Alliances between large food retailers do not have a harmful impact on agricultural prices, nor do they cause higher sales prices to consumers, a new research report by the European Commission concludes.
No general conclusions
Are retail alliances such as Coopernic (with Ahold Delhaize), AgeCore (with Colruyt, Intermarché and Edeka) or Eurelec (E. Leclerc and Rewe) damaging competitive conditions in the food supply chain? Not according to a new report published last week by the European Commission’s joint research centre: the study found no evidence of systematic unfair trading practices in the food chain.
As a result of some open trade conflicts, concern has been raised in recent years about the possible negative effects of alliances between major food retailers in Europe. Purchasing and other alliances would upset the balance of power in the sector, preventing farmers from getting fair prices for their products, while (brand) manufacturers would suffer from heavy bargaining pressure. Reduced competition would also lead to higher consumer prices.
But all of this does not seem to be the case: the report sees major differences between retail alliances and is wary of general conclusions. The alliances strengthen the competitiveness of retailers, who pass on at least part of the benefits obtained to consumers. Consolidation may under certain circumstances be detrimental to suppliers, but current regulations on unfair commercial practices are sufficient to address such problems.
Counterbalancing multinationals
EuroCommerce, the voice of the European retail and wholesale sector, welcomes the conclusions. Reacting to European Supermarket Magazine, managing director Christian Verschueren says that retailers need such alliances to remain competitive: “Retailers operate on low margins. The large multinational suppliers operate globally, achieve significant margins and have the power to set conditions in the supply chain. Most retailers are only present in a limited number of countries in Europe and join alliances to help create a reasonable basis of negotiation with these large manufacturers, and pass on the benefit to the consumer.” Verschueren also points out that retail alliances contribute to the creation of a true European single market.
Independent Retail Europe, the representative of the smaller, independent retailers, is on the same wavelength: director Else Groen explained that “Alliances help keeping our European retail market diverse, they are therefore an essential element of all consumer goods supply chains. The importance for consumers of local retailers in both rural and urban areas was once again demonstrated during the current coronavirus crisis.”
