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Case Study: Gerber Baby Food

Global Business Strategies

August 7, 2006

Case Study: Gerber Baby Food

Store bought baby food is considered a necessity for many individuals around the world. Prepackaged baby food is a convenience that few would give up and a product that helps individuals properly feed their infants. Most people, when buying or feeding a jar of baby food to their infant, do not think of the company and all the intricate details being a baby food maker entails. Gerber baby foods is the top seller of baby food products in the world, and just like any other global corporation, Gerber baby foods has the endless responsibility of running a successful corporation; it is not just about purГ©ed fruits and vegetables. The following is a case study of Gerber baby foods and the company's other non-food products (Gerber website, History, 2006).

Background and History

The world of store bought baby food began in Michigan, 1927 at the home of Daniel and Dorothy Gerber. Little did they know that by trying to find an easier method for hand-straining solid food for their seven-month old daughter Sally and Dorothy's suggestion of doing the chore at the local cannery, the Fremont Canning Company where the family produced a line of fruits and vegetables, they would create a baby food empire. Mr. Gerber took the advice of his wife and found that her idea of canning their daughter's baby food at the factory was an ingenious idea. Mr. Gerber continued experimenting and his daughter became company's first baby food analyst. Workers in the plant thought the idea was great and began requesting samples for their babies, and by late 1928 Gerber baby food was ready for the market (Gerber Website, History, 2006).

Gerber's experience in marketing was interesting as the company came around the time when national distribution was nearly unheard of, and most products were only available in a few stores in every area of the country. Gerber had to do something to gain national attention so that the company could survive. Gerber devised an ingenious marketing campaign for the company. Gerber offered a coupon including a picture of the Gerber baby in many publications, which encouraged previously skeptical grocers to place orders by the dozens. Six months later, Gerber baby foods were on grocery stores' shelve across the nation (Gerber Website, History, 2006).

Since Gerber's debut in 1928, The company has continued to grow into the leading baby food global corporation that has nearly 190 food products; is labeled in 16 languages; is distributed to 80 different countries; and has maintained one of the world's largest privet research facilities dedicated to infant nutrition. In 1994, Gerber merged with Sandoz, Ltd. The company then became part of the Novartis group of companies formed in 1996 by the merger of Ciba-Geigy and Sandoz. Gerber is headquartered in Fremont, Michigan(Gerber Website, History, 2006).

Products

Gerber began with only offering five products. The first flavors, introduced in late 1928, were strained peas, prunes, carrots, spinach, and beef vegetable soup. Gerber eventually went on to develop three age appropriate categories each containing a multitude of meats, vegetable, and fruits. Each category offer foods, consistency, and textures appropriate for different for the ages separated by the categories. Over the years Gerber has added other food products such as cereals, juices, finger foods, an organic line of food products, cultural flavor lines, and a line of food products for toddlers. In addition to the food products Gerber has also incorporated other non-food products such as bottle and breastfeeding products, other feeding products like utensils, cups, and dishware, Pacifiers and teething products, healthcare products, bath time and skincare products, clothing, and child insurance (Gerber Website, History, 2006).

Internal Company Strategic and Operational Challenges to Going Global

Like any other global corporation Gerber has challenges in the global market. Mr. Butterick, director of ruman Resources for the Latin America, discussed some challenges that affect Gerber's global operations and the changing environment in global business. He emphasized that due to the changing tariffs, regulations, and fast-paces technological advancements, including e-Commerce and EDI (Electronic Data Interface), global trade and operations of multinational companies will not be the same in the future (Michigan State University, 2000, para. 1). In order to handle global challenges Gerber must access new markets and develop the right combination of a product portfolio looking at eating habits, governmental regulations, pricing, sales potential, and climate (Michigan State University, 2000, para. 1). Gerber foods typically uses a country and market segment concentration strategy (FAO, 2006, heading ownership).

Gerber has a global responsibility to the company's customers to produce the highest quality products, and the company must overcome this challenge even when being a global company makes it a more difficult task. As stated by Mr. Butterick, "Babies are the most important human beings for mothers all over the world, and all mothers want to provide the best that they can afford" (Michigan State University, 2000, pare. 3). To ensure that this challenge is met, Gerber must monitor the quality of its products in every step of the supply chain from the selection of the fruits and vegetables to the storage of finished products on retailer's shelves, while continually looking towards emerging markets and keeping sales and margins high (Michigan State University, 2000, para. 4).

One way Gerber is monitoring quality is through a computer software program developed by the software company SAS. Using the SAS software Gerber's quality engineers developed a system that extracts daily complaint records from the corporate warehouse and links that data with manufacturing and process-related information. The software is able to categorize information by the products complaints are made about by the criticality of the complaint. The Consumer Response System (CRS) informs executives of product quality levels and alerts plant supervisors of possible concerns in the manufacturing process. Executives use to have to wait for weekly reports then try to evaluate and try to relate that data back to distinct departments or manufacturing processes. Now executives can to query and analyze quality data on their own. They can get their data and create their own reports, and the information is all up-to-date within a 24-hour period. Executives can react to complaints faster than they could before (SAS Website, 2006). Gerber understands that quality is related distribution as well. Gerber has a global distribution network that assures grocery distributors will receive the quantities of products in the designated time frame. (Gerber Ingredients website, 2006).

Decision to Operate Globally

At the time Gerber began making baby food the concept was new and revolutionary as people generally made homemade baby food. Gerber did not go global for quite sometime as the idea was not conceivable until later. In the 1960's Gerber started to sell the baby food in Europe. After marketing in Europe, Gerber began looking for other markets. Some markets have not taken so well to store bought baby food as some mothers in other countries like Brazil believe homemade baby food is more nutritious. There have also been dumping issues with Canada so Gerber stopped selling to Canada. Gerber is trying to make a market in Guatemala, but due to government regulations they have had some trouble fully entering the market. While some markets have not done so well, Gerber has thrived in other countries and sells to 80 countries, and Gerber continues to fond new markets to enter.

Successes and Failures in global operations

Overall Gerber has achieved success. As previously stated Gerber is sold in 80 different countries and controls 70% of the baby food market. On a small scale Gerber has had some troubles and small failures. Some failures were resolved and others are still on going.

Political Problems

Gerber has run in to issues with Canada. The baby food company was accused of dumping in Canada and was found guilty. In 1998 Gerber could no long sell baby food in Canada (CBSA, updated, 2004). The company was able to sell other non-food products, but the baby food market was, basically, handed over to Heinz. In 2003; however, the band was lifted, but Gerber has made no move to return as of yet (Mills. 2003).

In Guatemala Gerber had issues with complying with the regulations that the Guatemalan government established. The Guatemalan government enforces its own regulations and the regulations of the World Health Organization. Gerber flatly refused to follow the regulations established and the Guatemalan government tried to ban the company till the company was in compliance. Gerber threatened to go the World Trade Organization and the Guatemalan government became scared that a battle would occur and the cost would be too great. Guatemala was pushed into relenting stating that since Gerber was not a domestic company in Guatemala, it did not have to follow the stated rules; thus, Gerber was allow to disregard the Guatemalan regulations (Carson, 1999).

Economic Situations

As with most Global corporations economic situations are commons issues that must be handled. When Gerber tried to establish a market in Poland, Gerber found economically that most young parents could ill afford buying baby food; in fact, most did not see the need. Due to the Polish economic situation, processed baby food is a luxury for young Polish mothers. Most employees, from university professors to factory workers, take home $100 to $200 a month (Rothwell, 1993). Rent and transportation are expensive, leaving little disposable income for the average young family (Rothwell, 1993). Gerber also came to realize during the socialist period, agriculture was not collectivized, so Poland was able to feed itself. Non-processed food is cheap and plentiful in Poland making homemade baby food very affordable. Gerber did not give up; however, and wanted to stay in the market because as the country is slowly doing economically better, Gerber believes there will be a time when baby food is marketable. Gerber has chosen to stay in the polish market by pushing the company's other non-food products, and the strategy is working.

Another economic situation presented itself to the baby food industry and affect Gerber was the negative reception of using bio-engineered food in the company's baby food products. There are advocates for the use of bio-engineered fruits and vegetables, and so far the reports are all positive. The idea is that bio-engineered foods are safer because they have less mold toxin issues and growers have to use less pesticide, which in turn makes the food safer for children to eat; however, others are concern with another issue. Some individuals are concerned with gene mutation and possible mutations causing an epidemic (Rothwell, 1993).

This issue has not been proven to be a fact; yet, organizations such as Greenpeace have been loud enough to create a scare in Europe causing massive amounts of baby food to be recalled and thrown away. Greenpeace threatened Gerber that it would begin talks in America. Gerber feared that the outcome of the scare in Europe would be the same thing the Unite States, so the company voluntarily stopped using any bio-engineered food. Shortly after the situation Gerber started the company's Organic food line (Miller and Gregory, 2006).

Gerber still may not be past the bio issue as now there is a higher threat of children being affected by the issues that bio-engineering is trying to solve. Unfortunately, either choice Gerber makes the company may have an economic issue to handle, but for now the threat of Greenpeace has control over the company's decision, so Gerber chooses to focus on helping to control pesticides and toxins (Miller and Gregory, 2006).

Despite the bio issues Gerber's pesticide use reduction efforts are especially noteworthy because its primary consumers may be especially vulnerable to toxic chemicals. The ultimate goal of Gerber Products Co is to have no detectable pesticide residue in the company's baby food. Gerber has implemented a comprehensive pesticide reduction program, beginning in the farm field and ending in baby food preparation. Programs that Gerber supports to help achieve this goal include IPM (Integrated Pest Management) research, educating contract growers with respect to economic-based models of IPM and working with crop consultants and scouts, full pesticide use reporting, and extensive testing for residues (Liroff, 2005). The most important and core focus of these programs is the IPM, which supports research in 16 universities on nutrient and pest management strategies for fruit and vegetable production. Gerber also has strict pest management practices that require supply growers to adhere to strict pest management practices that substantially reduce pesticide use, especially for pesticides that cannot be removed in processing. Gerber also has sponsored and sometimes subsidized new agricultural techniques, even if they are more expensive, and diffuses the practices among its growers so the company can help growers bear the risk of testing new approaches (Liroff, 2005).

Gerber does have strict measures when it comes to the company's baby food products, but Gerber may have an economic issue of a different matter if continues to be allowed to disregard Guatemalan's regulations and does not consider the affects of disregarding the regulations (Carson, 1999). Gerber does not mark on the company's powder formula that breastfeeding is best. (Mokhiber, 1997). The company also uses their "fat happy" baby emblem on the powdered milk products (Mokhiber, 1997). Gerber also gives out free samples to families with young children and newborns. In many counties this practice is very common and not considered wrong; however, the Guatemalan government is concerned about the water that must be used with powdered products.

Guatemalan water is not always health and clean to drink. Guatemalan mothers others are encouraged to breastfeed so infants are not exposed to the dangers from the water, which could lead to severe illness and death in young children. The Guatemalan government worries that in not following the regulations, Guatemalan mothers will see the health "fat" Gerber baby and think the powdered formula is more nutritious and encourage them to buy the powdered formula (Mokhiber, 1997).. If this becomes a trend then more infants might die because or the water health issues. If the Guatemalan Government's fears are realized Gerber will have an epidemic they will be partly responsible for and more than likely will receive the full blame. Gerber continues to market as it wants and does not seem to be threatened by the controversy, and one day Gerber may be sorry (Carson, 1999)

Cultural

Gerber has had success in being accepted by most cultures. The company's products are mostly universally accepted without having to provide any modifications. However, Gerber has seen the value of creating baby food flavors that reflect different cultures. Gerber's latest line of baby food products has flavors that reflect Latin cultural flavors.

Culturally Gerber once had an issue with Brazilian mothers. Brazilian Mothers have always made their children's baby food and the process is a cultural tradition. Brazilian Mothers believe that the homemade food is the best. Gerber has found difficulty in trying to compete where the issue is not of an economic problem but a cultural one. Gerber still continues to try to win the Brazilian market but has not seen near the success as in other countries (Marist College Website, 2006).

Gerber has also had to handle issues where in some cultures women have low literacy rates such as Africa and the Middle East. The women in these cultures generally use pictures to tell them what food they are buying. When Gerber started selling their product in these countries the women saw the picture of the baby and believed that there was a or part of one baby in the jar (Williams, 2004). When the products did not sell well in these countries the quickly realized the mistake and soon fixed the problem.

Present Status

To date, Gerber is an extremely successful global corporation capturing 70% of the baby food market in the United States. Gerber has successfully markets and distributes almost 200 food products in the United States and has penetrated 80 counties and is always open to new opportunities. Gerber is committed to quality and continues to satisfy consumers and it has a low rate of complaints, which are immediately handled and usually resolved quickly.

Future projections of global operations

Gerber will continue to focus on further growth in the company's existing markets. The company's main focus is to keep providing new products to differentiate the company's products from competitors, focusing on branding, and making further advancements in children's health and nutrition products and research. Gerber also looks to furthering their strategic internationalization plan with expansion in Eastern Europe, Latin America and the Far East (Novartis Website, 2006).

References

Canada Boarder Service Agency, (CBSA), (2004), Final determination of dumping baby food (Gerber). Retrieved August 14, 2006 from:

http://cbsa-asfc.gc.ca/sima/anti-dumping/ad1180f-e.html

Carson, Rachel, (1999). Environment & health news, Corporate rights vs. human need. Retrieved August 14, 2006 from: http://www.rachel.org/bulletin/pdf/Rachels_Environment_Health_News_16 46.pdf

Ehrbar, Al, (2005) Fortune, Break away brands. Retrieved August 15, 2006 from: http://www.gerber.com/content/usa/bin/pdf/78513_E_PRINT.pdf

Food and Agriculture Organization of the United Nations (FAO), (2006). Market Entry Strategies, Retrieved August 14, 2006 from: http://www.fao.org/docrep/W5973E/w5973e0b.htm

Gerber Website, (2006). History. Retrieved August 14, 2006 from: http://www.gerber.com/history

Gerber Ingredients website, (2006). Responsiveness and distribution. Retrieved August 14, 2006 from: http://www.gerberingredients.com/wg_main.html

Liroff, Richard A. Ph.D, (2005). Benchmarking corporate governance of chemicals in products, Protecting public health, increasing profits and promoting innovation. Retrieved August 14, 2006 from: http://www.rosefdn.org/liroffreport.pdf#search=%22%20use%20reduction %20noteworthy%20because%20its%20primary%20consumers%20may% 20be%20especially%20vulnerable%20to%20toxic%20chemicals.%22

Marist College Website, (2006). Western Europe: Marketing challenges and strategic alternatives. Retrieved August 14, 2006 from:

http://foxweb.marist.edu/users/prema.nakra/westerneurope.html

Michigan State University Ciber News Website, (2000). December international business forum presentation emphasizes gerber's global strategies. Retrieved August 14, from: http://ciber.msu.edu/events/CIBERNews/vxn3/gerber.htm

Miller, Henry I. and Conko Gregory, (2006). Policy review, Scary Food. Retrieved August 14, 2006 from: http://www.policyreview.org/137/miller.html

Mills, Don, (2003). National post, New chance for Gerber in battle of the babies:; [National Edition]. Ont.: May 1, 2003. p. FP.1.Fr. Retrieved August 15, 2006 from: Proquest.

Mokhiber, Russell, (1997). Albion Monitor Online Newspaper, Multinational Monsters. Retrieved August 14, 2006 from:

http://www.monitor.net/monitor/9703a/tenworst.html

Novartis Website, (2006). Investor relations, Operations Report. Retreved August 15, 2006 from: http://www.novartis.com/downloads/oprevn97.pdf

Rothwell, Geoffrey, (1993). New York times, Poles Can't Afford Baby Food in Jars. Retrieved August 14, 2006 from:

http://query.nytimes.com/gst/fullpage.html?res=9F0CE0DF163FF934A257 52C:1A965958260

SAS Website, (2006) Gerber Customer success. Retrieved August 15, 2006 from: http://www.sas.com/success/gerber.html

Williams, Mitch, (2004) Sema International, Going worldwide, Marketing the entire globe. May 2004. Retrieved Agust 16, 2006 from: http://www.sema.org/images/pdf/32870.pdf

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