Porter Five Forces
14
The industry threats are high, specifically regarding protein alternatives and competitors; however, protection exists within the large-scale, low-quality, mass produced/distributed market segment. Multi-site, multi-regional chain buyers, supplying to the price-sensitive consumer, have less supplier options and, in turn, lower buying power, when seeking a one-source protein provider. Additionally, although barriers of entry are low for the industry overall, creating operational scale/efficiency to best capture the price sensitive market requires a higher cost of capital, thus increasing protection. Threat of Substitutes: High • • • • •
Alternate protein sources: crickets, beans, lentils, seeds, fish, turkey. Trends for plant-based diets increasing. Meat imitators Lower-priced, canned good alternatives Protein supplements such as blended shakes / mixes
Competitive Rivalry: Medium-High • • •
Multi-national rivals with similar quality and mass-production capabilities (JBS / Smithfield) Local producers unable to provide the scale for mass grocers, but can obtain share, especially within urban markets. Organic / All-natural farms with perceivably healthier products
Buyer Power: Medium-High • • • • •
Increasing GDP Price-sensitive Can afford high-priced meat (especially in urban regions), but willing to accept lowquality Low cost to switch Low brand loyalty
Threat of New Entrants: Medium • • • •
Price-sensitive customers require firms to build economies of scale to lower fixed costs. R&D investments required to max livability ratio, and to optimize production formulas. Stringent Chinese regulations for processing facilities. Strict import / export laws.
Supplier Power: Low-Medium • • • •
Largely consists of local farms Increasing demand for product Multitude of supplier options. Large buyers mandate their terms be accepted (capturing almost all margin)