Alibaba and Coop Italy, China and Made in Italy food. An opportunity for all?

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The news of Coop Italia’s landing on the planetary ecommerce champion last month went almost unnoticed. Alibaba, China and Made in Italy foods. An opportunity for all, accepting the invitation of the amazing Jack Ma? (1) Some brief reflections to follow.

Communication in general and politics in particular tend to generalize, without making the appropriate distinctions of size and numbers. Instead, it is useful to come to terms with reality. Successfully attacking a market with the size and characteristics of the PRC requires substantial resources (financial, human, time), accurate market analysis, and medium- to long-term strategies. That very few groups have, in the Italian food & drink scene.

A preliminary consideration is worth introducing the concept. The U.S. giants that dominate the West’s digital market, despite huge investments made, have so far failed to penetrate the Chinese market (see infographic on 2016 data).

It could be argued that the protectionism in vogue in the Chinese market is strongest in high value-added and internally replicable sectors. The services offered by the aforementioned U.S. giants are in fact manned by Chinese groups (Alibaba, Baidu, Tencent, Huawei) that effectively control and dominate the domestic market.

Italian food might have a better chance, thanks to iconic brands and inimitable products. Provided, however, that these intangible values are manned by a level of organization, financial capacity and investment within the reach of very few. Conversely, the venture could prove unsuccessful for SMEs, whose products are at risk of being ‘cloned’ by international giants (with good memory of the global success of Kraft-branded Parmesan ) before they reach the sales volumes and cash flow needed to reorganize large-scale production.

Therefore, the ability of local producers to emulate workmanship historically believed to be inimitable should not be underestimated. Thanks also to the acquisition of original know-how and technologies, as in the case of tomato preserves. (2) Or to the purchase of entire companies, such as the Salov oil mill in Lucca – owner of the ‘Filippo Berio’ brand – by the Chinese Yimin group in 2014. (3)

Volumes are crucial. With due proportion, China represents for the largest Italian players what the large-scale retail trade represents in Italy for artisans. That is, the prospect of increasing revenues significantly without sacrificing its identity and product quality. And if the business practices of European retailers are unfair, Amazon’s go far beyond that. Being required-among other things-to ship goods to the PRC and rent warehouse space at the supplier’s expense. Pending sale (preceded by on-demand customs clearance), about which, moreover, there are no guarantees.

The circle thus comes full circle, back to the starting point. You need financial strength, organization, investment. Not forgetting the brand. Which should not only be recorded but also made knowable-before visible-in the world’s most populous country. Where to this day brands like Amazon or eBay have little meaning, an understatement. Otherwise, better to look elsewhere.

We therefore wish the country-system that Coop Italy can assume the role of the Marco Polo of the third millennium. And maybe, that other Italian retail operators will decide to follow. A new route to the Middle Empire needs to be opened for Italian agri-food production.

Dario Dongo and Fabio Ravera

 

Notes

(1) Jack Ma’s intellectual stature can be understood by listening to his memorable lecture on history and geopolitics, to the remaining leaders of the planet, this year in Davos https://youtu.be/sC6IgkDg46E

(2) Cf. http://www.internazionale.it/reportage/stefano-liberti/2017/04/08/pomodoro-cina-italia

(3) In defiance of rhetoric about the Italian-ness of Italian foods and the origin of their raw materials, Filippo Berio-branded Spanish extra virgin olive oil (Chinese-owned) represented Made in Italy at the latest Los Angeles Times food and wine festival

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Specialist in distribution models and Revenue Operations with over 25 years of projects in different industrial sectors and countries (12 years in the US). I work on Lean Organizations, Supply Chain Inefficiencies, Organizational and Financial Restructuring Projects, Digitization and GDPR