AWB International, Melbourne, Australia
“Value-adding” to commodities as a means of breaking the nexus between business returns and economic cycles is a paradigm well-accepted in the agri-food sector. And “value” can be added in a number of ways; through marketing, service provision, or through transforming the product into something better from the customer’s perspective. Value adding alone, however, may not move the product out of the commodities, with milk powder being a classic example of a value added commodity. The challenge is to value-add and differentiate the product to create a customer, or consumer “unique value proposition”. Value adding through product transforming (i.e. downstream processing) invariably involves use of a technology and in many cases service provision does also – for example in quality assurance. It may be new or existing technology, but both, at some stage, are derived from research and development. Thus research and development must be focussed not only on value-adding but also on creating unique value propositions. Such propositions must come from the market whether it be customers’ raw material or ingredient needs, or at the consumer level from the drivers of the health, convenience and indulgence. Reflecting this is the changing dynamic in the agri- food industry, where suppliers of raw materials and ingredients to retail, branded food manufacturers are more and more becoming suppliers of technologies. This provides its own challenges for commodity producers with more robust frameworks required for evaluating the commercial potential of research and closer co-operation between the “markets” and research activities.