Del Monte

February 5, 2008

BUS 4633 Homework

Industry Analysis

Do-Over

Del Monte Foods is part of an industry that manufactures and wholesales processed and packaged foods. For comparison purposes, the focus of this assessment will be on the portion of Del Monte's business that concentrates on canned fruit, vegetable, and tomato products, which makes up 63% of the company's production. Del Monte's main competitors are companies such as Dole Food Company, Inc., General Mills, Con Agra Foods, Inc., and Campbell Soup Company that also process and package foods, specifically in canned form. Among the non-competitors are firms that deliver fresh produce and firms that provide frozen produce; other non-competitors are restaurants and fast-food chains. These businesses are excluded from the comparison because the final consumer would have a different meal preparation approach and a different lifestyle. These firms, however, could be considered substitutes if necessary for the consumer.

Considering competitive rivalry, this is a moderate threat to businesses in this industry. The industry is already mature and stabilized, but products are intensely similar and the customer can easily switch with very little consequence. Although the year-round sales are stable due to the nature of the products themselves, firms struggle with each other to steal customers away. This industry is attractive due to strong loyalty to particular brands, however advertising expense is high in the effort to gain new customers and to build/maintain strong brand images.

The outlook is quite favorable with respect to the bargaining power of suppliers. Industry inputs are certainly not unique: produce is produce. The relationships between the suppliers and the manufacturing firms is most likely strong and long-term, however, should this change, switching costs would be minimal. The suppliers depend upon the processing industry to get a vast amount of their products to the retail locations. In essence, the suppliers have very little bargaining power.

This industry also enjoys a low threat of the bargaining power of buyers. Due to the nature of the products, the numbers of buyers are practically infinite and they tend to purchase small quantities. Although start-up costs for a small business in this industry would be minimal, the risk of backward integration remains low. Strong brand loyalty also makes this industry quite attractive. Subsequently, the buyers have little, if any, power.

Pertaining to substitutes, the threat is moderate. The aforementioned substitutes, restaurants and frozen/fresh food producers, would be ready to take advantage of any vulnerability. Should processed foods not be available, such as a stock-out, a consumer could easily substitute frozen foods or, even easier, choose to eat at a restaurant. Although substitutes in this industry

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