Vertical integration in the food

Szentirmay, András – Gergely, István

Of the various coordinating mechanisms for product chains in the food industry, vertical integration is possibly the best harmonized system, which in these days is manifested in most cases in independent economic enterprises (cooperatives, companies, etc). The basic operational principle of vertical integration is very similar between different branches, but due to the variable character of various branches integration was developed to various levels in the various sectors of food industry. Both the farms growing the raw materials and the industry producing ready products are equally interested in the vertical structure of food production, but the interests of these two parties are generated by different factors. The largest representatives of vertical integration are the large food companies, who in some cases cover nearly the entire product chain and play a significant role not only in marketing the ready products but also the input materials.

The structural changes presently occurring in the food industry, the continuously changing income structure in the various branches, the requirement for uniform marketing policies that is increasingly capturing the foreground in market competition, and the consumers’ emphatic requirement for food safety and traceability, may all stimulate the development of vertical integration. Considering that the above causal factors develop their effects increasingly sharply in these days, it can be stated that the development of vertical coordination and integrated systems could become one of the characteristics determining the future of food industry in this country.

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