Supers create super powers

30-11-2007 | | |
Van Der Sluis

Over the past years we have seen major changes in the structure of the poultry meat and egg business. Many small to medium scale companies used to supply local retailers and could make a decent price for their products. How different is the picture today.

Survival of the biggest
The retail market has changed to a battle field of a small number of super(hyper)markets and large discounters, which compete on service and even more on price. The result is that they force the suppliers to offer products at bottom prices.
Due to the fierce competition there were always suppliers that were prepared to accept these low prices. Those who had the size to produce at a low cost were able to survive; others had to pull back try to find a niche or had to close down. Consequently the number of processing companies has dropped and the size of the survivors increased.
Poultry meat businesses consolidate
The consolidation process in the poultry industry has started and we see especially in the poultry meat business US, Thai and Brazilian companies actively acquiring companies in their home country as well as abroad. They become bigger and bigger and build up a strong market position. With that they also become major powers on the supply market and tough negotiators for the supermarkets and discounters. That is good for the poultry industry but is it good for the retailers?

Suppliers fight back
It looks like the strategy of becoming big and powerful, and thus able to dictate the market, all of a sudden has a negative side effect for the supermarkets. They forced suppliers to become bigger, but along with that these suppliers became as aggressive and powerful as the retailers themselves.
You may even say that they are responsible for creating powerful competitors who simply not just accept the price the supermarkets were so used to dictating.

When will we see the first case of a processing company saying to his major client/supermarket that the shelves will be empty if the price for the product is not at the level the processing company needs to keep its growers satisfied.