Supermarkets : Competition Inquiries Into the Groceries Market
THE IMPACT OF INVESTMENT AND CONCENTRATION AMONG FOOD SUPPLIERS AND RETAILERS IN VARIOUS OECD COUNTRIES
Gabor Konig, PhD
Session 2.2. Promoting responsible international investment in agriculture
This paper is distributed as part of the official conference documentation and serves as background material for the relevant sessions in the programme. The views contained within do not necessarily represent those of the OECD or its member governments.
OECD Global Forum on International Investment OECD Investment Division www.oecd.org/investment/gfi-8
THE IMPACT OF INVESTMENT AND CONCENTRATION AMONG FOOD SUPPLIERS AND RETAILERS IN VARIOUS OECD COUNTRIES
Gabor KONIG, PhD
Hungarian Ministry of Agriculture – Agricultural Economics Research Institute (AKI) Zsil utca 3-5, Budapest, 1093, Hungary gabor.konig@gmail.com, gabor.konig@aki.gov.hu
ABSTRACT In developing and transition countries, agriculture depends heavily on foreign direct investment (FDI). FDI commonly flows into food retailing, where the anticipated profit is higher, rather than into food production and processing. FDI brings needed capital and growth and leads to increased concentration of market players. Food retailer concentration increases competition, enhances efficiency, and lowers consumer prices, which benefits consumers and the general economy. Supplier (producer or processor) concentration is slower and occurs on a smaller scale but as is the case for retailers, concentration makes suppliers more competitive and allows them to lower their costs and selling prices. With a higher level of concentration, retailers have more turn-over and better financial standing/capital intensiveness, giving them stronger buying and bargaining power. This increased power has had disadvantaged suppliers. The retailers’ leverage (higher concentration and bargaining power) over suppliers increases retailers’ profits. Food retailers are often large and foreign-owned in developing and transition countries
Gabor Konig, PhD
Session 2.2. Promoting responsible international investment in agriculture
This paper is distributed as part of the official conference documentation and serves as background material for the relevant sessions in the programme. The views contained within do not necessarily represent those of the OECD or its member governments.
OECD Global Forum on International Investment OECD Investment Division www.oecd.org/investment/gfi-8
THE IMPACT OF INVESTMENT AND CONCENTRATION AMONG FOOD SUPPLIERS AND RETAILERS IN VARIOUS OECD COUNTRIES
Gabor KONIG, PhD
Hungarian Ministry of Agriculture – Agricultural Economics Research Institute (AKI) Zsil utca 3-5, Budapest, 1093, Hungary gabor.konig@gmail.com, gabor.konig@aki.gov.hu
ABSTRACT In developing and transition countries, agriculture depends heavily on foreign direct investment (FDI). FDI commonly flows into food retailing, where the anticipated profit is higher, rather than into food production and processing. FDI brings needed capital and growth and leads to increased concentration of market players. Food retailer concentration increases competition, enhances efficiency, and lowers consumer prices, which benefits consumers and the general economy. Supplier (producer or processor) concentration is slower and occurs on a smaller scale but as is the case for retailers, concentration makes suppliers more competitive and allows them to lower their costs and selling prices. With a higher level of concentration, retailers have more turn-over and better financial standing/capital intensiveness, giving them stronger buying and bargaining power. This increased power has had disadvantaged suppliers. The retailers’ leverage (higher concentration and bargaining power) over suppliers increases retailers’ profits. Food retailers are often large and foreign-owned in developing and transition countries