Investigating the sustainability of the current marketing models in the South African table grape industry
Thesis (MBA)--Stellenbosch University, 2012.
The South African table grape industry has a very fruitful history. The landscape of the South African table grape industry has changed at a rapid rate since deregulation in 1997. The sustainability of these changes was questioned and created the opportunity for this research. The orientation of this research report outlines the structure to this research. It indicates that the South African table grape industry is experiencing a strong trend of consolidation of the production and exporter base. Economically sustainable growers and marketing companies produce or attract more volumes of table grapes to export to global destinations. The environment provides the background to the South African table grape industry, since deregulation. Five major trends in this industry are important to mention and give perspective to the research question, namely: - The number of producers has declined at a rapid rate (about 52%) since deregulation. - Traditional production regions like the Berg and Hex River have become less important due to the timing of product supplied to the market. New geographic production regions have grown in importance, like the Orange River and Northern Province. - Production volumes of table grapes have slowed down over the last ten years and in certain regions have become stagnant. - The cultivar spectrum of table grapes has changed from seeded grape that is marginal to the market to a seedless product that earns premiums in the market. - There has been a shift in marketing of table grapes from Western countries like the UK and EU to Eastern countries. There are also certain factors that have a profound impact on the South African table grape industry, namely economic, environmental, political, social and global factors, which required further investigation. The evaluation of trends in the industry and the factors that affect the industry revealed the problem statement for this research and set the foundation for the research question. The research question of this study is: What are the distinguishable marketing models currently used by South African exporters and how sustainable is each model? The research methodology demonstrates that the South African table grapes industry is split into two dominant marketing models, which are the marketing agent and the grower-exporter model. A marketing model metrics was designed, based on literature and consultations with industry experts via a questionnaire, to evaluate the economic, social and environmental sustainability of these two marketing models. The method of data analysis was a qualitative investigation into the sustainability of marketing models that exist in the South African table grape industry. The structure of the holistic marketing dimension model which was used has the following four dimensions (Kotler & Keller, 2009:61): - Relationship marketing - Performance marketing - Integrated marketing - Internal marketing. Semi-structured interviews were held with six different marketing entities in the South African table grape industry, which represented 40 percent of the total population. The interviews were held by utilising a discussion guide that comprised of standard questions to all the interviewees. The information gathered from the interviews was used to design a conceptual marketing model, with the main objective of being sustainable on an economic, social and environmental level. This relevance and practicality of this conceptual marketing model was tested against a grower-exporter model in the South African table grape industry, called Angon Fruit. The findings of this research report focused on the triple bottom-line approach of building economic, social and environmental capital. The economic sustainability revealed the following factors to consider: - Grower-exporter model is a more sustainable marketing model, due to low cost operations. - Marketing agent model should have a definite competitive advantage, to justify relevance in the cost-chain. - Sustainable market share in volume of table grapes to export by a marketing company is five percent. - Prices paid to growers by a marketing company should keep track of inflation on inputs and a ten percent premium earned on top of the production cost is regarded as sustainable. - A sustainable commission percentage charged by marketing companies should not exceed five percent of free on board (FOB) value at Cape Town port. - Growers need to replace marginal seeded cultivars with premium seedless cultivars that are high in demand in global markets. - Marketing companies should supply table grapes at a split of 50 percent to Western countries and 50 percent to Eastern countries. - The sustainability of the Berg and Hex River production regions is at risk, due to global competitions from South American countries. The South African table grape industry revealed the following social sustainability findings: - A marketing company should have a social policy, which governs social responsibility projects (CSI). - The marketing company should be involved one major project instead of a few smaller projects. - Corporate social investment (CSI) projects should aim to provide the opportunity to improve education and training, improve health status and to develop sport among the youth. - The marketing company should not invest in CSI projects if the economic sustainability is at risk. The objective is to invest five percent of net profit in CSI projects, annually. Environmental sustainability revealed the following factors to consider: - A marketing company should have an environmental policy. - The company should measure its carbon and water footprint at least every two years, with the objective to reduce or optimise the level of use. - The company should embrace and implement green technology that utilises renewable energy to reduce the dependency on fossil fuels and coal-generated electricity. - The use of water should be optimised, through implementation of advanced technology. - The marketing company should adopt the practice of recycling. The conclusion to this research report is that the table grape industry is still economically sustainable, however more work can be done on the social and environmental sustainability. Finally, ten recommendations are made to the South African table grape industry to consider from a sustainability perspective. Companies can consider implementing these best practices into their marketing of table grapes.