1. ESTADO DEL ARTE
2.3 DISCAPACIDAD INTELECTUAL
Price is a crucial item in this business. In the review and pre-season meetings, both parties discuss the volume and quality; but price is not negotiated in the early stages. It is decided, in fact, week by week based on the availability of the crop.
Price is set through a negotiation process for each weekly order and not at pre-season meetings, although the cost of production is approximately known. Fresh produce prices are supply rather than demand driven and the amount of available produce has a negative impact on the prices. This means that during peak times prices decrease in response to high volume.
The price negotiations begin with the suppliers. The Supermarket receives all price offers from the suppliers and then makes a decision about the choice of supplier. If the suppliers do not agree with the Supermarket’s price offer they negotiate with them again. However, most of those interviewed believed that the price offers are in the same range from both parties.
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know, it is generally very close. We all in tune with where the market is, what the volumes are, and what the weather is doing. I reckon we are on the same page; it is very close any way. P1: Price’sdrivenbyweektoweekpricingduringtheseasonbysupplyanddemandofcourse, where the market is weatherimpacts.Sothat’swherethenegotiationsideofitcomesinalso throughout the season. and when you talk about apples and pears, they stored in a room so they are not going anywhere, but stone fruit’s changing every day, bit of rain, heat, whatever weatherimpactseverythingyoudo.Sothat’swherethenegotiationscomein.Ithinkeveryone justliketosetthepricefortheseasonbutthatjustnotpossiblebecauseifheat’sprettyhigh, the price goes up, demand goes up.
S1: we are not in the farm every day so like a stock market every day fluctuates we do a week on week slaps of prices and those prices are according to the volumes we have.
The main parameter in pricing is the available volume. The Supermarket and suppliers will follow a ‘promotion strategy’ when supply volumes are large and will lower prices for fruits in order to stimulate consumer demand. Promotions and their impacts on the chain are discussed in the next section.
Prices fluctuate during the season according to available volumes. In general, the prices at the beginning of the season are high due to supply shortage. Only a small percentage of farm regions produce fruits at the beginning of the season; but closer to peak times the available volume increases and prices decrease. After the peak season the prices increase as volumes decreases until the season ends.
G2: Normally in the first half picking prices are very high, and then it comes back every week. The price drops, because there are more and more fruit and more and more regions start to pick which will have an impact on the pricing. By the time it gets to the main region which is in Sunraysia in Mildura, by that stage it sort of fluctuates. By the time you have one sort of basic price and it fluctuates if you get promotion. And you try to give them better price and trying to shift more volumes. The price is all driven by how much fruit you have got to sell.
M3: At the start of the season it is extremely high, as you get in to the season it calms down and as you come to the end of the season it spikes up again.
M1: High price at the start of the season, high price at the end of the season, and wide fluctuations in between.
Chapter Six
Price fluctuations during the season depend on the characteristics of the produce. Some fruits like mangoes, apples, pears, grapes can be stored for several weeks to months. The need for prompt sale is low, although inventory costs must be factored into price. This encourages the suppliers to apply a ‘promotions strategy’ for these fruits also. Some other fruits are more delicate (such as strawberries and stone fruits) and have to be sold and consumed in a short period of time. Pricing for these fruits are more volatile and are supply driven.
Prices are supply driven, but supply volume is dependent on weather events - high temperatures, rain, and sun exposure can impact the available volume. Severe unexpected weather events such as floods and cyclones may impact farms in the longer term. This can ruin enormous volumes of supply and therefore increase the price during the season. Clearly, supply availability has a significant impact on price; but this is not the only parameter of concern in the pricing process. From the Supermarket’s perspective, providing consistent high quality produce to the consumers is even more crucial than price. Quality impacts on pricing negotiations and as noted, the Supermarket trades with a limited number of suppliers in each produce category. They prefer to maintain a long term relationship with the suppliers. For most suppliers having a long term relationship with one of the major retail chains in Australia is considered more important than selling fruit at slightly higher prices.
The indirect growers are not involved in the pricing negotiations. The marketers negotiate on behalf of the indirect growers, and pass the price associated with the order quantity to them. The marketer receives the information about the projected supply in the next week from all the growers and it is the marketer’s responsibility to consolidate all forecasts and negotiate the price with the supermarket. The grower does not deal with pricing. He receives the order and prices for the order from the suppliers and will normally accept the price.
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indirect growers in terms of the minimum return to the indirect growers- which gives stability of return to the indirect growers.
P2: We have to sign a contract with growers at the start of the year as far as a minimum return. For example we agree not to return the grower under $17. So we are bound by that contract. I need to take that into the consideration, [also] I need to take that into consideration where the market sits.[…]themainthingforusisthereturnforthegrower,becauseourbusinesscannot survive without grower.
P2: If I know that for example at the wholesale market the price is $30, then I need to sell to the supermarkets at $27 to give them the advantage for competition.