B2B e-commerce companies clamor for dairy industry business
When the news broke this summer that a group of some of the largest dairy companies in the country had formed Dairy.com, a business-to-business (B2B) e-commerce site devoted to the dairy industry, industry executives started to take a closer look at what e-commerce means to them.
In an attempt to answer some of those questions, Steven Gackenbach, director, external development, cheese division, Kraft Foods, spoke at the Wisconsin Dairy Products Association's (WDPA) recent convention about the plans behind Dairy.com, an independent company which intends to provide a wide gamut of services for people in the dairy industry, whether they be producers or dairy product manufacturers. The site's first phase of services are expected to go live in the first quarter of 2001. Dairy.com will provide both a physical dairy commodity exchange and dairy farmer services, among other things; this complete devotion to providing services for the entire industry, not just a portion of it, is what will make Dairy.com powerful, Gackenbach says.
"Dairy.com is really the first and only website to comprehensively serve the needs of the dairy industry," he says. "Our mission as a company is really to leverage that power of this new technology, the Internet, to help all dairy companies improve their business."
Yet despite Dairy.com's sole focus on dairy, it certainly won't be alone in offering services for dairy manufacturers. In fact, it will be one of a growing number of B2B e-commerce companies that focus on dairy. And while Dairy.com says the breadth of services for everyone in the dairy industry will give it a lot of power, some companies that are involved in multiple commodities say it's a strength to be involved in multiple commodities because users aren't forced to go to various sites for their different commodity needs.
E-commerce companies offering services to the dairy industry vary in exactly how they work, but many offer ways for manufacturers to deal with new and potential customers in an anonymous environment where privacy is key.
No matter the details of how they operate, though, all of the B2B e-commerce companies say that their presence opens up a wide vista of opportunities for the dairy industry to do more business easily.
For instance, Sourcing Direct.com, an additives and ingredients e-hub that went live May 1, offers dairy manufacturers both the opportunity to deal with previous customers directly online or to find new customers, says Dan Pennings, accounts manager.
For those who want to deal directly with a customer or supplier, the site allows a company to set up various different business partners and work out sales and purchases directly online without other companies seeing what is being done between those two companies. This is an easy way to get started using B2B e-commerce services, Pennings says, noting it saves companies both time and money by creating instant communications.
"It takes two to dance. We often recommend you go in with someone you know," he adds.
Companies can take this further by offering product to two or three specific customers but still limiting who sees the available product.
Companies also have the choice of offering a product to anyone who is a registered user of the site in an open market area, Pennings explains. While this may seem a bit daunting for either a buyer or seller who has never used an e-commerce service, SourcingDirect.com protects both the seller and buyer by prequalifying them before they become registered users of the site, he says. The site offers communication capabilities between buyer and seller, and both parties get e-mail hard copies generated through SourcingDirect.com's system, he adds.
In addition, the information gathered at the site is totally confidential and buyers and sellers don't know who the other is until the sale is nearly finalized, Pennings says. On top of that, on SourcingDirect.com's site a buyer who posts a bid sees the prices of the product being offered but the other people who are offering to supply that product don't see other prices being offered.
Michael Murray, vice president of dairy procurement, FoodTrader.com, also stresses that confidentiality is paramount at FoodTrader.com, one of the veteran B2B e-commerce companies having been online for the past three years. Privacy is so important that the company will work with users to make adjustments so that an FOB point that hints to a specific company simply due to the company's location isn't so readily apparent, Murray says.
In addition, the services available from various B2B e-commerce sites aren't just for domestic use, either. FoodTrader.com and some of the other dot coms also are focusing on international trade and value-added services.
For example, FoodTrader.com can help a manufacturer move product from point A to point B internationally not only by being on the worldwide-accessible Internet but also with the help of value-added logistics services and customs clearance assistance, Murray points out. FoodTrader.com has a presence in 170 countries and also provides profiles on various countries at its site.
Meanwhile, IngredientsNet.com — which has dairy company Glanbia plc as an investor — also is hurrying into the international arena. The Dublin-headquartered Internet portal, which went online just last month, recently opened a U.S. office in Naperville, Ill., and plans to open other offices as well.
All of these recent launches and soon-to-be launches of online trading services have dairy manufacturers scrambling a bit to decide how involved they want — or should — be.
"When you look at it on paper, it makes sense, but I'm not sure it's going to work," says Timon Zander, director of sales and procurement, Zander's Creamery, Cross Plains, WI. On the other hand, he notes that with the increasing involvement of e-commerce in the dairy industry, particularly Dairy.com, executives must keep an eye on the developments.
Many dairy executives appear to currently be poking at the services, trying to gather information about them and what they mean for the future. Paul Bensabat, CEO, Lactalis USA, New York, is one of them. He says that his company is looking into all of the different services and analyzing them but hasn't decided how it will ultimately utilize them.
With so many companies trying to figure out what e-commerce means for them, the International Dairy Foods Association is planning a March conference to examine just that issue. "Dot.milk?" will focus on dairy B2B opportunities including who the major players are, how to sell dairy products to retail and how to buy ingredients and supplies online.
For their part, e-commerce companies say the capabilities they provide make sense for manufacturers both large and small. Demand for them is growing, too, they say. Speaking at WDPA, Gackenbach cited Merrill Lynch figures that B2B e-commerce will grow from under a $150 billion business in 1999 to a $1.5 trillion business in 2003.
IngredientsNet.com also notes that since its establishment in March, for instance, IngredientsNet.com has signed more than 100 of the largest U.S. and European food ingredients companies as registered customers as the site works to capture a significant share of the ingredients market online over the next two to three years.
And while some manufacturers have expressed concern that e-commerce might detract from customer relationships in favor of price only, Vince Macciocchi, who recently was appointed IngredientsNet.com's vice president for sales in North America, says IngredientsNet.com instead provides a way to enhance buyer and seller relationships.
In addition, other companies are offering services to make direct relationships even more synchronized and paperless. For instance, ifoodnet.com's Supply Chain Manager software automates and integrates the industrial food industry's procurement, production and supply chain management processes. It includes a real-time communication environment for food industry manufacturers, suppliers, distributors and logistics companies to do business in areas such as product management, contract management, product delivery and business communications. And viaLink, a provider of services to synchronize item, price and promotion information, has been actively involved in a pilot project with the Grocery Manufacturers of America to streamline product delivery to retailers.
Of course, there is a cost to all of this. But e-commerce companies repeatedly tout streamlining, savings and market opportunity expansions resulting from using their services.
And ultimately what a company pays for services depends on the B2B e-commerce service that is being utilized. FoodTrader.com registration, for example, is free, as are the value-added services it provides. The company assesses a .5 to 3 percent fee to the seller depending on the transaction.
Meanwhile, SourcingDirect.com charges a small transaction fee as well as a $99 annual registration fee.
Dairy.com hasn't announced its pricing structure yet, but Gackenbach says a transaction fee and a subscription fee for value-added services such as information tools and supply chain efficiency tools are planned. A fee structure is expected to be announced in the fourth quarter. CMN
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