The question of effectively promoting California rice is often raised as growers and marketers looking to extract maximum value from the market. The following is a look the question and the factors the California rice industry would need to consider if such an effort were undertaken.
Marketing and budgets case study
Most industries target marketing and promotion expense at about ten percent of revenue. Consumer products companies would be expected to have higher spending. Industrial producers, where little promotion is needed, typically spend less. For this analysis, ten percent of revenues will be used. In addition, a good analogue for specialty rice such as California Calrose is considered. For some commodities such as fluid dairy, a strong case can be made that the best market and promotion comparison would be with soft drinks, as there is clear competition between the two beverages. In the case of Calrose, a good analogue would be brands within the natural foods industry. Both are evaluated.
Natural Foods Brands
Two natural foods brands are considered. Nature’s Path, a national brand with $260 million in sales in 2012 which markets over 100 products nationally and Canada. The company engages in traditional retail promotions including coupons, in-store promotions and consumer contests. In 2014, the company launched a series of television advertisements in support of their Pumpkin Flax Granola cereal. A marketing budget of ten percent of revenue would be $26 million.
The second company is Eden Foods with estimated 2013 sales of $55 million and markets 300 organic foods products including soymilk, grains, vegetables and supplements. The company engages in traditional retail promotion activities including coupons and in-store promotions. A marketing budget of ten percent of revenue would be $5.5 million
Dairy v. Soda and Water
Dairy promotions such as ‘Got Milk’ and the milk mustache campaign are also of note. Collectively, the fluid dairy industry in California spends an estimated $32 million annually on marketing and promotion. The market they compete in spent $597 million on advertising soda and the bottled water industry $61.4 million in 2013.
What it looks like for others
Comparing marketing and advertising spending among other commodity boards in the state is also of interest. The graphic below shows the spending on domestic and international marketing for the top groups in California.
These boards and commissions fund activities through assessments collected from members and also through participation in federal promotion programs such as the Market Access Program (MAP) and Foreign Market Development (FMD).
What it would look like for us
Considering farm gate value of $770 million for the 2012 California rice crop and applying a ten percent marketing budget would yield a marketing budget of $77 million annually for both domestic and international promotions. Based on a 42 million hundredweight crop, an assessment rate of $1.83 per hundredweight is imputed. Offsets of $1million to $1.5 million could be realized from USA Rice Federation participation in federal promotion programs such as MAP and FMD.
Current assessments of the Commission yield an average of $5 million annually, which translates to a rate of 11.5 cents to 14 cents per hundredweight of paddy, depending on crop size.
It appears unrealistic that the California rice industry could compete effectively in domestic and international promotions in support of Calrose or California–origin rice. Markets we compete in such as Japan and the West Coast and East Coast domestic markets command high advertising rates. It is also unlikely that assessment rates sufficient to fund a competitive marketing campaign would be supported.