issues for a better functioning food chain learning from the eu marketplace dr. rodolphe de...

Issues for a Better Functioning Food Chain

Learning from the EU marketplace

Dr. Rodolphe de BorchgraveArcadia International®

TGDF Annual Meeting

Antalya, 13 November 2013

ARCADIA INTERNATIONAL - Dr Rodolphe de Borchgrave

Contents

WHAT IS AT STAKE ?

CLAIMS & CONCERNS

POLICY OPTIONS

A CASE IN THE FRUIT & VEGS. SECTOR

A CHECK LIST


Arcadia International ® Profile:

Agro-food chain consultants An international network of experts Info: www.arcadia-international.net

Relevant experience EU certification of ASÜD dairy companies TURKEY fitness test on EU accession food safety chapter EC DG Enterprise on innovation and competitiveness EC DG Sanco on food safety policies EC DG Comp on retail concentration


An ideally functioning food chain “THE SUPPLY CHAIN INITIATIVE” (16 Sept 2013)

“..with the aim of ensuring fairness in commercial relations along the food supply chain”

“.. to nurture strong, collaborative supply chains. Our initiative reflects our commitment to working together in a positive and fair way” (Philip Clarke, Tesco PLC)

“…leading to greater accountability and transparency for all “ (Mella Frewen, FoodDrink Europe)

• “…better meeting the needs of shoppers” (Roger Scarlett-Smith, AIM)

• “We now call on the EU policy makers to endorse this initiative” (Christian Verschueren, Eurocommerce)


Some industry claims re. retail’s practices• Commercial payments• Category management and information exchange• Supplier image in private label support• Non written contracts and retroactive modification• Most favoured customer clause• Loss leading• Blind auctions• Supply exclusivity clauses• Imposition to purchase selected goods or services

Source: Comision Nacional de la Competencia


Retail response: defensive and offensive INDUSTRY CLAIMS ARE UNWARRANTED

Retail is not more concentrated than industry Retailers margins are not highest in the food supply chain Industry negotiates purchasing prices with farmers Bargaining power is not about size Industry have their own unfair practices COMPETITION FROM OWN BRANDS CREATE VALUE Lower prices for consumers (in the long term) Promote consumer choice and innovation Promote sustainable and responsible food chain Source : ERRT


Consumer claims FOOD PRICE EVOLUTION VS. INFLATION

– Consumer prices increase faster than inflation ASYMMETRIC PRICE TRANSMISSION

– Fluctuations in agriculture commodity prices reflect, after a delay, in industry and consumer prices– However there seem to be a pawl effect in consumer prices who do not come down after agriculture prices decline


Food chain: 180 anti-trust cases (2004-2011)

HORIZONTAL (cartel) : NATURE : Price fixing, exchange of consumer info, customer sharing SECTORS: Cereal products, meat, poultry & eggs

VERTICAL (anti-competitive) NATURE: Price related, exclusive purchase agreement SECTORS : Coffee, sugar, multi-products (retail)

ABUSE OF DOMINANT POSITION NATURE : Foreclose competition, min purchasing obligations, tying &

refusal to supply, unjustified contractual obligations SECTORS: Multi-products (retail), dairy, soft drinks

Source: ECN Activities in the Food Sector, May 2012


EU policy issues Objectives

Competitiveness: global market share and employment Consumer welfare: health, quality, transparency Internal market: fair competition Agriculture: stable and decent farmers’ income Options & programmes Monitoring, eg. price observatory Self regulation: codes of good conduct Regulation Catalysing a re-engineering of the supply chain

Source: EC


A case in effective re-engineering ISSUE• Retail concentration versus agriculture fragmentation• Unbalanced bargaining power• Unequal farmers’ access to market

FRAMEWORK• The CAP• The Fruit & Vegetables regime

PROGRAMME• Producers associations


Implementation : Belgium and the Netherlands

BELGIUM All fruit & veg producers are members of cooperatives… Who collectively own BVT : a centralised market

organisation BVT system in charge of : quality control, sorting, storing,

contract negociating, auction selling Collective marketing via Flandria brand name

The NETHERLANDS Farmers are industry like and larger scale than in Belgium Farmers went away from centralized market system Producers’ organisations are sales and marketing vehicles Compete with each other !


Impact on market BALANCED SUPPLY AND DEMAND• Fair income distribution to all cooperative members• Volume and quality ensured to retail• Stable supply: large throughput and efficient logistics

SECTOR CONSOLIDATION• Push towards larger production units

INNOVATION• Uniform quality rather than innovation: trend follower• Coordinate contacts with seed houses

CONSUMER CHOICE• Quality upgraded through VBT control• Significant increase in choice


A check list for the Turkish food chain ARE THERE ANY INDUSTRY-RETAIL ISSUES ? WHAT ARE THE CONVERGENCE AREAS ? WHAT ARE THE CONTENTIOUS ISSUES ? IS THERE TRANSPARENCY ? IS THERE A DISCUSSION FORUM ? WHAT ARE GOVERNMENT CONCERNS ? CAN COMPETENT AUTHORITY ACT AS EITHER :• FACILITATOR• REGULATOR• MONITOR• RE-ENGINEERING CATALYST


Conclusions IDEAL FOOD CHAIN FUNCTIONING IS NOT A GIFT OF

NATURE

UNBALANCE IS ONLY TOO NATURAL AND MUST BE ACTED UPON

THE CONSUMER IS TOO EASILY TAKEN AS HOSTAGE

AUTHORITY CAN AND SHOULD PLAY A USEFUL ARBITRAGE ROLE


Thank you for your attention !

[email protected]

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