Case Study: Gerber Baby Food Global Business Strategies August 7, 2006 Case Study: Gerber Baby Food

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 many
individuals around the world Prepackaged baby food is a convenience that few
would give up and a product that helps individuals properly feed their infants
Most people, when buying or feeding a jar of baby food to their infant, do not
think of the company and all the intricate details being a baby food maker
entails Gerber baby foods is the top seller of baby food products in the
world, and just like any other global corporation, Gerber baby foods has the
endless responsibility of running a successful corporation; it is not just
about purГ©ed fruits and vegetables The following is a case study of Gerber
baby 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, 1927
at the home of Daniel and Dorothy Gerber Little did they know that by trying
to find an easier method for hand-straining solid food for their seven-month
old daughter Sally and Dorothy’s suggestion of doing the chore at the local
cannery, the Fremont Canning Company where the family produced a line of fruits
and vegetables, they would create a baby food empire Mr Gerber took the
advice of his wife and found that her idea of canning their daughter’s baby
food at the factory was an ingenious idea Mr Gerber continued experimenting
and his daughter became company’s first baby food analyst Workers in the plant
thought the idea was great and began requesting samples for their babies, and
by late 1928 Gerber baby food was ready for the market (Gerber Website,
History, 2006)

Gerber’s experience in marketing was interesting as the
company 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 the
country Gerber had to do something to gain national attention so that the
company could survive Gerber devised an ingenious marketing campaign for the
company Gerber offered a coupon including a picture of the Gerber baby in many
publications, which encouraged previously skeptical grocers to place orders by
the dozens Six months later, Gerber baby foods were on grocery stores’ shelve
across the nation (Gerber Website, History, 2006)

Since Gerber’s debut in 1928, The company has continued to
grow into the leading baby food global corporation that has nearly 190 food
products; is labeled in 16 languages; is distributed to 80 different countries;
and has maintained one of the world’s largest privet research facilities
dedicated to infant nutrition In 1994, Gerber merged with Sandoz, Ltd The
company then became part of the Novartis group of companies formed in 1996 by
the 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 beef
vegetable soup Gerber eventually went on to develop three age appropriate
categories each containing a multitude of meats, vegetable, and fruits Each
category offer foods, consistency, and textures appropriate for different for
the ages separated by the categories Over the years Gerber has added other
food products such as cereals, juices, finger foods, an organic line of food
products, cultural flavor lines, and a line of food products for toddlers In
addition to the food products Gerber has also incorporated other non-food
products such as bottle and breastfeeding products, other feeding products like
utensils, cups, and dishware, Pacifiers and teething products, healthcare
products, bath time and skincare products, clothing, and child insurance
(Gerber Website, History, 2006)

Internal Company Strategic and Operational Challenges to
Going Global

Like any other global corporation Gerber has challenges in
the global market Mr Butterick, director of ruman Resources for the Latin
America, discussed some challenges that affect Gerber’s global operations and
the changing environment in global business He emphasized that due to the
changing tariffs, regulations, and fast-paces technological advancements,
including e-Commerce and EDI (Electronic Data Interface), global trade and
operations of multinational companies will not be the same in the future
(Michigan State University, 2000, para 1) In order to handle global challenges
Gerber must access new markets and develop the right combination of a product
portfolio looking at eating habits, governmental regulations, pricing, sales
potential, and climate (Michigan State University, 2000, para 1) Gerber foods
typically uses a country and market segment concentration strategy (FAO, 2006,
heading ownership)

Gerber has a global responsibility to the company’s
customers to produce the highest quality products, and the company must
overcome this challenge even when being a global company makes it a more
difficult task As stated by Mr Butterick, “Babies are the most important
human beings for mothers all over the world, and all mothers want to provide
the best that they can afford” (Michigan State University, 2000, pare 3)
To ensure that this challenge is met, Gerber must monitor the quality of its
products in every step of the supply chain from the selection of the fruits and
vegetables to the storage of finished products on retailer’s shelves, while
continually 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 computer
software program developed by the software company SAS Using the SAS software
Gerber’s quality engineers developed a system that extracts daily complaint
records from the corporate warehouse and links that data with manufacturing and
process-related information The software is able to categorize information by
the products complaints are made about by the criticality of the complaint The
Consumer Response System (CRS) informs executives of product quality levels and
alerts plant supervisors of possible concerns in the manufacturing process
Executives use to have to wait for weekly reports then try to evaluate and try
to relate that data back to distinct departments or manufacturing processes
Now executives can to query and analyze quality data on their own They can get
their data and create their own reports, and the information is all up-to-date
within a 24-hour period Executives can react to complaints faster than they
could before (SAS Website, 2006) Gerber understands that quality is related
distribution as well Gerber has a global distribution network that assures
grocery distributors will receive the quantities of products in the designated
time frame (Gerber Ingredients website, 2006)

Decision to Operate Globally

At the time Gerber began making baby food the concept was
new and revolutionary as people generally made homemade baby food Gerber did
not go global for quite sometime as the idea was not conceivable until later
In the 1960’s Gerber started to sell the baby food in Europe After marketing
in Europe, Gerber began looking for other markets Some markets have not taken
so well to store bought baby food as some mothers in other countries like
Brazil believe homemade baby food is more nutritious There have also been
dumping issues with Canada so Gerber stopped selling to Canada Gerber is
trying to make a market in Guatemala, but due to government regulations they
have had some trouble fully entering the market While some markets have not
done 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 stated
Gerber is sold in 80 different countries and controls 70% of the baby food
market On a small scale Gerber has had some troubles and small failures Some
failures were resolved and others are still on going

Political Problems

Gerber has run in to issues with Canada The baby food
company was accused of dumping in Canada and was found guilty In 1998 Gerber
could no long sell baby food in Canada (CBSA, updated, 2004) The company was
able 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 has
made no move to return as of yet (Mills 2003)

In Guatemala Gerber had issues with complying with the
regulations that the Guatemalan government established The Guatemalan
government enforces its own regulations and the regulations of the World Health
Organization Gerber flatly refused to follow the regulations established and
the Guatemalan government tried to ban the company till the company was in
compliance Gerber threatened to go the World Trade Organization and the
Guatemalan government became scared that a battle would occur and the cost
would be too great Guatemala was pushed into relenting stating that since
Gerber was not a domestic company in Guatemala, it did not have to follow the
stated rules; thus, Gerber was allow to disregard the Guatemalan regulations
(Carson, 1999)

Economic Situations

As with most Global corporations economic situations are
commons issues that must be handled When Gerber tried to establish a market in
Poland, Gerber found economically that most young parents could ill afford
buying baby food; in fact, most did not see the need Due to the Polish
economic situation, processed baby food is a luxury for young Polish mothers
Most employees, from university professors to factory workers, take home $100
to $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 not
collectivized, so Poland was able to feed itself Non-processed food is cheap
and plentiful in Poland making homemade baby food very affordable Gerber did
not give up; however, and wanted to stay in the market because as the country
is slowly doing economically better, Gerber believes there will be a time when
baby food is marketable Gerber has chosen to stay in the polish market by
pushing the company’s other non-food products, and the strategy is working

Another economic situation presented itself to the baby food
industry and affect Gerber was the negative reception of using bio-engineered
food in the company’s baby food products There are advocates for the use of
bio-engineered fruits and vegetables, and so far the reports are all positive
The idea is that bio-engineered foods are safer because they have less mold
toxin issues and growers have to use less pesticide, which in turn makes the
food safer for children to eat; however, others are concern with another issue
Some individuals are concerned with gene mutation and possible mutations
causing 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 in
Europe causing massive amounts of baby food to be recalled and thrown away
Greenpeace threatened Gerber that it would begin talks in America Gerber
feared that the outcome of the scare in Europe would be the same thing the
Unite States, so the company voluntarily stopped using any bio-engineered food
Shortly 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 a
higher threat of children being affected by the issues that bio-engineering is
trying to solve Unfortunately, either choice Gerber makes the company may have
an economic issue to handle, but for now the threat of Greenpeace has control
over the company’s decision, so Gerber chooses to focus on helping to control
pesticides and toxins (Miller and Gregory, 2006)

Despite the bio issues Gerber’s pesticide use reduction
efforts are especially noteworthy because its primary consumers may be
especially vulnerable to toxic chemicals The ultimate goal of Gerber Products
Co is to have no detectable pesticide residue in the company’s baby food
Gerber has implemented a comprehensive pesticide reduction program, beginning
in the farm field and ending in baby food preparation Programs that Gerber
supports to help achieve this goal include IPM (Integrated Pest Management)
research, educating contract growers with respect to economic-based models of IPM
and working with crop consultants and scouts, full pesticide use reporting, and
extensive testing for residues (Liroff, 2005) The most important and core
focus of these programs is the IPM, which supports research in 16 universities
on nutrient and pest management strategies for fruit and vegetable production
Gerber also has strict pest management practices that require supply growers to
adhere to strict pest management practices that substantially reduce pesticide
use, especially for pesticides that cannot be removed in processing Gerber
also has sponsored and sometimes subsidized new agricultural techniques, even
if they are more expensive, and diffuses the practices among its growers so the
company can help growers bear the risk of testing new approaches (Liroff,
2005)

Gerber does have strict measures when it comes to the
company’s baby food products, but Gerber may have an economic issue of a
different matter if continues to be allowed to disregard Guatemalan’s
regulations and does not consider the affects of disregarding the regulations
(Carson, 1999) Gerber does not mark on the company’s powder formula that
breastfeeding is best (Mokhiber, 1997) The company also uses their “fat
happy” baby emblem on the powdered milk products (Mokhiber, 1997) Gerber
also gives out free samples to families with young children and newborns In
many counties this practice is very common and not considered wrong; however,
the Guatemalan government is concerned about the water that must be used with
powdered products

Guatemalan water is not always health and clean to drink
Guatemalan mothers others are encouraged to breastfeed so infants are not
exposed to the dangers from the water, which could lead to severe illness and
death in young children The Guatemalan government worries that in not
following the regulations, Guatemalan mothers will see the health
“fat” Gerber baby and think the powdered formula is more nutritious
and encourage them to buy the powdered formula (Mokhiber, 1997) If this
becomes a trend then more infants might die because or the water health issues
If the Guatemalan Government’s fears are realized Gerber will have an epidemic
they will be partly responsible for and more than likely will receive the full
blame Gerber continues to market as it wants and does not seem to be
threatened by the controversy, and one day Gerber may be sorry (Carson, 1999)

Cultural

Gerber has had success in being accepted by most cultures
The company’s products are mostly universally accepted without having to provide
any modifications However, Gerber has seen the value of creating baby food
flavors that reflect different cultures Gerber’s latest line of baby food
products has flavors that reflect Latin cultural flavors

Culturally Gerber once had an issue with Brazilian mothers
Brazilian Mothers have always made their children’s baby food and the process
is a cultural tradition Brazilian Mothers believe that the homemade food is
the best Gerber has found difficulty in trying to compete where the issue is
not of an economic problem but a cultural one Gerber still continues to try to
win the Brazilian market but has not seen near the success as in other
countries (Marist College Website, 2006)

Gerber has also had to handle issues where in some cultures
women have low literacy rates such as Africa and the Middle East The women in
these cultures generally use pictures to tell them what food they are buying
When Gerber started selling their product in these countries the women saw the
picture of the baby and believed that there was a or part of one baby in the
jar (Williams, 2004) When the products did not sell well in these countries
the quickly realized the mistake and soon fixed the problem

Present Status

To date, Gerber is an extremely successful global corporation
capturing 70% of the baby food market in the United States Gerber has
successfully markets and distributes almost 200 food products in the United
States and has penetrated 80 counties and is always open to new opportunities
Gerber is committed to quality and continues to satisfy consumers and it has a
low rate of complaints, which are immediately handled and usually resolved
quickly

Future projections of global operations

Gerber will continue to focus on further growth in the
company’s existing markets The company’s main focus is to keep providing new
products to differentiate the company’s products from competitors, focusing on
branding, and making further advancements in children’s health and nutrition
products and research Gerber also looks to furthering their strategic
internationalization plan with expansion in Eastern Europe, Latin America and
the Far East (Novartis Website, 2006)

References

Canada Boarder Service Agency, (CBSA), (2004), Final
determination 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 Retrieved
August 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, 2006
from: http://wwwgerbercom/history

Gerber Ingredients website, (2006) Responsiveness and
distribution Retrieved August 14, 2006 from:
http://wwwgerberingredientscom/wg_mainhtml

Liroff, Richard A PhD, (2005) Benchmarking corporate
governance of chemicals in products, Protecting public health, increasing
profits 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: Marketing
challenges 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 global
strategies 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 in
battle of the babies:; [National Edition] Ont: May 1, 2003 p FP1Fr
Retrieved 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, Operations
Report Retreved August 15, 2006 from:
http://wwwnovartiscom/downloads/oprevn97pdf

Rothwell, Geoffrey, (1993) New York times, Poles Can’t
Afford Baby Food in Jars Retrieved August 14, 2006 from:

http://querynytimescom/gst/fullpagehtml?res=9F0CE0DF163FF934A257
52C:1A965958260

SAS Website, (2006) Gerber Customer success Retrieved
August 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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