Corso di Laurea magistrale In Economia e Gestione delle Aziende (Classe LM-77) Curriculum International Management Tesi di Laurea Local and Multinational Companies in the Agrifood Sector: Case Studies Relatrice Ch.ma Prof.ssa Maria Bruna Zolin Laureanda Francesca Michelon Matricola 816306 Anno Accademico 2013 / 2014 Index 1. Introduction - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 3 2. Food and beverage sector at international level - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 7 3. Public support in the agricultural sector - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 23 3.1 European Union public support to the agricultural sector - - - - - - - - - - - - - - - - - - - - - - - - p. 31 3.2 USA public support to the agricultural sector - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 40 4. Globalization and Regionalism - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 44 4.1 The World Trade Organization and the Agreement on Agriculture - - - - - - - - - - - - - - - - - - p. 44 4.2 Regionalsim and the Free Trade Agreements - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 51 5. Local and Multinational companies in the food and beverage sector: case studies - - - - - - - - - - p. 55 5.1 Cargill Inc. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 55 5.1.1 Brief history - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 55 5.1.2 Characteristics- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 62 5.1.3 The Multinational Business Model - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 65 5.1.4 The Guiding Principles - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 71 5.1.5 Cargill S.r.l.: the Italian subsidiary expression of the multinational business model p. 73 5.1.5.1 Cargill S.r.l. mergers and acquisitions - - - - - - - - - - - - - - - - - - - - - - - - - - p. 75 5.1.5.2 Cargill S.r.l. organizational structure - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 77 5.2 Veronesi Holding S.p.A. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 85 5.2.1 Brief history - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 85 5.2.2 Characteristics - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 88 5.2.3 The Local business model - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 98 ! 1 5.3 Rigoni di Asiago S.r.l. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 104 5.3.1 Brief history - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 104 5.3.2 Characteristics - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 108 5.3.2.1 Rigoni di Asiago S.r.l. in the world - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 112 5.3.3 The Local business model - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 121 5.4 Ditta Bortolo Nardini S.p.A. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 125 5.4.1 Brief history - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 125 5.4.2 Characteristics - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 127 5.4.3 The local business model - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 136 6. Concluding remarks - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 139 References - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - p. 147 ! 2 1. Introduction The analysis of the global food and beverage sector (explained in chapter 2) illustrates a paradoxical composition of the companies operating in this sector, as on the one hand there is a few very large Multinational Companies (MNCs), of which 10 MNCs (Associated British Foods (ABF), The Coca-Cola company, Danone, General Mills, Kellogg’s, Mars, Mondelez International, Nestlé, PepsiCo and Unilever) are extremely powerful, internationally widespread and able to satisfy a large amount of the global food demand (named the Big 10 according to Oxfam). These latters in turn are influenced by the activities of other multinational companies, the so called Commodity Traders (mainly the ABCDs, among which excels Cargill Inc.). On the other hand there is an enourmous amount of Local companies, that respond to a small demand of food through a limited offering, compared to the multinational ones. The companies composition of the global food and beverages sector so, even though seems to be characterized by the preponderance of an oligopoly of tremendously powerful multinational companies, dominated by the Commodity Traders, as they are benefited by a great amount of strenghts (first of all the vertical integration of an astonishing number of activities), is characterized at the same time by a lot of local companies, that thanks to the strong points presented, they are able to stand on the market, be competitive and offer an economic sustainable alternative to the multinational business models. The defintion of the two business models, Multinational and Local, have been determined relatively the location where their production processes take place, where production processes means the sum up of primary activities1 of the value chain, where according to Porter’s definition, they are crucial for the companies as they generate competitive advantages towards competitors, if the company perform them more cheaply or better than its competitors (Porter M. E., 1985). A multinational company so, stands for a company that conducts its production processes in a number of countries outside the nation of origin, having furthermore a great amount of other facilities abroad, (Bannock G., Manser W., 2003), whereas a local company undertakes its production process not only internally the company, but also circumscribed in a limited, relatively adjacent geographical area. In order to have a broad image of the food and beverages sector and to verify the co-existence of these two business models, four case studies of family-based companies of the food industry have been analyzed, Cargill Inc. (the largest family based company of the US and the largest commodity trader in the world) as example of multinational company (described in chapter 5.1), and Veronesi Holding S.p.A. (see chapter 5.2), Rigoni di Asiago S.r.l. (see chapter 5.3) and Ditta Bortolo Nardini S.p.A. (see chapter !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1 These primary activities (Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales and Services), must be sustained by 4 support activities: Firm Infrastructure, Human Resource Management, Technology and Procurement, that together with the previous 5 makes the company achieve a competitive advantage (Porter M. E., 1985). ! 3 5.4), that despite they are gathered under the same business model (the local one), each of them presents peculiar characteristics operating in different market segments. Veronesi Holding S.p.A. is one of the largest italian company of the food and beverages sector, according to the total turnover generated at the end of 20132 (in line with other giant players of this sector, such as Ferrero S.p.A and Barilla G. e R. Fratelli S.p.A. in turnover terms) that through its offering operates in both the animal feed sector and in the food sector of meat and egg markets, on the other side Ditta Bortolo Nardini S.p.A. stands for a small-sized 3 enterprise that operates in the beverages sector of the spirits, whereas Rigoni di Asiago S.r.l. is an interesting case of local company working in the jams market, that stands in the middle of the others two. This selection of the local case studies allows so to have a relatively wide portrait of the local companies’ environment. The in-depth analysis of the four case studies has been: empirical, through a direct contact with the companies (questionnaires sent to the companies, companies visits and interviews both telephonic as through emails), literal (in order to define the two business models through the literature, adapting the literature to the case studies) and analytical (through the examination of companies balance sheets as of other financial reports). Strenght points have been defined finally for these three local business models (clearly expressed in chapter 6), in order to confirm that despite the several advantages that benefit multinational companies (according to the case study examined, such as Cargill Inc.), these local companies could not only co- exist in the food industry (that seems to be ruled by an oligopoly of MNCs), but also thanks to their competitive advantages they could be economically sustainable, by promoting themselves as alternatives models to the multinational ones. Furthermore, in order to have an in-depth analysis of the global food industry it is essential