Introduction
SunRice is an Australian company supplying rice food products to almost 50 countries worldwide. The company consists of eleven businesses producing more than thirty brands and employs more than 2000 employees (SunRise, 2021, p 43). It is headquartered in Leeton, and its main growing area is New South Wales (Coates, 2017, para 1). Established in 1950, the company today has operations in Australia, the Pacific, Asia, America, and the Middle East. It manufactures more than many products, including table rice, flour, snacking products, and animal feed. As one of the nation’s largest branded food exporters, the company prides itself on having operations in state-of-the-art processing, packaging, and value-added food outfits. It is a major domestic market player and a supplier of household staple food in Australia (SunRice, 2021, p 4). The company established sustainable international sourcing and supply chains, such as paddy from Vietnam, to ensure reliable supply and enable Riverina growers to concentrate on top varieties.
Purpose
This report’s purpose is to analyze SunRice’s strategic approach and business model and describe in detail the company’s approach to competitive strategy. It covers the company’s performance measurement, balanced scorecard, and a summary of recommendations to enhance the company’s future performance. The report will provide information about SunRice’s strategic issues, resources, and capacities that give them a competitive advantage.
SunRice Strategy
SunRice has designed what it calls the 2024 Growth Strategy to fortify the company’s position as a global multimarket business. The company aims to benefit investors, growers, employees, and the communities it operates in (Pattison, 2021, para 2). It is currently executing a five-year strategic plan whose goal is to expand its global presence in the healthy snacking niche, capitalize on the increasing demand for sushi rice, develop new markets for rice-based valued-added products, and expand its market for low GI rice brands (RAAS, 2021, p 3). The five-year growth plan involves acquiring complementary food brands and products in the animal feed and snacking categories.
SunRice plans to achieve market re-rating due to its board track record and quality management, additional international markets, the opportunity to expand to new product categories, and the opportunity to take advantage of consumers’ demand for sushi rice, low GI rice, and healthy snacks. The company can capitalize on its Vietnamese operations to supply new export markets and use the experience in the country to benchmark for future expansion in other Asian markets (RAAS, 2021, p. 13). SunRice has a strong commitment to a sustainable dividend, strong ESG practice and policy, attractive yield and returns to valuation, and cheap fast-moving goods compared to other companies.
Rice is one of the most popular foods in the world, acting as a staple for at least half of the global population. The consumption of rice has increased by 1.2% annually for the last ten years (RAAS, 2021, p 7). India and China are the largest producers accounting for 23% and 30% of the world production, respectively. Australia produces less than 0.3% global contribution for all rice varieties. India leads in exports, followed by Thailand (RAAS, 2021, p. 7). Australia is a relatively small player with significant Japonica varietal production, which constitutes 20% of the total price of that variety produced globally.
SWOT Analysis
Strengths
- An experienced management team.
- A robust diversification strategy.
- A healthy track record in the payment of dividends.
- Sensible and value-adding acquisitions.
- The consumer shift to healthy products has boosted the demand for core rice and rice-based products.
Weaknesses
Water availability and high water prices have continued to be a major concern for rice growers in Australia. Adverse weather patterns have greatly affected rice output (Sullivan, 2020). Another weakness is the price taker compared to global rice markets (RAAS, 2021). Finally, there is inherent volatility for revenues because of fluctuations in Australian harvest size.
Opportunities
Global markets are experiencing growth in low GI consumer food categories that SunRice can capitalize on. Asia’s growing population and rise in income levels present an expansion opportunity. SunRice can add more categories to consumer food offers. As the world shifts to food safety assurances, the company has an opportunity to create new products and markets. Additionally, the company has succeeded together with the growing wealth class in developing countries (SunRise, 2021, annual report). After trade agreements with Vietnam, the company can supply new export markets and use the experience in the country to benchmark for future expansion in other Asian markets.
Threats
Covid-19 has presented the company with a myriad of challenges since 2019. This includes disruption in shipping lines, unprecedented challenges for populations regarding restrictions on movement, and challenges to forming new partnerships. With the advent of new Covid-19 variants, the end of the pandemic is still unknown (SunRise, 2021, annual report). Since SunRice relies on natural resources, climate change directly threatens its operations (Marshal, 2021). Water scarcity has already adversely affected rice production in Australia severely. Reduction in biodiversity and changes in weather may adversely affect arable lands used for rice production. Growers may make alternative crop choices and drop rice farming (NSW, 2018). The final threat is the concentrated supermarket structure in the Australian retail market.
Strategic Plan
The current plan foresees reducing earning volatility and growing profits through adopting the product offer to capitalize on changing food trends, obtaining a sustainable and secure supply chain, and expanding the range of healthy eating and snacking food products (RAAS, 2021 p. 14). In line with these aims, SunRice has partnered with New South Wales farmers to produce high-quality rice varieties that get top prices for export and are relatively cheap to grow due to farming best practices (NSW, 2018). SunRice has heavily invested in research and development to implement desired outcomes. Rob Gordon’s CEO has included the global food trends that characterize SunRice’s strategic plan. These trends include a rise in healthy snacking, movement away from sugars, rising fascination with sushi rice, food safety assurances, and the growth of a wealthy class in developing nations.
SunRice has established operations in new countries, such as Vietnam, to implement its strategy. The new markets can export, which is lacking in the Australian industry. The company recognizes that traditional markets continue to be resilient due to sourcing flexibility and process improvement. It continues to build brands in all areas of consumer sales and repurpose and acquire new businesses complementing the core rice business. For instance, the company expanded into the animal feed business and converted the Coleambally mill to produce animal feeds. It also purchased Roza’s to expand its consumer food offer (RAAS, 2021, p. 13). The changes being undertaken in SunRice are expected to reduce revenue volatility and compensate for fluctuations in domestic harvest size.
Competition Strategy
As one of the most popular foods in the world, rice is subject to geopolitical and economic dynamics which influence its availability and price. Multiple factors can affect the intensity of the company’s competition, including market countries’ economic conditions, level of global stockpiles, foreign exchange fluctuations, and tariffs and trade barriers. This may impact the company negatively in terms of revenue, loss of opportunities, and loss of market (SunRice, 2021, annual report). To manage the risk emanating from the competition and a challenging business environment, SunRise has a comprehensive competition strategy.
The company has invested substantially to maintain and grow its brands to differentiate itself from competitors. The company capitalizes on discerning consumers through the ‘premiumisation’ of its products. As indicated earlier, SunRice invests heavily in research and development to meet evolving customer needs and preferences (Enerva, 2021). There is constant intelligence gathering, and monitoring of competitors’ activity, market conditions, and key drivers to allow the company to take the lead in the market. SunRice invests in Brands, Intellectual Property, and Trademark defense and Protection. The company sources sustainable and secure rice volumes at fixed prices to mitigate risks and meet customer preferences. This is achieved through geographical diversification in countries like the US and Vietnam. On the other hand, vertical integration mitigates the rise of cost by providing enhanced control over the value chain (SunRice, 2021, annual report). SunRice invests in learning consumer preferences and insights to maintain and grow its premium position in the industry.
Performance Measurement
The company aligns executive remuneration to create shareholder wealth and its strategic objectives. The board aims to encourage the development of competitive prices for its products and ensure premium returns for rice sold outside Australia. SunRise delivered New South Wales growers an export premium of $5 million in the 2020-21 year compared to $27 million the previous year (NSW, 2021). However, this increased from $242/ton to $273/ton in terms of the export price premium achieved. The company achieved a freight scale advantage due to exporting in volume. As Covid-19 hit depleting rice reserves more quickly than anticipated, consumer demand increased sharply. After-tax, the net profit decreased by 19% to $18.3 in 2021. The dividends paid to B-Class shareholders remained constant at 33 cents compared to the previous year. However, shareholders’ total equity decreased to $461 million in 2021 from $481 the previous year (NSW, 2021). Earnings per share were 34.6 cents in 20121, down from 45.8 cents.
Balanced Scorecard
Financial
SunRice demonstrated dynamism and resilience during the pandemic to deliver a strong full-year result. The company made mergers and acquisitions amounting to $66 million in CopRice and Riviana segments. The consolidated revenue for the year was $1.03 billion in 2021, down 9% from the previous year (SunRice, 2021, annual report). The main reasons for the drop were the Covid-19 pandemic and the drought cycle, which negatively affected shipping and the movement of people.
Stakeholders
SunRice has 35 major brands for its customers and is a market leader across 15 countries. The company has developed new products to expand its global presence in the healthy snacking niche and its low GI rice brands market. The company indicates that it is committed to providing all its stakeholders with timely and transparent information (SunRice 2021, annual report). The dividends paid to B-Class shareholders remained constant at 33 cents compared to the previous year. Growers in SunRice are considered A-Class shareholders and have a 70-year connection to the company. There are found in 12 different countries, including Australia, Uruguay, and Vietnam, and feed around 19 million people every day.
Internal Process
SunRice’s processes and systems aim to provide safe, nutritious, and quality products to the 50 countries the company supplies. It consistently pursues new product innovation projects to keep up with emerging trends in the market. The company actively builds the global supply by entering new markets and territories. SunRice regularly merges or acquires complimentary food, animal, and snacking brands and products. (SunRice, 2021, investor) Such initiatives are expected to contribute to revenue growth and curb the effects of market volatility.
Organizational Capital
SunRise has over 2000 employees whose approach is to secure the long-term sustainability of the business and contribute to the communities from which the company operates. The guiding values are integrity, dynamism, collaboration, innovativeness, and taking care of the community. Employees are customer-focused, decisive, intellectually curious, and good at communication. The company prides itself in having 40% of its senior leadership held by women (RAAS, 2021). Due to the pandemic, the company has embraced increased flexibility in timing and location for its employees.
Recommendations
After spending $66 million on acquisitions in 2021, the company should continue seeking more business. This should be coupled with diversification, especially in countries that cannot afford premium rice products. The company should look at cost-cutting measures through efficient milling strategies. Bigger crop output in new territories like Vietnam and lower milling conversion will help offset lower returns. SunRise should intensify its sourcing from the current 12 countries, given the climate change impact. Other climate mitigation measures could include establishing new supply chains, investing in R&D, and enhancing manufacturing efficiency.
Conclusion
SunRise is in a unique position as one of the few global rice businesses that can capitalize on the recent trends in the industry. The developed and developing world is becoming obese, thus moving away from sugar. A new wealthy class in developing nations is looking for convenience and premium rice products. Many countries are looking for food safety assurances, and there is an ongoing fascination with sushi rice. SunRise is in the process of fulfilling these consumer preferences, and its future looks solid if it continues to source sustainable rice supplies to counter climate change.
Bibliography
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Enerva (2021) ‘SunRice’s $4.5 million factory upgrade boosts rice quality.’ Inside FMCG. Web.
Marshal, A. (2021). ‘SunRice eyes new growth options to counter Aussie crop challenges.’ Farm Online National. Web.
NSW. (2018) ‘Independent Review of Governance Arrangements 2017: The Rice Marketing Board for the State of NSW.’ Web.
NSW. (2021) ‘10th Annual report to NSW rice growers.’ Web.
Pattison, T. (2021) ‘SunRice Group holds annual general meeting in 2021.’ Area News. Web.
RAAS. (2021) ‘Ricegrowers Ltd (SunRice).’ Web.
Sullivan, K. (2020) ‘Rice company calls for government intervention to guarantee Australian rice harvest.’ ABC Rural. Web.
SunRice. (2021) ‘Investor strategy day.’ Web.
SunRise (2021). Annual report. Web.