Relationships between stakeholders in the food supply chain

Popp, József – Juhász, Anikó

Keywords: food supply chain, food suppliers, buyer power, concentration, competition

The food supply chain connects three important sectors – agriculture, the food processing industry and the distribution sectors. Key challenges identified for the food supply chain are the sub-optimal relationships between the stakeholders in the chain. Due to the large number of small and medium-sized companies, the food industry has an unequal bargaining power when compared to the highly concentrated retail sector. Even the largest food companies account for only 1-2% of a retailer’s business at national level, while a retailer may represent 20-30% of those companies’ businesses. The lack of market transparency, inequalities in bargaining power and anti-competitive practices have led to market distortions with negative effects on the competitiveness of the food supply chain as a whole. Asymmetry in bargaining power can lead to inefficiencies. Due to increased delays and asymmetry in price transmission, low comparability of retail prices, diversity of markets and actors along the chain, anticompetitive practices may potentially occur. As a result, food companies have a lower capacity to invest and innovate, and on the longer-term the economic welfare and choice of consumers is jeopardised. It important to exercise constant vigilance in order to identify and eliminate market distortions that have contributed to the observed asymmetries in price transmission along the food supply chain. While the food sector is in favour of strong competition, such unfair practices can only be solved be re-focusing the existing instruments of competition law. The issue of manifest unfair practices and the increasing buying power of retailers along the food chain has to be addressed. The rapid rise and fall of agricultural commodity prices and its delayed impact on food prices have raised concerns amongst stakeholders and policymakers about the functioning of the food supply chain. The European Commission has launched policy initiatives for the food supply chain in order to promote sustainable and market based relationships between stakeholders of the food supply chain and to increase transparency along the chain to spur competition and improve resilience to price volatility.

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