Supermarket Local Sourcing Initiatives: Corporate Control of the Food System and the Rise of Supermarkets

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The ownership of the food system has changed. The global food system is now controlled by a small number of very powerful multinational food corporations. Over the past 20 years, there has been a frenzy of corporate takeovers as food corporations fought with each other to increase their share (and hence their profits) in the food market. The result is an incredible concentration of market power, with just three or four corporations controlling each sector of the food industry. From inputs like seeds, increasingly dominated , fertilisers and machinery to the processing, transportation and retailing of food, each sector is now controlled by a handful of multinational agribusiness/food corporations. From Monsanto and Syngenta to Unilever and Diageo to Tesco and Asda.

The rise of supermarkets

Perhaps the most dramatic development and most obvious sign of the concentration of market power in the food system in the UK has been the emergence of the big supermarkets. Fifty years ago, food was mainly sold in street markets or in small independent shops: butchers, grocers, bakers and greengrocers that filled every high street. In 1960, small independent retailers had a 60% share of the food retail market. By 2000, their share was reduced to 6%, while the supermarkets’ share had increased to 88%.[4]

Now most of us buy well-known food brands (from multinational food corporations like Nestle, Kraft and Kelloggs) in one of four big supermarket chains (Tesco, Asda, Sainsburys and Morrisons). These four supermarkets control over 80% of UK food sales, and it’s set to get worse. The big supermarkets are still battling it out to see who can become top dog, but Tesco is currently the clear leader of the pack, with a massive 30% share of UK food sales [5]. A report from the All Party Parliamentary Small Shops Group has predicted that, at current rates of closure, there will be no independent retailers left in the UK by 2015. [6]

Historically, small independent stores have been a major outlet for food from local sources. In rural areas, where supermarkets have not yet gained a stranglehold, remnants of this local food sector still exist. A 1997 survey of small independent food shops in rural East Suffolk found 81 shops sourcing food from almost 300 local and regional producers, and some of them had been supplying produce locally for more than 30 years. [7] By contrast, the essence of the supermarkets’ success is based on centralised systems of purchasing and delivery and category management systems, which they say keep down transaction costs, help them achieve the necessary volume and year-round supply of food, and control and manage food quality and safety. Only large national or global suppliers can provide the quantities and consistency of supply demanded by these centralised purchasing policies. In practice, this means that the supermarket chains tend to deal with a small number of larger suppliers. For example, Sainsbury buys conventional carrots for all its stores from just three large growers. As Patrick Holden says, “Category management leads to migration towards economies of scale and away from local.” [8] Supermarket purchasing and category management policies are effectively the antithesis of local sourcing.

References
[4] Institute of Grocery Distribution, Grocery Retailing 2002: The Market Report, September 2002

[5] George Macdonald, Retail Week, Tesco Market Share Up as it Piles Pressure on Asda, 2nd March 2010 – www.retail-week.com/data/kantar-worldpanel/tesco-market-share-up-as-it-piles-pressure-on asda/5010942.article

[6] All Party parliamentary Small Shops Group, High Street Britain: 2015, 2006 – www.nfsp.org.uk/uploads/pdfs/High%20Street%20Britain%202015%20report.pdf
[7] CPRE Food Webs 1998 (reprinted 2002) – www.cpre.org.uk/filegrab/food-webs.pdf?ref=1652
[8] Sheila Dillon, Local sourcing of food by Supermarkets, The Food Programme BBC Radio 4, 21st October 2007


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