We are witnessing a global trend toward Retail and Market concentration, in combination with an expansion in the development of Private Governance association, specifically in Private Food Standards that reflect the growth in the structural power of retailers. Moreover, the increasing politic power of Retail firms in the Food sector and its implication on Environmental and Social Sustainability. However, what can we say about the power of these Retail groups in the Food Governance system?
What are facts about Retail Power?
Within Europe and the USA, Retail concentration is astonishing, rapidly growing over the past decade. The top largest supermarket chains have more than doubled their marketplace stake; in Latin America, the top five chains per country control the first per cent of the supermarket sector. Most of the acquisitions of local smaller chains and independents are foreign and taking place via foreign direct investment (FDI), while larger national chains make some.
The leading revenue source for the global Food Retail Industry is the supermarket segment, which generated significant revenue per cent of the overall market value. Food Specialist Industry represented an essential per cent of the market value share. In the years to come, economists foresee the existence of the largest supermarket chains dominating the global markets, buying on-site and distributing the products to their stores around the world through global networks.
The arrival of the new markets first boost in revenues in the luxury, organic, and health food segments, referred to as "niche markets”. The large Retail chains have responded in a double-approach to the competitive landscape, with some opting for the provision of expensive, high-quality foods and some others for cheaper, low-quality bulk foods. They are the markets where a significant amount of the capital will be concentrated in the future.
Private Governance and standards
The expanding Retail Power is explained by a change in global Food Governance and new technologies of Supply Chain Management. Private Governance allows people to decide on different standards accordingly to the needs of their industry. A regulatory procedure is developed to create order and enforce rules when governments are either unable or unwilling to do so.
The experience shows that the rules of the market are much more orderly, stable, and potentially enduring. Market-based regulations and Private Governance allow for more choices and are more liberal than government impositions and regulations. The existence of individuals and groups simultaneously observing partially different rules provides the opportunity for the selection of the more effective ones. However, conflicting interests and information asymmetries between retailers and consumers tend to yield the rigour and effectiveness of such standards.
Some examples of such standards are the British Retail Consortium (BRC), the Global Food Safety Initiative (GFSI), the International Food Standard (IFS), FOODTRACE, and the Ethical Trading Initiative (ETI), The Global Partnership for Good Agricultural Practice (GlobalGAP) covered fruits and vegetables, meat products and fish from aquaculture, as well. Private Governance institutions also have fundamental implications for Social Sustainability and, at least in this context.
Private Food standards mostly respond to:
Public requests and political pressures for more transparency in the Food Chain.
Ensure traceability and food safety throughout all stages of the Food Chain both to retailers and suppliers.
To provide a signal of quality attributes to the consumer.
Requirements to Environmental and Social responsibility.
Product, manufacturing process and packaging management.
To check Personal hygiene of personnel.
Environmental and animal welfare information.
Collaborative action to develop a traceability framework for the whole chain.
Creation of a practical framework used by all actors in the chain, including the international level.
Safeguard consumer protection to strengthen consumer confidence.
Improve efficiency costs throughout the Food Chain.
Food quality attributes promoted by retailers, such as appearance, cleanliness.
Food safety attributes - Rational use of plant protection products, level of pesticide, synthetic hormone residue or microbial presence, pollution prevention, use of energy, water and other natural resources, landscape conservation and enhancement.
High animal welfare and origin, quality attributes by some consumers and buyers.
Recycling programs for waste reduction in packaging, and reuse of material.
Social activities can include corporate Social Responsibility policies.
The Ethical Trading Initiative (ETI) aims to develop a standard code of conduct employment conditions among companies, unions and nongovernmental organisations (NGOs) and examining how systems of monitoring and verification can be established. As a UK initiative, its ultimate goal is to ensure that the working conditions of workers producing for the UK market at least meet international labour standards. The ETI should be distinguished from fair trade or alternative trade in that it does not only cover small producers and it does not carry a specific seal of approval, although companies can advertise it if they want to. ETI principle is open to participation to all stakeholders including suppliers and civil society. Resource constraints, however, especially from developing countries, provide a fundamental obstacle to participation
CONCLUSIONS: The nature and consequences of Private Governance expand by retailers, and their organisations have significant implications for Sustainability because Private Standards have ambivalent effects on the Environmental and Social Sustainability of the global Food system.
There’s a necessity of inflexibility for administrative regulation, as a means to re-establish some balance in power between business and civil society interests in global Food Governance, ensuring transparency, participation and accountability in standard development in general. The inclusion of social criteria through Analytic Governance approach, Sustainability, and the development of competition, not only based on price but also on quality.
Optimistic views on the implications of Private Governance standards for Social Sustainability exist as well, as it opens up new opportunities in global export markets. For instance, firms that implement measures can increase efficiency and therefore profit rates through better coordination and management. However, some spectators argue that the formal certification process needed benefits only some farmers; the impact of Retail Power, Private Retail, Food Governance and Sustainability, particularly in developing countries, is the area of most significant concern.
Dave Food
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