What business model does Kerry group operate under? Examine Kerry Group’ Business Model.
Kerry Group PLC is a large supplier, operating in the food and beverages industry. Kerry Group supplies over 15000 food products ranging from ingredients and flavours, to beverages and consumer products to over 140 countries in the world. This encorporates manufacturing plants in over 23 countries and sales offices ina further 20 countries. The company currently employs over 220,000 employees across the globe.
In 1986 Kerry Group PLC was launched as a public company and was released on the Dublin and London stock markets. It now has a current market capitalisation of over €4 billion and with a cash.The current CEO of Kerry group PLC is Stan Mc Carthy, who since his appointment to the position on 1 January 2008 has helped streamline and grow Kerry group PLC to a globally dynamic organization with increased effincies and commitments to innovation through increased investment in R&D.
The company has a defined structure, segmenting different elements to specific regions and with a very experienced and comprehensive leadership. (see below)
REVENUE GENERATION AND MARGINS
Kerry Group is the world leader in Flavours and Ingredients. The group develops and delivers innovative new ingredients flavours and derives specialized solutions for the food and beverage industries. In the domestic market (Ireland and the UK) Kerry group is the leading supplier of customer branded goods and offerings in its chosen categories.
In this diagram we see how Kerry Group is a leader in the Food and Beverage industry, (left column), and The leader in added value fridgefood.(see right column).
Kerry group estimate that the added value chilled market within Ireland and the UK is approximately €18 billion out of an industry total of €90 billion. Kerry Group have strived to increase their share in this market and maintain market leadership this year with an increase of 2.1% in 2010 contrary to a -0.3% drop in 2009. This can be attributed to their innovations and developments created through R&D; although there was no increase in expenditure in R&D in 2008, it remained the same although in reality it was an increased % of expenditure relative to total revenue.
It must be noted that as well that this can also be attributed to a slight recovery in the economic climate. Although Kerry group operates in a non-cyclical market system, it still showed a marked decrease in earnings.
Below is a pie chart illustrating the diversification of Kerry Group’s revenue sources from the Industry within Ireland and the UK.
VALUE PROPOSITIONWhile doing our study of Kerry Group PLC, it was evident that Kerry Group PLc recognizes the need for increased value and newly arising needs and as such they implemented new innovative products and ingredients so as to address these issues and generate increased revenue. Innovations such as “Egg Replacement” “Dough strength” “Dough development” were targeted at the ingredient marketplace whereas “extended shelf-life” and “Freeze-thaw Stability” were innovated so as to create better value for both the retailer and the end consumer.
COMPETITIVE STRATEGYKerry Group has 5 main elements to its competitive strategy, using these it attempts to gain a competitive advantage over the over its rival firms and dominate the markets.
• Go-to-market strategy• Added value chilled foods• Unrivalled supply chain• Supply chain innovation• Acquisition & development strategy since 2001
Go-To-Market StrategyKerry Group operate a Go-to-market strategy which allows them to guide consumer interactions. This is achieved through technological advances and their innovative product solutions for the Flavour and Ingredient sector. This helps build strong customer relationships and develop already prosperous business channels. Kerry Group identify which customer they are targeting and what product the customer requires better value or further innovation and then acts on this information resulting in better product deliveries and increased customer satisfaction. Added Value Chilled Foods
Kerry Group identified “Added value chilled foods as a very significant market within the food and beverage industry in Ireland and the UK. By their calculations the sector of the market accounts for approximately 20% of the Total value of the €90 billion industry. As such they invested significant energies and finances (through methods of R&D and Acquisition) into becoming the Market leader in this sector.
Unrivalled Supply ChainKerry group has an unrivalled supply chain thanks to the large base of home brands within Ireland and the UK. This results in large economies of scale, greater distribution possibilities as well as allowing for ease of expansion within geographical areas. They capitalize on being able to supply their large range of products to vast regions and customers while simultaneously reducing delivery costs as a whole.
Supply Chain InnovationKerry group identified a niche opportunity in the supply chain of products, namely the customized ingredient and flavour systems. For example, the production of cookie dough for an ice cream company.
As they already are leaders in the the flavour and ingredient industry it made sense to fuse the two separate market routes and create a new innovative supply chain. They used their innovative facilities combined with R&D to capitalize on this niche market, becoming market leaders in a newly created and innovative market. For customers, this helped reduce manufacturing investment and speed product development. (See below)
Acquisition & Development StrategyIn 2001, Kerry Group launched a strategy whereby they acquired suitable companies and integrated them into their group. This involved a lot of capital investment and careful planning. In most cases the companies acquired were done so as to either aid innovation or to be able to supply a demanded range of products.
Their ability to encorporate these new businesses with their previously owned has lead to further reduction in costs, greater ability for geographical expansion, and abilities to develop innovative new products through combining various properties from previously seperate products. Below is a diagram illustrating the amount of acquisitions between 2001-2009, the areas of the industry they were in and highlighting some of the most significant mergers and acquisitions.
This strategy of acquisition and development has led to unprecedented growth with an increase of 87.3c per share. That calculates to a 110 % increase in EPS. [pic]
This further translates to an increase in turnover of just over €1.5 Billion in the same period, with Turnover rising overall from €3.002 Billion in 2001 to €4.5 Billion in 2009. The pre-tax profits relating to 2001 were reported as €189.4m while in 2009 they had grown €335.8m.
STRATEGIC POSITIONINGKerry Group approaches strategic positioning by encompassing different products so as to target different positions within the industry. As it is such a large group, consisting of many different product and price ranges the strategic posititioning within the market rather than in relation to other companies, the figure below is how Kerry Group graphed it’s own strategic positioning.
Kerry Group tackles this under the following four headings:• Value• Health• Convenience• Indulgence
Value – This is done through formula optimization, creating longer shelf lifes, higher quality dough, products which have a better freeze thaw capability along with an optimised route to market, which avoids delays etc.
Health – This is achieved by improving recipes, using clear and clean labels which are informative and accurate as well as lowering sodium levels while having unfaltering levels of hygiene.
Conveniece – Allowing for portability, using sensible and practical packaging and reducing preparation times, increase convenience factor and helps to better position Kerry Group in this area of the industry.
Indulgence – Speciality products with increased sensory appeal and an increased culinary touch, increases a product Unique Selling Point while enticing more customers to their brands.