It is very surprising that so many producers see Cargill as an overpriced supplier, when its current pricing strategy s not actually extracting enough margin and may be passing up important levels of revenue. In the category where Cargill has truly value-added products in the mind of the customer, or are part of a unique program such as Herd Builder and Focus Feeds, they are not extracting the margins the could. In this category, according Cargill, a price increase of 5-20% and a margin increase of 20-80% are often possible without affecting volume. In many cases, the district, and the division in general, are using internal methods of pricing, like cost plus, that don't test what the market will bear. Instead, they should use more of an external pricing approach where you use information on the competitors' pricing, the value your product represents to your customer, and how unique your offering is (its positioning), to determine a price. External pricing will extract the margins that the products deserve and closer to what the customer is willing to pay for the perceived value and uniqueness. (Value--Benefits-Price)
Opportunities
As mentioned before, the California Dairy market with its 3,000 dairy farms and
1.5 million cows has immense potential to obtain new business. One factor that might help achieve the growth in business is the opportunity of the Dairy Management Consultants becoming very influential people in the industry by helping their current customers excel in the business. As the dairies get larger and more business oriented, the need for multidisciplinary consultants will continue to grow, especially for those who have such a variety of tools and resources at their service like Cargill does.
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