Grocery Manufacturers Look to Expand E-Business

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Food, beverage and consumer goods makers plan to spend much more on e-business in the future, according to a study by the Grocery Manufacturers of America.

Although companies surveyed by GMA said current e-business spending is less than one-half of 1 percent of revenue, 25 percent of companies expect to double their budgets in the next three to five years.

Strengthening corporate brands and better understanding customers were the top incentives for investing in e-business, according to the 2000 GMA E-Business Survey. Other motivators included: increasing efficiency with trading partners (71 percent); increased internal efficiency (67 percent); defending market share (57 percent); and lower procurement costs (52 percent).

Many of the companies surveyed already use sophisticated e-business techniques, such as enabling consumers to purchase products for delivery to their homes (24 percent); tying the sites to their mass media campaigns (29 percent); and using their sites to gather market feedback and capture visitors' data (33 percent).

Medium- to large-sized companies have taken a more aggressive stance. About 71 percent of executives said their companies' use of information technology is critical and essential.

However, all of the companies surveyed plan to boost e-business budgets -- from 11 percent to 50 percent -- in the next three to five years. About 35 percent of medium- to large-sized companies plan to double their budgets during this time frame, compared with 15 percent of small to midsize firms.

"The larger companies are more concerned with the rapid pace of technology innovation, potential channel conflicts and the difficulty in securing top management and business executive support of an e-business initiative," according to the GMA report.

In fact, smaller companies are "much less motivated" than larger firms to use e-business to connect with consumers, according to GMA. Less than 50 percent of small to midsize businesses said their investment in e-business is motivated by its ability to increase direct sales or to build their brand with consumers. Those results suggest that most small to midsize businesses view e-business as a streamlining technology rather than as a strategic capability to boost the company's top line.

The biggest barrier to e-business investment, according to the study, is an unclear return on the investments necessary to develop capabilities. "The amount of time, money and people required to create a successful e-business operation can reach levels that are hard to swallow for many companies," according to GMA.

Executives of the 42 firms surveyed also cited security, commitment from management, channel conflict and the lack of employees with appropriate skills as major barriers.

And, although the executives believe that business-to-business commerce is one of the major benefits of the Internet, their activity in that arena is relatively low. However, BTB is expected to have the most significant growth in activity in the next three to five years, according to the report.
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