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Keywords Food, Retailing, Grocery, Supermarkets, Supply chain, Dairy industry
Abstract Discusses the restructuring of the food production, processing and retailing sectors in the USA. Describes different methods of vertical and horizontal integration that have occurred. Goes on to discuss the consolidation of business in retailing in particular. Refers to the relationships that are being formed between the supermarket chains, for example Wal-Mart and Kroger, and dominant food-chain clusters. Considers whether or not smaller retail chains and wholesalers should-feel threatened by this consolidation. Takes the dairy sector in the USA as a case study in the restructuring of the retailing and processing sectors.
Over the last 40 years, the agro/food system in the USA, and in much of the rest of the world, has been in the process of being restructured one commodity sector after another. Starting with the broiler sector in the 1950s and 1960s, the ownership and management of the production input stage (e.g. feed and young chicks) were extended to the production stage. These stages were then formally merged with the processing stage. This vertical integration continued in combination with horizontal integration. A recent example of horizontal integration in the broiler industry is Pilgrim's Pride's purchase of WLR Foods. This acquisition combined with ConAgra's earlier purchase of Seaboard's poultry division means the four largest firms today share 50 percent of the production and processing of broilers. The turkey and egg sectors have followed a similar model.
For a variety of reasons unique to each, other commodity sectors have followed different paths to what appears to be a similar structural outcome, namely that market access for farmers is dominated by just a few transnational corporations. For instance, change came to the beef sector at the feedlot level. Today, 20 feedlots feed 50 percent of the cattle and are directly connected to the four processing firms that control 81 percent of the beef processing either by direct ownership or through formal contracts. The only question that remains is how the cow/calf producers will be integrated into the predicted seamless system. Will many of the small and less price-sensitive farmers be left without access to markets?
The pork sector is being restructured through a process similar to that found in the poultry sector, but it...