Marketing Report: Pioneer Foods Group Marketing Strategy and Analysis

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Marketing & Management
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Abstract:
The report aims at providing an insight into Pioneer Foods Group one of the prominent fast
moving consumer goods (FMCG) company of South Africa. The company was created as a
result of the merger between two of the packaged food companies of South Africa, Bokomo and
Sasko in the year 1997. Sasko which became known as the ‘Essential Foods’ and Bokomo which
came to be known as ‘Food and Ceres Beverage’ had been consolidated under a single structure
of management and came to be known as the groceries. The international portfolio of the brand
remains a well-established unit that boasted of prolonged standing relationship in key markets
for exports. The operations related to fruit snacking and breakfast cereals were however carried
out in UK. The mission of the company lies in nourishing the lives with well-loved and trusted
brands thereby empowering the families in deriving more from life. The report addressed a wide
range of non-financial and financial information for enabling the stakeholders and consumers in
making informed decisions with regard to the future strategies.
The report commences with an analysis of the marketing mix along with an evaluation of
competitive advantage and differentiation. The report also provides an insight into
commoditization and the overall product as well as the solution offering of the firm. The report
further acknowledges the aspect of segmentation and provides an insight into the service element
of the firm. There is also discussions on the experiential marketing, experience management and
the customer relations. In addition to this, the report also draws attention to the use of the internet
in the marketing, pricing and the cost structure, branding along with an insight to sustainability,
TBL and the stakeholders.
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Table of Contents
Introduction:....................................................................................................................................3
1. The Marketing Mix: The 4’Cs and 4P’s......................................................................................3
2. Differentiation and Competitive Advantage:...............................................................................5
3. Commoditization and Total Product & Solution Offering..........................................................7
4. Segmentation:..............................................................................................................................8
5. Management of the Service Element:..........................................................................................9
6. Experiential Marketing, Customer Relations and Experience Management.............................12
7. Use of Internet in Marketing......................................................................................................13
8. Pricing and Cost Structure:........................................................................................................14
9. Branding:...................................................................................................................................17
10. Sustainability, TBL and Stakeholders.....................................................................................19
Conclusion:....................................................................................................................................21
References:....................................................................................................................................22
Bibliography..................................................................................................................................26
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Introduction:
The objective of the report is to provide an insight into Pioneer Foods Group. The
primary business of the company lay in producing, distributing, marketing and selling of varied
range of beverage, food and the related products with the aim of enabling the consumers in
leading better lives. Some of its competitors includes Premier Foods, Associated British Foods,
Greencore, Pinnacle Foods, Tiger Brands, Snyder's-Lance, Samworth Brothers, 2 Sisters,
Alvarado Street Bakery and Hovis
1. The Marketing Mix: The 4’Cs and 4P’s
The four Cs of marketing includes:
1. Customer Needs and Wants: This refers to understanding the customer needs as well
as their wants (Londhe 2014). Pioneer Foods Group focuses on nourishing the lives of customers
according to their needs with trusted brands categorized under the essential food and groceries
that helped in empowering the families. This has been found to be backed by motivated
employees, excellent management and the world class facilities.
2. Cost: In addition to the price of the product, it also takes into account the time taken
by customers in getting to the location to get the product or the amount spent on gas for reaching
the location (Khan 2014). This also includes benefits of product offered. Pioneer Foods Group
delivers food products that aids the families in leading a healthy life. The firm also puts forward
enhanced means of distribution, marketing and production along with undertaking an export
across 88 countries for providing easier access to products.
3. Convenience: It is a more customer oriented method that focuses on whether the
customers can opt for shopping online or in the stores. Pioneer Foods Group makes it products
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available both through online as well as in the stores. This has enabled it in overcoming the
challenging economic conditions that put pressure on the willingness of consumers in making a
purchase.
4. Communication: Communication requires interaction between the buyer and seller.
Pioneer Foods have always valued transparent as well as open communication with the
customers through advertising, one to one interaction, brand and corporate websites, customer
care centers and the social media platforms.
The four P’s of Marketing include:
1. Product: Pioneer Foods has its products categorized under essential foods and
groceries. The essential foods primarily includes wheat flour, baked goods, rice, pasta, maize
products and dried vegetables under the brand name Sasko, White Star and Spekko. On the other
hand the groceries section includes dried fruit, baking aids, breakfast cereals, salads and meals,
deserts, nuts, base flavor, rusk, snack bar, frozen food and condiments under the brand name
Liquifruit, Weet-Bix, Ceres, Bokomo and Safari (pioneerfoods.co.za 2020).
2. Price: In essential food section, White Star Maize meal has been found to achieve fast
expansion of growth. This enhanced the popularity of the product mix along with its profitability.
The maize mea maintained status quo and had a price that was below leading brand. The product
however aimed towards being perceived as premium thereby targeting the maize meal consumers
who belonged to the lower and the middle class income groups. However, the refined maize
meal had been higher in price and had been considered as premium product. The maize meal
seemed to belong to the price sensitive market with the escalating cost passed on the customers.
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In the groceries section too, there was fierce competition between the cereal and the fruit
juice. The juice category was found to increase by 25 percent in value while the cereal category
rose by 20 percent. The sales volume of Liquifruit rose by over 30 percent while Weet-Bix rose
by 25 percent. Affordability remained the key drivers of growth in cereals with expanding levels
of profit.
3. Place: The product of Pioneer Foods is available in 88 countries across the world.
Besides, they are also available in large and medium retailers along with the metro stores.
Informally, they are also available across Kiosks and spaza shops (pioneerfoods.co.za 2020).
4. Promotion: Pioneer Foods Group carries out advertising via television, magazine,
radio and sales promotion. The firm uses advertising as the key medium to launch any campaign.
For instance, radio seem to have the highest frequency and reach for the target market of White
Star. The firm also undertakes promotion through print media for informing the educated class of
people. The firm also resort to sales promotion where consumers are provided a free sample
against a specific quantity purchased.
2. Differentiation and Competitive Advantage:
The differentiation of the Pioneer Foods lies in its brands, the people and the strategic
initiatives (Brenes, Montoya and Ciravegna 2014). The most prominent essential food brands of
the firm includes Sasko, White Star and Spekko while the grocery brand included LiquiFruit,
Bokomo, Safari, Ceres and Weet Bix. Some of the newer brands of the company includes John
West, Wellington, Mama, Today, Heinz and Big Jack. As far as the people are concerned, they
are not only smart but possess a tendency of winning. The strategic initiatives remains grouped
under the six different pillars which includes (pioneerfoods.co.za 2018):
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Shaping a win-win corporate portfolio
Focus on building of the power brands
Embedding the strategic management of customers
Resetting cost base and stepping productivity.
Building of higher performance of team
Adopting a practice of sustainability in all the practices.
The fast moving consumer good companies particularly the food and the beverage
business needs to undergo rapid evolution depending upon the trends of the changing customer
trends and expectations (Varley 2014). This enables them in attaining competitive advantage.
Pioneer Foods Group tries to attain competitive advantage by adopting bolt-on growth via the
mergers and acquisitions depending on the criteria of investment. The firm has also tried to
implement an agile as well as inclusive approach in addition to the operational activities
(Mncube 2013). The portfolio of products and brands of the Pioneer Foods Group always
remains under the review of the board and the management. The firm can be considered as able
and competent participant in the categories of staple food that remains associated with the key
food divisions depending on size of categories, market capabilities and the established
operations. However, the Pioneer Foods Group can attain competitive advantage by focusing on
the following areas (pioneerfoods.co.za 2018):
Maintaining a captivating portfolio through continuous optimization of the brand and the
product mix.
Leveraging the power brands, while continuously enhancing the growth prospects and
resilience
Robustly managing the demands and upgrading the channels of distribution accordingly.
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Rigorously managing the process efficiencies and the operating costs.
Equipping the employees for a higher performance teamwork.
3. Commoditization and Total Product & Solution Offering
The rising cost of the electricity prices, spiral petrol prices, the newly implemented sugar
tax and the rise in VAT to about 15 percent has led to a financial squeeze thereby bringing about
a change in the food demands of South Africa. The consumers are now making tougher choices
thereby adjusting the consumer patterns for lower levels of the disposable income. These
structural impacts along with a weaker rand had showed signs of reducing the deflationary cycle
thereby pushing the economy towards inflation. This could be one of the reasons for
commoditization of the essential foods and the groceries put forward by Pioneer Foods Group.
Commoditization refers to the process through which the goods having economic value and
unique characteristics ends up as simple commodities not only in eyes of the consumers but also
the market (Holmes 2016).
The total food products included the essential foods comprising of the flour, wheat,
maize, bread, meal, rice, pasta and the dried vegetables. These products comprises of the daily
essentials and the value added foods of South Africa. The grocery division on the other hand puts
across wide range of South African branded beverage and food products along with the private
level products for the local retailers.
As a solution, it can be said that to ensure the medium and the long term success, it is
necessary for the essential food division to leverage the scale, reach and capacity along with the
differentiating strengths. Besides, the essential food division should ensure an unwavering focus
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on the brand relevance through maintenance of service, product quality, pricing and availability.
On the other hand, with the consumer demand at lower ebb, management of groceries must
focus on the improving margins through the enhancement of the productive capacity and the
efficiencies of the supply chain by looking for options related to the cost savings. On the sales
and the customer side, manager tweaks process and interface for enhancing in-store presence of
the Pioneer Food brands and on enhancing the competitiveness. The portfolio however remains
well balanced and remains prioritized for the purpose of investment into a growth oriented
capacity.
4. Segmentation:
This basically refers to the procedure of dividing the potential customers into segments or
groups based on the various characteristics. There will be four different types of segmentation in
case of the Pioneer Foods Groups which will include demographic, geographic, psychographic
and behavioral (Wilkinson 2013). The target market for the essential foods and the groceries are
mostly business to customers. The segmentation based on the above criteria are as follows:
1. Demographic:
i. Age: Most of the customers were between 7 years old and 55 years old.
ii. Income: Will target customers from lower to higher income groups
iii. Gender: Meant for the women as they do most of the grocery shopping.
iv. Ethnic: South Africa is a multi-ethnic country with majority of black population.
v. Family Lifecycle: This can be married, young single, with or without children,
separated or widowed.
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vi. Social Class: The trend setting, affluent and the emerging black people who falls in
the upper and the middle class.
2. Geographic: The products of the Pioneer Foods Group remains distributed to almost
all the provinces of South Africa. The firm also exports its products across 88 countries around
the world through the brand custodians and the strategic partners. Some of the countries includes
Nigeria, Algeria, Mozambique, Ghana, Botswana, Zimbabwe, Zambia, Mauritius, Namibia and
the Democratic Republic of Congo, Germany, North America, Switzerland, France, Netherlands,
Australia, New Zealand, United Kingdom, South Korea, China, Japan and Philippines.
3. Psychographic: The psyche of target market might be described as ‘Keeping with
times. The people are ambitious, highly driven and possess the energy of succeeding
professionally as well as personally (Motale, Bevan-Dye and de Klerk 2014). The targeted
individuals are also determined to portray to the world that they are successful in everything they
does right from the career, to the family, home and the social life.
4. Behavioral: Primarily comprise of the image conscious and the brand loyal customers.
5. Management of the Service Element:
This comprises of the four key elements which are mentioned as follows:
1. Service Culture: The service culture at Pioneer Foods Group is determined by
leadership principles, mission, vision and values (pioneerfoods.co.za 2020). As far as the
leadership principles are concerned, the chairman and his board decided on the strategy for
reviewing the strategic intent. The highest concern of the board lie in balancing portfolio with
regard to the conditions of trading. The board however looks forward towards the compliance of
the regulatory requirement with the business strategy. The board also conducts external audits
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and craft a comprehensive and robust strategy for steering the company into a flexible, faster and
innovative path of growth. The Chief executive officer mentions that present realities dictates the
portfolio expansion and potential acquisition that will ensure the alignment of the brand with the
product basket put forward by Groceries. He also mentioned that the board also takes care of the
long term incremental expansion into the chosen African geographies. The recent acquisitions
made in UK with regard to fruit snacking in UK are believed to generate positive results. The
Chief financial officer that Pioneer Foods Group has generated a healthy flow of cash derived
through the operating activities that combined with financial facilities for ensuring capital
requirements and the plans for expansion in future.
As far as the vision is concerned, the Group focuses on becoming one of the leading FMCG
Company of Africa (pioneerfoods.co.za 2020). The company however holds the mission of
nourishing the lives of the clients with well-loved and trusted brands that empowered the
families in deriving more from life. The values of the firm however lies in the following
(pioneerfoods.co.za 2020):
Integrity: This refers to being transparent, ethical and honest
Empowerment: This enables the people in growing, excelling and realizing the complete
potential
Passion: This involves relentless pursuing of excellence.
Accountability: This involves putting the action into words by displaying commitment
towards the brand represented by Pioneer Foods.
Consumer focus: This involves prioritization of customers through building of
relationships and striving towards exceeding the expectations of the customers.
Teamwork: This requires collaboration for optimizing the efficiencies across the business
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2. Service Quality: This comprises of strategies, process and performance management
system. The strategies of the firm includes (pioneerfoods.co.za 2020):
Shaping the captivating corporate portfolio: This involves the continuation of
optimization of existing products, construct and the brand mix.
Focusing on the building of the power brands: This involves strengthening the growth
and the resilience prospects of the power brands
Embedding the Strategic Management of Customers: This involves the distribution of
the expansion channel.
As far as the process is concerned, the Pioneer Foods Group tries to create value from
the core activities of the business that inclues strategic sourcing, marketing, selling, production,
distribution of diverse food and the beverage products in coordination with the business
partners, service providers and the network producers (pioneerfoods.co.za 2020).
When it comes to the performance management system represented a program for
enhaning health and the safety skills of the staffs at the different manufacturing units along with
undertaking different occupationale safety and health training interventions
(pioneerfoods.co.za , 2020).
3. Employee Engagement: The firm has close to 8971 employees and hence the focus
area with regard to employee involves training, remuneration and initiatives related to the safety
measures (pioneerfoods.co.za 2018). The engagement platform included the email, intranet,
desktop screensavers, surveys, newsletters, face to face briefings, conferences, management
presentations, bulletin boards and the performance appraisal. In other words, the firm tried to
create value for the employees through the opportunities of the job, career opportunities,
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remuneration and improvement in the skills. The shorter and the longer time schemes for
incentives remained competitively benchmarked for ensuring retention and fair practice (Anitha
2014).
4. Customer Experience: Pioneer Foods Group tries to ensure higher quality and
consistent output with regard to the experience of the customers (pioneerfoods.co.za 2015). Each
divisions of the business tries and meets specific requirements of the customers whose
requirements and needs keep changing constantly. Maximum orders from the customer are
centrally processed following which instructions for delivery and production are sent to
manufacturing plants. In addition to this, the group incorporates verification system for testing
quality that included regular audits and ensuring constant engagement through the approved
suppliers.
6. Experiential Marketing, Customer Relations and Experience Management
Experiential marketing puts across personal connection that allows the customers to
easily remember the products. In this regard, it can be said that Pioneer Foods Group also
undertook experiential marketing through its essential foods and groceries section (Smilansky
2017). The essential foods undertook experiential marketing by launching 2 kg variant of the
White Star brand known as the ‘Instant Maize Porridge’ for enhancing the value proposition. The
product was launched through a marketing campaign that hosted one of the biggest breakfast of
South Africa. This campaign also integrated CSI initiative, social media and touch points of the
events for reaching close to 12 million people.
Pioneer Food Group also undertook steps for significantly enhancing some of its products
and brands of the groceries section. One such instance has been the re-launch of the liquifruit.
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The one liter range had been re-launched in prisma pack that had been accompanied with a sleek
can of 330 ml. In considering the trend of the health conscious people, the ‘Nectar ‘belonging to
Fruitree range contains no additional sugar. The iced tea formulation had a reduced level of sugar
to about 4.5 g for each 100 ml along with a repackaging of the range.
Customer relations refers to the manner and the procedure through which a business is
able to establish, develop and maintain relationship with the customers (Bellingkrodt and
Wallenburg 2015). Pioneer Foods Group has always prioritized the customers and tried to build
relationship through exceeding the expectations of the customers.
Experience Management represents the procedure of monitoring each interaction that
people experience with the company for spotting the opportunities of improvement (Grønholdt et
al. 2015). Pioneer Foods Group undertakes experience marketing through the following:
Support the development of competitive and sustainable communities
Minimize the influence of the activities on environment
Ensure safety and health measures to the people
Enhancement and maintenance of food safety
Ensure engagement of the ongoing stakeholder
7. Use of Internet in Marketing
Internet marketing refers to use of the digital media for informing the market regarding
the business as well as entice the people for purchasing the products and services (Gangeshwer
2013). In other words, the internet serves as a vehicle that provides a greater reach to the
promotional, advertising and the efforts of public relations.
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In this regard, it can said that, marketing in Pioneer Foods Group acts as the integral part
of responsibilities of executive management for each operating division of the group so that it
remains coordinated throughout the Pioneer Foods Group via a wide marketing forum. In the
digital front, Pioneer Foods Group looks forward to the implementation of Enterprise Resource
Planning (ERP) that is undergoing review and up gradation for ensure both technical and the
future readiness of the critical enabler of business (pioneerfoods.co.za 2018). In fact, the firm is
ensuring optimal support for the execution of the business strategy. Through digital
transformation by remaining focused on the system upgrade of ERP along with enhanced
deployment the firm will be able to implement effective marketing. This is aided with ensuring
strict regime on cyber security and governance in the place.
8. Pricing and Cost Structure:
The pricing and the cost structure of Pioneer Foods Group are mentioned as follows
(pioneerfoods.co.za 2019):
Revenue accounted for R20.2 billion
Operating profit accounted for R1603 million
Distributed dividends accounted for R680 million
Cost of remuneration accounted for R 2690 million
Cost of finance accounted for R197million
Amount of taxes paid accounted for R364million
The financial year of 2018 had been impacted heavily by the volatility in the economic,
political, and the currency shifts in South Africa as well as abroad 38. Pioneer Foods Group
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however portrayed better results by remaining in line with its ‘restore the core’ strategy. This
percentage figures are mentioned as follows:
Sales volume increased by 3 percent
Revenue increased by 3 percent
Adjusted earnings per share rose by 25 percent
Basic earnings per share rose by 47 percent
Adjusted operating profit rose by 26 percent
Revenue Analysis:
Figure 1: Diagrammatic Representation of Revenue Analysis of the Firm during 2017-
2018
Source: (pioneerfoods.co.za 2018)
The above diagram portrayed that the group was able to deliver high level performance
that helped it in generating a revenue growth of about 3 percent to about R20.2 billion for the
year. The volume however increased to about 4 percent. However, the analysis of operating
profit by segment is as follows:
Operating Profit Analysis:
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Figure 2: Diagrammatic Representation of Operating Profit Analysis of firm during 2017-2018
Source: (pioneerfoods.co.za 2018)
In the essential foods division the recovery of the maize supply in the South Africa
normalized the maize prices supported by overall improvement. Nevertheless, the baking and the
wheat milling segments came under pressure due to intense competition, lower demand and the
rising cost pressure against weakened local currency 26. The impact of the pressure had been
particularly evident in the sales of the maize during final quarter when the White Star remained
at all-time higher level of premium pricing. The value chain of wheat significantly delivered
weaker profitability in comparison to the baking segment that benefited from the combined
impact of the operational efficiencies, enhancement of quality and the volume traction during
second half of year. There has also been efforts for extending availability of the Sasko bread that
are expected to not only bear fruits but also bode well for an improvement in sustained
performance.
On a similar note, the Groceries division also produced better results through
performance mostly driven by the growth in the key categories of fruit juices and cereals 37.
Weet –Bix maintained the market share while Ceres, Fruitree and LiquiFruit gained the market
share 27. The overall performance of operating profit had been leveraged by the operational
efficiency. However, the operating results of the group had been influenced negatively through
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100 percent acquisition of Heinz Foods Business since it exhibited loss for the initial four
months.
Now, as far as the international division is concerned, it was able to register a yearly
growth in the operating profit as portion of the overall performance 36. Exports in African
markets remained subjected to the unstable economic conditions hence the business put across a
plan through implementation of ‘route to market’ strategies 28. The export business related to
fruits benefited from the stronger demands globally as well as the higher dollar prices that led to
the lower yields in the crop.
9. Branding:
Pioneer Foods Group believes that stronger brands are able to attract the customer loyalty
which is necessary of retaining and winning the market share (Reijonen et al. 2015). The group
believes that retaining customers will determine the scope for improving the margins and selling
of higher volumes. In doing so, Pioneer Foods Group also believes in remaining alert towards
any disruptive competition that would impact the brands in targeted categories
(pioneerfoods.co.za 2020). The following paragraphs shows how the group maintains its
branding in its three divisions:
In the essential food division:
For the maize products profitability is restored through normalizing the positions of the
raw materials. This enhanced the brand strength of White Star and also led to an
increased demand for the maize meal.
For wheat flour products, branding was maintained through volume participation
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For baked goods, the group tries to maintain branding through providing fresh supplies of
buns, rolls, biscuits and breads.
The rice products are imported and marketed through an extensive distribution to keep up
to the branding.
The group helps in maintaining the branding of the Pasta products through using
imported and local ingredients.
In the Groceries division:
Pioneer Foods Group acts as the market leader in breakfast cereals and leads to the
production of brands like Weet-Bix, Bokomo, Nature’s Source, Otees and ProNutro.
The nut and the dried fruits are marketed via retail under the brand name Safari
The desserts and the baking products are sold under the Moir’s brand
Sparkling fruit juice products are sold under the brand name of Ceres, Liuifruit and
Fruitree and captures close to 47.2 percent of the market share.
The ice tea is sold under the brand name Lipton and captures close to 50 percent of the
local market share.
In the International division:
Pioneer Group undertakes beverage exports of longer life fruit juices for close to 30 years
under the Ceres brand
The Group also undertakes grocery exports to the sub Saharan Africa under the brand
name Maizena, Bokomo and Moir.
As part of the essentials exports, the group primarily undertakes the export of maize meal
under the brand name White Star.
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As the long established leaders of the market, Pioneer Foods Group not only devoted
years but also a considerable amount of marketing resources for undertaking clear
differentiation of the brands into categories. Hence, the Group was able to distribute first and the
second place brand in the sizeable categories.
10. Sustainability, TBL and Stakeholders
The Group holds the belief that contribution towards a sustainable world implies
contribution to a successful and sustainable business (Galli et al. 2015). Hence, the sustainability
approach of the organization remains closely aligned to the business strategy through the four
overarching goals that supports the strategic business themes (pioneerfoods.co.za 2018).
However, the relationship between the sustainable development and the success of business is
mentioned below:
Figure 3: Diagrammatic Representation of Sustainable Goals and Aligned Strategic Imperative
Source: (pioneerfoods.co.za 2018)
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The triple bottom line (TBL) represents a theory or framework that recommends a firm
to focus on the environmental and the social concern in addition to the profitability (Alhaddi
2015). According to this theory, the company should have three bottom lines that must focus on
the planet, people and profit. When it comes to Pioneer Foods Group, the firms focus on the
three bottom lines are mentioned as follows:
As far Planet is concerned, the firm ensures reduction in the carbon footprint through
utilization of sources that are less fuel intensive as well as energy efficient.
The firm also focus one the People aspect through maintenance of responsible nutrition
as well as food safety by reducing of the sugar and the salt levels in food and beverages.
To ensure profitability, the firm puts across delivery of responsible product information
Stakeholders
The stakeholder for a firm primarily comprise of the investors, shareholders, consumers,
customers, employees, suppliers, community, regulators and government. Pioneer Foods Group
considers it to be a priority to create shared value for all the stakeholders (Lawrence and Weber
2014). The corporate governance policies and procedures remains housed within formal and
structured system that helps in maintaining balance between the objectives of business and the
interest and expectations of the shareholders belonging to the following interest group. These
includes (pioneerfoods.co.za 2020):
Stakeholders who remains directly affected by the business of the group
Stakeholders who potentially influences the ways in which the group conducts business
Stakeholder holding an interest in the actions and performance of the group.
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Conclusion:
On a concluding note, it can be said that the operating business models along with the
plans for business improvement places Pioneer Foods Group in an advantageous position. The
company not only establishes a suitable platform for competing effectively but also tries to shape
in diversified portfolio by aligning itself with the sustainable principles and future growth.
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