Business Models in the Food & Beverage Industry
A business model tells how a company will create and deliver value. It is also a blueprint for how to generate revenue. In the food and beverage industry, there are two main business models: the product-based model, and the marketing-based model. The product-based model focuses on product innovation, differentiation, quality, and scale; the marketing-based model focuses on customer appeal, customer engagement, brand recognition, and strategic sales. Companies that combine these models may see higher growth and more profitability than companies that pursue one model over the other. An example of a company whose approach is to combine models is Starbucks.
The business model portion of Starbucks operations focuses on delivering coffee products to consumers that are unique, high quality, and new. The company consistently offers seasonal flavors like the Pumpkin, Winter Spice, and so on. This stimulates a sense of urgency in the buyer. Starbucks also puts priority on high-quality ingredients and ethical sourcing through its Coffee and Farmer Equity (C.A.F.E.) Practices to promote sustainable farming. Customization is also a feature of this model: customers can personalize all orders with different milk choices, coffee types, syrups, and sizes.
The marketing-based model of Starbucks focuses on customer engagement and brand positioning. The company promotes the idea of Starbucks as a space...
The Starbucks Rewards Program incentivizes customers to be loyal to the brand and in reward they earn free drinks and birthday gifts. The Starbucks mobile app focuses on customer convenience, by letting customers place orders in advance and pay digitally. More information about Starbucks' business model can be found here: Starbucks Business Model Analysis
Cyber-Ransom Incident: JBS Foods
In 2021, JBS Foods suffered a ransomware attack that took advantage of vulnerabilities in its cybersecurity system....
…major liquidity problem. Suddenly, the company could not meet its short-term obligations.
To address the crisis, Dean Foods filed for Chapter 11 bankruptcy, which allowed it to restructure its debts and continue operations while searching for a buyer. The company ultimately sold its production facilities and brand assets to Dairy Farmers of America (DFA). This sale provided necessary liquidity, so that the company could pay off its creditors and reduce its liabilities. Dean Foods restructured its supply chain and made operational cost reductions.
The Dean Foods cash flow crisis shows the importance of cash flow forecasting as well as diversification in the food and beverage industry. Companies need to be able to react to changes in consumer behavior, and they need sufficient cash reserves to weather industry disruptions. Diversification into new product lines like plant-based dairy might have also given Dean Foods another revenue stream.
For more information on Dean Foods' cash flow crisis, see here: Dean Foods…
