducing water footprint

project

Cargill produces dressings and

sauces for retail at a facility in São

Paulo, Brazil, that requires a large

amount of water. The production of

mayonese & alike products also

generate too much wastewater.

Actions: to raise employees’

awareness & set goals to reduce

the use of water

Results: In 2 years’ project the

facility was reusing 10% of its water

(by June 2010) and had a reduction

of 20% of its oxygen demand

Conclusions

We have presented three illustrative cases and proposed a model for leaders and managers involved in food chains,

networks and companies to achieve long-term, better business results.

We call it the “Value Creation, Capture and Sharing Model”,

where food companies, chains and networks can create, capture and share value by reducing its costs, applying differentiation strategies and finally, engaging in collective

action.

Ideally, companies that could master the three strategies simultaneously would benefit from the advantages provided.

Conclusions

The examples provided in this chapter were based on large-size companies. GE, Google, IBM, Intel, Johnson & Johnson,

Nestlé, Unilever, and Wal-Mart – have already embarked on important efforts to create shared value by reconceiving the intersection between society and corporate performance.

Yet the authors argue that the transformative power of

shared value is still in its genesis.

Leaders and managers are urged to develop new skills and knowledge - such as a far deeper appreciation of societal

needs, a greater understanding of the true bases of company or food chain productivity, and the ability to collaborate across

profit/nonprofit boundaries.

Conclusions

It is time to expand the scope of the concept value creation to include other stakeholders, with returns potentially

captured and shared by employees, suppliers and society overall as well.

Small and medium-sized enterprises (SMEs) should also be encouraged to apply value creation, capture and sharing

strategies, as they contribute greatly and increasingly to the economic development of nations.

Finally, food companies and chains from all over the world

(with special attention to developing countries) are stimulated to add value to their products and processes,

increasing their competitiveness in global terms. The “Value

Creation, Capture and Sharing Model” was designed to be a suitable framework for doing so.

Marcos Fava Neves & Marcia Dutra de Barcellos

TAK!!

Marcia Dutra de Barcellos, Prof. Dr.

Federal University of Rio Grande do Sul, Brazil

mdutrab@gmail.com

http://lattes.cnpq.br/5277492107669504