The study was commissioned after complaints from operators in the food supply chain about the impact of retailer concentration. The complaints alleged that operators, in particular large modern retailers, impose often detrimental conditions on their suppliers, and so these suppliers are not able to invest in new products. This was alleged to reduce choice and innovation in food products for European consumers.
The study results show that the entry of new competitors always increases choice and innovation. In many member states, retail markets are not overly concentrated, and retailers’ bargaining power does not seem to have a negative impact on choice and innovation.
Joaquin Almunia, commission vice president in charge of competition policy, said: “In the past five years, stakeholders have raised lots of questions on the functioning of our food supply chain. We need hard facts to assess the concerns expressed, in particular regarding the impact of the bargaining power and private labels of large retail chains. This study provides important insights and paves the way for future work in these areas.”
At a local level, consumer choice has been continuously increasing over the past decade in terms of number of shops, products, brand manufacturers and product package sizes displayed in shops. However, the number of innovations reaching the consumer each year has decreased since 2008 by 6.5 percent, largely due to the economic crisis.
Concentration of brand manufacturers at national level has increased in most product categories investigated. Concentration of retail overall, both modern retail and traditional shops, has increased in almost all Member States, primarily because of the increased penetration of modern retailers, for example supermarket chains, hypermarkets and discounters with a centralized distribution system involving modern logistics.
Concentration of modern retailers alone increased in some member states while it decreased in others. In moderately concentrated retail markets, retailers’ stronger bargaining power vis-a-vis suppliers does not seem to lead to less choice and innovation in food products. However, a lack of data prevented the study from analyzing situations of high concentration of modern retail. Moreover, the share of private labels in the assortment does not have a significant impact until it reaches a high level at which point it may become detrimental for choice and innovation.