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Friday, December 5, 2008

Let’s grow a cash cow

I was reading an article about the food poisoning in China, and how it affects the whole world. Somewhere in the article I found the name of Bangladesh, and its current operations against food poisoning and other stuffs. I kept reading.
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‘Do I find a new opportunity here?’ I thought. ‘How about starting a new food business? A premium one? ’, I said to myself. ‘Wouldn’t people be paying more for quality food?’
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Think about a corner street burger shop and KFC (Bangladesh). They both are making money. KFC surely makes much money for its quality burgers, and other food items. People spend more than 200 BDT over the high quality burgers of KFC. In Australia, I do not spend AUD 10 on a KFC burger, because first of all it’s crap, and not fresh. Rather I spend my money on quality food items; on fruits, vegetables, and other nutritious foods.
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As I was saying, if anyone starts to grow a premium food shop with quality food items, I believe s/he is going to grow a cash cow. People will certainly spend more to stay safe.
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However, there will probably be no chance for the poor and ill fated people to sneak a look into the premium food shop through the window glasses. But for those who has money will absolutely spend more on the premium food shop items, helping it become a cash cow.

3 comments:

fareeha's journals..... said...

gr8 idea.....:)....n

Rumi said...

Saeed Bhai,
in BD kfc is acting as the Premium Food Provider...IMO they are better in comparison to other burger and Fried Chicken Providers.

the_skywalker said...

Rumi you are rite in your comment. In fact, it would be prudent for the writer if he provided clarifications about what kind of premium food business he is thinking of. Food business value chain is so long, starting from wet market for raw vegetables/grains/fish to high end restaurants. Here, I understand that the write is talking about premium food business for our day to day consumption. But it would be grossly wrong to draw a similarity with KFC and day to day food consumption such as fish/vegetables in BD scenario. Contrary to the developed world, KFC in Bangladesh context is at the upper part of the value chain i.e.a high end restaurant. In BD with slowly growing middle income population, more and more people will go for good/premium restaurants because for that consumers group consumption at good restaurants do not only satisfy gastronomy but also sense of prestige. Now, if we think that opening up high end shop for vegetables, fruits, fishes, milk or yogurt can be a big cash cow, it may not be a good idea at this moment. Yes, there are few chain stores such as Meena Bazar or Nandan or Agora which are doing well, but depth and breadth of those stores are still limited to certain parts of Dhaka.

You may ask why I think negatively. First, most people in BD still think that optimum combination of price and freshness for vegetables, fruits, fish are more available in wet market than super store. Second, premium is a tricky concept. Premium is associated with some other value propositions. It means different things for different stuffs. For commodity like food it does not work out much as it works out for stuffs such as car/watches/clothes or jewelry. For example, Mercedes or BMW derive the aura of premium from the value proposition of superior German Engineering, whereas LEXUS is premium because of super efficient Japanese Engineering. Even in West, people are yet to accept the premium concept for day to day food consumption in a big way. I just give an example. In west, when I go to some of the biggest super stores, I find that there are far less people for the organic food counters. This is true for Bangladesh. Especially where food is still a significant part of people’s consumption basket so price plays a big role in their consumption decision. So, just on the basis of a single value proposition of freshness, somebody may not be able to charge premium price. It is despite the fact that in wet market things like formalin contamination of fishes happens often.

So, can there be alternative business model? Most probably “ YES” if somebody comes up with combination of convenience, price and freshness. Is that possible? In INDIA some companies such as Reliance or Goenkas are trying to do it. In some states they are successful and in some states they are not. This business model requires overwhelming restructuring of value chain and it may even create some social unrest as it has happened in some part of INDIA.