The market power of supermarkets (including discounters, hypermarkets) vis-á-vis manufacturers has grown stronger in parallel with their increased market share in food and non-food retailing. In both developed and emerging markets consumers tend towards more convenience, time saving, quality and luxury. This gradual shift in market power from A-brand producers to ‘A-brand’ retailers led to lower prices for producers, longer payment terms and an increase in the importance of Private Labels (brand names owned by the supermarkets) at the expense of ‘A-brands’ manufacturers are hence forced to step up marketing expenditure, to the detriment of profits. This was further exacerbated by the venue of the large discounters, causing the ‘Supermarket Wars’ in the last decade.
In 2011, supermarkets no longer just ‘rent out shelf space’. They actively position themselves in consumer segments with a balanced, attractive assortment, typically between 20,000 and 50,000 items. In the next decade we will see increased growth and supermarket consolidation. In the entire EastAgri region the share of independent stores in retail trade will continue to decline.
The effects of increased supermarket power on backward linkages and procurement systems are:
1. Increased centralization of procurement;
2. Growing use of specialized/dedicated wholesalers;
3. Adoption of contracts with preferred suppliers (also via dedicated wholesalers);
4. Rise of private quality and safety standards.
Read: Links Among Supermarkets, Wholesalers, and Small Farmers in Developing Countries by Reardon et. al.
Agribusiness Handbook: Food Retail (2009)Central and Eastern Europe / Impact of Food Retail Investments on the Food Chain (2005)
Related meetings and workshops
The Remodeling of the Retail Sector of South-East Europe, Sarajevo, May 2004
The 6th International conference of FMCG, Retail and Agribusiness Industry in Vienna, February 2016EUR 10 million EBRD equity investment in Montenegrin retail chain, December 2015EBRD supports expansion of Ukrainian retailer Novus, February 2013