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 manyindividuals around the world Prepackaged baby food is a convenience that fewwould give up and a product that helps individuals properly feed their infantsMost people, when buying or feeding a jar of baby food to their infant, do notthink of the company and all the intricate details being a baby food makerentails Gerber baby foods is the top seller of baby food products in theworld, and just like any other global corporation, Gerber baby foods has theendless responsibility of running a successful corporation; it is not justabout purÃ_x0090_“©ed fruits and vegetables The following is a case study of Gerberbaby 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, 1927at the home of Daniel and Dorothy Gerber Little did they know that by tryingto find an easier method for hand-straining solid food for their seven-monthold daughter Sally and Dorothy’s suggestion of doing the chore at the localcannery, the Fremont Canning Company where the family produced a line of fruitsand vegetables, they would create a baby food empire Mr Gerber took theadvice of his wife and found that her idea of canning their daughter’s babyfood at the factory was an ingenious idea Mr Gerber continued experimentingand his daughter became company’s first baby food analyst Workers in the plantthought the idea was great and began requesting samples for their babies, andby late 1928 Gerber baby food was ready for the market (Gerber Website,History, 2006)
Gerber’s experience in marketing was interesting as thecompany 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 thecountry Gerber had to do something to gain national attention so that thecompany could survive Gerber devised an ingenious marketing campaign for thecompany Gerber offered a coupon including a picture of the Gerber baby in manypublications, which encouraged previously skeptical grocers to place orders bythe dozens Six months later, Gerber baby foods were on grocery stores’ shelveacross the nation (Gerber Website, History, 2006)
Since Gerber’s debut in 1928, The company has continued togrow into the leading baby food global corporation that has nearly 190 foodproducts; is labeled in 16 languages; is distributed to 80 different countries;and has maintained one of the world’s largest privet research facilitiesdedicated to infant nutrition In 1994, Gerber merged with Sandoz, Ltd Thecompany then became part of the Novartis group of companies formed in 1996 bythe 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 beefvegetable soup Gerber eventually went on to develop three age appropriatecategories each containing a multitude of meats, vegetable, and fruits Eachcategory offer foods, consistency, and textures appropriate for different forthe ages separated by the categories Over the years Gerber has added otherfood products such as cereals, juices, finger foods, an organic line of foodproducts, cultural flavor lines, and a line of food products for toddlers Inaddition to the food products Gerber has also incorporated other non-foodproducts such as bottle and breastfeeding products, other feeding products likeutensils, cups, and dishware, Pacifiers and teething products, healthcareproducts, bath time and skincare products, clothing, and child insurance(Gerber Website, History, 2006)
Internal Company Strategic and Operational Challenges toGoing Global
Like any other global corporation Gerber has challenges inthe global market Mr Butterick, director of ruman Resources for the LatinAmerica, discussed some challenges that affect Gerber’s global operations andthe changing environment in global business He emphasized that due to thechanging tariffs, regulations, and fast-paces technological advancements,including e-Commerce and EDI (Electronic Data Interface), global trade andoperations of multinational companies will not be the same in the future(Michigan State University, 2000, para 1) In order to handle global challengesGerber must access new markets and develop the right combination of a productportfolio looking at eating habits, governmental regulations, pricing, salespotential, and climate (Michigan State University, 2000, para 1) Gerber foodstypically uses a country and market segment concentration strategy (FAO, 2006,heading ownership)
Gerber has a global responsibility to the company’scustomers to produce the highest quality products, and the company mustovercome this challenge even when being a global company makes it a moredifficult task As stated by Mr Butterick, “Babies are the most importanthuman beings for mothers all over the world, and all mothers want to providethe best that they can afford” (Michigan State University, 2000, pare 3)To ensure that this challenge is met, Gerber must monitor the quality of itsproducts in every step of the supply chain from the selection of the fruits andvegetables to the storage of finished products on retailer’s shelves, whilecontinually 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 computersoftware program developed by the software company SAS Using the SAS softwareGerber’s quality engineers developed a system that extracts daily complaintrecords from the corporate warehouse and links that data with manufacturing andprocess-related information The software is able to categorize information bythe products complaints are made about by the criticality of the complaint TheConsumer Response System (CRS) informs executives of product quality levels andalerts plant supervisors of possible concerns in the manufacturing processExecutives use to have to wait for weekly reports then try to evaluate and tryto relate that data back to distinct departments or manufacturing processesNow executives can to query and analyze quality data on their own They can gettheir data and create their own reports, and the information is all up-to-datewithin a 24-hour period Executives can react to complaints faster than theycould before (SAS Website, 2006) Gerber understands that quality is relateddistribution as well Gerber has a global distribution network that assuresgrocery distributors will receive the quantities of products in the designatedtime frame (Gerber Ingredients website, 2006)
Decision to Operate Globally
At the time Gerber began making baby food the concept wasnew and revolutionary as people generally made homemade baby food Gerber didnot go global for quite sometime as the idea was not conceivable until laterIn the 1960’s Gerber started to sell the baby food in Europe After marketingin Europe, Gerber began looking for other markets Some markets have not takenso well to store bought baby food as some mothers in other countries likeBrazil believe homemade baby food is more nutritious There have also beendumping issues with Canada so Gerber stopped selling to Canada Gerber istrying to make a market in Guatemala, but due to government regulations theyhave had some trouble fully entering the market While some markets have notdone 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 statedGerber is sold in 80 different countries and controls 70% of the baby foodmarket On a small scale Gerber has had some troubles and small failures Somefailures were resolved and others are still on going
Political Problems
Gerber has run in to issues with Canada The baby foodcompany was accused of dumping in Canada and was found guilty In 1998 Gerbercould no long sell baby food in Canada (CBSA, updated, 2004) The company wasable 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 hasmade no move to return as of yet (Mills 2003)
In Guatemala Gerber had issues with complying with theregulations that the Guatemalan government established The Guatemalangovernment enforces its own regulations and the regulations of the World HealthOrganization Gerber flatly refused to follow the regulations established andthe Guatemalan government tried to ban the company till the company was incompliance Gerber threatened to go the World Trade Organization and theGuatemalan government became scared that a battle would occur and the costwould be too great Guatemala was pushed into relenting stating that sinceGerber was not a domestic company in Guatemala, it did not have to follow thestated rules; thus, Gerber was allow to disregard the Guatemalan regulations(Carson, 1999)
Economic Situations
As with most Global corporations economic situations arecommons issues that must be handled When Gerber tried to establish a market inPoland, Gerber found economically that most young parents could ill affordbuying baby food; in fact, most did not see the need Due to the Polisheconomic situation, processed baby food is a luxury for young Polish mothersMost employees, from university professors to factory workers, take home $100to $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 notcollectivized, so Poland was able to feed itself Non-processed food is cheapand plentiful in Poland making homemade baby food very affordable Gerber didnot give up; however, and wanted to stay in the market because as the countryis slowly doing economically better, Gerber believes there will be a time whenbaby food is marketable Gerber has chosen to stay in the polish market bypushing the company’s other non-food products, and the strategy is working
Another economic situation presented itself to the baby foodindustry and affect Gerber was the negative reception of using bio-engineeredfood in the company’s baby food products There are advocates for the use ofbio-engineered fruits and vegetables, and so far the reports are all positiveThe idea is that bio-engineered foods are safer because they have less moldtoxin issues and growers have to use less pesticide, which in turn makes thefood safer for children to eat; however, others are concern with another issueSome individuals are concerned with gene mutation and possible mutationscausing 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 inEurope causing massive amounts of baby food to be recalled and thrown awayGreenpeace threatened Gerber that it would begin talks in America Gerberfeared that the outcome of the scare in Europe would be the same thing theUnite States, so the company voluntarily stopped using any bio-engineered foodShortly 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 ahigher threat of children being affected by the issues that bio-engineering istrying to solve Unfortunately, either choice Gerber makes the company may havean economic issue to handle, but for now the threat of Greenpeace has controlover the company’s decision, so Gerber chooses to focus on helping to controlpesticides and toxins (Miller and Gregory, 2006)
Despite the bio issues Gerber’s pesticide use reductionefforts are especially noteworthy because its primary consumers may beespecially vulnerable to toxic chemicals The ultimate goal of Gerber ProductsCo is to have no detectable pesticide residue in the company’s baby foodGerber has implemented a comprehensive pesticide reduction program, beginningin the farm field and ending in baby food preparation Programs that Gerbersupports to help achieve this goal include IPM (Integrated Pest Management)research, educating contract growers with respect to economic-based models of IPMand working with crop consultants and scouts, full pesticide use reporting, andextensive testing for residues (Liroff, 2005) The most important and corefocus of these programs is the IPM, which supports research in 16 universitieson nutrient and pest management strategies for fruit and vegetable productionGerber also has strict pest management practices that require supply growers toadhere to strict pest management practices that substantially reduce pesticideuse, especially for pesticides that cannot be removed in processing Gerberalso has sponsored and sometimes subsidized new agricultural techniques, evenif they are more expensive, and diffuses the practices among its growers so thecompany can help growers bear the risk of testing new approaches (Liroff,2005)
Gerber does have strict measures when it comes to thecompany’s baby food products, but Gerber may have an economic issue of adifferent matter if continues to be allowed to disregard Guatemalan’sregulations and does not consider the affects of disregarding the regulations(Carson, 1999) Gerber does not mark on the company’s powder formula thatbreastfeeding is best (Mokhiber, 1997) The company also uses their “fathappy” baby emblem on the powdered milk products (Mokhiber, 1997) Gerberalso gives out free samples to families with young children and newborns Inmany counties this practice is very common and not considered wrong; however,the Guatemalan government is concerned about the water that must be used withpowdered products
Guatemalan water is not always health and clean to drinkGuatemalan mothers others are encouraged to breastfeed so infants are notexposed to the dangers from the water, which could lead to severe illness anddeath in young children The Guatemalan government worries that in notfollowing the regulations, Guatemalan mothers will see the health“fat” Gerber baby and think the powdered formula is more nutritiousand encourage them to buy the powdered formula (Mokhiber, 1997) If thisbecomes a trend then more infants might die because or the water health issuesIf the Guatemalan Government’s fears are realized Gerber will have an epidemicthey will be partly responsible for and more than likely will receive the fullblame Gerber continues to market as it wants and does not seem to bethreatened by the controversy, and one day Gerber may be sorry (Carson, 1999)
Cultural
Gerber has had success in being accepted by most culturesThe company’s products are mostly universally accepted without having to provideany modifications However, Gerber has seen the value of creating baby foodflavors that reflect different cultures Gerber’s latest line of baby foodproducts has flavors that reflect Latin cultural flavors
Culturally Gerber once had an issue with Brazilian mothersBrazilian Mothers have always made their children’s baby food and the processis a cultural tradition Brazilian Mothers believe that the homemade food isthe best Gerber has found difficulty in trying to compete where the issue isnot of an economic problem but a cultural one Gerber still continues to try towin the Brazilian market but has not seen near the success as in othercountries (Marist College Website, 2006)
Gerber has also had to handle issues where in some cultureswomen have low literacy rates such as Africa and the Middle East The women inthese cultures generally use pictures to tell them what food they are buyingWhen Gerber started selling their product in these countries the women saw thepicture of the baby and believed that there was a or part of one baby in thejar (Williams, 2004) When the products did not sell well in these countriesthe quickly realized the mistake and soon fixed the problem
Present Status
To date, Gerber is an extremely successful global corporationcapturing 70% of the baby food market in the United States Gerber hassuccessfully markets and distributes almost 200 food products in the UnitedStates and has penetrated 80 counties and is always open to new opportunitiesGerber is committed to quality and continues to satisfy consumers and it has alow rate of complaints, which are immediately handled and usually resolvedquickly
Future projections of global operations
Gerber will continue to focus on further growth in thecompany’s existing markets The company’s main focus is to keep providing newproducts to differentiate the company’s products from competitors, focusing onbranding, and making further advancements in children’s health and nutritionproducts and research Gerber also looks to furthering their strategicinternationalization plan with expansion in Eastern Europe, Latin America andthe Far East (Novartis Website, 2006)
References
Canada Boarder Service Agency, (CBSA), (2004), Finaldetermination of dumping baby food (Gerber) Retrieved August 14, 2006 from:
http://cbsa-asfcgcca/sima/anti-dumping/ad1180f-ehtml
Carson, Rachel, (1999) Environment & health news,Corporate rights vs human need Retrieved August 14, 2006 from:http://wwwrachelorg/bulletin/pdf/Rachels_Environment_Health_News_16 46pdf
Ehrbar, Al, (2005) Fortune, Break away brands RetrievedAugust 15, 2006 from:http://wwwgerbercom/content/usa/bin/pdf/78513_E_PRINTpdf
Food and Agriculture Organization of the United Nations(FAO), (2006) Market Entry Strategies, Retrieved August 14, 2006 from:http://wwwfaoorg/docrep/W5973E/w5973e0bhtm
Gerber Website, (2006) History Retrieved August 14, 2006from: http://wwwgerbercom/history
Gerber Ingredients website, (2006) Responsiveness anddistribution Retrieved August 14, 2006 from:http://wwwgerberingredientscom/wg_mainhtml
Liroff, Richard A PhD, (2005) Benchmarking corporategovernance of chemicals in products, Protecting public health, increasingprofits and promoting innovation Retrieved August 14, 2006 from:http://wwwrosefdnorg/liroffreportpdf#search=%22%20use%20reduction%20noteworthy%20because%20its%20primary%20consumers%20may%20be%20especially%20vulnerable%20to%20toxic%20chemicals%22
Marist College Website, (2006) Western Europe: Marketingchallenges and strategic alternatives Retrieved August 14, 2006 from:
http://foxwebmaristedu/users/premanakra/westerneuropehtml
Michigan State University Ciber News Website, (2000)December international business forum presentation emphasizes gerber’s globalstrategies Retrieved August 14, from:http://cibermsuedu/events/CIBERNews/vxn3/gerberhtm
Miller, Henry I and Conko Gregory, (2006) Policy review,Scary Food Retrieved August 14, 2006 from:http://wwwpolicyrevieworg/137/millerhtml
Mills, Don, (2003) National post, New chance for Gerber inbattle of the babies:; Ont: May 1, 2003 p FP1FrRetrieved August 15, 2006 from: Proquest
Mokhiber, Russell, (1997) Albion Monitor Online Newspaper,Multinational Monsters Retrieved August 14, 2006 from:
http://wwwmonitornet/monitor/9703a/tenworsthtml
Novartis Website, (2006) Investor relations, OperationsReport Retreved August 15, 2006 from:http://wwwnovartiscom/downloads/oprevn97pdf
Rothwell, Geoffrey, (1993) New York times, Poles Can’tAfford Baby Food in Jars Retrieved August 14, 2006 from:
http://querynytimescom/gst/fullpagehtml?res=9F0CE0DF163FF934A25752C:1A965958260
SAS Website, (2006) Gerber Customer success RetrievedAugust 15, 2006 from: http://wwwsascom/success/gerberhtml
Williams, Mitch, (2004) Sema International, Going worldwide,Marketing the entire globe May 2004 Retrieved Agust 16, 2006 from: http://wwwsemaorg/images/pdf/32870pdf
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