⏱ Estimated reading time: 6 min read

As we saw in Part 1 of the Value Conundrum, creating and selling successfully added value is far from easy. The key is to have a product that is attractive in value and price, but that is not the whole story. The next challenge is to share the value within the value chain. As we are going to see, this exercise, even when paved with good intentions, is a little minefield of its own.

Congratulations, you succeeded with many efforts in creating a new product for which there is interest in the market. You invested time and resources; you made investments and yet something strange happens: you do not see the financial reward for your efforts. Someone else seems to benefit much more than you do for the efforts and the sacrifices you made and the risks that you took.

Where did that extra money that you were promised ended up going? Welcome to the unfair world of value chains! Although it sounds like humor and irony, this is a reality that many in food and agriculture experience on a regular basis. And it is not funny at all. You increased costs and probably you contracted more debt in order to get the new products out of the ground. What was supposed to be an improvement turns out to be at the very least a major frustration.

Why is that, and why do producers not get the proper share of the added value they created? Well, it is all in the way the chain from farm to consumer plate works.

First, money enters the chain from only one end: the money that the consumers pay for the products they buy. For each unit sold, a bit more money comes in the system. The overall total for the product line is the total pot that the entire value chain has to distribute to all the links of that chain, and that can be a lot of players!

Like everything else with business, it is necessary to start with the end of the chain and go backward. At the point of sale to the consumer, the retailer or the restaurant charges their price, but those sellers also had to buy the product to include it in their offering. That is where things start to get tricky… and unfair. Their purchasing, and the price they pay is always the result of a commercial negotiation. Always! And it is same to their suppliers. Those, too, bought at a price that resulted from another commercial negotiation. Once the revenue money enters the pot, it is also necessary to factor in the respective costs at each part of the chain. The negotiations may appear about prices but they actually about the respective margins of all the suppliers and buyers.

That is the thing: a value chain -although the term sounds really friendly and aimed at fairness- is in reality a sequence of many commercial negotiations, and anyone who had to deal with major buyers knows that such negotiations can really be cutthroat, purely and simply. Commercial negotiations are always about bargaining power. What alternative offers do buyers have that make them demand the price they demand? That is an important question, and why it is so important to know who the competition is. Business is first of all competition, which means that they are many contenders but only a few ones will get the medals. And there will be losers.

Then, the bargaining power brings the next question: how bad do you want -or worse, need- to get that sale? That will set the dynamics of the negotiation. How much concession can you afford? How much compensation for each concession can you get from the buyer? Of course, that has a lot to do with supply and demand. This good old law of economics will determine who has the upper hand in the negotiation and who does not. Quite often, the producer is in the weaker position. For them, it is a matter of how many alternatives they have to sell the product, and what those alternatives are. The key rule here is that you will sell for the worst alternative you have when you do not have other alternatives.

This part of commercial negotiation is critical to get the added value and get most of it. You must have a strong bargaining position. If you don’t, then you are in trouble. A solution that often sounds attractive is to get a bigger market share. First, you need to be able to grow to the desired size. That requires access to some substantial money. But even though you grow your market share, this is no guarantee for a better bargaining position. Supply and demand will always trump market share. Just imagine you are the sole producer. You have a market share of 100%. Sounds good, doesn’t it? Not necessarily. If you produce more than the market can absorb, you will have a problem. You need to move your entire production and buyers cannot take it all. What your choices, then? Well, you can stick to your price and store the unsold volumes. If you are in the business of perishables, as is the case for many food and agriculture products, you will soon be under time pressure. The product is deteriorating. You must sell it. The only way to do that on short notice is to cut your price to what the buyer wants to take that volume. Of course, you can think of freezing the product. That also costs money an gnaw at your margin. There goes the value is someone else’s pocket.

In Part 1, I was mentioning that many food producers are production-driven and look at profitability from a “production costs plus margin” point of view. That is the wrong approach. The right one is to be market-driven, in order to balance supply and demand, to have a solid bargaining position, basically to know the market so that you produce what sells at a profitable price instead of producing and then struggle to figure out who will buy and at what price. The latter is always the fastest path to doom. Yet, it is the path wandered much too often. The old quote of Peter Drucker: “The purpose of a business is to make a customer” should be much more prevalent in food and agriculture than it usually is.

Marketing should be considered at least as important as the technical side of production, especially with farmers. They should be more than “farmers”. They should see themselves primarily as food suppliers, who just happen to have a farm.

Copyright 2026 – Christophe Pelletier – The Food Futurist – The Happy Future Group Consulting Ltd.