Profitability of 'ready-to-eat' strategies: towards model-assisted negotiation in a fresh-produce chain

Abstract

With help of a simple System Dynamics model describing purchase frequency of consumer segments, we illustrate under which circumstances a scenario of ‘ready-to-eat’ positioning creates value for retailer, trader and grower in a fruit production chain. Although fully quantified, the model is meant as a discussion support tool. It illustrates how collaboration affects the pay-offs of innovation for each trade partner. We show how negotiations addressing other factors than prices optimize total chain profit and hence profit per player. These factors include ready-to-eat positioning, the variation in product ripeness within batches, and cost-sharing agreements regarding product loss and the promotional budget.