Parmareggio: The road to servitization

Today it’s no longer enough to offer excellent products in the hope of rising above the chaos and confusion of the competition. Now it’s just a first step – albeit an essential one – that companies have to take on the road to a sustainable future. But the journey doesn’t end here.

With the rules of the competition getting tougher by the day, it’s a must for companies in mature sectors like food & beverage to find a way to boost their growth, squeeze the bargaining power of distributors and supplies, out-price the competition and give consumers options by offering differentiation.

Otherwise the risk in this sector is watching as your food products turn into “just” basic ingredients.

This is where servitization comes into play. Servitization means the ability to convert from making and selling physical goods to providing an integrated offering – with an accent on service – to create value for the customer and the company itself. When it actually becomes a business strategy, servitization zeroes in on the needs of consumers, which in turn bolsters their loyalty and their willingness to spend, cementing the differentiation advantage into place and erecting higher entrance barriers.

So what companies need is a real change in perspective.

For a perfect example we can look to the Granterre-Parmareggio Group and its Parmareggio brand, which has an impressive ten-year track record. And this in a not-particularly-attractive sector in continual evolution, marked by high fragmentation (with the risk that the public perceives all products as the same), intense price volatility and strong bargaining power among actors both upstream and downstream. In other words, it’s a sector in a constant state of flux, in particular in terms of foreign markets and global competition

But in the midst of all this uncertainty, Parmareggio has made management decisions that have paid off, in particular by funneling investments into specific strategic areas/drivers of servitization.

Product innovation: Parmareggio has focused on “easy-to-use” products, offering fixed weight packaging so that consumers are facilitated in their choice and do not need to compare different packaging and pricing. Furthermore, it launched solutions for a wide variety of occasions: Parmigiano Reggiano as a food, as a topping (for pasta, pizza, salad), and as the base for creating new products. Among them, with ABC Snacks, targeted to children between 6 and 10, the company switched from its normal category positioning to the refrigerated snack segment.

Process innovation: Parmareggio continued to invest in high-quality products, no short cuts allowed. But at the same time the company ramped up its servitization by investing in speed in transportation/distribution. Now Parmareggio can get its packaged cheese to market in 48 hours tops.

Downstream integration: Before every new product launch, Parmareggio tries to get a complete picture of the needs of consumers, listening to what they have to say via focus groups, market research and online surveys. What’s more, every product has its own dedicated marketing campaign consisting of activities and special initiatives that engage and reward consumers.

Upstream integration: As a cooperative, Parmareggio has very close ties with its members. All-round integration initiatives (like “The Taste of Italy” ) aim to create a network of companies that produce complementary goods with an eye to accumulating critical mass, contending with foreign markets, and battling the imitation phenomenon that afflicts Parmigiano Reggiano.

Attention to the product: All of Parmareggio’s products without exception are made of Parmigiano or its byproducts (e.g. butter), with a variety of forms, packaging, and uses. Setting this bar is a way to enhance servitization too, because consumer see this as the highest guarantee of quality and specialization.

Communication: Parmareggio has always paid special attention to the communication activities that accompany new product launches, underscoring quality but also spotlighting the brand, accentuating Parma - the region of origin - and guaranteeing traceability.

• Servitization is an essential tool for sustaining and shoring up leadership in a sector that is continually evolving and constantly fluctuating, especially with regard to foreign markets and global competition. To achieve medium- to long-term success, companies must stay focused on the question: “How can we better serve consumers?”
  
  
• Developing a product range that can fulfill the needs of consumers and exploit new consumption opportunities is a strategic choice.
  
  
• Online surveys, focus groups, and market research are indispensible instruments for tuning into what consumers think and what they want, which is the source material for inventing new products. These tools are also useful for testing new products pre-launch.
  
  
• Ad hoc communication that conveys brand values and product quality is a sure way to see better sales results on strategic products.
  
  
• Membership in a consortium with other major Italian players in the food sector is a power play for reaching the critical mass needed to compete on foreign markets, promoting Italian culture, taste and food on a global level thanks to branded products and the quality producers who stand behind them.