Corporate Control over the food chain

What is the problem?

"The market reality of today is different from that of, say 30 years ago. We have observed a dramatic concentration of the retailing and processing sector over the last two decades, with a few firms in each country controlling most of the market"

The current food system is characterised by an increasing dominance of a small number of retailers, food distributors and processors who are capable of imposing their own interests on society and are becoming the arbitrators of the agriculture and food system. Whereas farmer's prices for many products have fallen the last decades, consumers' prices often have not followed this trend. Middlemen, supermarkets and agribusiness have reaped the profits, at the expense of farmers and consumers.

Transnational companies are exerting increasing control over the food system and this threatens peoples' rights of access to resources on an equitable basis. Just a small number of TNCs commonly account for over 80 percent of the trade in an agricultural product [1]. For example, six TNCs account for 85 percent of world grain trade, eight handle 55-60 percent of world coffee sales and just three account for 83 percent of world cocoa trade[2]. Five companies account for nearly 2/3 of world pesticide sales: Astra Zeneca, Dupont, Monsanto, Novartis and Aventis.

Studies in UK the have found that the concentration of supermarkets there is increasing at an alarming rate. In the UK, France, Germany and Spain, the five major retailers for each country hold between 50% and 33% of market share [3]. Over the 1990's, the number of specialist food shops in the UK fell by 22%, while the number of supermarkets and large retailers in the food industry increased by 18%. This stranglehold that large retailers have over food supply has negative effects on local employment and the environment , and allows the supermarkets to exert monopoly power in two directions: "downstream" (at a retail level) and "upstream" (at a supplier level)

Recent studies in Britain indicate that supermarkets have "a negative net effect on retail employment up to 15km away" [4]. As supermarkets are more "efficient" in their use of labour, they employ far less people than smaller or specialty retailers. They also impact on local employment as new buildings, fittings and maintenance are usually carried out by central contractors, and their produce comes from central distribution centres, rather than local producers. Also, profits made by smaller, local businesses are more likely to stay in the local economy where the proprietors live.

All of British supermarket Safeway's dairy produce passes through a single distribution point, regardless of point of origin or destination. Central distribution points for large retailers create excess transport miles and pollution. As supermarkets are built, traffic increases: many are built out of town centres, at a distance from public transport and have huge car parks, designed to encourage car use. Parking here is often free, as opposed to metered parking in town centres where smaller retailers are situated, to encourage people to shop in supermarkets. Storage is expensive for the giant retailers, so they encourage systems of "just in time"delivery, where "very environmentally unfriendly, refrigerated juggernauts visit farms daily, often collecting just few pallets of produce." [5]

Big retail food chains try to squeeze as much profit out of the market, and as large a share of that market as possible. To do this, they advertise agressively, using tactics such as "loss leaders": staples that are priced far below market price to show a store is cheaper than its rivals. Many food corporations are currently taking an increasing share of the value of food sales, while farmers receive a reduced share. For example, while the food and catering retail price index in the UK has increased by 50 percent since 1987, the price that farmers receive has actually fallen by 3 percent [6]. To take another example, in 1999, while UK farmers received less than the cost of production for potatoes, supermarkets were selling them at around five times the price they paid to farmers, a situation experienced with many farm products [7].

TNCs also explore ways of reducing their costs in order to be internationally competitive. The trend is therefore for corporations to merge their operations, a process that concentrates trade and control over the food system within ever fewer TNCs. Control on this scale can only undermine peoples' efforts to achieve food security and food sovereignty.

What should be done?

Governments need to put regulations in place to curb and reduce the power of TNCs, including [8]:

• High minimum environmental, labour and human rights standards for corporate activities.
• Effective legislation and mechanisms to prevent the formation and consolidation of monopolies, oligopolies and cartels in food and agricultural systems. The EU should prevent domination of market forces. Policies should include limiting market share through competition rules. Competition rules should also be applied at a local and regional level, e.g. to stop a supermarket forcing all small shops out of business in a small town.
• Guaranteed legal rights of redress for citizens and communities adversely affected by corporate activities.

What can I do?

Check out the Agribusiness Accountability Initiative: http://www.agribusinessaccountability.org a growing international network of academics, activists and food system experts who recognize that corporate concentration and vertical integration among transnational agro-food companies threaten the sustainability of the most important industry on earth – the global food system. Friends of the Earth take part in this network.

Check out our links page for a list of other Websites talking about Trade, Globalisation and Corporate Control.

[1] Madeley, J. (2000) Hungry for Trade: How the Poor Pay for Free Trade. Zed Books, London.
[2] Madeley, J. (1999) Big Business, Poor Peoples. Zed Books, London.
[3] Dobson Consulting 1999 cited in Roger Clarke Buying Power and Competition in Food Retailing in the UK Economics Section, Cardiff Business School, 2001.
[4] Sam Porter, Paul Raistrick, The Impact of Out-of-centre Food Superstores on local retail employment, the National Retail Planning Forum, Nottingham, 1998.
[5] John Breach, head of the British Independant Fruit Grower's Association cited in George Monbiot Captive State: The Corporate Takeover of Britian, London, MacMillian, 2000, p 174.
[6] Gorelick, S. (2000) Facing the Farm Crisis. The Ecologist: Special Supplement, vol.30, no.4, pgs.28?31.
[7] McCarthy, M. (1999) Why Britain's Farmers are Making a Loss on Nearly Everything They Grow. The Independent, Saturday August 28th, p.3.
[8] FOEI (2001) A Corporate Accountability Mechanism. A lobby/briefing draft. Friends of the Earth International.
[9] FOEI (2000) Ibid.