The Sustainability of European Food Supply Chains

The sustainability of European food supply chains

A report by Ethical Corporation

March 2006

1 Executive summary...... 3

Section 1...... 13

Food Value Chains...... 13 The ‘Value Chain’ ...... 14 The first link in the demand chain ...... 17 ‘Value chain governance’ … ...... 17 How to turn a supply chain into a demand chain...... 21

‘Credence claims’ ...... 23

Traceability ...... 27

Standards: the codification of retailer demand...... 34

Contracts ...... 45

Vertical Coordination ...... 59

‘Forward Integration’...... 67

Buyer Power...... 71

Private Label ...... 88

Summary – the hourglass...... 99

Section 2 A sustainable system?...... 101

Environmental impacts of the modern food industry...... 102

Agriculture ...... 111 Impact 1 – pollution...... 116 Impact 2 – loss of ecosystems and biodiversity...... 123 Impact 3 – soil degradation...... 135 Impact 4 – water stress...... 140 Plenty more fish in the sea? ...... 148

Distribution ...... 159

2 Food miles...... 160 Production and storage...... 174 Processing ...... 180

Consumption...... 183 Waste...... 183

Human health...... 194

Appendix:...... 197 the food supply chain – in detail...... 197

Retailers ...... 198 The Four Trends: Globalisation, Horizontal integration, Concentration and Internationalisation ...... 198 Top transnational retailers: company profiles...... 208 A closer look at Europe’s food retail market...... 210 Expansion into Central and Eastern Europe (CEE) ...... 216 Discounters ...... 221 Processors ...... 228 Trends ...... 228 Top transnational processors: the company profiles...... 232 Processors in the US: leading the way in concentration...... 236 Concentration in Europe ...... 238 Input Suppliers...... 239 Agrochemicals ...... 239 Seed Companies...... 241 Producers...... 245 Trends ...... 245 Concentration...... 246 Europe...... 247 Food Service Sector ...... 256 Trends ...... 257 Concentration...... 258 Executive summary

Introduction

3 In today’s European food system –

• Large retailers are dominating...

• Small retailers and manufacturers are going under...

• Farmers everywhere are struggling...

• Consumer choice is contracting...

• Energy that produces food is running out…

• Food is travelling thousands of miles…

• Fish stocks are vanishing...

• Desert is spreading into farmland...

• Animal species and plant varieties are endangered...

• Water is over-used and polluted...

• Waste mountains are rising...

• Human health is being threatened...

...and these are just some of the major problems.

Scope

This report examines the sustainability of European food supply chains.

It describes the structure of these supply chains and how they operate. It also considers the environmental impacts of food production, distribution and consumption.

Food supply chains, or value chains, cover every stage of the food system from production through to final consumption. Or all that happens ‘from farm to fork’.

This report focuses mainly on Europe. But a European food supply chain will soon be a thing of the past. As European retailers expand internationally, the links in the chain are lengthening. Food is sourced all year round from all over the world. We are moving rapidly towards a global food supply chain.

The sustainability of the food system is considered in terms of its energy consumption and emissions. It also covers the environmental impacts of intensive farming, which are threatening long-term food production.

Actors in food value chains

Retailers – also referred to as ‘supermarkets’. They control the ‘point of sale’ where food is sold to consumers.

Processors – food and drink manufacturers, whose business is to alter the composition of raw ingredients to create new types of food products.

Producers – farmers who grow the food.

Suppliers – all actors in the chain who supply products for retailers to sell. Suppliers can cover exporters / importers, wholesalers, processors and producers, depending on the product.

Structure

The first section of this report – Food value chains – examines the relationships between the different actors in the value chain. It describes how a few, large retailers coordinate the activities of other actors along the chain.

Section two – A sustainable system? – looks at the broader impacts of current food production. It considers the environmental impacts of the food system at its various stages, from agricultural production to household waste. It provides clear evidence that

5 the current system, given its rate of energy consumption and use of natural resources, is unsustainable.

The appendix takes a more detailed look at the food system. It provides facts and figures on retailers, processors, producers and food service. It also highlights the consolidation trends that are affecting the industry as a whole.

Summary

The changing structure of European food supply chains…

From supply to demand…

Retailers were once the final link in a supply chain. Now they are the first link in a demand chain.

Power concentrates at the most strategic part of the value chain. The actor who occupies this part of the chain is able to capture the most value from it.

Once, producers determined food supply. They decided what was produced and how. People ate whatever food was available or in season. But after the Second World War, power started to shift to manufacturers and processors whose brands ‘added value’ to food products.

Now, retailers occupy the strategic part of the chain. A handful of large retailers dominate European and increasingly global markets. Retailers are the gatekeepers to the market, since most food sales now go through them. They can use information on customer purchases to make demands on suppliers. It is retailers who have the power to determine what is produced and how.

If these trends continue, global food supply will soon be controlled by just a handful of retailers. The chairman of Royal Ahold predicts that only 5-8 value chains will survive globally, competing against one another.

Why retailers dominate – concentration and buyer power…

Retailers today have more power than ever before. This is because the European food industry is becoming highly concentrated. In the UK the top four supermarkets have a 75% market share. In some European countries the consolidation of retail is even greater. In parts of Scandinavia the top three firms account for 95% of the market.

6 The leading firms are household names. In the UK it’s a simple list of four names: Tesco, Sainsbury’s, Asda, and Morrisons. It’s the same in virtually every other country in Europe and increasingly the world – a very short list of names.

Economists would define this system as an oligopoly – or, a market dominated by a small number of large firms. Normally an oligopoly exists when the top four firms account for more than 60% of the market. The top four UK retailers account for 74% of the market.

Large firms have buyer power. They can make better margins. They can also demand lower prices from suppliers than their competitors.

Buyer power allows retailers to impose strict conditions on suppliers. These can include demands for additional payments for access to shelf space, or discounts on orders. Buyer power allows retailers to shift financial risk on to suppliers. For example: some retailers delay payments by as much as 90 days. Suppliers must wait, while a retailer uses their capital to fund its own expansion.

In this way, retailers cut their costs, boost their profits and drive competition further down the chain. Increasingly hard-pressed suppliers are left to scrap for a share of the supermarkets’ business.

How retailers dominate – supply chain management and vertical coordination…

Retailers are driving a new system of food production – a demand chain where they coordinate the flow of products from the producer all the way through to the store.

In a demand chain producers deliver what they are told to produce when they’re told to produce it. And they deliver the shape, the colour and the size they are instructed to.

Retailers use several tools to organise the value chain. They develop relationships with small numbers of preferred suppliers. They introduce product standards and traceability systems to chart the progress of food through the supply chain. This process of organising the activities in a value chain is known as vertical coordination.

This report examines the tools of vertical coordination. These include:

• distribution centres

• factory gate pricing

• efficient consumer response (ECR)

• category management

• open-book pricing

But the two most important tools of vertical coordination are:

• Standards

• Contracts

Standards are the codification of retailer demand. Standards specify what a supplier is to produce and how. They also cover how food should be packaged and distributed.

Standards now apply to nearly every aspect of food supply: from the seeds used to grow vegetables, the pesticides to be used, harvest schedules and even the temperature of containers in which those vegetables are air-freighted to a supermarket outlet half way across the world.

Contracts are an even more explicit form of vertical coordination. Like standards, contracts are a codified expression of retailer demand. Through contracts, retailers specify their demands: the quantity, quality, delivery time and price of food.

In fact, food production is coordinated to such an extent that the lead company in a demand chain can dictate the size of an apple grown 6,000 miles away to within a tolerance of two millimetres.

And as standards and contracts proliferate, retailers grow bigger and extend their control over the supply chain.

Results of retailer domination – the food industry consolidates…

Standards contribute to consolidation of the value chain. The transaction costs associated with monitoring and enforcing standards mean that retailers start to work with a small number of ‘dedicated’ or ‘preferred’ suppliers.

• In 1989, the UK supermarket share of fresh fruit and vegetable sales was 33%. By 2003 it had risen to 80% - none of which was sourced through wholesale markets.

This can have disastrous effects on small suppliers. The evidence shows that when standards are introduced, small producers lose out.

• In Brazil, 60,000 dairy producers went out of business between 1997 and 2000 when supermarkets started demanding that milk be refrigerated on farms.

8 • In Kenya in the early 1990s, smallholders produced 70% of vegetables and fruits shipped for export. By the end of the decade they were left producing just 18%.

Standards act as barriers to market entry because of the extra costs that they impose on producers. Although voluntary, standards and assurance schemes are in effect mandatory. And as markets mature, meeting standards ceases to guarantee a premium.

Traceability has become a key feature of the modern food supply chain. The need to verify standards means that products must be traced through every stage of production.

Retailers are also making ‘credence claims’ about their products. Credence claims differentiate goods by identifying characteristics that give them increased value. Credence goods include free range or organic produce, or Fairtrade.

Credence claims and traceability go hand in hand. Retailer reputations rest on the claims they make about their food. If products can be traced, retailers are able to back up their credence claims.

Traceability is driving further coordination of the value chain. As the food system consolidates, retailers switch to a small number of preferred suppliers. But this in turn increases the risks and costs associated with failure, which demands greater traceability and so more vertical coordination..

Private label: reification of retailer power

Private labels are retailer brands.

Private labels are a way for retailers to differentiate themselves from their competitors. As a result of private labels, retailers are no longer identical. Instead they acquire ‘identity’.

Private label gives retailers the flexibility to source products from different suppliers, enabling retailers to reduce their margins in the supply chain. One clear example is supermarket own-label fresh fruit and vegetables. Retailers can source similar or identical products from a number of different suppliers.

Private label both confirms and reinforces the buyer power and status of retailers as governors of the value chain.

In a food demand chain, suppliers are left at the mercy of the retailers who sell their products. Retailers hold all of the cards when deciding prices and conditions.

Environmental impacts of European food supply chains…

Supermarkets may be the first link in the demand chain. But the origins of the 21st century food system pre-date their existence by several years.

Converting fossil fuels into people…

The modern food system began in 1908, when a German chemist called Fritz Haber discovered a way to turn air into nitrogen fertilizer using natural gas. His discovery eventually heralded the ‘Green Revolution’: a revolution that grew into a movement to increase crop yields using new crop varieties, irrigation, fertilizers, pesticides and mechanisation.

The Green Revolution enabled the development of intensive agriculture, which produced huge increases in crop yields. And these yields supported a massive increase in human population. Global population grew from 1.6 billion in 1900 to 6 billion in 2000 – and it is currently growing at the rate of 83 million a year. All supported and sustained by the fruits of the green revolution.

The real basis of the food system is energy. The food we eat today depends upon the fossil fuels that go in to agriculture. Fossil fuels – in the form of fertilisers, pesticides and petrol for farm machinery and delivery vehicles – keep the food system running.

The modern food system is essentially a way of converting fossil fuels into people. Put simply, without oil and gas we would starve. Given that fossil fuels are an unsustainable resource, and that world population will continue to rise, this is a problem that is yet to be solved.

Devastating impacts – at every stage of the chain…

The seeds of the green revolution were sown on shaky ground. The fossil fuels upon which we all depend are running out.

What’s more, their use is causing environmental damage that threatens future agricultural production.

Industrial agriculture has damaging environmental effects: air and water pollution; the destruction of ecosystems and loss of biodiversity; soil degradation; and water shortages.

But agriculture is just one part of the chain. Processing and distribution account for much of the food system’s energy consumption.

Food is increasingly processed and pre-packaged before it reaches the store. What’s more, demands for all year round supply and just in time delivery are increasing global

10 sourcing and the development of refrigerated supply chains – a major cause of climate change.

Here are just some of the environmental impacts associated with European food supply chains:

• The food system as a whole expends 10-15 calories of energy for every calorie of food energy produced.

• Some UK fertilizer manufacturing plants use more gas than the entire City of Birmingham.

• The cost of cleaning up chemical pollution, repairing damaged habitats and coping with human sickness caused by industrial farming is as much as €3.3 billion per year.

• The external costs of intensive farming in the UK amount to as much as €300 per hectare.

• Today, 75% of the world's food is generated from just 12 plants and five animal species.

• Over 2,300 apple varieties exist in Northern Europe – but just two varieties account for more than 50% of the current apple market.

• To produce 1 kg of meat involves as much water as ten month’s basic household water requirements (50 litres per person per day).

• To produce just one egg using industrial methods takes an estimated 63 gallons of water.

• The food on the typical American family’s dinner table has travelled on average 1,500 miles.

• The UK imports carrots from South Africa. Every calorie of carrot imported requires 66 calories of energy to get it here.

• The energy needed to fly a kilo of mange tout 5000 miles from Zambia is enough to keep a 100-watt light bulb glowing for over 40 years.

• The edible food thrown away in the UK is enough to feed more than 250,000 people.

• A typical American child now gets a quarter of his or her vegetables in the form of French fries or potato chips.

The current food system is unsustainable.

12 Section 1

Food Value Chains

The ‘Value Chain’ What a value chain is, how it works and how it is used…

"You are looking at how to re-engineer the value chain [in order] to lower the price…There are clear rules about who sets the prices and we believe we, as retailers, are the ones.”1 Anders Moberg, chief executive of Dutch retail group Ahold

"The future will not be one farmer competing with another farmer, one distributor competing with another distributor, one retailer competing with another retailer. It will be one value chain competing with another value chain."2 Professor David Bell, Head Agribusiness Program, Harvard University

Retailers today have more power than ever before. In the UK the top four supermarkets have a 75% market share. In some European countries the consolidation of retail is even greater. In parts of Scandinavia the top three firms account for 95% of the market. And in Australia the top two supermarket chains make over 74% of national grocery sales and an even higher share of the country’s total supermarket sales.3

Supermarket dominance is now so great that the food industry can, in most countries (even developing ones), be accurately described as an oligopoly, or “a market situation with only a few sellers” In fact, classical economic theory states that when four firms control more than 60% of a market it is an oligopoly (see box).

This means that routes to market for suppliers – farmers, food processors, wholesalers – are dramatically reduced. Supermarkets are not just ‘sellers’, but ‘buyers’ further down the supply chain. As supermarkets grow and become more powerful, suppliers are feeling the squeeze. As one economist observes:

“Oligopoly does not result in the end of competition so much as the redirection of competition downwards as lead companies capture more power to set supplier against supplier.”4 Barry Lynn, Senior Fellow, New America Foundation

Oligopoly: a small number of large sellers…

An oligopoly is “a market situation with only a few sellers, each anticipating the other’s reactions. Each firm has a sufficiently large share of the market to need to consider those reactions of the others…” (Oxford Dictionary of Economics).

An oligopoly is a market dominated by a few large firms, each of which has control over the market. It is an industry where there is a high level of market concentration.5

Normally an oligopoly exists when the top five firms in the market account for more than 60% of total market demand/sales.6 But market competitveness begins to decline when the top four firms reach a 40% market share.7

However, oligopoly is best defined by the conduct (or behaviour) of firms within a market rather than its market structure.8

Key features of an oligopoly are: • Interdependance of firms. Firms behaviour is affected by what they believe their rivals might do. This means that each firm must take into account the likely reactions of other firms in the market when making pricing and investment decisions. • Market dominated by a small number of firms • Large firms are involved in selling either identical of very similar products • Significant barriers to entry • Price may be relatively stable across the industry • Goods can be homogenous or highly differentiated • Branding and loyalty may be a potent source of competitive advantage • Non-price competition may be prevalent.9

But it was not always this way. Over the last century or so, control of the food system has changed hands. Once, it was the producers and wholesalers who determined what was produced – and how. And so there was a food supply chain, controlled by suppliers. Then along came brand companies, manufacturing highly processed foods. As brands grew popular, power began to shift to those leading manufacturers.

Now, as retail consolidates on a huge scale, it is the retailers that have most control. And so we now have a food demand chain – where power lies in the hands of a few giant multinational processing and retailing companies who control demand.

Retailers were once the final link in a supply chain. Now they are the first link in a demand chain.

Three defining features of today’s global food industry

1. A few, large buyers dominate the market. Retail chains consolidate through mergers and acquisition, and start to expand internationally.

15 2. Supermarkets control the supply chain, which is increasingly coordinated through the use of sophisticated technology and product information.

3. Retailer brands (so-called ‘private label’) develop to challenge manufacturer brands.

Food is now increasingly produced and distributed through supply chains. And food supply chains are not markets. In fact, they rule out normal market relationships. Supply chains are instead vertically structured and are usually controlled or managed by just one particular company.10

Value chains: definition

Value chains are the chains that link all the activities involved in making a product.

In the case of food, the chain starts with the farmer and ends with the consumer.

At every point in the chain value is added to the product. Value is also taken away – as each actor in the chain captures a share of the profit. The distribnution of value reflects the distribution of power along the chain. Those actors at the most strategic part of the chain – the parts where power is concentrated – are able to capture the most value from the chain.

Increasingly, private – secretive - contracts and coordinated food supply chains are replacing traditional open markets such as wholesale markets or exchanges.

“We want to turn all public markets into tourist attractions in two years time”11 Retail chain executive, Croatia 2003

16 The first link in the demand chain Why it is essential to be the “first link” in a value chain

“The goal of today’s powerful oligopolies has been described as ‘the oldest in commerce – to fence in the place where deals are done and to tax producers and consumers for the right to be there’.”12 Barry Lynn, Senior Fellow, New America Foundation

Retailer power lies in their control of the key part of the chain – the store, or the place where deals are done. Retailers stand at they interface between the consumer, on one side of the checkout, and the suppliers on the other. Control of this point enables supermarkets to capture the largest share of the ‘value’ along the chain.

As supermarkets grow, they shed many of their traditional functions. Supermarkets no longer process and package fresh fruit and vegetables at the back of the store. They no longer have specialist knowledge ‘in-house’ (someone who knows about fish on the fish counter, for instance). In fact, the trend for outsourcing has even extended as far as outsourcing the choice and purchase of stock – a role traditionally regarded as central to retailing.

What supermarkets can do - given their strategic place in the value chain – is to collect information on customer purchases. This information can then be analysed, codified and communicated back to suppliers. Supermarkets have market intelligence, which they can use to make demands on suppliers, while their control of the final, most crucial stage of the value chain means they can demand ever-better terms for themselves.

‘Value chain governance’ … Who calls the shots?

Global value chain governance is the way a lead company, such as a food retailer, controls all the product standards and processes along the value chain. The lead company decides:

• What is to be produced

• How it is to be produced

• How much is to be produced, and when

17 As the first link in the demand chain, retailers are in a position to tell supplier what to do. Suppliers at the second, third and fourth stages of the chain have no option but to bow to these demands.

Retailers codify their demands in a set of standards. These standards are monitored and enforced by carefully selecting suppliers, whose compliance is verified by third-party auditors, and then regular inspections to make sure the supply chain is working properly. Preferred suppliers reveive rewards – such as higher prices and larger volumes than other suppliers. Lead companies punish any failure to meet their standards with sanctions – such as the threat of exclusion from the supply chain, or at the very least reduced purchases and financial penalties.

“Value chain governance (or vertical coordination) is such a strong characteristic of agribusiness supply systems that it is easy to take it for granted or regard it as inherently superior to arm's-length market relationships. However, value chain governance involves considerable cost in monitoring and enforcement. The up-front costs of developing systems and relationships with suppliers also lead to less flexible sourcing.”13 John Humphrey, Global Value Chains initiative, Institute of Development Studies, University of Sussex

This marks a complete shift in the organisation of food production and supply. The control of the value chain by one lead company is happening for three main reasons:14

1. Retailers are trying to set themselves apart from their competitors by selling non- standard products. The different and distinctive packaging, labelling, varieties, processes and so on, require retailers to work directly with suppliers.

2. Retailers need to know their supply chain is working. Modern supply systems depend upon a frequent, reliable delivery of products. Any failures by suppliers put retailers’ reputations at risk, so a tight coordination of the chain is needed. Retailers also increasingly use ‘credence’ claims which require systems to check and enforce the processes that underlie these claims.

3. Any innovation in the production and supply of food requires simultaneous changes at all the different points in the value chain.

Crucially, this process is self-reinforcing. The more vertical coordination of the value chain there is, the greater the tendency of retailers to rely on a small number of suppliers. This in turn increases the risks and costs if there are failures in such a consolidated system.15

What’s the difference between a demand chain and a supply chain?

Producer-driven supply chains tend to be industries that are capital- and technology- intensive – for example: automobiles, aircraft, semi-conductors. The profits are greatest for those with scale and technology – ie. the manufacturers.

Buyer-driven supply chains tend to be industries that are labour-intensive – for example: garments, toys, electonics... and food. The profits are greatest for those with supply chain information and marketing expertise – ie. the retailers. Retailers are in the best position to capture the most value from these chains – at the expense of regional wholesalers, small farmers and small processors.

“At its heart, it [modern food production] is a move from an economy based on the production of goods to an economy based on the production of knowledge.”16 Lawrence H. Summers, President, Harvard University

Control of these knowledge-based value chains hinges on three things:17

1. Information… the volume of information needed to flow through and coordinate the chain

2. Standards… how easily retailer demands can be turned into usable information for the different actors in the supply chain

3. Supplier compliance… the ability of suppliers to meet these standards, or demands.

And the amount of information needed for the modern food system is growing. The production of complex foods like chilled and fresh ‘ready meals’ that need to be delivered quickly and in the right conditions demand a huge level of coordination and control. There is much greater coordination of deliveries, product development (such as new products, new varieties, new packaging and so on) and control over production processes (mostly to do with product, labour and environmental standards).

And as the complexity and sophistication of food value chains grow, retailers are trying to push down the costs of coordinating supply chains by:

1. Investing in the competences of existing suppliers and by working only with the most competent suppliers. Both of these strategies lead to further concentration of the value chain.18

2. Codifying the knowledge that flows through the value chain.19

3. Restructuring and simplifying the whole value chain so that the ‘handover’ points between the actors in the chain are either completely eliminated through vertical integration or reduced in complexity. The increasing use of an exporters’ own farm production is an example of vertical integration. The introduction of category management by UK supermarkets is an example of how information and functions within the value chain can be transferred between agents.20

All this leads to greater concentration along the entire value chain because dealing with just a few of these large suppliers is easier than dealing with many small ones. Large buyers have more buying power and therefore more opportunities to enforce compliance with their wishes. Control and governance of the value chain is therefore associated with buyer power.21

“We punish farmers very hard if they don't deliver what we order.”22

Bernardo Roehrs, a spokesman for the Ahold chain

20 How to turn a supply chain into a demand chain In double quick time

This example shows how retailers have managed to coordinate and control many of the functions of the value chain by turning a supply driven food chain into a demand driven food chain. The result of this change is almost total vertical coordination and the introduction of a set of standards that apply to nearly every aspect of food supply: from the seeds used to grow vegetables, the pesticides to be used, harvest schedules and even the temperature of containers in which those vegetables, designated for export, are air- freighted to a supermarket outlet half way across the world.

How to take full control of the food supply chain… a ‘step-by-step’ guide

All quotes below are taken directly from a paper detailing Royal Ahold’s business strategy for streamlining its supply chain for its TOPS supermarket chains in Thailand, and commissioned by KLICT, an international research initiative funded by the government of The Netherlands. .

1 Set up a supermarket chain in a country with a low supermarket share of food sales

“Most of the total output is sold through the traditional market outlets… In Thailand only 5% of food sales go through supermarkets.”23

2 Assemble the major actors in the supply chain. In the case of the TOPS Thailand project it was

“Royal Ahold (a global leading retailer)”… “Syngenta (crop solutions company)”… “Rabobank International”…“TNT Logistics”(an global logistics company)…“SGS (a certification and inspection company).” 24

3 Set up a logistics and distribution centre

“The strategic initiatives that were taken included: The creation of a logistic service provider (the World Fresh Distribution centre).”25

“The formulation and implementation of the logistic strategies in Thailand was based on the following aspects…simplification and scale exploitation.”26

4 Implement and promote low prices 365 days per year

“introduction of the ‘Supercheap’ pricing program with everyday low prices.”27

5 Emulate the ambience of traditional markets

“Tops uses lighting with a natural feel to highlight its food, especially the fresh fruit and vegetable displays which have been designed to give the look and feel of a traditional wet market.”28

6 Implement a demand-driven system

“The direction and content of the improvement strategy has been demand oriented. Performance criteria for the fresh goods supply chain reflected the consumer requirements.”29

7 Dramatically reduce the number of suppliers and then develop relationships with a small number of preferred suppliers

“Improve the quality and safety of perishable goods by developing preferred supplier relationships… The Preferred Supplier Approach reduced the total number of suppliers from 250 to 60 after critically benchmarking their performance and development potential.” 30

8 Be tough on suppliers

“Continuous benchmarking of the performance of these suppliers kept them ‘sharp’ and alert. Main supplier positions were no long-term guarantee and occasionally there was a re-shuffle of suppliers.” 31

9 Develop and impose standards and certification schemes on suppliers

“Quality and safety assurance had to be guaranteed by a certification procedure. Depending on the circumstances the appropriate certification system or command and control mechanism had to be determined”32

10 Then take the lessons learnt and implement them in other countries

“The lesson’s learned from Thailand are being duplicated in Brazil and Ghana. This includes the tools for a chain analysis.”33

22 ‘Credence claims’ ‘Most food is sold with a story’

Here’s an example of how food is sold with a story. In fact, this story uses 211 words to sell six slices of bacon. Or 35 words per slice. This excerpt from Waitrose packaging illustrates the value of credence claims.

Free Range. Unsmoked English Dry Cure. 6 Back Rashers. Specially selected Waitrose free range pork, produced from Hampshire breed, renowned for tenderness and flavour is cured by hand and matured slowly, allowing the meat to develop a fuller flavour. The gently rolling countryside of Norfolk and Suffolk, its climate and free draining soil, is perfectly suited to rearing pigs outside all year round. The Hampshire breed, distinctive by its markings, produces pigs that thrive in the outdoors and are allowed to roam and root freely. The curing process is the traditional way of preserving pork. The recipe has been specially developed using the finest natural sea salt which is carefully rubbed into the pork by hand. It is then left to mature slowly into bacon allowing the flavour to develop before being sliced into rashers. Roger Newton supplies Waitrose with English Free Range pigs from his farm in Norfolk. Pigs reared outside are kept in small family groups and fed on a balanced cereal diet with vitamins and minerals. Warm shelters and straw bedding protect them from the winter, while mud baths keep them cool in the summer. By combining Roger’s expertise over many years with the characteristics of the Hampshire breed we can provide the best quality meat. Care, commitment and high standards of animal welfare ensure succulent tender bacon. Waitrose packaging for 6 bacon slices

The academic Susan Friedberg points out that ‘most food is sold with a story’.34 In an increasingly consolidated retail market, the major supermarket chains are embarking on a strategy of product differentiation, selling their products by making claims about how and where food is produced.

And so standards have been developed by companies to help communicate to consumers that their products are superior to those of competitors.35

Product differentiation based upon such claims is part of a broader trend towards the increasing importance of credence claims in the food industry. Credence goods are defined in the following way:

“A credence good is a complex, new product with quality and/or safety aspects that cannot be known to consumers through sensory inspection or observation-in consumption.”36 John Humphrey and Hubert Schmitz Global Value Chains Initiative Institute of Development Studies University of Sussex

Credence claims differentiate goods from competing products by identifying characteristics that give them increased value. These claims act as a form of product branding, so that particular labels (free range) are associated with particular characteristics (a good bacon sandwich) which may in turn come to be valued by consumers.37

How to add an extra 10% to the value of coffee

The Food Brands Group in the UK markets a variety of coffees under the "Percol" brand name. Its top end product is called “Sanctuary”™ which claims to be a “Bird friendly, single estate, organic Arabica coffee”. The packaging makes the following claims:

• The product has superior quality because it is grown on a single estate, organically. These claims are supported by certification from the UK Soil Association (whose logo is also displayed) as well as information about the precise location where the coffee is likely to have been grown.

• The product is “bird-friendly”. Shade-grown coffee does not destroy the forest canopy, a claim supported by certification from the Smithsonian Migratory Bird Centre.

• The product has social benefits. A claim is made that Percol is committed “to the coffee growing communities and environment” and that the company has “a mission to care for the people and the environment where it is grown”. Reference is made to “The Coffee Kids Charity” and “raising money for health and education projects to improve the quality of life for children and their families where coffee is grown”.

The result is a product that sells for a 10% premium over other Fairtrade organic coffees.38

So credence claims enable retailers to economically exploit certain ‘qualities’ of food, which are not immediately verifiable by the consumer.

• health benefits

• product safety

• regional origin

• high levels of animal well-being

• ecological soundness

Credence attributes can describe the content of a food or the processes which made it.

Content attributes are the physical properties of a product. They can be difficult for consumers to perceive. For example, consumers are unable to determine the amount of

24 isoflavones in a glass of soymilk or the amount of calcium in a glass of enriched orange juice by drinking these beverages.39

Process attributes These do not affect final product content but refer to characteristics of the production process. Process attributes include country-of-origin, freerange, dolphin-safe, shade-grown, earth-friendly, and fair trade. In general, neither consumers nor specialized testing equipment can detect process attributes.40

The table below shows how these credence claims come into effect.

The different guises of credence claims41

Private Voluntary Initiatives Some are private voluntary initiatives, such as Starbucks’ ‘C.A.F.E. (Coffee and Farmer Equity) Practices’. This programme uses independent third-party verifiers to audit farms on environmental and social indicators. In this case, a service sector company establishes a claim for its particular product, basing its credibility on third- party certification.42

Branding the Enterprise Other claims encompass the branding of an entire enterprise. One example is the Thandi brand, developed for wine and fruit: “Thandi’s aim is to empower previously disadvantaged farming communities. With support and mentorship from leading players in the fruit and wine industries, these communities export top class produce to countries all over the world” (http:www.thandi.com). This claim is allied to one about the quality of the product.43

Regional Branding Claims about product characteristics, quality or production processes can also be made at the regional level – this is known as regional branding. Examples are Jamaican Blue Mountain coffee, the Copper River brand of wild salmon. This type of branding can be developed through regional associations, both public and private.44

Certification Schemes Product differentiation can also be based on schemes that are not geographically specific. Broad certification schemes are designed to identify particular characteristics of product or production processes originating from designated producers. Fairtrade and organic certification schemes are just two examples.45

Consumer food choice may be influenced by product prices and product quality, but consumer ideas about food “quality” have changed considerably in recent years. One

25 major US study finds that today’s European consumer sees food quality as something that involves the following four features…46

• Sensory qualities are the traditional aspects of food quality: taste, appearance, and smell, with taste being dominant. Taste is an experience that can be evaluated only after a product has been bought and consumers use a host of market signals, like brand, price, and quality labels, in trying to predict the taste experience.

• Health qualities have become increasingly important during the last 50 years, and studies indicate that consumers give equal weight to health and sensory attributes. Many health effects of food are too abstract to be experienced directly. Consumers therefore have to interpret various signals. More recently, manufacturers have developed ‘functional foods’. These are food products that have an added health benefit such as yogurts with probiotic ingredients or margarine made with cholesterol- reducing ingredients. These health attributes require active communication.

• Process qualities relate to the processes used in food production – even those that have no analyzable impact on the final food product. Some consumers pay more money for organic products or for products produced with due concern for equitable income distribution. These products look and taste the same as products without these attributes.

• Convenience qualities are those features of a food product that save the time or energy that consumers spend on shopping, food storage, preparation, eating, and food disposal.47 Microwaveable meals are a good example of ‘convenient food’, as are pre- washed carrots and food which is packaged so that it can be eaten ‘on the move’.

Crucially, these quality attributes become more valuable the more marketable they are.48 In other words, if there is a large potential market for a particular quality, then there is a big incentive for retailers to invest in the technology and resources to ensure any claim about that product’s quality can be backed up.

But the key to monetising these credence claims is traceability.

26 Traceability Food is worth a lot more if it can be traced from plough-to-plate, from farm to fork. Or, from DNA to sausage (via satellite)

“Consumers in Japan can use their camera cell phones to scan a code on the outside of shrink-wrapped fruits and vegetables that’s embedded with information about the produce.”49 CIO magazine, 2005

Retailer reputations rest on the claims they make about their food. If a product can be traced through every stage of production, then the retailer can back up its ‘credence claims’. Traceability – ‘from farm to fork’ – is now tremendously important. A German study, for instance, found that when selecting a supplier, traceability is six times more important for a retailer than quality.50

This is leading to the emergence of traceability systems which can track food all along the supply chain.

“Traceability is an indispensable part of any market for process credence attributes—or content attributes that are difficult or costly to measure.”51 USDA, 2004

Because it is difficult – or sometimes impossible – to verify credence claims by simply looking at the product, any foods subject to credence claims need to be completely traceable and identifiable as they move along the value chain.52

The development of these credence goods requires the coordination of different agents along the value chain, so that claims made to consumers in distant markets can be backed up. It requires the coordinated activities of producers, certifiers and retailers.53

With existing technology it is now possible to trace information on both content and process attributes. two types of information….. product information and process information.

• Product information is information about the food’s identity, location and processing time. This information is useful for ‘recall management’ and logistics. This form of traceability is regarded as a way to improve operational efficiency and reduce costs.54

• Process information offers extra information on process conditions such as temperature. Process information can be used to provide quality assurance and product differentiation and is often referred to as ‘quality-oriented traceability’.55

Traceability systems can also provide the information to determine whether supply chains are operating correctly.56 This is crucial. The rising profile of supermarket brands means that that just one error in the supply chain would damage the reputation of the retailer’s entire stock.

Traceability systems also help firms to establish the extent of their liability in cases of food safety scares and possibly shift liability to others in the supply chain. The traceability systems themselves do not determine liability, but because they provide information about the production process they can provide evidence for any glitches in production.57

In the food industry, supply chain management and infrastructure for traceability is a crucial area of competition.

“An indispensable element of any supply management strategy is the collection of information on each product from production to delivery or point of sale.”58 USDA

The table below shows the sophistication of the tracking and tracing systems used by one leading UK retailer, J Sainsbury, to chart the progress of goods through its supply chain. A ‘corporate file management’ system for instance stores data on all of the company’s suppliers.

The table also shows how traceability systems are integrated into retailer buying practices. A ‘sales-based replenishment’ system is used to make orders based on actual and forecast sales in store. A ‘supply chain integrated ordering network’ generates orders for suppliers to deliver goods to distribution centres. The result is a faster, more coordinated supply chain.

RDC: regional distribution centre

From individual genes to checkout counter… Today, it’s got to be traced all the way

Modern food supply chains demand a near-totalitarian control of information. Such an information trail starts with the DNA of a cow or the genetic code of a seed…

…and is traced through the production and processing of food all the way to the checkout counter where sales information is scanned and then stored in customer databases.

These information trails – or traceability systems – are the basis of today’s supermarket supply chain management. A supermarket’s traceability system is essential to find the most efficient ways to produce, assemble, warehouse, and distribute products.

The greater the level of coordination along the supply chain, the greater the benefits of traceability systems for supermarkets.60 Technology is crucial to the generation of information and is shaping the way retailers are taking control of the value chain. The US retail industry now spends about 2.1% of its turnover a year on technology, up from 1.8% in 2001.61

Nowhere is the trend towards total traceability in the food chain more apparent than in the meat industries. “The ultimate objective will be to track every piece of meat from plate to farm through each step in the value chain: retail, distribution, processing, slaughter, production, nutrition, breeding and genetics”.62 John Webb, Maple Leaf Foods (Global food processing company)

How animals get an electronic license plate with “Bio-tagging”

Genomics – the study of organisms and their DNA – is the fastest growing technology for recording food quality and other attributes.63

A number of genomics companies are already developing DNA tracking systems for meat.64 DNA tracking can link meat back to the farm of origin and so bypass the expensive step of tracking it through a processing plant.65 Major global food processor Maple Leaf Foods called upon Pyxis Genomics66 to help them implement a DNA tracking system for the pork produced in their plants

“The success of identifying the gene panel significantly enhances our ability to provide live animal tracking systems that can directly link store-bought product back to its origin in a matter of hours, instead of days or weeks.”….“This is critical in an industry seeking to offer the highest standards of assurance to consumers.” Dr. Lawrence B. Schook, President and CEO of Pyxis Genomics Inc

DNA animal tracking can track animals through slaughter and processing plants and eventually provide consumer information through product codes and a website.67

Farm animals are already tracked and traced in a number of ways:

• Electronic tags (bio-tagging) – an “electronic license plate” for animals. Tags contain codes, which are scanned every time the animal arrives at a new spot in the production chain.68

• Retina scanning.

• Implantable computer chips.69

• RFID - the US Department for Agriculture (USDA) has recommended that all livestock in the U.S. be tagged with radio frequency identification devices. The information on each animal’s origin and location would be stored in a national database. • Paper bar codes and spray-on bar codes – for tracking inside the slaughter and processing plant is trickier. Options include paper bar codes that can be read at each point where a cut of meat is made.70 Possibly in the future, spray-on bar codes could be used to identify a particular cutting line.71

30 Check out your Christmas dinner while its still “alive and gobbling”

Heritage Foods already provides consumers of their turkeys with a certificate of its origin.72 By visiting the company’s website consumers can type in the turkey’s certificate number and find out everything from its age, farm of origin, its diet and where it was processed. Consumers who pre-order their turkey can even access the company’s 24-hour webcam to watch their turkey while it’s “alive and gobbling”.73

Radio frequency identification (RFID) Where cows talk to satellites, crates talk to trucks, empty shelves talk to suppliers. And retailers overhear everything

Retailers are well positioned to take advantage of new technology. They can also demand that their suppliers adopt new tracking and tracing systems. And, once installed, these systems in turn increase retailers’ ability to oversee all aspects of the chain.

Studies show that use of advanced technology is directly linked to increases in market share. And only those retailers with a large market share can afford to adopt advanced technology.

No technology has been as important as the development of affordable radio frequency identification (RFID). Demands for traceability and cost-efficiency mean that RFID will soon become standard across the food industry. Analysts believe RFID will be essential technology for most supply chains within the next ten to 20 years.74

• In 2004, just 35% of European retailers were experimenting with RFID, but by the end of 2006 89% plan to use RFID.75

• By 2015 about 900 billion food items could be RFID tagged, with a further 824 million livestock having more sophisticated tags on – or implanted in – them.76

What is RFID?

RFID is a tracking technology, which enables the flow of information across the value chain.

RFID tags contain a microchip and a tiny antenna that send the price and other information about the product to a computer.77 They contain more information than bar codes, and can be read from a longer range (about 15ft). An RFID reader can be placed at the entrance to a distribution centre or stockroom, allowing reading of large quantities rapidly.78 Below is a short list of the main capabilities of RFID:

• Real time tracking of products throughout the value chain • Access to “live” sales data (as opposed to the usual 20 to 30 days) • Inventory management and accuracy • Display product availability • Monitoring when products are made and when perishables expire • Verification of product authenticity • Direct consumer marketing79

Customer information Who cares when you last bought a 500g pack of muesli with real strawberries?

The tracing of information does not just stop once food is placed on the retailers’ shelves.

The ownership and control of information puts retailers into the driving seat when it comes to food supply.80 Every time a can of soup or a pack of fresh pasta is passed through the check out, point of sale data is transferred from barcodes81. This data helps to build sophisticated customer profiles and develop marketing strategies. This information is a major source of competitive advantage both to retailers and the chain ‘insiders’ with whom it is shared.82

32 In the UK, Tesco has led the way, gathering huge amounts of data about its customers’ buying preferences. Before the Tesco’s Clubcard came along, the largest consumer panels that suppliers could use consisted of around 20,000 people. Suppliers now pay for access to Tesco’s enormous database.83

• Tesco has issued 12m Clubcards, which allow it to record exactly what, when and where people are buying food.84

• Shoppers each buying 20 items a week would generate more than 12 billion pieces of data each year.85

“We believe we have one of the largest databases anywhere in the world.”86 Martin Hayward, of Dunnhumby, (who manage Tesco’s databse)

Electronic systems for tracking inventory, purchases, production, and sales have become an integral part of doing business in the United States. A few big retailers such as Wal- Mart and Target have even created proprietary supply-chain information systems that they insist their suppliers adopt.

• In the mid-1990s Wal-Mart’s database contained 7,000 gigabytes of information. Now it contains 10 terabytes…that’s 10,000,000,000,000 bytes…. making it the largest commercial data bank in the world.87

At the same time, retailers can access information along the entire value chain. Tracking technologies enable retailers to control and monitor food production all the way back to the farm. Put simply, information about consumer preferences is used to shape the demands retailers make of their suppliers. The complex way this information now passes up and down the value chain has stemmed from major developments in supply chain management.

There are many barriers to achieving total traceability. The complexity of supply chains – especially where a foodstuff is split into different parts (i.e. when a cow is made into hamburgers) – can make it difficult to track food. Short chains with a constant series of links obviously have an easier traceability than long and complex chains and networks with flexible and changing connections.88 Also some food products are so small that it does not make economic sense to track them individually. So, to maintain a traceability system requires several companies to share commercially sensitive information.89

But larger retailers can overcome these barriers by laying down the main requirements – in the form of contracts and private standards.

33 Standards: the codification of retailer demand. Understanding the DNA of the food supply chain

Because retailers increasingly sell ‘food with a story’ and make specific claims about the products that they sell it is important that these claims can be verified.

To do this they have created sophisticated traceability systems and built the infrastructure to monitor each process along the entire food chain.

Private standards are the rules which specify what those processes are.

Whilst technology has enabled the control of information, private standards are the codification of retailer demand. They are the rules by which retailers coordinate their supply chain.

“… a ‘standard’ is to be understood….as a set of technical specifications that may be adhered to by a producer, either tacitly or as a result of a formal agreement.”90

Standards specify and harmonize product and delivery attributes, thereby enhancing efficiency and lowering transaction costs.91 Standards can specify two aspects of a finished product:

1. Product standards – cover the physical characteristics of the finished product. For example a cucumber might have to be a certain colour, length, girth and wrapped in a particular type of plastic.

“Now they are telling us that the size of a Fuji apple is ideally 65mm, not 63mm so when you are thinning you have to tell the workers to cut more deeply … There is more skill involved, but it also takes longer and there is more labour.” 92

South African apple farmer, commenting on European food standards

2. Process standards – cover how the product is produced, including social and environmental practices that are not ‘visible’ in the finished product. A cucumber might have to be produced using certain agricultural methods or treated with particular pesticides

“Waitrose British Pork comes from pigs that are reared naturally on carefully selected British farms. The pigs always have soft straw to sleep on and space to roam around. Claire and Trevor Carlton-Moor produce pigs for Waitrose on their farm in East Anglia.”

34 Waitrose advertisement

Anecdotal evidence suggests some supermarkets specify that the vegetables they sell are produced using only mains water irrigation methods.

Some examples of private standards

There are a few main trends in standards. Firstly there is the increasing complexity and importance of public, mandatory standards in global markets. But increasingly important are the private, collective standards on agribusiness trade and value chains.93 Retailer brands are hugely influential and because of their economic power, retailers are a major force in driving quality standards.94

Although often labelled as ‘voluntary’, in that they are not imposed by regulatory authorities, standards often act as entry tickets into the market – producers must comply with certain standards, and demonstrate that they have done so, or their products will not reach the supermarket shelves.95

Here are some examples of private retailer standards:

EUREP/GAP (Euro Retailer Produce Good Agricultural Practices) covers agriculture, food-safety aspects as well as working conditions and environmental aspects

EurGAP control points Production area Criteria assessed 1. Traceability 2. Record keeping 3. Varieties and root stocks 4. Site history and management 5. Soil and substrate management 6. Fertiliser use 7. Irrigation 8. Crop protection 9. Harvesting 10. Postharvest treatment 11. Waste and pollution management, 12. Worker health, 13. Incremental issues 14. Complaint form 96

BRC (British Retail Consortium standards) – offers an extended developed checklist for food-safety specifically for the UK market

GMP+ (Good Manufacturing Practices) – implemented in the animal sector. It requires traceability of feed.

35 SQF (Safe Quality Food) – emphasizes capabilities of tracking and tracing throughout the supply chain

Private standards Retailer rules in action

Companies at all stages of the value chain are developing high-profile standards to differentiate products their competitors’.

Retailer standards include Tesco's Nature's Choice, Carrefour's Filière de Qualité and Loblaw's President's Choice.97

• Carrefour applies its Carrefour Quality Certificate to 200 items around the globe98

• Somerfield, sets out its criteria for cauliflowers over three pages, including a demand that all should be 12cm-16cm and uniform in colour with no more than two spots per leaf. They must also be at exactly 6C when they are delivered to the store’s depot.99

Processors are also introducing private standards…

Bottom of the heap: ‘Not-traced and not-controlled’

Danone is a leading European manufacturer of fresh dairy products. In Bulgaria, the company has introduced a system of standards for its suppliers, the Danone Quality Control System (imposed by the International Danone Group). Every year all milk suppliers are visited and evaluated on the basis of 26 criteria relating to quality and safety of milk production. Suppliers that pass on all 26 criteria are labelled ‘Traced and Controlled Danone’ and are granted preferred supplier status. Suppliers that do not fulfil all 26 criteria are labelled ‘Traced and Controlled’, ‘Traced and not- controlled’, or ‘Not-traced and not-controlled’. 100

36 And so are fast-food companies…

Fast-food companies make the most stringent demands

Food-service companies, especially international chains such as McDonald’s, are very demanding – much more so than even supermarkets – in terms quality attributes and standards. They insist their suppliers control water quality, seed varieties, pesticides, packaging, and temperature, along with rigid standards specifying the size, colour and texture of the foodstuffs they sell in their food outlets.101

Most fast-food restaurants also demand daily microbiological control and audit monthly the “fresh-cut” companies which supply them.102

More importantly, fast-food chains take their sourcing strategies with them wherever they go. In developing countries small producers often find it hard to obtain information on standards, let alone make the investments needed to meet them.103

This drives small farmers out of business which leads to bigger farms that use more technology-intensive growing methods, as well as larger, more centralised food processing plants.104

Assurance schemes…and retailer value It’s best to link your credence claims to a worthy organisation.

Private quality assurance schemes are designed by third party organisations often in collaboration with retailers. Examples include “Farm Assured British Lamb” or “Farm Assured British Pigs”.

Third parties not only help design the schemes, they often help to enforce them. Many retailers ‘sub-contract’ the role of source verification to the various producer-driven farm assurance schemes in operation.105

Farm assurance and whole-chain assurance schemes lead to the production of food with certain extra qualities – which back up the credence claims made by retailers. These credence qualities also have extra value for the retailer, as they might be able to sell them at a premium to a particular range of customers.

In this way, retailer product differentiation strategies in the UK impose retailer standards further down the chain.

The consequence of this is that much of the market is closed to farmers who do not embrace one or more of the assurance schemes designed to give added value. 106

For UK farmers and processors, memberships in the Farm Assured British Beef and Lamb (FABBL) and other such schemes are voluntary. But studies suggest that failure to comply with the standards is not really an option. Membership has become a de facto mandatory requirement of major processors, who are in turn responding to pressure from major food retailers, restaurants, and food service.107

• In 2000, about half of English beef producers and around a quarter of English lamb producers belonged to Farm Assured British Lamb and Beef (FABBL). They produced 76% of beef and 51% of lambs slaughtered in England.

• About 30% of English pig producers belonged to Farm Assured British Pigs (FABPIGS) in 2000, but they produced about 85% of the pigs slaughtered in England.108

In other words, it is the bigger producers that belong to these certification schemes.

How standards create private labels

Major food retailers have implemented ‘proprietary’ quality assurance schemes in order to develop their own private label products. These schemes require suppliers to be members of one of the generic farm-level schemes, but then specify a variety of additional requirements – such as carcass specifications, age limits, breed, additional feed constraints, and enhanced ability to document the animal’s source and how it was produced.109

Retailers are driving in the spread of assurance schemes. This exerts substantial pressure on producers who might otherwise be unwilling to bear the costs of membership and of meeting scheme standards, but who are aware that if they don’t they will be excluded from the market.

Furthermore, as markets mature, meeting stringent new standards is no guarantee of a market premium for suppliers. In fact, new standards often become an ‘unfunded mandate’ and arguably demonstrate a disproportional allocation of costs and benefits between standards ‘makers’ and standards ‘takers’. When combined with buyer power, the costs and efforts necessary to meet the standard, to prove that it has been met and allow for traceability down the supply chain, are likely to fall on the producer.110

Standards and consolidation Standards favour large farms

These standards also drive concentration further down the food chain.

The cost of compliance means that standards discriminate against small farms. Although often described as ‘voluntary’, private standards can act as entry tickets or barriers to the market.111 The stringency of the standards discourages many small farmers from entering into contracts for supply. And in countries or regions where just four retailers can control up to 90% of the market small suppliers are effectively excluded from everything but the scraps. To make matters worse, emerging evidence points to a distinct preference by supermarkets to source from larger producers.

• In Malaysia, for example, one chain had 200 vegetable suppliers in 2001 - by 2003 this number had fallen to just 30 “preferred suppliers”.112

• In Chile it has been found that the scale of fresh produce operations of 50 or 75 associated small growers, each with one or two hectares, is often not sufficient to offset the cost of supermarket procurement practices.113 Only large-scale farming operations can meet the demand.

The extra demands of supermarkets

In Ecuador, the traditional open market demands from potato growers only four criteria be met: 1. a certain set of varieties 2. a maximum level of mechanical damage 3. a minimum size 4. a certain color

In contrast, the supermarket channel demands fourteen criteria be met: 1. a certain set of varieties 2. a certain form 3. a maximum level of mechanical damage 4. a level of cleanliness 5. a level of food safety 6. a certain odor limit 7. a certain size 8. a certain color 9. a certain maturity 10. temperature maintenance 11. specific packaging 12. a certain volume 13. timing and place restrictions 14. a specific payment period114

Food service companies also impose standards that shut small suppliers out of markets and help to consolidate the food supply chain.

• The Association of Small Irrigation Users of Palencia (ASUMPAL) is a cooperative supplying salad tomatoes, that comply to stringent specifications, to McDonald’s in Guatemala. Its membership fell from 330 in 2000 to 30 in 2001 to just 6 in 2002.115 ASUMPAL’s members lacked the expertise, as well as the money to invest in the modern greenhouses, drip irrigation and pest control that would have helped them meet supermarket specifications116

Distribution and packaging

Standards do not just apply to production. They often specify how food should be packaged and distributed.

Standardised packaging and supply are essential to the smooth operation of large scale global distribution networks. Supermarkets demand standard quality of produce (appearance, size, colour, crates, pallets) so that they can run their stock efficiently and standardise pricing.117 So, for suppliers, understanding the right packaging, the right case pack sizes and the right unit loads demanded by supermarkets can make or break the profitability of their business.118

If, for example, a supplier does not use the right size crate then they cannot supply the retailer. This means that even packaging can act as a barrier to new suppliers who want to enter the food supply chain. Standardised packaging can also lead to discriminatory requirements which eat into the profitability of producers.

• Wal-Mart now demands that packages of chicken breast must weigh exactly 5lb and that is all that the supplier is paid for.119 Because the supplier is not paid for any extra chicken in a package, any small oversupply will mean the supplier consistently loses out.

The traceability systems driven by retailers are forcing suppliers – manufacturer and farmer alike – to follow suit and adapt to those new systems.

• Tesco and Metro introduced RFID at individual case level in 2004. All of their suppliers were told to be RFID compatible from 2006.120 Wal-Mart has required its top 100 suppliers to be RFID capable since January 2005. Its next 200 suppliers had to put RFID tags on cases and pallets from January 2006.121

And so suppliers have two choices: either implement RFID across their own operations or lose an outlet for their produce. For many suppliers a large retailer like Wal-Mart accounts for most of their business and so suppliers have no option other than bear the cost of this expensive technology.

• Wal-Mart suppliers have collectively spent $250 million to implement the technology, according to AMR Research released this past winter.122 US manufacturers will spend $400,000 per facility to become RFID compliant, plus another $6,600 annually per $1 million in sales for the tags themselves.123

Suppliers faced a stark choice: adapt or face commercial ruin.

“It’s a significant cost to our company, but you’re either going to do it their [Wal-Mart’s] way, or they’re going to find another supplier.”124

Tillamook County Creamery, Oregon, US

The imposition of these costs further consolidates the supply chain. The impact of new standards can be particularly severe in developing countries, as these case studies show.

Brazil: new standards transform the supply chain… and 60,000 dairy farmers go bust.

In Brazil, the imposition of new supermarket standards in 1997 led directly to 60,000 dairy farmers going out of business in just 36 months.

Following pressure from supermarkets, dairy processors in Brazil began to demand the instillation of expensive refrigeration tanks on all dairy farms. However, the smallest tank available for farmers to buy helds 200 litres of milk, requiring production of at least 100 litres a day. Since average farm production was just 50 litres a day most farms were unable to afford the new system. In fact, fewer than 6% of dairy farmers had a daily output of 100 litres or more, so there was an instant and massive exclusion of small dairy farmers.

Dairy processing in Brazil is highly concentrated. In 1996 the top 3 firms (Nestle, Parmalat, and a domestic firm) had 61% of the dairy processing market. Tetrapack, in conjunction with the major retailers, embarked on an aggressive strategy to promote vacuum packing UHT milk. This combined with Parlamat’s promotion of UHT milk caused UHT to take over the fluid milk market from just a 5% share in the late 1980s to a 75% share in 2001.

“The consequences of this substitution are important. Most UHT milk is sold in supermarkets, while pasteurised milk used to be sold by bakeries. This means that milk retail has shifted rapidly into supermarkets, whose relentless quest for cost-cutting was

41 passed on to the dairy processors. Private standards were instituted by the leading processors to reduce costs….”

These standards required milk cooling at the farm level which reduces procurement costs and improves the quality of the raw material. To take full advantage of the refrigeration system, the farmer has to invest in herds and costly equipment…

During the period 1997-2000, the number of farmers delivering milk to the top 12 companies dropped by 60,000 (35% of suppliers) and there was a 55% increase in their average size (litres/day/farm).

Nestlé alone shed 20,000 farmers from its supply lists – a drop of 49%. Since the demands were imposed the average scale of a supplier increased by 135%.125

It is a similar story in Kenya…

Kenya’s fresh fruit and vegetables. Fewer, bigger farms. Small-holders swept aside

• In 1989, the UK supermarket share of fresh fruit and vegetable sales was 33%. By 2003 it had risen to 80% - none of which was sourced through wholesale markets.126

The changing nature of fresh vegetables trade between Kenya and the United Kingdom highlights a shift from market-based global value chain governance to more explicit coordination, and it reveals the importance of the competitive strategies of UK supermarkets in driving this change.127

Fresh produce is one of the few products that can persuade consumers to move from one supermarket chain to another… so it is very important to retailers. To differentiate their products retailers emphasise the quality of their fresh produce and have introduced new, non-seasonal and processed items in a bid to attract customers. In the UK much of this produce comes from Kenya.

Retailer emphasis on quality and variety has changed the structure of the value chain

In the 1980s, trade in fresh produce between the UK and Kenya went through a series of arm’s-length open market relationships. Traders in Kenya bought produce in wholesale markets or at the farm gate and exported it to the UK, where it was sold in wholesale markets and distributed to independent shops.

Supermarkets have transformed this open market. As UK retailers grew and became more powerful, they began to take a greater share of fresh food sales. Supermarkets then used their buyer power to introduce a more explicit form of coordination into the chain. They developed closer relationships with UK importers and Kenyan exporters, and moved to

42 renewable annual contracts with suppliers whose capabilities and systems were subject to regular monitoring by third party performance auditors. Supermarkets began to inspect suppliers prior to incorporation in the chain, and made regular spot checks at all points in the chain, right down to the fields where the produce was grown.

Supermarkets then started to specify exactly how products should be grown, harvested, transported, processed and stored.

These requirements were specified and monitored by

• the use of detailed, written procedures for growing (including the use of specific pesticides and chemicals), harvesting, processing and transport

• swapping information with a small number of "preferred" suppliers

• auditing and inspection of importers, exporters and farms.

Firstly they reduced the number of UK suppliers/importers for each product range. They then adopted a system of category management, which meant the remaining suppliers were given more and more responsibility for sourcing, product development, and even consumer research.

Then as many processing functions as possible were transferred to exporters in Kenya, where costs are lower. In fact, one company went so far as to fly chives from Europe to Kenya, so that packers there could use them to tie small bunches of green beans and miniature carrots together – to make them appeal to British shoppers. The plastic trays these were sold in were also flown from Europe to Kenya.128

Result – smallholders excluded, as consolidation is driven further and further down the chain

Supermarket standards have led leading exporters to increase own-farm production at the expense of purchasing vegetables from both smallholders and large contract farmers.129

• In the early 1990s, smallholders produced 70% of vegetables and fruits shipped from Kenya… by the end of the decade they were left producing just 18%.

• By 2000, 40% of fresh produce was grown on farms owned or leased directly by the importers based in the developed countries, and another 42% on large commercial farms.130

• In 2002, 1,600 Kenyan growers lost their contracts.131

There has been concentration of exporters too.

43 • The top five exporters now control over 75% of all fresh vegetable exports.

But it doesn’t stop there, these remaining exporters are now consolidating vertically. Kenya’s largest exporter, Homegrown has entered into a joint venture with MK airlines which flies cargo planes each night to the UK.132 And Kenyan exporters are beginning to merge with UK importers either through outright ownership or equity participation.133

Smallholders excluded

As supermarkets transfer their global sourcing patterns to the developing world, large numbers of smallholders will find themselves excluded from the supply chain.134

The figures show that global retailers are rapidly increasing their penetration in developing countries (see appendix). As they do so, they switch their sourcing from the wholesale markets used by small suppliers and retailers to a small number of preferred suppliers and introduce their own grades and standards that shut out small suppliers.

These “preferred suppliers” are driving through the demands of multinational retailers. They cut the retailers coordination and enforcement costs, and enforce private standards and contracts on their behalf.135

In Nicaragua for instance, fresh produce supplier Hortifruti works on developing farmer ‘competences’. The company’s agronomists visit farms to oversee crop planning and provide other technical assistance. Hortifruti is the ‘buying arm’ for most of the stores in the Central American Retail Holding Company (CARHCO), which is a third-owned by Wal-Mart.136 Through contracts with growers it has streamlined the supply chain, leading to cost reductions on tomatoes of up to 60%.137

44 Contracts One of the most effective ways to grow your company (with someone else’s money)

“…development economists and agribusiness researchers generally agree that the growing number of complex contractual arrangements replacing spot markets is a defining characteristic of the agroindustrialisation phenomenon”138 Agricultural Economics, 2000

“We are likely to see a continuing shift to more explicit forms of vertical coordination, through contracts and processor ownership, as a means to ensure more consistent product quantity and quality.”139 US Department of Agriculture

Contracts are a more ‘explicit’ way of coordinating the value chain. Like standards, contracts are a codified expression of retailer demand.

A contract is, in essence, a formal or informal agreement between two parties that is costly to break either because of a monetary penalty or lost future business.140 The FAO defines a contract as, “an agreement between farmers and processing and/or marketing firms for the production and supply of agricultural products under forward agreements, frequently at predetermined prices”.141

In today’s food supply chain contracts are frequently used for the following products:

Product Contractor Fruit and Vegetables Retailer or Preferred wholesaler Dairy Retailer or Processor Poultry Retailer or Processor Meat Retailer or Processor Cereals Retailer or Processor

Through contracts, retailers and processors specify their demands: the quantity, quality, delivery time and price of food.

• In Germany around one-third of the total value of agricultural production was produced under various types of contract in the 1990s.142

45 Retailers, for example, make contracts either directly with the producer or with suppliers, who in turn make contracts with producers. The retailer benefits from a consistent supply and a guarantee that food has been produced in accordance with standards specified in the contract. Suppliers and producers receive a guaranteed income.

But there is another important feature of contracts. Growth.

Contracts as a cheap way to achieve vertical integration

There are two basic ways that a company can get bigger. It can do so either through direct ownership, by which firms “grow larger”, or through agreements, by which firms are “effectively larger”.

The first way, known as vertical integration, is achieved through mergers or acquisitions, where one firm purchases the assets of another firm at another stage of the value chain.

The second way, known as vertical coordination, is achieved when firms gain access to larger markets, a wider product line, or higher quality produce through formal or informal agreements.143

Standards are a type of informal agreement. Formal agreements are known as contracts. They are a more explicit form of vertical coordination. Contracts are part of what industrial organization literature terms “vertical restrictions”, which fall short of full vertical integration (which supermarkets and food processors usually avoid) but approximate in certain ways the outcome of a vertical merger.

These contracts can also be established when a retailer (via its wholesaler or directly) “lists” a supplier. That listing is an informal (usually) but effective contract—in which delisting carries some cost, tangible or intangible.144

But, contracts do not come without risks, especially for producers. Farmers, in particular, are at risk of becoming dependent on a sole contractor, and may lack bargaining power to obtain fairer terms. Or, the contractor may manipulate quality standards in order to reduce purchases.145 Yet despite their weaker position, producers still end up being liable for the on-farm investments often specified in contract production as well as all the environmental liabilities which can be substantial. Contracts also lead to a lack of price transparency…

What is a contract?

A standard farming contract includes provisions for price, production practices, product quality, and credit facilities, etc146

In agriculture, these are the areas that contracts typically cover:

• Market provision: The grower and buyer agree to terms and condition for the future sale and purchase of a crop or livestock product • Resource provision: In conjunction with the marketing arrangements, the buyer agrees to supply selected inputs, including on occasions land preparation and technical advice • Management specifications: The grower agrees to follow recommended production methods, inputs regimes, and cultivation and harvesting specifications 147 In addition to this, for livestock, there are two further “sub-categories” into which contracts fall: production contracts and marketing contracts. . • Production contracts: these are where the contractor owns the animals and the farmer is paid for feeding and looking after them

• Marketing/pricing contracts: these are where the farmer owns the animals, but has some prior agreement with the contractor regarding purchasing arrangements or pricing

In the U.S. the first type predominates in the poultry sub-sector, while marketing or pricing contracts now account for a majority of sales in the hog market.148

Contracts more and more popular

Contracts are now the primary method of handling sales of many different livestock foods such as milk, pigs, and poultry, and also the sales of major crops such as fruit and vegetables.

And contracts will govern a growing share of global agricultural production over the next decade, for the following reasons…

• Demand for differentiated agricultural products to meet specific consumer preferences should continue to grow, and these products are generally produced under contract. • Pressures will grow to ensure traceability of products for health and consumer concerns, and contracts provide one way to ensure traceability. • Large farms continue to account for sharply growing shares of agricultural output. Contracting is closely associated with farm size, and contract use can be expected to grow along with the increase of large farms.149

Example: Processing Tomatoes in California

Almost all U.S. processing tomatoes are grown in California, the vast majority under contracts. There are few participants in the California market—51 processors in the 1990s and about 500 growers. The 50 largest growers account for 40% of production. Different processors need different tomato characteristics for the huge variety of different tomato products: paste, juice, sauce, ketchup, soup products and so on. These market characteristics lead to a reliance on contracts and contracts are designed to provide incentives to growers to produce the tomato characteristics desired by buyers.150

Example: French Fries

McCain Foods is the world’s largest french fry processor, it produces one-third of all french fries consumed in the world and at least 40% more than any other company. Most of McCain’s potatoes are grown by producers that enter into contracts before the year’s crop is planted.151

US leads the way in contracts

Contracts have governed an increasing proportion of US agricultural production since the 1950s152 and now cover over one-third (36%) of the value of U.S agricultural production, up from only 12% in 1969.153

In some sectors of US agriculture contracts are used even more widely:

• Contracts covered nearly one half of all livestock production 2001, up from one- third just 5 years before. 154

• Contracts dominate the production of poultry and eggs… 88% of the value of production in 2001155

• The number of pigs produced under contract has rocketed in a just short space of time: in 1997, 56.6% of hog production was contracted. By January 2005 the number of non-negotiated or non-spot purchases accounted for 89.4% hog purchases.156

Source: USDA data157

Fruit and vegetables… more and more contracts too

Conventional retailers are gradually reducing the number of suppliers per product and beginning to contract with just two or three preferred vendors capable of offering consistent, year-round volumes, quality, and traceability systems.158

This system essentially functions as a contract between the retailer and the grower.159

How this shift takes place…

1. A private wholesaler emerges and grows the share of its business from supermarket chains.

2. The wholesaler shifts the majority of its business to supplying just a handful of retailer chains. It also adds services such as packaging and quality control that it did not do as a ‘traditional’ wholesaler.

3. The ‘dedicated’ wholesaler stops buying on the open spot market or from a list of customary suppliers and instead starts outgrower schemes where it contracts production that meets the specific standards of the retail chain.

49 4. The retail chain often acquires or enters in a joint venture with the wholesaler firm. This acquisition has the advantage of control, exclusivity so that it also ‘captures’ a supplier base, and making the wholesaler a profit centre.160

The result of all this is that leading supermarket chains are shifting toward ‘direct’ purchase from growers. This direct purchase is managed by the dedicated wholesaler as a ‘preferred supplier programme’. And most of these dedicated wholesalers are actually owned by the retail firms or are run as joint ventures.161

This process is currently in action in Croatia, where the largest chains have recently begun to buy up the specialized wholesalers so that they can run their own “preferred supplier” programmes.162

Food processors and producers… more and more contracts

Case study: Pork under contract

The pig livestock industry – especially in the US - is a classic example of agricultural production being increasingly carried out under contract at the behest of processors. This is happening for three major reasons.163

1. Simplicity and guaranteed supply.Working with a fewer and larger producers who meet tight production schedules gives processors assured supplies so that the processors’ facilities are always kept fully utilised.164

2. Captive market. By turning independent producers into contracted pig farmers, processors can profit by supplying the inputs into the production process (such as feed and even the pigs themselves).165

3. Uniformity. A processor’s direct role in the management of production means it can deliver the uniformity and productivity levels required.166

The net result of this trend for pork production in the US:

• Pork production coordinated through production contracts or direct ownership of production units by processors (vertical integration) increased from 11% in 1993 to 59% in 1999.167

• The percentage of pig-to-finish production units with contracts increased from 11% in 1992 to 34% in 1998. The share of output taken by these contracted units increased from 22% to 63%.168

And just like in other agricultural business conducted under contract, this is leading to concentration in the industry and larger farms…

• The four largest pork processing companies in the US accounted for 32% of the market in 1985. This share had grown to 63% by 2003169

• Production operations in the US with more than 1000 pigs raised their share of the total number operations from 37% in 1987 to 71% in 1997.170

171

An example of how supermarkets encourage food processors to wider use of contracts

In the US, retailers recently began demanding processors supply case-ready and branded pork (case ready is pre-cut, pre-packed and pre-labelled meat). This in turn influences the processors’ methods of production. This demand for uniform ‘pork products’ leads to processors taking more control over the breeding stock and production practices. Because, consistent inputs – as specified by the processor – can help to produce pigs of the particular size and weight needed for a ‘standardised’ pork product.172

And, in many cases, integrated processors have now even taken control of the genetics of pigs by retaining – through contract – the ownership of the genetics of the livestock supplied to the farmer.173

Larger farms in a concentrated pork industry are having serious impacts in Europe too. Consider the recent activities of the world’s largest pig processor.

Large processors prefer to contract with producers on large farms. But farm concentration creates environmental risks – especially in the pig industry.

Smithfield, the largest American pork processors, has recently expanded in Europe. In 2004, the company moved into the UK, Spain and Romania.

But in Europe, Smithfield’s largest operations are in Poland.

• In 1999, Smithfield acquired a 67% share in Animex S.A., Poland ’s largest meat and poultry processing company for $51.2 million.174

Through Animex, Smithfield…

• slaughters 1.2 million pigs per year.175

• has supply contracts with 1,600 Polish farmers.176

• owns 47,000 sows in the country – up 14,000 since 2003.177

By 2006 an additional 10,000 animals will come from farmers raising Smithfield-owned stock under contract.178

The presence of Smithfield is drving consolidation in Polish pig farming.

• After buying Aniemx, Smithfield closed three of the company’s large slaughterhouses and cut nearly 2,000 jobs.179

• Farmers contracted with Animex (Smithfield) have seen a dramatic change in lifestyles. Where they once had 20 or so pigs, many now have 1,000 or more.180

But concentration in pig farming creates environmental risks. Smithfield’s intensive pork production methods in the past have created a number of problems with waste disposal.

• In the US, the Department of Justice and Environmental Protection Agency have alleged almost 7,000 violations of the Clean Water Act by Smithfield since 1991.181

There is a danger that these waste disposal problems will be exported to Europe:

• In 2003 Prima Farms – a Polish company funded by Smithfield – was found guilty in 2003 of dumping huge amounts of waste without permits.182

The big and the less of contracts: fewer but bigger farms

Contracts go hand in hand with concentration in the farming sector. As retailers, “preferred wholesalers” and food processors push to reduce the number of their suppliers the inevitable consequence is fewer and larger farms are supplying the demands of fewer and bigger customers.

“90% of our produce is supplied by 40 farms and the last 10% is supplied by 100 farms. This is simply not viable anymore.”183

Large fresh produce processor "Working with one strawberry grower … we helped develop ways of extending the growing season. He started with 100 acres and now has more than 1,000 dedicated to producing just for us" UK supermarket Morrisons184

• In the US farms with $1 million or more in sales have nearly half their production under contract.185

• Research indicates that vertically integrated firms tend to rely on large farms for contract production and are less willing to work with small or medium-sized farms which provide less output volume.186

The net result if all this is that, for all practical purposes, producers often end up with just a single buyer even if there are several buyers who could theoretically compete to buy from them: buyers in effect create captive suppliers.187

53 Problems with contracts: Risk of dependency

Proponents of contracts say that they are a way of reducing most output price risks and many input price and yield risks. But contracts also bring the new risks of supplier dependence, insecurity and potentially unfavourable terms.

Contracts do not guarantee long-term income security. Farmers are kept on their toes by the constant possibility of losing their supply deal with a retailer or processor.

“We don't really encourage any long-term contracts, we used to. But for both sides it doesn't work… We have entered into longer term things, but it’s very much the exception.”188 Anonymous retailer interview, December 2001

The example of American pork production

In the US, many pig farmers no longer own any animals. Multinational food processors provide the animals and even the seeds to feed them. The whole production cycle – genetics, feed rations, scheduling and procedures, and even the weight of animals at processing – is controlled by these firms. Moreover, the buildings and equipment used by the farmer are specified by the integrating firm.

At the end of the season, the full-grown animals are brought to the company's processing plants, where they are weighed. Each farmer's performance is rated in pounds. Then the company deducts all its charges – for the animals themselves, for feed, transportation, and any other services or products it supplied, such as propane to heat the buildings.

If there is anything left over, the farmer is compensated.

The only things the company allows the farmer to own are the heavily-indebted buildings and land where the company raises its animals.189

In many cases, the food processor that handles the farmer's product is linked (by ownership, joint venture, or strategic alliance) with the firm that provides the farm's inputs. These clusters of firms dominate the farmers, reducing their independence and choice. With no one else to buy seeds, pesticides and fertilisers from – and no one else to sell to – the farmer loses all control over price and profit.

On most American pig farms, all of the significant management decisions, such as selection of facilities design, genetic stock, health program, breeding dates, when to place on feed, feeding system, when to price, when to deliver, are made by the contractor – not the farmer.190

54 This means that the grower/farmer doesn’t contribute much to a contract pig operation, and so cannot expect to get much back in return. The contractor provides the technology, the management and the market and so the contractor is going to make the money – not the farmer.191

However, to get involved in contract production, the farmer must often borrow heavily to finance the construction of the facilities – typically $200,000 to $1 million – and generally assume the financial risks associated with raising pigs for a pork company.

Although these farmers are dependent on the contracting firm, the law regards them as equal parties in the contract. They must therefore accept liability for anything that might go wrong during production.

For example, it is the farmer – not the pork companies which owns the pigs – that bears the environmental risks associated with the vast amounts of waste generated at factory farms.192 The processor makes the big money, yet the contract producer remains responsible for dealing with the vast amounts of waste that and for any violations, waste lagoon ruptures, or other environmental problems.193

• A single average factory in North Carolina has about 3,700 pigs and produces 38,480 pounds of faeces and urine every day.

• In all, North Carolina pork factories produce 19 million tons of waste a year. That's 2.5 tons of pig waste per North Carolina citizen per year.194

Death of the ‘wholesalesman’

Supermarket purchases now involve not only larger quantities than traditional marketing systems, but entirely new methods of procurement.

Traditional wholesalers have been unable to supply the quantity, quality and consistency required by supermarkets….or meet their price requirements.195

The World Bank and the European Bank for Reconstruction and Development (EBRD) saw the need for wholesale market development in Eastern Europe and so financed the construction of many new markets.

These markets are now redundant. It has been proposed that they could be used as enormous banana ripening rooms or cold storage facilities for the new retailer-owned dedicated wholesalers that dominate food supply in Eastern and Central.196

The irony of this is that the region has gone full circle in just ten years: from a centralized communist system of agriculture and production pre 1990, to an open market system during the 90’s and now back again to a centralized system run by retailers.

• In Poland alone, 50% of local food wholesale trading companies amalgamated or went out of business as supermarket share of retail sales increased - the meat industry shakeout in Poland was especially severe – half of the remaining firms expected to merge or go bankrupt. 197

• In 1998, 42% of fresh produce handling in South Korea was done by wholesale and conventional markets, but four years later this had dropped to 29.5%.198

• In Mexico, raditional wholesale markets in the main cities have experienced a fall in volumes traded by 25 - 30% between 2003 and 2005.199

• The Malaysian supermarket, Giant, had 200 vegetable suppliers in 2001 but by 2003 this was down to just thirty.200

56 Problems with contracts: Lack of price transparency

Relationships between contractors and producers are essentially ‘closed’. Contract details, including information about price, are not generally made public. For external parties this means that there is less opportunity for price discovery – and this can lead to market distortions.

Under contracts, pricing becomes subject to manipulation, and its role in regulating the economy, by establishing equilibrium between supply and demand, is weakened. In other words vertical coordination can bring about market closure and becomes a barrier to pricing efficiency.201

Contracting also reduces ‘price transparency’. Contract terms are generally not published and often vary from contract to contract. This reduces the opportunities for ‘price discovery’ along the chain.

Price transparency is an important indicator of a well-functioning, competitive market place. Perfect competition depends on a free flow of price information between market participants. This of course is rarely realized, but open and wholesaler markets come reasonably close. In a market scenario where there is an arms-length relationship between seller and buyer, there is more opportunity for suppliers and buyers alike to find out how much is being paid for food, as everyone shops around for the best price.

‘Perfect competition’ does not occur in buyer-driven chains.202

Farmers should have access to similar price information as the processors and retailers – but increasingly, they do not.

Some of the ways that contracts cause problems for farmers • Contracts make it difficult for producers, particularly smaller-sized ones and those that want to use open cash markets, to determine a ‘fair’ market price203 • In America, many livestock farmers, not under contract, say that they are unable to obtain the data needed to quickly and easily compare bids from different buyers in order to negotiate the best possible price for their livestock204 • Farmers wishing to enter into contracts may find it difficult to compare prices across contracts, because contract terms may contain language specialized to the farmer or circumstance of production, and—particularly in livestock—terms are not generally publicized.205

The tail that wags the dog. Contracts can now distort open market prices

57 “In the old days I would have been able to offer you $67.50 for these cattle (on a $66 market), but now paying more would screw up 20,000 formula cattle.”206

Cattle buyer to a cattle feeder, quoted in US Department of Justice / Federal Trade Commission Workshop on Merger Enforcement

The cattle feeder, mentioned above, did not receive a fair price (in this case $67.50) because the price for animals farmed under contract is tied to the price of cattle sold on the open spot market (in this case $66). The buyer could not offer a fair price because to do so would increase (“screw up”) his costs to other contracted farmers by $30,000.

Even with pricing information, contracts make it harder for producers to receive a fair price. This creates a ‘distorted incentive’ – where contract farmers are not rewarded for producing animals of superior quality, because their price has been fixed in advance. And farmers not under contract have less incentive to produce better quality because, indirectly, the open market price is linked to the contracts price.

Contracts lack the flexibility of spot markets. Unlike spot markets, contracts fail to reflect the fluctuations and seasonality of supply.

Typically, growers expect to receive high spot market prices when there are shortages, which compensate for periods of low prices. But this potential for higher returns in periods of short supply is lost under contracts. Suppliers that have forward-contracted with buyers at a lower average seasonal price may be unable to return the temporary high prices (to their growers) which other growers may receive when marketing through suppliers who sell mainly on the spot market.207

Moreover, the lack of transparency in prices also creates the potential for large firms – whether buyers or sellers – to unfairly wield market power.208 This ability to distort the market, by keeping prices down or imposing extra costs on other parts of the chain, is explored in the next section.

To summarise, in a vertically coordinated chain, the head of the chain controls the information flows and information is shared between ‘chain insiders’. ‘Chain outsiders’, those suppliers who are not contracted to major retailers or processors, lose out.

58 Vertical Coordination

Retailers are now driving a new system of food production – a demand chain in which they control the flow of products from the producer all the way through to the store.

The use of standards, contracts and the development of preferred suppliers as ways of organising and governing the chain is set to continue.

These changes turn the food system into a vertically coordinated supply chain.

This section looks in more detail at the retailer infrastructure – distribution centres – and management practices – factory gate pricing, efficient consumer response (ECR), category management and open-book pricing – that make such governance possible.

It also shows how, as these trends continue, all aspects of the food system are becoming more integrated.

Distribution and Logistics

“Centralization proceeds in steps, with a shift from by-store procurement to use of distribution centers handling distribution in a zone— then a country, then a region, then globally”209

Supermarkets have rendered traditional wholesalers and wholesale markets redundant by replacing them with their own Distribution Centres (DC’s).

And these Distribution Centres are crucial to the vertical coordination of food supply chains. They are also crucial to the development of private-label products.

A DC is effectively a huge warehouse owned by the supermarket chain. Primary producers and food manufacturers deliver their products directly to DC’s 210 and the supermarkets then distribute them to their individual stores.

• Carrefour, the world's largest supermarket chain, owns a huge distribution centre in São Paulo, Brazil. It serves a market of more than 50 million consumers.211 To put this into perspective, a single Carrefour DC serves a market greater than the combined populations of: Switzerland, Luxembourg, Netherlands, Belgium, Denmark and Sweden.

• Ahold in Poland operates over 180 outlets, all of which are supplied via five distribution centres.

• Tesco opened a 40,000 m2 distribution centre on 6 January 2004 for the distribution of all processed/packaged food for all its stores in Poland. It is now building a second, for fresh food.212

• Companies consider a network of 20 hypermarkets is necessary to justify a distribution centre.213

And as supermarket control reaches further and further back along the supply chain retailers are now beginning to take over parts of the upstream distribution network, collecting products directly from their suppliers and taking them to their distribution centres. This gives them further control of the coordination of food production.214 Today almost 30% of the cases delivered to Tesco's distribution centres arrive on Tesco trucks. 215

Increasingly, DC’s are being used not for storage but simply as transfer points where trucks are simply unloaded and reloaded.

• A German study notes a trend towards distribution centres with no storage space, where most of the goods are directly reloaded in a process known as cross docking.216

This means that the big retailers warehouse space is effectively becoming trucks on the roads.

Factory gate pricing

Factory gate pricing (FGP) is a supply chain technique which aims to iron out all ‘unnecessary’ transportation costs and improve the general efficiency of distributing food. By asking their suppliers to release product costs “at the Factory Gate” (that is product costs excluding the cost of delivery to the retailer) supermarket chains are able to take further control of food distribution.

The national port of entry might be the best place for the retailer or the retailer’s logistics provider to collect food products form the supplier. On the other hand, the site of production might be the desirable pick up point for the retailer’s distribution network. If cost efficiencies demonstrate that the original place of production is the most economic point to take control of the goods, a further link in the supply chain can be removed.217 Distribution centres are now often selected as the most efficient site for goods removal.

According to one report farm gate pricing has the following effects: - Reduces overall transport and product costs - Increases the retailer’s control of the supply chain

60 - Increases the operating costs of competitors, such as smaller retailers, convenience operators, food service operators by removing cross- subsidisation.218

A 2005 PricewaterhouseCooper survey of the Australian grocery retail market estimates that by 2010, 30-40% of Australian grocery retailers and wholesalers will implement factory gate pricing for inbound goods.219

A respondent in a PricewaterhouseCoopers survey notes that “As always these programs are designed by the retailers to lower their costs and are not always in the best interests of suppliers”.220

• By 2003 Tesco had contacted 90% of their Scottish suppliers about factory gate pricing.221

Efficient consumer response (ECR)

These developments in the architecture of the supply chain – distribution and information technology – work hand in hand with the retailers’ theories of supply chain management – which also lead to a more coordinated system of food supply.

It’s called “Efficient Consumer Response”.

Wal-Mart is generally regarded as the pioneer of Efficient Consumer Response. The company has developed its own integrated supply/demand chain. At its core is the concept of sharing information about retail sales with suppliers. This enables Wal-Mart to squeeze more costs out of the supply chain and lower prices. It forced the rest of the industry to adopt a similar system and forge closer links with their suppliers. The data scanned every day at the check out is the beginning of the information chain for these relationships.222

“On the supply side, the ECR concept reengineers the whole supply chain. Currently, the flow of goods in the supply chain is based on the push principle. [But] by creating a seamless information flow among all key players in the supply chain, it is possible to transform it to a supply chain that is based on the pull principle”223 M. Lagace, Harvard Business School

61 Background: Efficient Consumer Response (ECR)

The concept – of sharing information about sales with vendors and developing a continuous and coordinated flow of products – was introduced to “non-Wal-Mart retailers” in 1992. It was institutionalised by a coalition of trade associations (the Food Marketing Institute and the Grocery Manufacturers of America), food manufacturers and suppliers, and a handful of big chains under the name of Efficient Consumer Response (ECR) in 1992.224

‘Efficient Consumer Response’ does not actually have much to do with consumers. Essentially, its all about tracking consumer purchases at the point-of-sale and then sharing that data with suppliers, retailers can now tailor the delivery of goods to match the volume being sold.225

ECR has been constantly tweaked and improved upon since it’s introduction. Collaborative Planning, Forecasting, and Replenishment (CPFR), is another development fathered by Wal-Mart. It takes the ECR vision and implements it through the use of better information technology which allows for a greater, vertical exchange of information between retailers and manufacturers.

By sharing retail information with the food manufacturer every day and working with a historical record of consumer sales, the manufacturer and the retailer can each forecast sales over some future time period, share their forecasts, and negotiate anticipated future sales if necessary.226

The basic goal of ECR was to copy Wal-Mart by implementing electronic data interchange (EDI) so as to control the supply of goods and reduce the product lines in each category in order to streamline delivery and their associated costs.227

With CPFR too, manufacturers deliver food products on a prearranged schedule and manage the inventory of their own products in each store.228

The next evolutionary step from ECR is ‘category management’.

Category Management

Category Management is the practice of outsourcing the buying function from retailer to supplier.

Supermarkets select suppliers to look after a specific category of products, such as cereal, pet food, fresh fruit and vegetables etc. These suppliers are known as ‘category captains’. They are often the supermarket’s leading suppliers or brand leaders. Category captains recommend brands for the store to sell and give advice on how they should be marketed.

For suppliers there are clear benefits to being appointed as a category captain. Category captains have access to information, including pricing and promotional plans, about all the products in the category. With this information they are then able to develop comprehensive sales and marketing plans for the retailer (including shelf-allocation plans, pricing, and promotions). This gives them enormous knowledge about their direct and potential competitors.229

Retailers argue that category management is necessary because they do not have the in- house expertise to cover thousands of specific products. They claim suppliers are better placed to know the times of year when a product will sell best, the most effective promotions, or the kinds of complementary goods that could be displayed in adjacent space.230

But category management as practised today – with sometimes just one supplier in charge of each category – raises competition concerns.

Category management: a potential threat to open – and free – competition

"As an antitrust matter, it seems rather strange that you'd have one company advising a store on how to handle the product of its competitors"231 US Federal Trade Commission member Thomas Leary

Category captains have control over the products of their direct competitors. They also have preferential access to commercially-sensitive information, including access to competitor sales data.232 They have the power to make decisions about product placement, promotions and pricing – not only for their own category-dominating brands, but also for those of their competitors.233

• In the extreme, Wal-Mart (Asda in the UK) nominates just one supplier for each category, in a mutually exclusive deal. Most other supermarkets divide each category among two to four suppliers, giving each 30% to 40% of the business.234

Category management is another feature of co-ordination along the value chain. Through alliance – or ‘partnership’ – with preferred suppliers, retailers can reduce management costs associated with purchasing and merchandising.

Category management is a further example of supermarket oligopolies driving costs and competition further down the chain. Supermarkets have successfully engendered a competition among suppliers for "Category Captaincies." Leading suppliers have built huge and expensive infrastructures to develop category strategies for each category in which their brands compete, and for each major retailer who they think will pay out on this investment 235

63 In practice category management benefits the leading suppliers, since they are the ones who can afford to invest in the technology required. This leads to further consolidation – or the entrenchment of a few vertically coordinated relationships as the preferred means of organising the flow of products along the value chain.

Open Book Pricing

This is a buying strategy where price is based on the supplier’s costs – rather than a price chosen by the supplier. The price the supplier eventually receives is the sum of its costs plus an agreed profit margin.

Open book pricing is usually used for long term supply contracts. But the supplier must agree to allow the buyer free access to his accounts, which are checked regularly to make sure that all the cost are genuine and that there is no unnecessary expenditure.

• Retailers often use open book pricing to source private label products. Spanish discounter Mercadona has integrated 110 suppliers into what it calls its ‘inclusive’ philosophy. This relationship is characterised by an open book policy based on a ‘contract for life’.236

• McDonald's has four core suppliers. One of them is OSI, which supplies 25% of its beef in the US, and 85% internationally. These four suppliers meet every quarter to discuss and share best practices. McDonald's pays them on a cost-plus basis with an open-book system, whereby the fast-food chain can inspect suppliers' costs at any time.237

But open book pricing is not without risk.

Canadian studies report cases that “border on abuse” where open book is being used as just another tool to cut suppliers’ margins. In the extreme case this can remove all incentive for suppliers to reduce costs since any savings achieved are simply captured by the buying company. 238

From a wider economic perspective open book pricing essentially enables the retailer to decide and dictate returns on capital for each participant in the supply chain. Some may regard this as an unhealthy development.

64 Vertical Integration

In a vertically integrated supply chain the profits always gravitate to the top, which is why they are attractive to retailers.

The companies that are best at coordinating all the activities of the food chain to guarantee the specific qualities they believe are demanded by consumers are either:

• Vertically integrated firms • Or firms that coordinate activities along the supply chain – for example, through the use of contracts.

These organisations can coordinate the production, transportation, processing, and marketing of food239 and are able to respond to consumer preferences for consistent and specific product qualities.240

Profits go up the chain

“We have a high level of vertical integration in the fresh foods side of the business… one of the things we have always prided ourselves on is buying direct from farmers and growers…The more we can deal directly with farmers, the better” 241 Morrisons

Here are some ways in which retailers are able to create vertically integrated supply chains:

• Alliances with farmers, farm input suppliers and food processors or distributors • Acquisition of food processors or distributors • Development of their own wholesale distribution facilities

Vertical integration benefits retailers in the following ways:

• Cost savings – the suppliers' profit margin can be seized by the retailers • Competitive advantage – the retailer can enforce a uniform set of standards across the supply chain and produce goods of a homogeneous quality • Dependency on individual suppliers is reduced or eliminated

However there are drawbacks. By developing one-on-one relationships with the dominant manufacturers, and by gaining control over producers and distributors – the retailers threaten to smother the smaller members of the food supply chain. And, just as importantly, they make it difficult for new companies to enter into retailing.

Vertical integration ….it happens in developing countries too

The trend towards global retailer ownership of their own suppliers also extends to developing countries.

• Wal-Mart owns one-third of Central American Retail Holding Company (CARCHO).242 • CARHCO owns the Corporación de Supermercados Unidos (CSU) – which is a discount store, supermarket, and hypermarket operator in Costa Rica, Nicaragua, and Honduras • And finally CSU fully owns Corporación de Compañias Agroindustriales (CCA), which supplies the supermarket chain with all of its fresh produce….

….CCA also develops private label items. It works throughout the agricultural sector sourcing and distributing fruit, vegetables and grain purchased from more than 1,000 producers in Costa Rica and other Central American countries. CCA participates in the poultry industry through more than 450 independent producers.243

US meat production… a prime example of vertical integration

• 95% of U.S. poultry is produced under vertically integrated conditions, entirely in the hands of less than 40 firms. The four-firm concentration ratio for broiler slaughter was 56% in 2003244

• In the 1980s vertical integration spread to pig production. But the major change was in the 1990s when Smithfield became the largest producer and processor of hogs in the US and around the world. In 1994 processor-owned hogs accounted for 6.4% of US hog production. This share shot up to 27% in 2001, in part reflecting Smithfield Foods’ purchases of two leading hog producers.245

• Vertical integration is also increasing in the beef sector; a GIPSA report indicates 32% of all US beef marketed in 1999 was under captive supply – meaning that the processors own the cows.246

Vertical integration in the food supply chain is becoming the norm. And in many areas of food production large retailers in particular are driving this vertical integration. That is to say, they are extending their control back along the supply chain to food production, processing and distribution… as well as forwards to the consumer.

66 ‘Forward Integration’ The importance of the “last 10 feet”

"I want to help customers make choices about what is good to buy."247 (Anders Moberg, chief executive of Ahold)

Consumers are also part of this increasingly vertically coordinated food chain. Retailers do not simply control the many stages of supply, they are also intimately involved with influencing consumer demand. Retailers gain influence over shopping decisions in two ways: by marketing and by their control of vital in-store media.

“The medium is the message” Not any more, today “the message is the medium”

Control of the shopping space is especially important. According to marketing lore, the “last 10 feet” within a supermarket is where up to 75% of buying decisions are made.248 Retailers own and control the very media that can influence consumers as they make their shopping decisions.

It is becoming more and more apparent that the supermarket floor itself is one of the most effective advertising media. Nestle’s former marketing director, Andrew Harrison, has suggested that supermarkets are the real ‘new media’ and “the next natural evolution in close relationships between brand owner and store owner”.249

In recent years there has been a general decline in advertising revenue across most traditional media – but retail as a medium is going in the opposite direction. The reach of the supermarkets is huge.

“there is a clear opportunity to talk to lots of people in a short space of time in a very suitable environment.”250 John Owen, Starcom Motive

And this medium is exactly what retailers take advantage of…

• In 2003 the in-store radio station of UK supermarket Asda reached 12.4 million listeners – that is more than Capital Radio, the UK’s largest commercial radio station.251

Shoppers equal viewers. And Tesco TV is equivalent to a top-rating TV programme

One of Tesco’s latest marketing developments in the UK is Tesco TV. By the end of 2004, it was ‘available’ at Tesco’s 300 largest UK stores, which account for 530 million shopping trips each year and 10 million shopping trips per week.

The supermarket can make big money by charging companies for showing their products for 2.5 or more seconds on its screens. According to Tesco, companies advertising on Tesco TV have seen their sales of advertised products increase 10%.252

Fully one quarter of the €24.5 billion spent on advertising in the UK each year is on goods available in supermarkets.253 But food marketeers have discovered an effective, new, way to influence consumers, retailers in-house magazines.

Supermarket ownership of media is designed to drive sales and most importantly, it creates a closer link with consumers.254

The in-house retail magazine industry has grown exponentially by 244% over the last 10 years with the UK market now valued at £385 million and is set to increase past the £531 million mark by 2009.255

Readership Estimates for UK Food and Entertainment Magazines (October 2003- February 2005)

Magazine %ge of population Readership

ASDA Magazine 4.4 2,169,000

BBC Good Food 1.5 764,000

Family Circle 1.0 482,000

Observer Food 0.9 443,000

Sainsbury's Magazine 3.5 1,742,000

Somerfield Magazine 2.8 1,392,000

Tesco Magazine (from Sep04) 7.3 3,614,000

Waitrose Food Illustrated 1.4 675,000 256

Disparities in the figures above are down to differing assessments of what has been ‘seen’ or ‘read’.

The power of supermarket media

• Supermarket magazines are now seen by over half of all UK adults.257 In 2003 the combined readership of Asda, Safeway, Marks & Spencer, Tesco and Sainsbury's, totaled 25.65 million – more than 54% of all UK adults.258

• The ABC Consumer Concurrent Release in the UK shows that Asda Magazine – with over 2.5 million readers – is the magazine that is second most-widely-read by British adults (after Sky Magazine).259 Tesco’s Club Card magazine is not listed but early 2005 estimates put its readership at just over 3.6 million.260 It is carefully divided into five versions to appeal to different segments of its audience.261

• General consumer magazines have struggled to get advertising in 2002-2003. But Asda Magazine, Safeway Magazine and Sainsbury's Magazine increased advertising revenues during the period by up to 50%.262

Advertising that is effective

• Research by the Association of Publishing Agencies has shown that 60% of consumers read a customer magazine from cover to cover.263

• Waitrose says it has seen sales growth of up to 25% for products featured in its free in-store title, In Season.

But, you maximise your impact when you combine the magazine with a loyalty card

• Data that retailers collect from loyalty cards is also used to measure the impact on sales of products featured in their magazines. This data is also useful to suppliers, who help fund the magazines. For example, Tesco agreed in 2003 to share customer data with catfood supplier Felix – in order to create a campaign aimed at cat owners.264

Then, you drive the message home… with 20 million emails a month

• Tesco is currently dispatching 16-20 million marketing emails per month to 4 million consumers.265 This is greater than all of its supermarket rivals combined and is proving hugely effective. According to a major digital marketing company, 60% of Tesco's online revenue comes from emails.266

• www.tesco.com is the UK’s fourth busiest retail website, behind Amazon, eBay and Argos. In the US, supermarket companies Wal-Mart and Target are the third and fourth busiest retail sites respectively.267

69 • In October 2005 Tesco sent 44 separate messages, each promoting a different offer. In comparison, Sainsburys sent 2, Asda 7, M&S 4, Waitrose 3 and Lidl 8. So, Tesco accounted for 58% of the supermarket sector's emails268

70 Buyer Power

In a 2005 survey, only 35.6% of retailers chose ‘retailer-supplier relations’ as an issue of importance. But, for suppliers, 67.1% thought it was an important issue.269

‘Buyer power’ is the power lead firms in the value chain have, to exert a disproportionate influence on the market. Large retailers are able to distort prices and information. They can also use their power to demand better terms and conditions from suppliers than their smaller competitors.

As food retail consolidates, the remaining supermarkets begin to acquire buyer power. They not only dominate the chain through standards and contracts. They can also use their position – as the link between producers and consumers – to capture extra value from the chain.

One of the other ways they can do this is to shift costs onto and extract additional value their from suppliers. The UK Competition Commission, in 2000, identified a total of 50 supermarket practices concerning relationships with suppliers that it considered to be against the public interest.270

Definition: Buyer Power

[A] retailer is defined to have buyer power if, in relation to at least one supplier, it can credibly threaten to impose a long term opportunity cost (i.e., harmful or withheld benefit) which, were the threat carried out, would be significantly disproportionate to any resulting long term opportunity cost to itself. By disproportionate, we intend a difference in relative rather than absolute opportunity cost, e.g. Retailer A has buyer power over Supplier B if a decision to delist B’s product could cause A’s profit to decline by 0.1% and B’s to decline by 10%.271

For suppliers, retailers are not just customers. They also act as suppliers and competitors

For suppliers, retailers have three interlinked roles: customers, competitors and suppliers

1. Retailers as Customers The major UK multiple retailers typically account for 10 - 30% of a supplier’s total sales.

2 Retailers as competitors

71 Retailers private label products compete head-to-head with suppliers branded products. And because retailers control stocking, shelf allocation, and retail pricing they have the power to promote own-label products at the expense of manufacturers’ brands.

The threat to a branded goods supplier is twofold: the retailer can, if it chooses, undermine the supplier’s branded products (i.e. raise the price) or simply substitute the branded product with a private label one.

3. Retailers as Suppliers Retailers supply shelf space and advertising space to their suppliers. This role is especially important in concentrated markets because it puts retailers into a position where they are able to “sell” their shelf space. They do this by making widespread use of listing fees, shelf space (“slotting”) fees, promotional support (“pay to play”) payments, specific promotion payments (e.g., for “gondola ends” and funding the cost of “multi- buy” promotions), required discounts for the range or depth of distribution of products, and even mandatory contributions to the cost of store refurbishment or the opening of a new store.

‘Exit power’ The power to say “get lost”

‘Exit power’ is the ability to turn elsewhere for cheaper produce. As a retailer, exit power is the power to hurt a supplier more than they can hurt you.

If a retailer delists a supplier it might only suffer a small loss because it can easily find replacement suppliers and products. But if a supplier is delisted it will find it harder to make up the lost business elsewhere.

Even the very largest suppliers usually account for only 1–3% of a major supermarket’s sales. But for a supplier, losing of a single contract with one of the top four UK grocery retailers would mean sales-losses of 10 - 30% – around ten times more than a supermarket might lose.272

Many suppliers now have little choice but to conform to retailers’ demands. Their access to regional and global supply networks means retailers can always obtain lower prices.

• In western Europe, 85% of the total retail food sales go through just 110 buying desks.273

• In 2000, the big three chains in the UK (Tesco, Sainsbury and Asda) had a cost advantage of between 6% and 8% compared to some of the smaller chains.274

72 • The UK Competition Commission’s 2000 report on supermarkets shows that the largest supermarket, Tesco, can consistently obtain discounts from its suppliers 4% below the industry average, while the smaller players have to pay more.275

And this imbalance in the bargaining power between retailer and producer is leading to – and perpetuating – a situation of supplier dependency….

• The largest grocery supplier in the UK provided less than 3% of Tesco’s total purchases and the average supplier provided less than 0.01% of their purchases276

• For some food processors, 90% of their business comes from an individual grocery retailer.277 For all practical purposes, producers and suppliers/integrators can often end up with just a single buyer even if there are several buyers who could theoretically compete to buy from them.278

• In 2002, Kraft Foods – at the time the world’s second largest food manufacturer - generated more than $3.6 billion (12.2%) of its revenues from Wal-Mart alone.279

Retail buyer power can be very significant (to the extent of distorting competition) even if the retailer controls as little as 8 percent of the total market.280

Extra retailer rewards

Large retailers in concentrated retail markets are able to get much more than just low prices from their suppliers.

Buyer power also gives them the ability to impose strict contractual obligations on suppliers.

Demand extra payments These can include demands for additional payments or discounts, including “listing charges,” where buyers require payment of a fee before goods are purchased from the listed supplier; “slotting allowances,” where fees are charged for store shelf-space allocation; retroactive discounts on goods already sold; and unjustifiably high contributions to retailer promotional expenses.

Restrict competition Other practices benefit retailers in other ways. For example, contracts which prevent the supplier from selling to another retailer at a lower price. Or, exclusive supply arrangements which lock other retailers out and allow the retailer the advantage of product differentiation.

Transfer risk to suppliers

73 Buyer power also means retailers are able to shift financial risk onto suppliers. Retailers may force sale-or-return conditions on suppliers, demand compensation for product lines that fail to meet expected sales targets, or negotiate retrospective discounts where targets are met.

Appropriate suppliers capital Or the retailer may simply make late payments knowing that the supplier will not discipline such action because of its fear of losing future contracts.

The following table was originally published by the UK Competition Commission in 2000 and outlines some further practices used by supermarkets to exert their bargaining strength over suppliers.

281

Retailer fees

In the US, retailer fees for fresh-cut produce account for approximately 1-8% of sales and it can now cost up to $2 million to acquire business from a national chain.282

Retailer fees are, in effect, compulsory. Supermarkets in the UK have claimed that many of the practices listed above are simply ‘requests’ to suppliers, but the UK’s Competition Commission concluded otherwise, holding that such practices are in effect ‘requirements’ given the extent of buyer power.283 These restrictive practices are not unique to the UK, they happen elsewhere too. Especially as retail markets become consolidated.

Suppliers are often left at the mercy of the retailers who sell their products. Because of the way they manage their supply chains, the development of private label and their

74 knowledge of – and proximity to – consumer demand, retailers hold many of the cards when deciding prices and conditions.

“Wal-Mart has the critical mass to exact all kinds of concessions from the suppliers they deal with, and they have the demand side of the equation covered as well, because they bring the demand to the suppliers.”284

Paul Ritter, US online retail strategy consultant

The power to punish

Power is something which is usually derived from the ability to enforce one’s wishes. Generally, those wishes are complied with for fear of punishment if they are not met. Food retail is no exception to this rule:

• In one UK supermarket, if the barcode on a chicken reaching a checkout cannot be scanned the processor is warned. If it happens a second time, there is a fine of £500. A third ‘offence’ incurs a £1,000 fine, a fourth offence will cost the processor £3,000 and if it happens a fifth time, the processor is subject to a ‘possible volume restructure’.285

Carrefour in Thailand

Carrefour opened its 23rd hypermarket in Thailand in December 2005,286 but commentators noted that the French-owned global retailer has recently become more aggressive in dealing with local small and medium-sized manufacturers.

The company issues 12 page contracts and suppliers now have to pay various costs. These include ongoing ‘slotting costs’ dependent on the number of items and the number of stores, rebates of 1-6% of monthly or annual sales to maintain the business and promotion fees. Not to mention a wide range of other contributions extracted by the chain for advertising, new store openings, store remodeling and so on.

One commentator estimates that in the mid-1990s a medium-sized firm might have to pay 44% of its total deal with Carrefour as additional fees (26% transparent, 18% hidden expenses). And at the same time the supplier would often sell its products at a loss.”287

75 A ‘virtuous circle’ if you’re big. But a ‘vicious’ one if you’re not

As a retailer, the bigger you are the more buyer power you have to get better prices from suppliers. These lower prices can be used to undercut smaller retailers who cannot obtain the same discounts.

This allows the bigger retailers to get into a “virtuous circle” where size equals discounts… discounts equal undercutting smaller chains… weaker chains fail… bigger chains grow market share… more market share equals bigger discounts… and so on.

In principle, this could carry on to the point where it becomes impossible for any small retailer to survive in the market.288

The knockout blow

The smaller retailers are hit twice. Firstly, they don’t get the lower prices big retailers get. And secondly, the low prices that suppliers get from big retailers force them to charge higher prices to smaller retailers in order to cover their fixed costs.289

Retailer power pushed to the bottom of the chain

Retailers with heavy bargaining power are putting enormous pressure on food manufacturers. The manufacturers, in turn, are putting pressure on the farmers. This is because manufacturers are more interested on serving the interests of the powerful retailers. And also because the farmers have the least power – they are at the bottom of the food supply chain and cannot pass the costs onto anyone else. But, in some cases, the farmers also get pressure directly from the retailers.

And therefore, the farmers are getting the hardest squeeze of all.

They are squeezed by a limited number of big buyers, a limited number of big suppliers (of animal feed, etc.), and global oversupply. Moreover, they are squeezed by cost cutting and the profit-improvement strategies of the dominant firms. Most importantly, farmers can only access the market through a few multinational companies.

Buyer power goes global

The potential for sharing price information is increasing for retailers. With inter-linkage between buying groups and cross border alliances, and with multinational mergers and acquisitions becoming more common – a massive communication network for retailers is created... And this is on an international level.

• Ahold and eight other European retailers have formed an alliance that negotiates with private-label manufacturers when purchasing hundreds of products, from

76 paper goods to soft drinks that are sold under the brand name Euroshopper.290

As the search for low prices becomes increasingly global, retailers are investing in online exchanges that allow business-to-business transactions via the Internet, at lower transaction costs.

GlobalNetXchange (GNX) was set up early in 2000 by Sears, Carrefour and Oracle, and was quickly followed by the establishment of the WorldWide Retail Exchange (WWRE) by 17 international retailers. These two networks have since joined to form Agentrics.291 This consultancy serves over 50 global retailers and provides online auctions and ‘solutions’ for streamlining supply chain management and the collaboration of retailers.

Before the Agentrics merger, more than 50,000 suppliers made $80bn worth of electronic transactions every year through the GlobalNetXchange.292

The WWRE is the premier Internet-based business-to-business exchange for retailers and suppliers. Designed to facilitate and simplify trading between retailers, suppliers, partners and distributors, the WWRE currently consists of over 230 members from Asia, Europe, North America and South America. To date, the WWRE has cut costs for its members by over $2 billion on more than $12 billion transacted through the use of its solutions.

Members include: Ahold, Auchan, Casino, Coop Italia, Dairy Farm, Dansk Supermarked Gruppem, Delhaize, Edeka, El Corte Inglese, Laurus, Markant, Marks & Spencer, Publix Supermarkets, Rewe, Safeway, Tengelmann, Tesco

Shift towards cross-border procurement systems.

• Central Europe, home of the “first wave” of retail transformation in Central and Eastern Europe, is also the cradle of “regional procurement”. Ahold announced in October 2002 the formation of Ahold Central Europe (ACE), which integrated its operations in Poland, Czech Republic, and Slovakia. ACE, based in the Czech Republic merges “backroom functions” such as product procurement and administration for 400 Albert supermarkets and Hypernova hypermarkets in Central Europe with combined 2001 sales of approximately Euro 1.3 billion.

• In south eastern Europe (the Balkans), Metro is setting up a Southeast Europe Business Unit. It will serve as the buying desk for all Metro stores in the Balkans, sourcing from several countries293

77 Value capture

“The economic gains by one player usually represent redistribution of income from other players in the (food) sector, particularly with market concentration”294 Democratic Staff of the Committee on Agriculture, Nutrition and Forestry United States Senate

Some economists view wide variations in rates of return within a given industry as one indicator of the disparity of economic power among participants. In America, for instance, the overall profitability of the food and agriculture sector ebbs and flows over time, but it is clear that certain sub-sectors have consistent ability to earn substantial, often double-digit returns on equity. 295

• US Farmers’ return on equity averaged just 1.1% per annum between 1995-1999

• In 1999-2000, the average return on equity in the food processing sector was 22.6%, up from 13 .5% in 1993

• Returns on equity for American food retailers from 1980 to 2004 have fluctuated between 12% and 22% (2004 it was 18%) 296

Profits go up the value chain Across the world, retailer profits are increasing. But these increases are coming at the expense of suppliers further down the chain. To increase margins, retailers not only impose fees on their suppliers. They also offload risks (especially financial risk) and shift processing costs further down the chain. While, their market dominance means that they can also keep producer prices low.

• In 1950, the world’s agribusiness was worth $420 billion, and more than 30% of this was value added by farmers. By 2028, the worlds agribusiness market could be worth $10 trillion, and Dr Ray Goldberg, now Fellow of the American Agricultural Economic Association estimates that the farmers’ share of that will fall to just 10%.297

Where does all the money go? In 2000 US farmers received just 19% of the amount consumers spent on food. The remaining 81% went to pay for the marketing bill (see table below).

The marketing bill is the costs associated with processing, wholesaling, distributing, and retailing foods298.

Between 1990 and 1999, the marketing bill rose by 45% while, during the same period, the farm value of food purchases climbed only 13%.299

Growth share matrix of the food supply chain

Retail food price

What farmers get

1950s 1990s

Retailers’ share

Manufacturers’ share Farmers’ share

Total food marketing bill USA percentage allocation Percentage allocation (rounded) 1967 1987 2000 Percentage received by farmer 33 24 19 Marketing bill 3 67 76 81 Labor 1 28 36 38 Packaging materials 8 8 8 Transportation 5 5 4 Fuel n/a 4 5 Corporate profits 4 3 5 Other 2 24 22 22 Source: Calculated by ERS based on data from government and private sources. 1 Includes employee wages or salaries and their health and welfare benefits. Also includes estimated earnings of proprietors, partners, and family workers not receiving stated remuneration. 2 Includes depreciation, rent, advertising and promotion, interest, taxes, licenses, insurance, professional services, local for-hire transportation, food service in schools, colleges, hospitals, and other institutions, and miscellaneous items. 3 The marketing bill is the difference between the farm value and consumer expenditures for these foods at both food stores and restaurants. Thus, it covers processing, wholesaling, transportation, retailing costs, and profits.

• An investigation by the UK’s National Farmers Union in 2002 found that a basket of farmed produce, including beef, eggs, milk, bread, tomatoes and apples, typically cost £37 at retail; however, farmers only received a value of £11 for it at the farm gate – only 28% of the retail value.300

• According to a recent United Nations trade conference, annual export earnings of coffee-producing countries in the early 1990s were US$10–12 billion and global retail sales about $30 billion. Now, retail sales exceed $70 billion, but coffee- producing countries receive only $5.5 billion.301

• In 2005, US growers of perishable foods received the equivalent of only 19% of the retail price.302

• In Florida tomato growers have seen the real price paid for their tomatoes fall by a quarter since 1992, but US supermarkets have raised the real price to consumers by 46% during the same period.303

• In Tasmania, Australia, 6,000 potato farmers rely on just two buyers. The price per tonne of prime potatoes has not risen in ten years. Moreover, fast food outlets get €10,000 Australian dollars per tonne of fries they sell. Only €120 of that goes to the grower.304

US Farm value share for selected foods % Farm Value Share of Retail Price 98 99 2000 Milk (½ gal) 41 39 34 Pork (1 lb) 25 25 31 Cheese (natural cheddar, 1 lb) 39 32 29 Potatoes (10 lbs) 15 19 17 Grapefruit (1 lb) 18 18 16 Corn (1 lb) 8 8 7 Green beans (cut, 1 lb) 7 6 5

Source USDA

Fresh fruit and vegetables – ripe for value capture

Fresh fruit and vegetables are good for supermarket profits as they typically provide retailers with 30-40% gross profit margins. This is among the highest in the food retail business.305

Supermarket produce buyers typically manage a product category for 12–18 months. They have to prove themselves fast and are judged, rewarded, and promoted on the overall profit they make.306

A report using data from the Deciduous Fruit Producers Trust and interviews from importers and exporters, estimates the breakdown of the price of South African apples in UK supermarkets. It finds that supermarkets take a 42% share in retail, whereas the costs paid in farm labour account for only 5% of the price and farm income only 4%. Shipping the apples accounts for 12% of the price UK consumers pay for apples. The remaining 27% of apple price is down to customs, farm inputs and packaging, import commissions and UK handling costs. 307

At the same time the farmers have seen their revenues fall sharply. In the ten years since 1994 real export prices paid for South African apples have fallen by 33%.308

Costs pushed down the value chain

In addition to cutting the prices paid to suppliers retailers are also offloading processing costs.

A good example of this is the switch to ‘case-ready’meat, this is meat which is delivered to the retailer pre-cut, pre-packed and pre-labelled. This practice shifts the cost of cutting, packaging and labelling from supermarkets to suppliers.

Structural change in the food system requires a new division of labour along the value chain.

“Now about 90% of our dry groceries are shipped through our DC [Distribution Centre]… when we started up our fresh DC it was about 60% processing and 40% receiving and shipping. Now it’s about 80% receiving and shipping and 20%, maybe even less than 20% actual processing. It’s now being processed off site” 309

Anonymous industry interview, January 2002.

This trend is also prominent in the fast-food industry. The transfer of peeling, cutting, and blanching of potatoes from restaurant workers to processors, reduces labour costs and leads to cheaper and standardized supplies of French fries.310

The case study below looks at the UK dairy industry. It exhibits the consolidation trends that are affecting the food industry as a whole. The timeline is taken from industry media sources from January 2004 to March 2006. It clearly shows the steps of buyer power in action:

• Retailers switch to preferred suppliers

• Dairies close as suppliers feel the squeeze

• Farm gate milk prices fall (in some cases farmers receive less than the cost of production for a litre of milk)

• Retail milk prices rise (consumers pay more)

• Retailer profits increase

83 to consumer”. Arla set about selecting We pay you less dedicated milk suppliers for Asda.313

Aug 04 Buyer power in action… when Tesco and Sainsburys de-list milk markets consolidate, competition suppliers gets pushed to the bottom Three months later Tesco and Sainsbury of the supply chain reduced their fresh milk suppliers from

three to two. Tesco chose Arla and

Robert Wiseman, while Sainsbury’s The take-over of Safeway by Morrisons opted for Wiseman and Dairy Crest.314 in 2003 further consolidated the UK retail landscape. Sep 04 Retailer milk margins up by 25% Inevitably, it also set off a further round Milk Development Council announce of consolidation amongst their suppliers. that retailer margins on liquid milk and dairy products have increased This is what happened to milk prices… significantly over past 10 years. “As a result, the six pence per litre fall in the Jan 04 farm-gate milk price between 1994 and Asda plan to cut milk suppliers 2003 has generally increased retailer Asda announced that it would margins.” From 2003-04 report.315 consolidate its milk supply chain. Under its Total Category Management scheme, Asda plans to source all fresh milk from Nov 04 a single ‘dedicated’ supplier.311 Asda supplier to close plants Arla announce plans to close two June 04 production facilities in London and Asda select single milk supplier Newcastle.316 Asda selects Arla Foods as its sole supplier. “This move means that for the Dec 04 first time in 40 years we will have a Tesco/Sainsburys supplier to cut farm- direct relationship with every single gate milk price farmer who supplies us with milk. … a Robert Wiseman announces it plans to segregated supply chain using a the “slash” price it pays to dairy farmers. dedicated group of farmers. This will The move will reduce the price paid by 317 enable us to trace our fresh milk from 0.5ppl (pence per litre). To 19.16ppl. the farm through to the bottles in our Jan 05 customers' trolleys.”312 Asda supplier to cut farm-gate milk price June 04 Arla announce that it will consider Asda aim for cow-to-consumer cutting milk prices in a review scheduled tracebility for 1 April. It also announces the closure 318 Asda say that the move to single supplier of its east London distribution center. was prompted by concerns that farmers Jan 05 were not being paid enough for their De-listed Asda supplier to close plant milk. It emphasises the importance of Dairy Crest – de-listed by Asda – Arla providing a direct link from “cow announce the closure of its Yeovil

84 factory, the only remaining UK factory Asda supplier requests “secret” dedicated entirely to the production of price negotiations fresh dairy products.319 Arla say that as their arrangement with Arla Foods Milk Partnership (AFMP) May 05 accounted for 60% of volumes, price Asda supplier in price cut rumours negotiations should be able to take place Reports circulate that Arla Foods are to outside of the public arena.324 cut their milk price by 0.35ppl from 1st 320 June. June 05 Tesco/Sainsburys supplier announce May 05 farm-gate milk price cut Morrisons to cut milk suppliers Wiseman announce that it is to cut its Morrisons announce plans to consolidate milk price from July, there has been a its supply chain and reduce suppliers decrease of 0.25ppl for Wiseman's base from three to two. Arla and Dairy Crest 321 price as well as changes to its retain contracts. Wiseman is de-listed. seasonality profile payments, with a

June 05 further increase in penalties during spring and further reductions down to Another farm-gate milk price cut 325 Joseph Heller announce milk price cuts 0.3ppl for autumn milk. of 0.6ppl from June. Reasons include Aug 05 increased costs of fuel and packaging. Another farm-gate milk price cut They also claim competitiveness of Golden Vale creameries announce pricing from other cheese manufacturers 0.3ppl price cut on contracts from 1st September.326 Over the last 8-10months they claim their margins have been eroded simply Sep 05 to maintain their market share. However, Asda supplier enforces farm-gate consumer data shows that there has been milk price cut around a 5% increase in territorial Arla Foods announce that its farm-gate cheese price (Heler's predominant milk price is to be cut by 0.35ppl from product) over the past year. This would 10 September. The proposed price cut suggest that if the processors are not was put to the 1,600 contract farmers receiving this price increase then it is who comprise the Arla Milk Partnership, potentially increasing retailer margins.322 but was rejected by them. As a result the price cut has been enforced by Arla.327 June 05 Asda supplier justifies farm-gate price Sep 05 cut Farm-gate milk price at lowest since Arla announce it will cut the price paid 2002 to farmers for milk by 0.35p to 19.65ppl. DEFRA provisional farm-gate milk price It said the cut was necessary to “recover for July is 17.98ppl. The lowest July the exceptional cost increases from the farm-gate price since 2002.328 marketplace”. NFU say that farmer’s average cost of milk production is Sep 05 20ppl.323 Another farm-gate milk price cut First Milk announce a milk price cut of June 05 0.2ppl from 1st October. The company

85 cited recent downward pressure on milk “the development of a more powerful prices as well as increased cost of supply chain” Dairy UK also warns transporting milk due to high oil prices contract farmers, unhappy with low as reasons for the cut.329 prices, not to break contract agreements by striking.335 Sept 05 Retailer profits for liquid milk up 25% Dec 05 The Milk Development Council reveal Asda supplier warns: farm-gate price to that retailer profits for liquid milk have drop, but consumers to pay more risen by 25% in 10 years, growing more Arla chairman says the group is seeking 330 rapidly since 2003. to increase milk selling prices to reflect the realities of “increased packaging Sept 05 and fuel costs”. He also warns that De-listed Asda supplier issues market competition spells “downward profit warning pressure” on farm-gate milk prices.336 Dairy Crest, de-listed by Tesco and Asda, say profits for the six months Jan 06 ending 30 September will be Retail milk prices up by 2.2ppl significantly lower than in the first half and up by 12% in last 12 months 331 of the year. All major supermarkets confirm they have raised the retail price of milk Sept 05 2.2ppl. There has been a 12% increase in

the retail price of milk in the past 12 Tesco/Sainsburys supplier hints at months. A 4 pint-polly bottle now costs more price cuts £1.16.337 Wiseman express concern over rising derv, plastic and energy costs, 332 Jan 06 suggesting further price cut. Tesco/Sainsburys supplier benefits from retail milk price rise but Oct 05 warns farm-gate prices to fall More farm-gate price cuts Wiseman benefits from some of the Dairy Crest announce price cut of 2.2ppl retail price rise being passed back 0.275ppl.333 to help with higher costs but warns farm- 338 Oct 05 gate prices under pressure. De-listed Spar supplier closes diary Longslow Diaries to close of 50 million Jan 06 Asda supplier cuts farm-gate prices litre Welsh dairy, and possibly close Arla Foods announce 0.3ppl price cut Manchester depot. Spar’s decision to from February. Plus an extra 0.6ppl price consolidate supply chain to single cut for February and March.339 supplier is given as reason.334

Mar 06 Nov 2005 Tesco/Sainsburys supplier Dairy UK critical of OFT cuts farm-gate prices Dairy UK Chairman complains of Wiseman announces 0.65ppl farm-gate “incessant and rigorous scrutiny” by the price cut effective 1st March.340 competition authorities and says OFT will jeopardise the sector if it prevents

86 Mar 06 Farm-gate milk prices Contractor March Price(PPL) DC Sovereign 19.5 Wiseman 19.15 Arla-Asda 18.80 Arla 18.30341

In June 05 the NFU claimed that farmers average cost of milk production was 20ppl..

972 English and Welsh dairy farms closed in the 12 months to December 2005. (Ref. Dairy Hygene Inspectorate)

The power of private label

Buyer power enables retailers to develop their own brands. The development of private label goods is discussed in the next section. The key point is that private label offers retailers a double benefit: increased sales and customer loyalty while also obtaining lower supplier prices.342

Private label goods allow retailers to drive down supply prices by playing off one supplier against another or using closed – private - online auctions to determine contract winners.

This, in turn, allows for higher gross margins on these products, especially because retail prices are typically set with reference to the “umbrella price” for the leading brand stocked. This puts pressure on branded goods manufacturers to reduce their supply prices in order to secure shelf space.343

87 Private Label 100% capture of the value chain

"From time to time, I am sorry to say, some suppliers might not understand customer needs and sentiment the way they should do… There are clear rules about who sets the prices and we believe we, as retailers, are the ones. We will continue to do so and use our private label as a very efficient weapon."344 Anders Moberg, chief executive of Dutch retail group Ahold

Private label is both the realisation of retailer power over the food supply chain and the future of food production….

Retailers are taking more control of the food supply chain by developing their own store- brands (from now on referred to as ‘private label’). The rapid growth of private label does not just signal the emergence of a new, strong retail brand. It does more. It both confirms and reinforces the buyer power and status of retailers as governors of the value chain. And as retailers develop their own products to compete with branded goods they are able to use their buyer power to determine the prices of increasingly diverse food products.…..

• Private label product now account for 21% of global food sales and are expected to grow to 30% by 2020.345 • In less than 15 years’ time, nearly a third of global food sales will be private label.346 • Wal-Mart’s ‘Great Value’ brand - the best selling store brand in the U.S. grocery market – is the first truly global store brand….. available in Argentina, Brazil, Canada, China, Germany, Mexico and South Korea.347 • The retail share of private labels among food products is high in many European countries, reaching 50-60% in Switzerland and 20-40% in most other Western European countries.348

Private label: Retailer brands

Private label is a way for retailers to differentiate themselves from their competitors. As a result of private labels, retailers are no longer identical. Instead they acquire ‘identity’.

Importantly, this shifts the basis of competition away from price. They are now also able to use “identity” as a competitive weapon. And “identity” is something which it is not possible to put a number on.

Private label products shift brand identity from the food manufacturer to the retailer.349 And. the company that controls and defines the brand is in a stronger position to capture the value of the food supply chain.

“The point in the value chain at which a brand is defined has an impact on the options for the different companies in the chain, and through this the returns they can expect to obtain.”350 Humphreys, 2005

Depending on who defines the brand, the supply chain can be organized in completely different way. So if a bottle of wine is branded by the producer (Chateaux Margaux), a geographical area (Champagne), a manufacturer/wholesaler/distributor (Taylor’s port, Gilbey’s gin), or a retailer (Tesco Shiraz)….it has major implications for the chain.

The location of brand control has many potential consequences….

When a brand is controlled by the retailer

Retailers can develop own label produce, giving them the flexibility to source product from different suppliers, this therefore enables them to reduce margins in the supply chain. One clear example is supermarket own-label fresh fruit and vegetables. Multiple suppliers can be used to source similar or identical products.351

So private label brings some major advantages for the retailer. But the strategic development of private label can only be achieved once retailers have a significant market share. Only when retailers control enough of the market to pose a direct competitive threat to branded goods, can private labels succeed and grow.

Another essential ingredient for private label is the Distribution Center. Without DC’s retailers would be unable to handle and distribute their private label products. Traditional wholesalers would not become an instrument of their own demise by getting involved in private label products.

Concentrated food retail markets are clearly linked to the growth of private label.

“Euromonitor believes that the single most important factor in the rise of the global private label market has been the development and consolidation of chained grocery stores”352 Euromonitor, 2005

The table below refers to all retail (food and non-food sales), but it gives an idea of how retail concentration correlates with private label. Of the ten most developed Private Label countries, nine had retailer concentrations over 60% - meaning that in nine of those ten countries the top five retailers had a market share of over 60%.353

COUNTRY REGION PRIVATE RETAILER LABEL CONCENTRATION SHARE Switzerland Europe 45% 86% Germany Europe 30% 65% UK Europe 28% 65% Spain Europe 26% 60% Belgium Europe 25% 80% France Europe 24% 81% Netherlands Europe 22% 64% Canada North America 19% 62% Denmark Europe 17% 89% United States North America 16% 36% 354

Generally, when retailer concentration was low, the share of private label was also low,355 thereby confirming a link between concentration and private label.

As the big chains are greatly expanding their private-label offerings, private label is set to grow and take an increasingly large share of the food market.

• Own-label manufacturers have become huge concerns in their own right. Hazlewoods, a private label manufacturer, for example, has over 10,000 staff and plants stretched across Europe making ready meals, sandwiches, pizzas, cooking sauces and cakes.356

And in Europe, private labels are growing their market share faster than in any other region. Private label value sales (including non-food categories) have a 23% share across 17 markets and had a growth rate of 4% between 2004 and 2005. This growth rate is even faster in the emerging markets of Croatia, Czech Republic, Hungary, Slovakia and South Africa where private label sales grew by 11%.

• Consumers in the UK were found to have private label products in their shopping basket on 82% of their shopping trips.357

Private label share of sales, by country and by store

UK Safeway 47% Tesco 51% Sainsbury 54% Asda 54%

90 Somerfield 36% National Average 45%

Germany Aldi 90% Rewe 22% Tenglemann 19% Metro 14% Markant 6% National Average 33%

France Carrefour 20% Auchan 16% Intermarche 29% Leclerc 18% Casino 23% National Average 22%358

91 Manufacturer brands lose out

By developing supermarket own-brands, retailers are absorbing the market shares of food processors and increasingly taking the role as coordinator of the food chain.

Studies show that national brand manufacturers are hit hard when store brands are introduced. Retailers use their power to market their own private label products and national brands in a way that favours the private label brand. 359

And so just as private label is on the rise, the brand owners share of food retail is falling:

• Nestlé’s food sales in Europe slipped 0.4% in 2004 and sales of its bottled waters such as Perrier and Vittel dropped by 8.4%.360

• Global brands’ share of Europe's bottled water market plummeted from 53% in 1997 to 40% last year, as retailers turned to private-label producers.361

• Private label sales in Slovakia grew by 14% in 2004-2005 compared to a fall by 6% of manufacturers’ sales.362

In response to the challenge of private label, manufacturers are changing their strategies – reducing the number of products in their portfolios and heavily marketing their best- performing brands.

• Heinz – once famous for its ‘57 varieties’ – is now focusing on what it calls its 15 power brands.363

• Unilever had a five year programme to cut about 1,200 under performing brands by 2004.364 In the same year the company’s European sales dropped by 2.8%.365

In 2003 it was estimated that if the US closes the private label development gap with the UK by half, brand manufacturers would loose an additional $20 billion in sales. This would mean an operating profit loss of between $2 billion and $4 billion.366

Source: The changing face of the global food industry, presentation OECD conference the Hague 6 Feb 2003, Jan-Willem Grievink

And so the balance between traditional brand-owners and retailers is shifting. Retailers are no longer beholden to the brands. And there are many ways that retailers are able to speed this process along. The retailer introducing a store brand can ‘create room’ for the store brand in the market in many different ways:

• By providing the best location in the aisles (in the centre of the aisle or beside the best selling brand in the category) • By reducing the promotions of national brands • By raising the relative prices of national brands compared to the store brand.367

And retailers go to great lengths to promote their private label products….. “because 90% of people are invariably right handed, the retailer invariably places the store brand to the immediate right of the leading national brand.”368 Meza and Sudhir, 2003

93 The development of private label

The development of private label has two distinct phases: ‘low cost, high value’ private label goods, and ‘premium’ private label.

The two types of private label

1. ‘Low cost, high value’: these products undercut the manufacturers’ brands. Retailers use their dominant position within the value chain to set suppliers against each other as they demand ever-lower prices.

2. ‘Premium’ private label. These products challenge the more up-market manufacturer brands. Retailers use their control of the value chain to set standards and back up credence claims about ‘niche’ products.

‘Low cost, high value’

Retailers begin by offering a product under their own label in the easiest categories, such as those categories with weak brands or low investment in brands, for example, fresh food and meats.

Then they push their own-label brand into categories not typically associated with private label.

Finally, after moving into as many categories as possible, they stretch their brand within categories, which allows them to appeal to a diverse customer base. At this stage the supermarket will offer good, better and best food products within the same category.369

Discounters demonstrate the power of private label Aldi, which already accounted for 16.7% of the German grocery retail market in 2003, relies almost exclusively on its own store brands.370 Private Label products account for approximately 95% of its sales.371 Below is a quick run-down of the status of private label among some European discounters.

• In Germany’s Lidl and Penny, private labels account in both instances for over 60% of total grocery sales. • Spain’s Dia and Mercadona are not only the country’s largest discounters, but also the two most important Spanish grocery retailers. They both rely heavily on private label brands. Mercadona is a particularly interesting case as it increased its private label share from about 3% in 1997 to 51% in 2002, while its market share increased from 3.5% to 12.6% over the same period.372 • In the UK, KwikSave’s private label sales represent over half of total grocery

94 sales.373

Discount style operations are on the rise across developed food systems.

But the ‘low cost, high value’ model, epitomised by Aldi and other discounters, is just one form of product differentiation.

Once a supermarket’s brand is recognised and trusted, it becomes well-placed to launch new niche products to target the increasingly precise and diverse demands of consumers.

‘Premium’ private label

The approach of retailers to private label, particularly in more developed markets, has advanced far beyond simply meeting the consumer demand for lower priced products - the more traditionally perceived role of ‘value’ store brands.374 Private retailer labels are now critical to providing and meeting the highly differentiated demands of wealthier consumers, particularly in Europe.

“Strategically, retailers worldwide seem to be placing more and more of an emphasis on branding and marketing their private label wares to match the lifestyles and values of their shoppers”375 ACNielsen Report, 2005

Retailers are now starting to differentiate themselves on the basis of their private label offering.376

• Tesco was one of the first supermarkets to sell it’s own branded produce. Since then it has launched Tesco Value, Tesco Finest (spanning most product areas in the store), Tesco Organics (launched over ten years ago), Tesco Free From (150 products which are gluten, wheat or milk free), Tesco Healthy Living, Tesco Carb Control, Tesco Fair Trade and Tesco Kids377

• Carrefour introduced a line of low-priced private-label goods in 2003 that now generates $1.6 billion in annual sales.378 • U.K. retailer Tesco now sells caviar under its own name, and “charges a really big premium”.379

Competition pushes Sainsbury towards premium private label

When Sainsbury’s realised it was being outperformed by rival Tesco, the company was forced to rethink its strategy on low-priced own label products. Sainsbury's worked hard

95 to turn itself around and create an image of quality, partly with the help of celebrity Chef Jamie Oliver. Now the UK's two leading retailers, Sainsbury's and Tesco, offer premium ranges under the "Taste the Difference" and "Finest" private labels respectively, as well as a number of other value added ranges, such as organic products.380

As their customers’ trust in the brand increases, retailers are able to shrink the price gap and improve the economics of private label. They reduce space for manufacturers’ brands, eliminate ‘second tier’ (lesser-known) brands and invest in their own proprietary merchandising.381

This means that the private label food products developed by retailers can be sold at a premium to consumers. • The organic private brand of Auchan (a major French retailer) carries the highest premium, about 40% over the price of standard products, but accounts for less than 10% of the total beef shelf space.382 • All beef sold in France must adhere to nationally required safety and quality standards, but private label beef is promoted as being safer and higher in quality than the standard product, which is unlabeled and generally sold at a lower price. To promote sales, retailers allocate most of their beef shelf space to the brand. This product may carry up to a 5% premium over prices of standard beef products.383 • Danish retailer, Dansk Supermarket, offers a series of different private brands for dairy products as higher quality alternatives to the major manufacturer Arla brand commonly seen in the market. The Dansk brands are advertised as being superior in quality due to the use of local production under traditional cultural practices with due consideration given to food safety concerns.384

Private label increases vertical coordination

The use of private retailer labels places full accountability for product quality and safety on the retailer.

To ensure that these retailer-branded products meet the desired quality and safety standards, it is essential that retailers coordinate and develop relationships with other upstream sectors in the food supply chain. The level of coordination and cooperation depends on the desired level of product differentiation.385 The more differentiated the product the greater the coordination.

Private labels are essential to retailer strategies of product differentiation. And as retailers make ever greater credence claims about their food products, they need traceability systems and standards to back up these quality claims about their goods.

96 Private label is both the vehicle for communicating the retailer’s product claims and the means to deliver them.

From the food retailers’ point of view, this implies managing relationships with processors and producers to ensure demands for product traceability and the long-term relationships with these supply chain members.386

Retailer control of the supply chain makes the development of private label possible; and the success of private label depends upon retailer control of the supply chain.

Is private label better value?

As the quality and acceptance of European goods has improved, their price gap with manufacturers’ brands has narrowed. In the 1970s, private label (food and non-food goods) sold at a 40% discount to name brands. By the 1990s, the price gap had narrowed to between 5% and 20%.387

More importantly, a recent private label report by AC Nielsen found a number of examples where private label products had an average price that was actually higher than the manufacturer brands388

As retailers began acting as marketers, they embraced private label because overheads are low, the marketing costs are miniscule, and consequently….the margins are on average 10% higher than branded goods.389

The UK Competition Commission has estimated the basic cost differences between brands and private label……

Suppliers Cost Saving 10.6% Lower Supplier Margin 18.8% Retailers Purchase Saving 29.4% Lower Retail Price 19.3% Higher Retail Margin 10.1%390

The results of this are clear. Retailers with strong private label programmes make higher profits.

97 Retailers with strong private label programs make higher profits

WEAK Private Label STRONG Private Label % $B % $B Sales 100% $30.00 100% $30.00 Division of sales between Private Label and Branded

% Private Label 5% $1.50 30% $9.00 % Branded 95% $28.50 70% $21.00 Gross margin Private 35% $0.525 35% $3.15 Label Gross margin Branded 25% $7.125 25% $5.25 $7.650 $8.40 % of operating expenses ($6.90) 23% ($6.90) 23%

Operating profit 2.5% $0.75 5.0% $1.50

Source: Globalization: Who's Winning? Coriolis Research

This also means that retailers are able to earn high margins on national brands in categories where private label has a high share…

As private label starts to dominate a product category, the price differential between private label and manufacturer brands drops. This means that as the trend towards private label increases, cost-savings to consumers shrink.

In the ‘frozen meat/poultry/game’ category, private label has a market share of 39% and is only 2% cheaper.391

Once consumers trust and purchase significant volumes of private label products within any given category of food, retailers can raise the price of the private label products.

Studies have shown that retailers often increase the prices of national brands after private labels are introduced. Prices rise in aggregate despite the appearance of lower priced private labels. The launching of private labels also stimulates higher advertising on the part of the manufacturer.

In America studies show that retail prices and retail profit margins tend to increase after the store brand introduction.392

98 Summary – the hourglass

Increasingly the food supply chain begins to resemble an hourglass. The diagram below refers to 85% of the food retail trade in Western Europe. At the bottom of the hourglass is the produce from a huge number of farmers. Before this produce can reach the top – the millions of consumers in different countries – it must first pass through a small number of processing firms and an ever-diminishing number of retailers.

393

99 100 Section 2

A sustainable system?

101 Environmental impacts of the modern food industry.

Foreword…

Section one showed how retailers coordinate food value chains. Here we consider the environmental impacts of the food system at its various stages, from agricultural production to household waste. The food system consumes vast amounts of energy, while its emissions have a huge impact on the environment.

This section is divided into three main parts: agriculture, distribution and consumption. There is also a fourth section on the food system’s effects on human health.

Agriculture looks at the rise of energy intensive farming and its environmental impacts. These are: air and water pollution, the destruction of ecosystems and loss of biodiversity, soil degradation and water shortages.

Distribution covers all stages of the value chain between farm and store. It examines the energy consumption and emissions of food transportation, storage and processing.

Consumption looks at the waste created by the food system and the environmental problems associated with its disposal.

But first, the energy requirements of the modern food system…

102 From fuel to food

“Modern agriculture is a device to convert large amounts of fossil fuel into human food.”394 Folke Gunther, ‘ecosystem consultant’

The modern food system converts fossil fuels into people.

The food system depends on fossil fuels. Increases in food production since 1950 are directly attributable to fossil fuels. This has lead to rapid increases in world population, which is projected to reach nine billion by 2050.395 More people require more food, which means more fuel.

Humans have always drawn their energy from the food they eat. But we did not always rely on oil as the source of food energy. Before the industrial revolution, all food energy was derived from the sun through photosynthesis. Either you ate plants or you ate animals that fed on plants, but the energy in your food was ultimately derived from the sun.396

• In 1850, the United States relied on biomass wood or solar power for 91% of its energy.397 Now that situation has reversed. Fossil fuels account for 92.3% of total energy consumption, with solar energy sources making up the remainder.398 As much as 20% of total energy consumption is attributable to the food system.399

Today’s food system relies heavily on fossil fuels to produce, process and transport food to consumers. Ever since the Green Revolution (see box) crop yields have been maintained or increased because of the availability of cheap fossil energy for inputs like fertilizers, pesticides, and irrigation.400

Background: The Green Revolution

The Green Revolution is the name given to the vast increases in food production after the Second World War. Per capita production has now increased every year since 1950 thanks to the use of improved strains of wheat, rice, maize and other cereals.401

• In the 50 years since 1950, global agricultural production increased by 60% whereas the 1950 level of production had been reached only after 10,000 years of agricultural development.402 • Between 1950 and 1984, world grain production increased by 250%.403

But higher yields come at a cost. The energy for the Green Revolution is provided by fossil fuels in the form of fertilizers (natural gas), pesticides (oil), and hydrocarbon-

103 fuelled irrigation.404New crop strains are geared towards fossil fuel inputs. These strains are developed to be more efficient at exploiting chemical fertilizers and easier to harvest mechanically.

Agriculture today runs on energy-intensive technologies that require heavy fossil fuel inputs. The flow of energy input in modern US agriculture for instance is 50 times higher than in traditional agriculture.405 The current U.S. daily diet would require nearly three weeks of labour per capita to produce.406 And not all this energy is converted into food. Between 1945 and 1994, energy for agricultural use has increased about 4-fold while crop yields have increased about 3-fold.407

Energy for food – the US example

In the US, an individual consumes 400 gallons of oil a year in food - about 17% of all energy used in the country each year.408 This percentage is similar in other developed countries. In Sweden, as much as 20% of energy consumption goes towards supplying food.409

The following table gives a breakdown of energy consumption in the US food system. The largest single contribution comes from food processing. This is because to preserve shelf-life, food is either heated or dehydrated. Much processed food is now also chilled. All of these processes require large amounts of energy.

410

104

The food system uses huge amounts of energy…

• The U.S. food system consumes around ten times more energy than it produces in food energy. 411

• The U.S. food economy uses as much energy as France does in its entire economy412 - 10,551 quadrillion Joules.413

• One hectare of land uses 1,000 litres of oil.414

• One pound of beef requires 3 litres of oil.415

It also ‘loses’ a great deal of energy…

• The average U.S. farm uses 3 kcal of fossil energy in producing 1 kcal of food energy416.

• If one considers the whole supply chain, including processing and transport – the food system expends 10-15 calories of energy for every calorie of food energy produced.417

105 A sustainable system?

Sustainable development is “development that meets the needs of the present generation without compromising the ability of future generations to satisfy their needs.”418

Energy consumption in the food system continues to rise. Research on thirteen European countries (Europe-13) in the period 1970-2002 showed that agriculture, food processing and transport have increased their energy consumption at a rate of 1.6%, 1.8% and 2.3% per annum respectively.419

World population is also rising. Turning fossil fuels into food has lead to a massive increase in the number of mouths to feed.

World population growth since the 13th century:420

Current population levels are sustained by our ability to turn fossil fuel energy into food energy. We would be in grim trouble if we had to derive our energy needs from current basic photosynthetic production, as our ancestors did.421

For the United States to sustain itself using solar energy – given its land, water, and biological resources – its population would have to fall from 250 million to less than 100 million.422

• The US currently consumes 40% more energy annually than the total amount of solar energy captured yearly by all U.S. plant biomass.423

106 • Without fossil fuels, the US would have to need to use four times more land than it does at present.424 Almost three-quarters of its land area is already devoted to agriculture and commercial forestry.425

• For the UK to meet its energy demand using solar power, it would have to convert 10.8% of its land to solar panels.426

Put simply, without oil and gas we would starve. Given that fossil fuels are an unsustainable resource, and that world population will continue to rise, this is a problem that is ahead of us rather than behind us.427

Peak oil

‘Peak oil’ is a theory that tries to predict when worldwide petroleum will peak.

US oil production peaked in 1971 and has been devreasing since then.

As oil runs out it becomes harder to extract. The peak signals the moment when oil extraction becomes mnore costly and less energy-efficient.

There is no question that oil will peak. The question is when. According to some estimates, we may have passed it already.

Predictions of the size of oil reserves fall into three broad groups based on how the authors see future oil production.428

Group 1, which mostly comprises geologists, calculate that global oil production will peak sometime between the years 1996 and 2020, and thereafter decline.429

Group 2, mainly government agencies, anticipate that there will be enough oil to meet demand to at least 2030.430

Group 3, mainly economists, dismiss the possibility of a hydrocarbon peak occurring in the near or medium term. They see no need to quantitatively assess future oil production.431

There is no simple technological fix to the problem of depleting natural resources and a growing population. Technology can be used to manage and exploit natural resources. But it cannot increase the flow of natural resources available for exploitation.432

107 Environmental impacts

The current food system is unsustainable. The energy that supports it will soon run out. In addition, food production and distribution are damaging the environment – and human health as well.

Climate Change

As we have seen, the modern food system runs on fossil fuels. Burning these fuels increases levels of greenhouse gases in our atmosphere – which in turn drive temperature changes and, more importantly, increase the risk of climate change.

Atmospheric CO2 Concentrations, 1750-2000 S 380

360

340

320

PER MILLION) 300

280

260 ATMOSPHERIC CO2 CONCENTRATION (PART 1700 1800 1900 2000

Climate change: facts

• The global average surface temperature in the year 2003 was nearly 0.8 °C above the average temperature at the end of the 19th century, making it the third warmest year in recorded history.

• The 10 warmest years have occurred since 1990, including each year since 1997.433

• Scientists project that the global average temperature will rise an estimated 1.4 to 5.8 degrees Celsius by the year 2100, according to the United Nations Framework Convention on Climate Change.434

• In the event of climate change, floods, droughts and storms are likely to become more frequent and severe. The results? Loss of lives, dangers to harvests, and a

108 threat to global economic stability.

What does the production of food have to do with it?

The food system is one of the single largest sources of greenhouse gases, contributing an estimated third of global emissions. And some studies suggest that most climate change policy overlooks the trends of the food system which are increasing those emissions.435

Agriculture especially has a major impact on global warming. The chart below summarises the contribution of agriculture to global warming. The contribution includes fossil fuel usage on farms and is not solely due to the nitrous oxide and ammonia produced by agriculture.

436

• One study estimates that 20% of all greenhouse gases in the world come from agriculture.437

• In terms of energy use and CO2 emissions, the food industry is the UK’s third largest industrial energy user.438 One report estimates the food system’s contribution to greenhouse gas emissions to be ‘at least’ 22% of the UK total.439

• Each year, the average family of four in the UK emits 4.2 tonnes of CO2 from their house and 4.4 tonnes from their car. But the food they eat – due to production, processing, packaging and distribution – would account for as much 440 as 8 tonnes of CO2 emissions.

The ecological results of an industrialised food system are problematic – short term and long term. Here are just a few of the main issues:

• Air pollution

109

• Water pollution

• Loss of ecosystems and biodiversity

• Soil degradation

• Pressure on water sources

The price of food may be falling – between 1975 and 2000 the price of food fell in real terms by 31% when compared with the All Items Retail Price Index.441 But consumers pay the price for the food system in other ways.

“The myth of cheapness completely ignores the staggering externalised costs of the food, costs that do not appear on supermarket checkout receipts.” 442

Given the environmental and social destruction involved in industrial agriculture, the real price of modern food production for future generations is incalculable.443

110 Agriculture

Energy-intensive farming

There are two ways to increase agricultural production: either increase the amount of land, or increase the amount of yield per land unit.

The first method – increasing the area of land under cultivation – puts pressure on natural resources. It can threaten ecosystems and biodiversity.

The second method – increasing land productivity – requires large amounts of fossil fuel inputs, in the form of chemicals and farm machinery.

Intensive farming in the UK: bigger yields at environmental cost

Almost 77% of the UK’s land surface has been managed for agricultural production. But it has not always been managed efficiently:444

• Since 1945, poor farming practices have damaged about 550 million hectares – an area equivalent to 38% of all farmland in use today.445

• The external costs of UK intensive farming are as much as €300 per hectare.446

Farming is energy-intensive. Agriculture is ultimately a process of energy conversion: converting solar energy, along with various chemical and fossil energy inputs, into food energy that will sustain a human population.447

Agricultural energy consumption is broken down as follows:

• 31% for the manufacture of inorganic fertilizer • 19% for the operation of field machinery • 16% for transportation • 13% for irrigation • 8% for raising livestock (not including livestock feed) • 5% for crop drying • 5% for pesticide production • 8% miscellaneous.448

Since the Green Revolution, the amount of energy used in agricultural production has

111 risen by an average of 50 times more than the energy input of traditional agriculture.449 In the most extreme cases, energy consumption by agriculture has increased 100 fold or more.450

Producers use energy directly for operating machinery and equipment on the farm, transporting products to market and indirectly in fertilizer produced off the farm. In the US: • Average energy-related expenses for rice, sugar beets, and peanuts were about $128, $108, and $97 per acre, respectively.

• Energy-related costs for corn, sorghum, and wheat averaged $66, $51, and $34 per acre, respectively.

Expressed as a percent of per acre total US farm expenses, which includes land and depreciation, energy-related costs are the highest for sorghum, 23%; rice, 21%; corn, 19%; and wheat, 18%.451

Fertilisers spur soil revolution

Fertilisers put nitrogen – the essential plant nutrient – into the soil. Crop production now relies on fertilizers to replace soil nutrients, and therefore on the fossil fuels needed to mine, manufacture, and transport these fertilizers around the world452

The manufacture of inorganic fertilizer is the single largest contributor towards agricultural energy consumption – accounting for 31%.453 • Just one kilogram of nitrogen for fertilizer requires the energy equivalent of 1.4-1.8 liters of diesel fuel.454 • According to The Fertilizer Institute, in just one year between June 2001 and June 2002 the US used over 12 million tonnes of nitrogen fertilizer – requiring the same energy to produce as that provided by 96.2 million barrels of diesel fuel.455 • Fertilizer is effectively manufactured from natural gas: some fertilizer manufacturing plants use more gas than the entire City of Birmingham.456

In fact, it is estimated that fertiliser production consumes approximately 1.2% of the world’s energy and so is responsible for approximately 1.2% of total greenhouse gas emissions.457

Specialisation

A key aspect of industrial farming is specialisation – when production focuses on a limited range of crops or animals, also known as monocultures.

112

Not so long ago, the small farms of a region would produce a wide range of products for nearby consumers. In today's globalised food system, however, every region is pushed to specialise in whichever commodity its farmers can produce most cheaply – and to offer that product on global markets.

Specialisation tends to go hand in hand with concentration, as farmers seek to maximise efficiency and productivity through economies of scale.

• 33% of Germany's poultry is bred in just a few districts to the north of the country.458

• A cattle feedlot with 20,000 cows – modest by industry standards – processes as much sewage as a town of 320,000 people.459

• Some European piggeries have up to 62,000 pigs on a single site, with pen density of 0.7 square metres per finisher pig.460

• In the early 1970s, there were some 36,000 family farms rearing pigs in Ireland. By 1996, only 700 pig farmers remained.461

• In Sweden, half of the farms are expected to go out of business in the coming decade.462

• In 1988, when the drive for industrial pig farming began, there were about 690,000 pig farmers. Now there are fewer than 100,000 independent pig farmers remaining. Moreover, in North Carolina there were 28,000 pig farmers. In 1998, there were only 3,000. And today there are so few pig farmers that you could almost count them on your fingers.463

• Twenty years ago, 60,000 Danish farms produced around 13 million pigs. Now some 13,000 farmers produce nearly twice as many.464

• Two decades ago there were an estimated 27,000 family farms in North Carolina today 2,200 remain – most of them pig factories of the kind pioneered by companies such as Smithfield, producing genetically engineered pigs.465

Monoculture – is it really efficient?

It has been argued that the old agricultural system – with many small, unspecialised farms – can in fact be more efficient than the globalised and concentrated system dominating today.

It may seem that large monocultural operations are more efficient and productive...

113 But – “that is in large part a myth.”

“...the small farm doing traditional polyculture (raising more than one kind of crop, using different root depths or soil nutrients on the same piece of land) makes more intensive and efficient use of resources and can produce significantly more food per overall acre.” 466

Concentration in agriculture means larger farms. In the middle of the 20th century, agricultural structures began to change radically – and they are still evolving today. Before, the farm and its infrastructure were part of a decentralised system – the traditional family farm was the norm. Now, the system is one of centralised ownership and control. The 21st century farm has become industrialised.

Average size of European farms in terms of full-time workers 1989 to 2000 number of full time workers Year: 1989 1990 1991 1992 1993 1994

0 - <4 1,111,430 1,139,930 1,142,380 972,910 923,490 816,140 4 - <6 833,440 828,920 828,810 761,350 761,510 726,900 6 - <16 776,350 777,430 776,240 752,720 755,560 721,630 16 - <40 865,370 862,950 857,280 820,620 811,630 748,240 40 - <100 464,230 459,700 457,620 468,870 463,910 456,270 100 and more 92,900 100,120 103,530 134,980 133,400 146,860

Total 4,143,720 4,169,040 4,165,860 3,911,460 3,849,500 3,616,030 number of full time workers Year: 1995 1996 1997 1998 1999 2000

0 - <4 737,040 842,970 808,590 820,740 729,860 760,650 4 - <6 706,690 742,740 750,990 741,580 671,270 689,260 6 - <16 779,490 755,650 751,650 745,810 682,680 679,850 16 - <40 829,770 820,680 821,920 819,720 767,670 768,730 40 - <100 483,400 515,660 519,620 517,160 527,760 525,720 100 and more 153,850 181,870 184,360 184,190 231,130 232,550

Total 3,690,230 3,859,580 3,837,120 3,829,200 3,610,370 3,656,770

Source: EU FADN Public Database

• The six founding members of Europe's Common Agricultural Policy had 22 million farmers in 1957. Today that number has fallen to just seven million.467

114

• In Poland, farmers are being forced into competition with the more 'efficient' large-scale farmers from Western Europe. If that trend continues, 1.8 million Polish farms could disappear in the next few years.468

Environmental impacts of intensive farming

Industrial agriculture may be more productive. But this productivity comes at a cost, both financially and in terms of environmental impacts.

• The cost of cleaning up chemical pollution, repairing damaged habitats and coping with human sickness caused by industrial farming is as much as €3.3 billion per year.469

• The external costs of intensive farming in the UK amount to as much as €300 per hectare.470

• It has cost the British government over €1.4 billion to install the equipment necessary to remove nitrates and pesticides from water.471 Water companies now pay between €195 and €290 million a year to remove chemicals from UK drinking water – costs that are paid for by consumers, not the polluters. 472

Intensive farming is associated with the following environmental problems:

• Pollution (air and water)

• Loss of ecosystems and biodiversity

• Soil degradation

• Water shortages

These four impacts are discussed in turn below.

115 Impact 1 – pollution

Air pollution

Agriculture is a major contributor to climate change. The use of fertilisers releases greenhouse gases such as nitrous oxide into the atmosphere. The rise in global meat production means larger quantities of methane are emitted through natural animal digestive processes.473

• Agriculture alone accounts for approximately 10% of total climate-changing greenhouse gases.474 But other estimates estimate that approximately 20-35% of global greenhouse gas emissions originate more generally from agriculture.475

• Agriculture produces 40% of human-related emissions of methane.476

• Agriculture produces more than 50% of total human-related emissions of nitrous oxide.477

Nitrogen

Nitrogen is an essential, if not, the essential plant nutrient. The majority of nitrogen in the soil is in forms which are unavailable to plants, so growers have to use other sources – either inorganic fertilizers or organic manures to feed their crops.478

• Levels of nitrous oxide – a harmful greenhouse gas – have risen by 16%, mainly due to more intensive agriculture.479

• Treatment of agricultural soils – such as fertilizer application and other cropping practices – are the largest source of U.S. nitrous oxide emissions, accounting for 67%, according to a 2003 study.480

During growth, most crops recover only 50% of applied nitrogen, meaning that 50% is wasted. Before the crop reaches the supermarket, another 25% of the nitrogen is discarded as trimmings and crop residues. Of the nitrogen fertilizer applied to the growing crop only 25% is contained within the final product 481

How the unused 75% is managed can have both financial and environmental costs. 482

Methane

116 Methane is a dangerous greenhouse gas and a major cause of global warming.

Methane concentrations in the atmosphere have more than doubled over the past 250 years. This increase is due to agriculture, leakage during fossil fuel use, as well as the burning of trees and other vegetation483

• Large, confined livestock operations generate vast amounts of manure, which releases methane, a potent greenhouse gas with 20 times the heat trapping power of carbon dioxide.484

• Of all domestic animal types, beef and dairy cattle were by far the largest emitters of methane. Rice cultivation and agricultural crop residue burning were minor sources of methane.485

486

117 Water pollution

Water pollution from massively intensified agriculture is a major worry today.

As European agriculture has industrialised, its negative effects have increased on inland waters. Our rivers, lakes and ground-waters are now endangered by pollution from nitrates, pesticides, heavy metals, and so on. Moreover, as inland waters become increasingly polluted, human health is put at risk.

• In the UK, nearly half of nationally protected lakes are threatened by pollution487

• Many rivers in the south of England rely entirely on treated sewage for their summer flows.488

• Danish pig slurry, for instance, would fill 90,000 average-sized swimming pools a year.489

What is going into the water?

There are four main ways in which agriculture pollutes water – the use of nitrogen and phosphorous fertilisers on the soil; the use of pesticides on crops; and the use of antibiotics on animals.

Nitrates

Nitrogen, in the form of nitrogen compounds – such as ammonium nitrate – is used in 60% of all fertilisers.

Problems arise when these compounds diffuse into the water supply. Unless fertiliser and manure are absorbed by crops or removed during harvesting, excess nitrate can be

118 washed into groundwater as well as surface water bodies.490 Nitrates and phosphates act as food for algae, producing algal blooms that ‘suffocate’ other plant life and fish in a process known as eutrophication (see box).491

Nitrogen from agricultural sources accounts for between 50% and 80% of the nitrates entering Europe's water. 492

Eutrophication

Excess nitrogen in water can cause the growth of algae and other plants – in a process called “eutrophication”. Algae blooms are damaging in two major ways:

• First, when the plant matter dies and decays, it can rob the water of its dissolved oxygen – suffocating large amounts of sea-life.

• Second, algae blooms block the sunlight needed by bottom-living animals and fish, and by vegetation such as sea grass – and without sunlight, this life migrates, or dies.

Agriculture is the major reason for ‘nutrient loading’ through the application of nitrogen fertilisers such as ammonium nitrate.

Nitrogen pollution is blamed for more than 40 “dead zones” worldwide, where nitrogen- fuelled algae blooms consume the oxygen in the water, killing or driving away all living things.493

• As a result of these intensive agricultural practices, total nitrogen output to the Gulf of Mexico has increased 3 to 7- fold compared to pre-settlement outputs. The Gulf of Mexico is now the third largest hypoxia zone (oxygen deficient “dead zone” due to nitrogen input) in the world, with the area uninhabitable by most aquatic organisms varying between 12,000 to 18,000 square kilometers in mid- summer.494

Nitrate concentrations are increasing in Europe:

• Over 20% of groundwater in the EU and between 30 and 40% of lakes and rivers are showing excessive nitrate concentrations.495

• Nitrate concentrations are increasing in 19% of individual groundwater bodies in Europe. The most marked rises are in Hungary, Sweden, Finland and Germany.496

• Water quality figures from the RSPB show that over half of UK rivers suffer from too many phosphates and a third from too many nitrates.497

119

High levels of nitrates in water pose serious risks to human health. Drinking water can be affected unless concentrations of nitrogen are filtered out. Nitrate has been shown to be toxic to human babies.

• Maximum allowable levels of nitrates in drinking water are exceeded [in some places] in every country in Europe. 498

• It is estimated that 800 000 people in France, 850 000 in the UK and 2.5 million in Germany are drinking water with nitrate concentrations above the permitted EU limit 499

• In some parts of Africa nitrate loads in some suburban groundwater wells are six to eight times higher than WHO acceptable levels 500

Clearing up the nitrogen in our water will take a long time. It takes about 20 years for nitrogen discharges to diffuse fully into water.501 And the clean-up will cost millions.

• The ‘denitrification’ of UK drinking water costs £19 million a year

• The projected cost of achieving the EU nitrate standard for drinkable water is £199 million over the next 20 years.502

Phosphates

Phosphorous, like nitrogen, is commonly used in fertilisers.

But phosphate fertilisers are a major cause of excess concentrations of phosphorous in European waters. Phosphates are the main cause of eutrophication in freshwater. They also make a significant contribution to the pollution of coastal and marine waters.

• In the UK, most rivers have phosphorus concentrations higher than ecologically acceptable levels.503

Phosphate pollution mostly comes from agriculture:

• In the UK, agriculture is responsible for 50% of phosphates found in water.504

• The cost of treating water contaminated with phosphates from UK agriculture is £52.3m per year.505

Pesticides

120

In virtually every country where agricultural fertilizers and pesticides are used, they have contaminated groundwater aquifers and surface waters.506

The term pesticide also applies to herbicides, fungicides, and various other substances used to control pests. Pesticides are in common use in agriculture:

• Each year the world uses about 3 million tons of pesticides, formulated from about 1,600 different chemicals.507

• Only 0.1% of applied pesticides reach the target pests, leaving the bulk of the pesticides (99.9%) to impact the environment.508

• Many pesticides have not been tested for their toxicity, and testing in the past has focused on acute effects rather than long-term effects.509

Although it is difficult to measure their exact levels, there is no doubt that pesticides pose serious risks to human health. More than 1 million US citizens drink water laced with pesticide run-off from industrial farms.510

And pesticides also endanger animals. Studies have shown the link between exposure to pesticides and developmental abnormalities in amphibians. Researchers observed frogs with extra legs growing from their abdomens and backs, stumps for hind legs, or fused hind legs.511

GM crops and pesticide use

Research shows that GM crops actually lead to an increase in the use of pesticides.

A 2003 report found that since 1996, the 550 million acres of GM corn, soya beans and cotton planted in the US have led to 50 million pound increase in pesticide use.512

These results undermine one of the central claims of the supporters of GM farming – that the crops are better for the environment because they require fewer chemicals.

The report, which was commissioned by Iowa State University, the Consumers' Union, also found that:

• In 2001, 5% more herbicides and insecticides were sprayed on GM crops compared with crops only of non-GM varieties. In 2002, 7.9% more were sprayed, with a rise of 11.5% in 2003.513

• In total, £73m more agrochemicals were sprayed in the US during 2001-2003 because of GM crops.514

Although GM crops needed up to 25% fewer chemicals for the first three years after their

121 introduction in 1996, afterwards they required significantly more. During 2002-2003, for example, an average of 29% more herbicide was applied per acre on GM maize than on non-GM varieties.515

Since the report’s publication the trend towards increased pesticide use on GM crops has continued. In 2004 farmers sprayed an average 4.7% more pesticides on GM crops than they did on the identical conventional crops.516

Antibiotics

Antibiotics are used in agriculture as medicine, and also to increase the growth and power of animals.

Industrialised agriculture leads to increased use of antibiotics. In factory farming, the large number of animals makes individual treatment impossible. So antibiotics are given out en masse. A pig might receive up to ten different antibiotics – by injection, in water or in food.

Anti-microbial use by poultry producers has risen 307% per bird since the 1980s. Beef cattle are given 28% more antibiotics than they were 15 years ago, and pigs are fed 15% more.517

Every year, around 5,000 tonnes of antibiotics are given to animals in the EU.518 Many of these antibiotics pass straight through into the animals’ manure, before moving on into our water. As much as 80% of the antibiotics that are fed to the birds go unmetabolized. And the drugs end up in chicken faeces, or litter, in highly concentrated amounts and much of that waste ends up as fertilizer on nearby fields.519

• Danish and Swiss researchers have found 68 types of drugs in soil and water samples, mostly derived from pig manure. Some soils used for absorbing pig waste contained concentrations of the antibiotic tilosin, up to 40 times the current limits.520

• In the worst case scenario farm animals would be responsible for 15% of the oestrogens contaminating UK waters. 521

• In 2002 the U.S. Geological Survey's Toxic Substances Hydrology Program published the results of a study that searched for pharmaceuticals in 139 streams in 30 states, including New Jersey. Fourteen antibiotics used in both human medicine and animal agriculture were found in 48% of the waterways.522

122 Impact 2 – loss of ecosystems and biodiversity

The healthy balance of ecosystems and biodiversity is being increasingly threatened – by over-specialised agriculture, overuse of natural resources, and the outputs of industry.

The food production system has been globalised and industrialized to lower costs and boost outputs. The food system now follows the most economically efficient routes for production. As a consequence, fewer varieties and breeds are being farmed – and much agricultural land is now farmed more intensively than ever before.

The main results are:

• Loss of ecosystems through the destruction of landscapes by agriculture.

• Loss of biodiversity through the over-exploitation of natural resources.

• Loss of agro-biodiversity through more industrialised and mono-cultural farming.

All over the world, land is being converted to agriculture:

523 • Half of the world's wetlands were lost last century.

• Logging and land conversion have shrunk the world's forests by as much as 524 half.

• Some 30% of the world's original forests have been converted to agriculture, resulting in extensive species and habitat loss. Agriculture is still encroaching on 525 many national parks and other protected areas.

Ecosystems Ecosystems are communities of species that interact with each other and the physical settings in which they live. They are natural assets and are vital for agriculture and fishing.

Biodiversity Biodiversity means the variety and variability of life on our planet.

Agro-biodiversity Agricultural biodiversity means the variety and variability of animals, plants and micro-

123 organisms that are used (directly or indirectly) for food and agriculture. Furthermore, these are necessary to sustain key functions of the agro-ecosystem – in other words, they support food production and its future security.

Agricultural biodiversity is the result of human activity – but human life is dependent on it. In the short term we need it for our food, and other goods. However, it must be maintained properly so that we can have food in the future – and so that our environment will survive.

What is happening?

Intensive farming changes the face of the landscape. Land is cleared and then cultivated in a way that will maximise productivity. But the pursuit of productivity has a destructive effect on natural habitats and the animal and plant varieties that depend on them.

Direct effects of intensive agriculture on natural habitats include:

• Drainage of wetland and removal of woodland

• Removal of boundary features (hedgerows and stone walls)

• Drainage, ploughing and reseeding of upland indigenous grasslands and moorlands

• Loss of mixed, rotational farming systems, with a shift to autumn tillage and winter grazing of heaths

• Pesticide effects on non-target plants and invertebrates of managed land

Indirect effects include:

• Nutrient enrichment of adjacent land and water (encourages pernicious weeds)

• Insect and plant mortality from pesticide drift into adjacent land and water

• Removal of plant and insect food supply of farmland bird and mammal species by changes in cultivation and grazing practices.526

124 Three main impacts of intensive farming are:

• Loss of ecosystems

• Loss of biodiversity

• Loss of agro-biodiversity (genetic erosion)

These are outlined below.

Loss of ecosystems

Virtually all of Earth’s ecosystems have now dramatically transformed through human actions. Although the most rapid changes in ecosystems are now taking place in developing countries, industrial countries historically experienced comparable changes.527

Natural ecosystems most at threat from the food system include forest land, wetlands and coastal areas. As agriculture has expanded across the globe the demand for land has led to the conversion of natural ecosystems to land suitable for agricultural production.

The world has 14 major biomes – major regional ecosystems supporting plants and animals – and the majority of these biomes have been greatly modified.

• Between 20% and 50% of nine of the world’s biomes have been transformed to croplands.528

The case of forests

Forests worldwide cover some 3.9 billion hectares—almost a third of the earth’s land surface excluding Antarctica and Greenland. Any changes to this woodland has enormous impacts on the environment:

• Of the carbon currently stored in terrestrial systems, 38-39% is stored in forests.529

• But 20-30% of the world’s forests areas have been converted to agriculture, resulting in extensive species and habitat loss.530

125 • Some 9% of the world's tree species are at risk of extinction. Moreover, tropical 531 deforestation probably exceeds 130,000 square kilometres per year.

• 43-46% of the potential areas of temperate broadleaf, mixed and tropical deciduous forest is now agricultural land. This accounts for 34% of total agricultural land.532

The demands of the modern food chain are leading directly to deforestation, as the following case studies show.

Palm oil – and deforestation in Indonesia and Malaysia

Palm oil now accounts for a 21% share of the global edible oil market making it the second most consumed edible oil in the world after soy oil.

Indonesian palm oil exports have increased by 244% in the past seven years. Between 1995 and 2002 alone, palm oil usage in the European Union increased by 90% and the EU now accounts for 23% of Indonesian palm oil exports.

As much as 87% of all the deforestation in Malaysia between 1985 and 2000 can be attributed to palm oil plantations. Companies often consider that the most efficient way to prepare the land for an oil palm plantation is to burn the existing forest and scrubs – although the Indonesian government officially banned such practices in 1997533

European animal feed – and the destruction of the Brazilian rainforest

Meat production today is highly intensified. It is also highly inefficient. For every kilogram of beef, five kilograms of feedstuff is needed.

Europe imports 55 million tons of feedstuff every year from Brazil, Thailand and other 534 southern countries.

And this is one of the main reasons why rainforests in Brazil are being destroyed at such a high rate:

• Between August 2001 and August 2002, 25,500 square kilometres of Brazilian 535 rainforest was cut down – an area roughly the size of Belgium.

These figures are at least 30-40% higher than historical averages.536 Increased soya bean demand for feedstuff is a major factor here.

• Soya bean production takes up 1.2 million acres in Argentina and 8 million acres in the US. However, Brazil is expected to overtake US soya production in a few 537 years.

126 • Soya beans, along with other imports such as cassava and soya cake, make up 538 about 30% of all European animal feed. • It is estimated that, for every acre farmed in the UK, two more are farmed 539 overseas to feed the UK's intensively farmed livestock.

Loss of biodiversity

It is not possible to conserve biodiversity by managing it directly. Instead, the causes of biodiversity loss – namely human activities – must be managed.540 European onvention on the conservation of European wildlife and natural habitats

The food system is so large that in itself it supports a wide range of biodiversity. Millennia of agricultural expansion means that much of the remaining earth-based biodiversity survives on land dedicated to food production.541

“Agriculture is dependent on biodiversity for its existence and, at the same time, is a threat to biodiversity in its implementation.”542 Leo Horrigan, Robert S. Lawrence, and Polly Walker Johns Hopkins Bloomberg School of Public Health

But as agriculture becomes mono-cultural, this biodiversity is being lost. Species, breeds and varieties of animals and plants are disappearing. Extinction rates are now around 100 times greater than they were in the fossil record.543

Loss of biodiversity – the facts:

• Nearly 26,000 plant species worldwide are under threat of extinction – that's 544 about 10% of all plant species.

• More than 1,100 mammal species, 1,200 birds, 700 freshwater fish, and hundreds 545 of reptiles and amphibians are also threatened with extinction worldwide.

• 20% of the world's freshwater species are extinct, threatened or endangered. At 546 least 10,000 freshwater fish species are endangered or threatened globally.

127 • Birds that depend on agricultural fields have fallen in numbers by as much as 50% since 1970 in the UK as a direct result of the intensification and specialisation of 547 farming.

• Overall, approximately 75% of the world's agricultural biodiversity has been lost in the last century, according to the FAO.548

549

There is a strong correlation between intensive farming and the loss of animal species. For example:

• Farmland holds nearly 60% of the threatened species in Europe, and agricultural intensification is the most common single threat, affecting over 40% of the declining species.550

128 • Across Europe, declines in farmland bird diversity correlate with agricultural intensity.551 Pesticides almost killed off the otter and many birds of prey, since they were introduced in the 1950s.552

• Bees are in decline due to pesticides. In France, honey production has dropped by a third in the last decade, and by up to 90% in some areas.553 But bees provide an essential ‘natural service’ for farmers. In the US, for instance, bees pollinate $10 billion worth of crops per year.554

Less intensive farming:

According to a large-scale survey by the British Trust for Ornithology (BTO) and other wildlife research organisations, organic farms in lowland England with cereal crops support:

• 32% more birds • 35% more bats • as well as 109% more wild plants

In addition, there was a far greater diversity of wild plant species, with 85% more species in the organic field cropped areas.555

Loss of agro-biodiversity - genetic erosion

Genetic erosion is the loss of genetic diversity – including the loss of individual genes, and of particular combinations of genes (gene complexes).

Intensive farming leads to genetic erosion. As 'wild', uncultivated areas – such as forests and wetlands – are converted to agriculture, animal species and plant varieties are lost. The impacts of agriculture on seas, lakes and rivers also contribute to genetic erosion.

Monocultural farming narrows gene pool

Farming was once polycultural – small farms would produce a large variety of animals or crops. That system guarded the genetic pool for future agriculture and so maintained biodiversity.

129 Now, farming is increasingly monocultural. For example, a whole region may now be devoted to the production of a single type of crop. This will lead to a loss of biodiversity worldwide and damage the basis of future agriculture. Moreover, future generations will have fewer food choices.

Main causes of genetic erosion in domestic animals are:

• Intensification – multipurpose local species and breeds have been replaced by those with higher production levels (including cross-breeds and pure-bred exotics).

• Cross breeding – a few selected breeds used in widespread cross-breeding programmes can lead to loss of specialised characteristics.

• Changes in knowledge – the idea that 'modern/imported' is best has led to the loss of traditional farming knowledge... and to the erosion of domestic animal diversity.

• Changes in technology – animal production and transportation by machinery have changed the farming system. Artificial insemination and embryo transfer, for example, have led to rapid replacement of indiginous breeds.

• Changes in economy – traditional livestock production systems are now seen as uneconomic.

Genetic Erosion: Animals

The uniformity of the animals we eat is startling:

• Just 15 species account for over 90% of global livestock production.556

• Up to 30% of mammal and bird livestock breeds (i.e., 1,200 to 1,500 breeds) are currently at risk of being lost and cannot be replaced.557

• The FAO estimates that at least one breed of traditional livestock dies out every 558 week in the world.

• On average, two breeds of domestic animal are lost every week.559

130 Many farmers now have little or no control over the breeds they raise or the mating of their animals. Instead, they get them from breeding facilities run by large companies who dominate the farmers. These companies now have increasing control over livestock genetics.

Facts…

• Of the 3,831 breeds of cattle, water buffalo, goats, pigs, sheep, horses and donkeys that are believed to have existed in this century, 16% have become extinct, and a further 15% are rare.560

• 617 livestock breeds have become extinct since 1892.561

• Worldwide, at least 1,500 of the 5,000 or so domesticated livestock breeds are now rare, and are represented by less than 20 breeding males on the planet or less than 1,000 breeding females, according to the FAO.562

• In the 1920s, more than 60 breeds of chicken were raised in the US. Today, five breeds supply nearly all of the chicken meat and brown eggs, while almost all white eggs now come from a single breed – white leghorns.563

Top-heavy turkeys

Over 90% of all the commercially produced turkeys in the world come from just three breeding flocks. This increases the risk of new strains of avian flu – against which these 564 birds have no resistance.

Today's most popular turkey breed grows its meat where producers want it – but its huge 565 breasts barely allow it to move, let alone reproduce naturally.

Reasons…

Certain species or breeds are more economical and easier to farm – saving time and money for the producer. Here are some of the main reasons why smaller numbers of livestock breeds are being farmed:

• increases in growth performance pest and disease resistance

• ease of handling

• adaptation to current levels of technology

131 • consumer choice

Breeds become rare, either because their characteristics do not suit the demand at the time, or because their qualities have not been recognised.

Genetic Erosion: Crops

As with livestock, genetic diversity of food crops is in decline. Modern crop varieties are taking on more uniform characteristics, and these varieties are planted over large areas in monocultures.

This tendency is not limited to high income countries where the commercialisation of agriculture is most prevalent. Modern crop varieties are displacing traditional varieties throughout the world, threatening the loss of an enormous genetic resource and increasing the vulnerability of large areas of homogeneous crops to pest and disease attack.566

The Green Revolution has promoted the growth of just a few strains of cereal crops – the ones that are developed to absorb commercial pesticides and fertilisers, and are easier to harvest mechanically.

• Today, 75% of the world's food is generated from just 12 plants and five animal species.567

• More than 90% of the world’s caloric intake comes from just 30 crops, and only 120 crops are economically important at a national scale.568

• Just three plant species - rice, maize and wheat - contribute nearly 60% of calories and proteins obtained by humans from plants.569

570 • More than 90% of crop varieties have disappeared from farmers' fields.

• Although there are 2000 species of potatoes, commercial production is almost completely restricted to just one species, solanum tuberosum. Twelve varieties of this one species dominate 85% of the U.S. potato harvest.571

These trends can be seen all over the world:

• In the Philippines, thousands of traditional rice varieties were once cultivated by small farmers. By the mid-1980s, just two varieties accounted for 98% of all rice 572 production.

132

• In India, three-quarters of all rice fields are planted with just 12 varieties of the grain, 573 compared to 30,000 just a few decades ago.

• In Germany, 500 plant species are endangered or extinct as a result of agricultural 574 practices.

• In the US, the entire commercial potato crop is made up of just six varieties, and 75% of it from just four closely related varieties – chiefly the Russet Burbank that 575 McDonald's uses for its fries.

Consolidation of the seed industry is causing a reduction in the number of different crop varieties.

Large seed companies tend to rely on first-generation hybrids because they force growers to buy new seed every year. As the industry has consolidated, traditional varieties have been removed from seed catalogs at an alarming rate. In 1981, nearly 5,000 non-hybrid vegetable varieties were being sold through mail-order catalogs; by 1998, 88% of those varieties had been dropped 576

• In the USA, beef, more than 40% of all production comes from 2% of the feedlots.577

• 37% of the world’s grain, and 66% of U.S. grain production, is fed to livestock.578

• And four of the major crops used in animal feed—corn, soybeans, cottonseed, and wheat—account for 80% of the pesticides used in the US. 579

133 Consumer impact – loss of food variety

The loss in genetic diversity means a contraction of food choice for future generations.

Industrialised agriculture uses only a few varieties of crops – the ones that allow for the most efficient harvesting, processing and packaging. As a result, tens of thousands of crop varieties are being lost.

Variety loss in numbers:

• According to the FAO, 95% of all the calories we eat come from only 30 varieties 580 of plant.

• Over 2,300 apple varieties exist in Northern Europe – but just two varieties 581 account for more than 50% of the current apple market.

582 • Since 1970, over 60% of UK apple orchards have been destroyed.

583 • In 2000, 73% of all lettuce grown in the US was iceberg lettuce.

• The US has lost nearly 93% of its lettuce varieties, and... • over 96% of its sweetcorn varieties • about 91% of its field corn varieties • over 95% of its tomato varieties • 95% of its cabbage varieties • 91% of its field maize • 94% of its pea varieties 584 • and almost 98% of its asparagus varieties.

134 Impact 3 – soil degradation

“The sustainable use of soils is one of Europe's greatest environmental, social, and economic challenges” 585

Klaus Topfer, executive director United Nations Environment Program (UNEP)

Agricultural land under threat

Our food comes from the soil. FAO Food Balance sheets show that 99.7% of human food (calories) comes from agricultural land, while less than 0.3% comes from the oceans and other aquatic ecosystems586

Agriculture depends on soil quality. However, large areas of productive land have been degraded by human mismanagement and climatic effects. When agricultural land is degraded, food production and livelihoods are threatened.

The main causes include erosion, soil compaction, nutrient depletion, acidification and other types of pollution.

Damage to the soil is not an easy problem to solve, because new soil takes so long to form, soil is considered a limited and non-renewable resource if viewed over 50-100 years.587

The basics

In 2000, arable and permanent cropland and pasture covered 38% of the total available land surface.588 Worldwide, 67% of agricultural land has been degraded.589

135

United Nations Environment Programme590

There are several main types of soil degradation relating to food supply.

Soil Erosion

Soil erosion is a major cause of soil degradation; erosion is mostly caused by water, as flowing water has more power to displace soil than wind.591

A recent study shows that soil erosion is a particularly serious problem in the Europe – more than half of Europe’s land has suffered various degrees of erosion by water, and about a fifth has suffered erosion by wind. A recent UN-EU report described this as the continent's “silent disaster”.592

The chemicals and cultivation methods characteristic of large-scale monocultures change soil consistency, making it more prone to water and wind erosion.

Bulgaria: a lesson in erosion

Bulgaria’s risk of soil erosion is due to natural conditions and agricultural land use.

Natural risks: • over 80 % of the country is hilly or mountainous and therefore susceptible to surface run-off and erosion during heavy rainfall; • many soil types are naturally vulnerable to erosion.

Before 1946 most small scale farmers in practiced anti-erosion techniques, such as contour cropping and terraces on sloping land. Eroded slopes and vulnerable river banks were planted with trees to control the risk of water erosion. Shelter belts were planted in

136 larger fields to reduce the risk of wind erosion.

In the late 1940s and 1950s, the introduction of large-scale agriculture meant field sizes were increased dramatically by destroying and ploughing-up the traditional field boundary strips and shelter belts. As a result wind and water erosion increased dramatically. In less than 20 years, about 10 % of arable land had been eroded so badly that it was no longer suitable for cropping or afforestation.

Now • over 78 % of cultivated land and 15 % of forests are highly susceptible to water erosion and over 38 % are susceptible to wind erosion • the total average annual soil loss from all types of land in Bulgaria is approximately 136 million tonnes per year, of which 30–60 million tonnes are lost by wind erosion.

Source: Stefanova (2002)593

Some facts: • Nearly 60% of agricultural land in Ukraine is affected by or at risk of erosion594

• Water erosion is also the dominant form of soil erosion in France, where it affects about five million hectares of agricultural land (about 17% of the total). In fact, soil erosion is reported to affect most of the main cereal growing areas in France.595

• Erosion is most serious in central Europe, the Caucasus and the Mediterranean region, where 50–70% of agricultural land is at moderate to high risk of erosion.596

• In Spain, over 50% of the agricultural land is classified as having a medium to high risk of erosion, and in its southern region this figure reaches over 70%.597

If trends continue, the European Environment Agency anticipates an increase in the soil erosion risk of 80% in EU agricultural areas by 2050598

Soil erosion: the international context

US • In eastern Washington, each pound of grain costs twenty pounds of topsoil.599

• The US has lost half of its topsoil since 1960, and continues losing topsoil 17 times faster than nature can create it600.

Worldwide • Research estimates that soil erosion has reduced Africa’s grain harvest by 8

137 million tons, or roughly 8 percent. This loss is projected to double by 2020 if soil erosion is not reduced.601

• 30% of the world's arable cropland has been abandoned because of soil erosion in the last 40 years.602

The statistics on soil erosion are debatable603, but the IFPRI estimates soil degradation has led to a 13% fall in cropland productivity over the past 50 years604

Soil Compaction

Soil compaction is one of the major problems facing modern agriculture. Put simply, compaction is the packing down of soil particles605. This reduces the pathways available for water and so leads to flooding and poor water retention. Compaction is caused by the overuse of machinery, intensive cropping, grazing and dairy farming606, short crop rotations, and poor soil management.607

By reducing the larger pathways in the soil, soil compaction limits air supply and damaging the habitats of soil organisms. This changes the types and distribution of soil organisms, creating nutrient deficiencies to plants and reducing root growth608

A growing problem remains unclear

• A 1994 study estimated that soil compaction was responsible for the degradation of an area of 33 million hectares in Europe609.

• More recent studies indicate that the problem is growing. Soil compaction is the main form of soil degradation in Central and Eastern Europe, where it has now affected over 62 million ha - 11 % of the total land area.610

Attempts to counter the effects of soil or subsoil compaction – such as improving drainage and irrigation - can lead to lowering of groundwater levels the excessive use of water and nutrients and general water pollution.611 (See following section on ‘water’ pg?)

Europe’s climate is changing: higher rainfall in winter are expected, coupled with short periods of high rainfall and longer periods of drought in summer612. Compacted soils will make crops more vulnerable and increase the risk of flooding and water erosion. This will result in the pollution of surface water with soil, nutrients and the chemicals used in agriculture.613

Salinisation

138 Salinisation can be caused by excess water from irrigation which raises the water table, bringing salt to the surface. It results in completely unproductive soils, which are currently found mainly in the Mediterranean region and central and eastern Europe.

• Salinisation affects 25% of irrigated cropland in the Mediterranean614.

• In the US and India, 4 to 6 million acres of productive farmland lost due to salinisation annually.615

• In California, where over 8 million acres of cropland are irrigated, roughly 4 million acres are affected by salinisation.616

Desertification

Sahara spreads into Europe

Desertification, caused largely by industrial agriculture, is now a big danger for the four southernmost EU countries – Spain, Portugal, Italy and Greece. The European Space Agency’s Desert Watch project reports that 300,000 square kilometers of Europe's Mediterranean coast - an area larger than Britain - is threatened by desertification617. A European Environment Agency report warns that areas are becoming so degraded that they are no longer able to support any “profitable cultivation” – and as a result, leading to abandonment of land and depopulation.618

The affected regions rarely get any of their vegetation back – and thereby add to the growing volume of degraded drylands. 40% of the Earth's surface is already drylands and 70% of this is degraded.619

Spain – the next desert?

One-fifth of the land in Spain already is so damaged that it is turning into desert, according to figures presented at a UN conference in 2000. It has been calculated that the country loses the equivalent of the rock of Gibraltar into the sea every year. Andalucia’s olive plantations alone lose an estimated 80 million tons of topsoil every year620 – as much as 40% of Andalucia is prone to severe erosion.621

139 Impact 4 – water stress

Water – in plentiful supply – is fundamental to the development of human life, and central to the maintenance of our ecosystems and biodiversity. When water resources are running scarce – are under pressure – we can be said to be suffering ‘water stress’.

In the year 2000, there were 29 countries under water stress according to the World Meteorological Organization. The number is predicted to rise to 34 by 2025. According to the World Bank, 22 nations have ‘severe’ water shortages and a further 80 are considered ‘serious’.622

Like other industries, the food system is heavily dependent on water. All of the food we eat requires water to grow, and water is a necessary part of much food processing. However, water supplies are now being damaged. Overuse and pollution mean that usable water is now growing scarce.

Modern agriculture is water intensive. In the United States, close to 19% of agricultural energy use is for pumping water.623 And US agriculture uses about 85% of all freshwater pumped from storage sources.624

It is also expensive. Irrigation costs two to five times more per acre than rain-fed crop production in both equipment and fossil energy needed to power the application of the water.625

140 Overuse

Water is not an unlimited resource. Only 3% of the water on the planet is fresh, and more than two thirds of that is tied up in glaciers and ice caps.626 To meet our needs, and the needs of the ecosystem, we must rely on less than 0.5% of all of the world’s water.627

The following table shows where this tiny but significant percentage of the world’s water comes from: aquifers, rainfall, natural lakes, reservoirs and rivers.

628

Worldwide, the demand for water is rising:

• In the last two decades, while world population rose by around 40%, water use increased by 300%.629

Demand is now so great that several major rivers – including the Colorado, Ganges and the Indus – no longer reach the sea for all or most of the year.630

Groundwater sources are also running out. Groundwater supplies about one-third of the world's population, and is the only source of water for rural dwellers in many parts of the world. Excessive withdrawal of groundwater, in quantities greater than the ability of

141 nature to renew the aquifers, is now widespread in parts of the Arabian Peninsula, China, India, Mexico, the former Soviet Union and the United States.631 In some parts of China the water table has dropped 300 feet in 40 years.632

• The depletion of groundwater reserves means that water withdrawal across Europe is expected to decrease by about 11 % by 2030.633

• The groundwater that provides 31% of the water used in agriculture is being depleted up to 160% faster than its recharge rate.634

• The overdraft of U.S. ground water averages 25% greater than its rate of replacement.635

Food and water use

Pressure on water resources comes from increases in population and reduced rainfall due to climate change. The food system makes a significant contribution too.

Worldwide, agriculture accounts for more than 70% of freshwater consumption, mainly for irrigation of agricultural crops. In Africa and Asia, agriculture accounts for nearly 80%.636

In Europe, agriculture accounts for almost two-fifths of all water use.

Water withdrawal by sector in Europe:637

• Industry – 45% • Agriculture – 39% • Households – 13% • Evaporation – 3%

Food production has always been highly water-intensive. But intensive farming and changing consumption patterns are putting more and more pressure on this limited resource:

• To produce a healthy human diet requires 3,500 litres of water – that’s 70 times more water than the 50 litres recommended for daily household use.638

• Agriculture accounts for 70% of global human freshwater usage.639

• Within the European Union agriculture represents around 30% of total water abstraction.640

142 Crops for instance transpire enormous amounts of water. During the growing season, high-yield corn will transpire about 4.2 million litres of water per hectare.641

Some foodstuffs are more water-intensive than others. To produce one pound of corn, for example, takes 100 to 250 gallons of water, while to produce one pound of corn-fed beef requires 2,000 to 8,500 gallons. It takes 1,000 tons of water to raise one ton of grain, while it takes 15,000 tons of water to raise one ton of grain-fed beef. 642

The table below shows the extent to which meat is more water-intensive than cereals:

(Source: Let it Reign643)

• Producing a pound of animal protein requires, on average about 100 times more water than producing a pound of vegetable protein.644

• For each kilogram of boneless beef, it is about 6.5 kg of grain, 36 kg of roughages, and 155 litres of water (or about 15,000 litres of water on average per kilo of boneless meat).645

• 1 kg of meat involves as much water as 10 month’s basic household water requirements (50 litres per person per day).646

• To produce just one egg using industrial methods takes an estimated 63 gallons of water.647

Basic water usage figures for selected foodstuffs (litres/kilo produced):

• Potatoes - 500 litres • Wheat - 900 litres • Alfalfa - 900 litres • Sorghum - 1100 litres • Maize - 1400 litres • Rice - 1910 litres • Soya beans - 2000 litres • Chicken - 3500 litres • Beef (feedlot) - 100,000 litres.648

143

As incomes rise and consumers start eating more meat, more water must be used further down the food chain.

Irrigation

• Globally, roughly 15-35% of irrigation withdrawals are estimated to be unsustainable.649

As demand for water continues to rise, so too will the need for irrigated agriculture. Irrigation is crucial for overall food production – no more so than in southern Europe where the number of irrigated fields has increased steadily since the 1980s.

• Spain, Italy, France, Greece and Portugal account for 85% of the total irrigated area in the EU.650

• Water used for irrigation in Spain, Portugal and Greece exceeds 70% of total usage.651

In 1995, 134 billion gallons per day of freshwater were withdrawn for irrigation purposes (39% of total freshwater withdrawal), 49 billion gallons per day of this from groundwater sources.652

But irrigation has negative effects. In addition to competition over surface water rights, it also contributes to salinisation and the depletion of aquifers.1 Moreover, in some parts of southern Europe in particular, water extraction exceeds the natural supply. As a result, the natural ground water levels get lower. This leads to a decrease in the number and size of wetlands – and the possible intrusion of sea-water.

Aquifers are a common source of the water used in irrigation. But in many parts of the world, irrigation is depleting underground aquifers faster than they can be recharged.

In other cases, agriculture depends upon “fossil aquifers” – aquifers that mostly contain water from the last ice age. These ancient aquifers receive little or no recharge, so any agriculture that depends upon them is inherently unsustainable.653

• In the US, 95% of the United States' fresh water is underground.654 About 66% of irrigation water in Texas and 38% in California is pumped from ground water.655

1 An aquifer is an underground layer of water-bearing permeable rock, or unconsolidated materials (gravel, sand, silt, or clay) from which groundwater can be usefully extracted using a water well.

144 • North America's largest aquifer, the Ogallala, is being depleted at a rate of 12 billion cubic metres (bcm) a year. It will likely become non-productive within the next 40 years.656 Total depletion to date amounts to some 325 bcm, a volume equal to the annual flow of 18 Colorado Rivers.657

Large-scale irrigated agriculture in Spain

In Spain, irrigated agriculture accounts for 56% of total agricultural production, occupying only 18% of the total agricultural surface.658

The area of Spain where the most damage has been done to the soil is the Almeria province, in Andalucia. The region's underground water supply has been severely depleted, due to the use of vast amounts of water for irrigation.

The explosive growth of greenhouse agriculture has made Almeria one of Europe's most remarkable economic success stories – every day, hundreds of trucks take produce directly from Almeria to supermarkets in Germany, Scandinavia and Britain. But it has also turned the province into a vivid picture of desertification.

Almeria has more than 30,000 hectares of cultivated greenhouses.659 Most of them are on sand soil. Hydroponic agriculture is practiced in Almeria – in other words, the growth of plants in a nutrient solution, with or without soil. This type of agriculture uses more water than the environment can provide, steadily draining ground-water supply.

Here are some of the main consequences for Almeria: • depletion of ground-water • intrusion of sea-water, causing high salinity • water and soil contamination by pesticides, fertilisers, etc. • destruction of crops by insects and disease • loss of soil • loss of inhabitable land

Loss of ground-water and intrusion of sea water: As ground-water is lost, the threat grows of an influx of sea-water. Sea-water intrusion into aquifers is estimated at four million metres squared per year in Almeria. Approximately 80% of the aquifers have some sea-water intrusion – but people keep taking out the water. And what's more, the cost of water supplies generally accounts for less than only 5% of the total expenses of greenhouse agriculture in the region.

Water and soil contamination: In the use of water and fertilisers on crops, between 20% and 50% of nutrients are wasted due to lixiviation (i.e. separation into soluble and insoluble constituents). Nitrate levels are very high in Almeria – typically over 100ml per litre. In a single year in the region, greenhouses generate about 60 tons per hectare of vegetable residue, about one tonne per hectare of plastic, and a lixiviated volume (water and fertilisers) of about 300 m2 per

145 hectare – about 0.6 tons per hectare of fertilisers.660

Now, Almeria is beginning to get a number of competitors. Morocco is already producing competing products – and with even fewer environmental restraints than in Almeria. And soil degradation is already beginning to happen in the oases there.

Water and food security

Today 852 million people, or 15% of the world’s population, are undernourished. Every year, 5 million people die from hunger. What’s more, with world’s population projected to increase to 9 billion by 2050, extra pressure will be placed on areas where food is already scarce.661

Since all of the food we eat requires water to grow, there is a clear danger that the overuse of water will threaten global food security:

• If present water consumption patterns continue, two out of every three persons on earth will live in water-stressed conditions by the year 2025.662

If current consumption levels continue, there may not be enough water to produce the food that we need:

• To eliminate hunger and undernourishment by 2025, the additional water requirements may be equivalent to all blue water withdrawn and used today for agricultural, industrial and domestic purposes.663

• Based on today’s water productivity and a projected diet of 3000 kcal/day, an additional 5600 km 3 /year of water needs to be appropriated by 2050 to eradicate undernutrition and feed an additional 3 billion world inhabitants. This is almost three times as much as the present global consumptive water use in irrigation.664

The table below shows the amount of extra water needed to produce a healthy diet for all today, and in 2050. Food production today uses 6,800 km3 of water per year. By 2050, water use will almost double to 12400 km3/yr. The ‘challenge’ represents the additional need for water that will have to come either from new green water resources (horizontal expansion) or from turning evaporation into transpiration (vapour shift).

146 (Source: Let it Reign)

147 Plenty more fish in the sea?

Fish – an industry in crisis?

Trends in the fish industry are typical of the food system as a whole. The processing market is dominated by a small number of firms. While most fish sales pass through familiar retail outlets, not local markets.

The case of fish also highlights the dangers of intensive and unsustainable agricultural practices.

Around the world, demand for fish is rising. But fish stocks are falling – often faster than they can be replenished. Over two-thirds of global fish stocks are now fully or overexploited.665

Global consumption of fish has doubled in the last thirty years666 and there appears to be no sign of a slow-down. Seafood provision alone will need to double by 2020 to keep up with demand.667 At the same time, the exploitation of fishing stocks threatens the very survival of many fish species.

Most of the world’s fish stocks are over-exploited. This is destroying aquatic biodiversity and ecosystems as animals at the top of the food chain are removed.

In addition, fish farming – or aquaculture – is transposing intensive farming methods from the land to the sea. Fish farming is the world’s fastest growing type of food production, growing at an average rate of 10% every year.668

Unfortunately, the environmental impacts of fish farming are also varied and worrying. Farmed salmon, for instance, are packed into floating cages, where parasitic infections such as sea lice can spread rapidly. Large amounts of waste from fish farms can also pollute nearby waters. What’s more, fish farming does not prevent the exploitation of smaller ‘wild’ fish, such as sand eels and shrimps, which are turned into pellets for feed.

The global fish market

The global fishing industry - which is worth around $80 billion a year669 - is responding to an enormous demand for fish:

• The average consumption of fish per person has almost doubled in under half a century.670

148 • In 2000, the world’s fisheries netted nearly 95 million tonnes of fish - their largest annual catch ever.671 A large proportion of this – around 15 million tonnes – is caught by China. 672

• The illegal, unregulated and unreported fishing market is worth an estimated $2- $15 billion annually.673

Figure 3.2: Household consumption of fish

Source: DEFRA, 2003

Fish on the shelves

A look at the UK fish market reveals the same consolidation trends that are affecting other sections of the food industry.

Concentration:

• UK supermarkets saw their share of fresh fish sales rise from 21.4% in 1990674 to 75% in 2000.675

• Now, their share accounts for a staggering 90% of the £1.8 billion UK retail market for seafood.676

• Tesco buys 80-90% of its white fish from a single supplier (Seachill in Grimsby).677

One of the key reasons for the dramatic increase in concentration ratios is the success of private label goods, such as processed, frozen, “ready-meal” and convenience- driven fish products (such as pies and sauce-covered microwaveable meals).678 Less than a quarter of Tesco’s UK stores now have fresh fish counters.679

Concentration at the retail level is leading to concentration amongst fish processors:

149

• One company, Young's Bluecrest, controls 40% of the seafood processing market in the UK.680

• In 2000, the fishmongers’ retail market share fell to only 20.3%.681

Globalisation:

• Less than 20% of the UK’s cod consumption is supplied by the UK catching industry; the rest is imported from Iceland, Russia, Denmark, Norway, China (processed) and the Faeroes.682

• Around 50% of UK catch by value is exported (mainly due to high value shellfish exports to France and Spain),683 but 75% of UK demand is met through imports.684

But global fish stocks are approaching exhaustion

• In 2003, 76% of the world’s assessed fisheries stocks were either fully exploited (52%), overexploited (16%) or depleted (8%).685

• In the North-East Atlantic, 100% of fish stocks are fully exploited. 686 Of those, 41% are overexploited or depleted.687

• 60% of European fish catches exceed safe limits (levels above which the volume of fish caught are no longer replaced by population growth). Half of open sea fish catches are outside safe limits.688

Fish are being taken from the ocean faster than they can replenish themselves.

The most threatened seas in Europe:

• The North Sea (over-fishing, high nutrient and pollutant concentrations)

• The Iberian seas (i.e. the part of the Atlantic along the eastern Atlantic shelf, including the Bay of Biscay: over-fishing, heavy metals)

• The Mediterranean Sea (locally high nutrient concentrations, high pressure on the coasts, over-fishing)

• The Black Sea (over-fishing, rapid increase of nutrient concentrations)

150 • The Baltic Sea (high nutrient concentrations, pollutants, over-fishing)

Environmental costs of over-fishing

We are consuming our marine biodiversity. Enormous quantities of fish are simply discarded because they are of an unmarketable species or size, or because a vessel does not have a quota for that species:

• On average, a quarter of catches are discarded. In the southern North Sea, beam trawlers discard over half the fish caught, and the discard rate can rise to 90% in some fisheries.689

• For every tonne of Dublin Bay Prawn landed from the Irish Sea trawl fishery just under half a tonne of whiting are discarded as by-catch.690

Fishing methods - such as the practice of ‘bottom trawling’ - are having huge impacts on marine ecosystems:

• For every 1kg of North Sea sole caught by beam trawl on the seabed, up to 14kg of other animals are killed691

• 30-50% of the cold-water coral reefs known or expected to be found in Norwegian waters have been partially or totally damaged by bottom-trawling activities.692

And as the example below shows, even the best efforts to promote the sustainable sourcing of fish have had very limited success.

151

Case study: Unilever: Fishing for Good

Unilever is one of the world's largest buyers of fish, sourcing from a number of fisheries in the Atlantic and Pacific oceans. In 1996 the company made a long-term commitment to buy all its fish from sustainable sources by 2005. In conjunction with the WWF it also initiated an independent fisheries certification programme in 1996.

And yet by 2002 almost two-thirds of Unilever's fish came from sources that failed to meet its own internal sustainability criteria. And only 5% of its fish purchases came from fisheries certified by the independent certification programme.693

According to its own assessments, Unilever is on track to source 60% of its seafood from sustainable sources by the end of 2005.694

Unilever also encourages the fisheries with the best management regimes to apply for certification by the MSC (Marine Stewardship Council).

Just 4% of wild capture fisheries currently qualify for the MSC certificate.695

Our current fishing practices will cause untold damage to marine ecosystems. As one biologist, Larry Crowder from Duke University, puts it:

"You can't just remove the top layer of an ecosystem without having a knock-on effect."696

But this is exactly what is happening. 90% of the world's big fish are gone.697 In the past 50 years, over-fishing has removed nine out of the ten large predators – the big fish like tuna and cod. These predators such can travel thousands of miles and into different seas to feed and breed. If these predators are taken away, the top layer of the food chain simply disappears – with untold consequences.

152

Aquaculture: a solution to the global fish crisis?

Fish farming - or aquaculture - has been practised for centuries. But modern, industrial fish farming has seen rapid growth in the last few decades - so much so that the FAO believes that by 2020 more than half the world's fish will come from farms.698 World- wide, aquaculture production is expected to nearly double in the next two decades, climbing from 29 million tonnes in 1997 to 54 million tonnes in 2020.699

• Aquaculture is predicted to grow to the point where it provides 40% of fish for human consumption.700 Production from aquaculture is now growing by around 5% a year and supplies 30% of total global production of fish and seafood.701

• Today, the UK is the largest aquaculture producer in the European Union, producing 30% by volume of the EU's total production; 90% of this effort is concentrated in Scotland, where the industry has an annual turnover of around £500 million.702

Farmed fish and big business

Fish farms fit well with retailer demands. Supermarkets favour farmed fish because of its consistency of supply and lower prices. Now salmon can be sold in the same way as beef or lamb.

In North America, the market is growing quickly – by 12-13% a year in recent years. A round half of the fresh and frozen seafood consumed by Americans is farmed.703 Ten years ago, Costco, the American retailer, did not even stock fresh fish. Now it sells 15,000 tonnes of farmed salmon fillets a year. The same story applies to shrimp, now America's most popular seafood.704

As aquaculture grows - and retailers demand ever-lower prices - the industry is undergoing rapid consolidation, as the example of Nutreco shows (see boxes).

153 Nutreco: netting the aquaculture market

In September 2004, Dutch aquaculture company Nutreco merged with Stolt Sea Farm, combining its fish-farming, processing and marketing activities in the new company, Marine Harvest.

Marine Harvest is now the world's largest aquaculture company and the largest producer and supplier of farmed salmon.705 Marine Harvest controls about 20% of the world’s farmed salmon production706

Nutreco's website declares that the strategy of the new Marine Harvest rests on: • "the provision of a dependable supply” • "a growing range of value-added products" • "quality control, tracking and tracing, and leadership in food safety".

Salmon feed industry

The salmon feed industry is strongly concentrated amongst a few players. Worldwide, three feed companies (Nutreco, EWOS and BioMar) control 70-75% of the market.707

Fifteen years ago there were 50 fish farm companies in British Columbia. Now there are 12 with just five multinationals operating 80% of British Columbia's marine salmon farm sites as well as scores of salmon farms around the world.708

Vertical integration: Nutreco is the leading player on the fish feed market, producing 1 million tonnes in 2004. Over 70% of this is used in salmon and sea trout farming, a market in which Nutreco has a 40% share. Of the salmon feed, approximately 30% is destined for Nutreco's own farms. Nutreco supplies specialised feed for more than 50 other fish species.709

But is it sustainable? Environmental implications of fish farming

Fish farms have created serious environmental problems. If environmental costs were to be included in the price of farmed salmon, their price would increase by as much as 57%.710

154 Major concerns include:

• The continued depletion of wild fish populations (known as forage fish) to produce fishmeal and fish oil for aquafeed.711

• Pollution from the faeces, uneaten food and the chemicals used to treat disease and parasitic infections.712

• The introduction of exotic species (including disease and parasites) and increased abundance of pathogens.713

• Interactions between farmed species and wild populations of fish and shellfish. For example, farmed fish can escape and disturb or breed with wild populations.714

Wild stocks become fish-food

It is questionable whether fish farms do in fact preserve fish stocks:

• It takes three tonnes of wild fish to produce one tonne of salmon.715

In order to make the pellets to feed farmed fish, 'industrial' fishing boats literally vacuum the seas of sand eels, sprats, anchovies, sardines and other lesser species. Wild fish are used for fishmeal and fish oil to feed farmed stocks.716

• In 2002, about 24% of estimated world fish production (32 million tonnes) was destined for non-food products, in particular the manufacture of fishmeal and oil.717

• In 2003 fish farms used about 40% of the world's supply of fish oil. Many, including the FAO, predict a worldwide shortage of fish oil within the decade.718

• By the year 2010 the fish-farming industry will use 48% global fishmeal production.719

• The Royal Society for the Protection of Birds in Scotland warns that industrial fisheries harvesting the North Sea for animal and fish feed threaten the survival of coastal species such as puffins, which depend on the small fish used in feed.720

Pollution

155

721

The nutrients in fish waste, which include nitrogen and phosphorous, can cause huge damage to the environment: Nutrients collect in the sediment on the bottom of lakes, causing eutrophication (see section on Water). Biodiversity then suffers as fish and plant life die or migrate.722 But waste from fish farms does not just affect lakes. Offshore fish farming is now growing source of nutrient build-up in some coastal waters.723

• 100 tons of fish, grown in captivity produce the same amount of chemical waste as do 2,800 to 3,200 people in developed countries.724

• A 1,000 tonne salmon farm – small by current industry standards – produces sewage waste equivalent to a town of 20,000 people.725

• Pollution from fish farms on the west coast of Scotland is comparable to the sewage input of up to 9.4 million people.726

• A study by the Scottish government found that 70% to 80% of nutrients given off from salmon are dissolved into the water.727

156 Marine biologists say that siting farms at the mouths of deep-sea lochs is a major problem because there is not enough tidal flush to remove the pollutants and sweep them out to sea. One has likened it to flushing your toilet once every two weeks, or in some cases once every two years.728

Disease

• Salmon farms, each with about one million fish, ensure the rapid spread of parasites and pathogens. For example: in 2001, it was reported that around 20% of farmed salmon in British Columbia were infected with the Kudoa parasite, with rates on some farms reaching 50%.729

Sea Lice

• Researchers looking at a salmon farm in Canada found that infection levels in wild juvenile salmon near the farm were 73 times higher than normal. 730

• In some Scottish fisheries, salmon and sea trout have been found with up to 500 lice on them – causing horrific damage, eating the fish from inside out. Moreover, sea lice have spread from farmed fish to wild stocks, thus endangering the species that fish farming was designed to save.731

• The lice problem in farms has led in some cases to inappropriate use of organophosphates, killing large areas of sea bed. Furthermore, escaped farmed salmon mix with wild fish (that were once distinct to individual river basins) and damage their genetic make-up.732

The Transgenic Gene scenario

The aquaculture industry is exploring the possibility of creating transgenic fish: the marine equivalent of GM crops. The genes of other fish are inserted to promote growth (by increasing food conversion efficiency) and enhance resistance to disease.

Genetically modified (GM) salmon are not currently available for sale to UK consumers and no transgenic animals have been approved for use as human food in the US.733 But government agencies in the US, Canada, Cuba and China are known to be reviewing procedures for the authorisation of commercialising transgenic aquaculture products.734 Already some transgenic animals have been approved for turning into animal feed.735

According to one scientific model, if a transgenic fish escaped and mated with wild fish, the following could happen:

• Purge Scenario

157 - The new trait might simply disappear due to the effects of natural selection.

• Spread Scenario - The new trait might spread through the wild populations offering a survival advantage and persisting in subsequent generations.

• A 2004 study showed that when food was scarce, transgenic Coho salmon (bioengineered for faster growth) out-competed, and even ate, native salmon.736

And accidents will happen

• A 2003 study estimated that some two million salmon escape every year in the North Atlantic, which is equivalent to about 50% of the total pre-fishery abundance of wild salmon in the area.737

• More than 490,000 salmon escaped in Trustna Norway, costing the company £2,673,000. At first the company reported that only 200,000 fish had escaped.738

158 Distribution

‘Distribution’ covers all stages of the value chain between farm and store. This section examines the energy consumption and emissions of food transportation, storage and processing.

Much of the food system’s energy consumption occurs during these intermediary stages. In the US for instance, processing and transportation together account for 39.1% of total energy use in the food system.739

Food is increasingly processed and pre-packaged before it reaches the store. What’s more, demands for all year round supply and just in time delivery are increasing global sourcing and the development of refrigerated supply chains.

Food value chains may be consolidating. But the links in the chain are lengthening. Food is now travelling further than ever before.

159 Food miles

Food now travels vast distances before it reaches our plates. Links in food value chains are lengthening, for two main reasons:

The food system is centralised. A single huge processing plant will now serve many regions. And since transport is still relatively cheap compared with other supply chain costs740, retailers tend to favour centralised sourcing. All of the food that we eat passes through just a handful of large distribution centres.

The food system is also globalised. Leading firms are extending their influence over ever-larger distances. Retailers aim to source food all year round, from all over the world.

“However, some raw materials can only be produced in certain countries and because of our need for a reliable year-round supply, much of it comes from Eastern and Southern Europe and also South and North America. For example we get our strawberries from Poland, Turkey, Mexico, Morocco and Argentina and our cherries come from Serbia and Turkey.”741

Website of food manufacturer, Muller

Industry trends driving food miles

• increased sourcing of food from around the world

• specialisation and centralisation of food processing

• increase in the amount of processing

• increased market share of major supermarket retailers with out of town locations

• movement towards greater centralisation of distribution

• purchasing policies of major retailers greatly favour centralised sourcing.742

Food is being transported around in increasingly complex ways before it reaches the retail shelf. After leaving the farm, products will be sent to a regional or even national plant to be processed and packed. Products will then be sent to a regional or national distribution centre. Finally, after hundreds of miles of travel, the products may even come back to a local store – just a few miles from where they were grown.

160 Furthermore, 'just in time' delivery is becoming more common in retail. This means that supermarkets order on a daily basis for a majority of their products. These orders come from a central distribution centre.

Global food

European supermarket shelves are also brimming with food products from around the world – apples from Chile, kiwis from New Zealand, grapes from South Africa.

• Half of all vegetables and 95% of all fruit consumed in the UK now come from overseas.743.

As countries source their fresh fruit and vegetables from distant fields, a whole industry has sprung up to cater for the supermarket demands of fresh and traceable delivery.

744

As the sale of imported fruit and vegetables increases, sales for local fruit and vegetables are decreasing. For example, just 6.25% (2,500) of Asda products are sourced locally.745

Global sourcing

Global retailers are forming strategic alliances with suppliers (grower-shippers) to structure year-round supply chains. Retailers are looking to source particular products from just a handful of places.

161 • Carrefour buys melons from just three growers in northeast Brazil to supply all of its 67 Brazilian stores and to ship to distribution centres in 21 countries.746

• Ahold has already done global promotions for mangoes and some other items, using shippers in one country as a source for all its stores around the world.747

• At least one Europeam retailer is seeking to source grapefruits for all of its stores worldwide from Florida.748

International food trade trebled between 1968 and 1998.749 This situation means that food is travelling further.

The facts…

• Between 1968 and 1998, world food production increased by 84%, and human population by 91%. Food trade increased by 184%.750

• Since 1961, the tonnage of food shipped between nations has grown twice as fast as the global population. 751

• Exports of food from the UK have soared since 1961, from two million tonnes to 15 million tonnes in 2000.752 Another major study estimated that the UK exported 8.8 million tonnes of food, feed and beverages in 2000 and imported 17 million tonnes.753 But certainly, both imports and exports, measured in tonnes, have at least tripled in the last 20 years. 754

And consumers are no longer surprised when they buy produce from the other side of the world.

• The food on the typical American family’s dinner table has travelled an average of some 1,500 miles.755 An average food item in the US now travels 25% farther than in 1980.756

• The typical American prepared meal contained ingredients from at least five countries outside the United States.757

• One study estimated the distance travelled by the ingredients of a Swedish breakfast (apple, bread, butter, cheese, coffee, cream, orange juice, and sugar). The mileage calculated for the meal was equivalent to the circumference of the earth.758

The result?

Huge increases in transport and energy use.

162

Transportation and emissions

Food now travels further than ever before. Food is being shipped around more and consumers are travelling further to buy their food. Consumer shopping patterns have changed – from frequent visits to local shops towards weekly trips to large out-of-town supermarkets.759

• In the UK, a fifth of food (by weight) moves more than 200km.760

• Over the last 20 years, the transport capacity of food and agricultural products in Germany has doubled.761

• Between 1983 and 1991 the average number of links in the food supply chain rose by around 13%, while their average length increased by 26%.762

Transport consumes a quarter of the world’s energy, and accounts for some 25% of total CO2 emissions. 80% of this can be attributed to road transport. At the same time road and air transport is over 95% dependent on fossil fuels.763 Very simply, fossil fuels are burnt to produce the energy needed to transport food. This contributes to polluting emissions.

163 Transport accounts for a large percentage of air pollution

80 Carbon 70 Monoxide

60 Sulphur 50 Oxides

40 Nitrogen Percentage 30 Oxides

20 Volatile 10 Organic Compounds 0

y rt try po rg ther ne O ns E dus ra In T ousehold H SOURCE?

• Between 1990 and 2000, CO2 emissions from transport increased by 18% in the EU – mainly due to increased road transport in almost all member states.764

• CO2 emissions from freight transport increased by 36% between 1990 and 1999.765

• Between 1989 and 1999 there was a 90% increase in road freight transport of agricultural and food products between the UK and Europe.766

Some food miles are more polluting than others…..

There are many different ways of measuring the impacts and assessing the causes of ‘food miles’. A single indicator based on total food kilometres is an inadequate indicator of sustainability,767 because different forms of transport have different impacts on the environment.

• Transporting the same weight by plane emits almost 6 times as much CO2 as transport by road, nearly 30 times as much as by rail, and over 40 times as much

164 as by ship.768 Other studies have put airfreight just below this level – but still 769 increasing CO2 emissions by up to 30 times that of sea transport.

• Heavy goods vehicles (HGVs) produce five times the emissions of cars per kilometre traveled, but over 1000 car journeys will be made to carry home the contents of just one HGV.770

Food miles in the UK

• In the UK, distances for food transport by road increased by 50% between 1978 and 1999. The food system now accounts for between a third and 40% of all UK road freight.771

One major estimate puts food production, retailing and transport at 8% of the UK’s final energy consumption. And food transport accounts for nearly half of this.772

The vast majority of food in the UK, whether home-grown or imported, travels by road. Over the past 50 years there have been dramatic changes in transport logistics, with most goods now delivered to the supermarket’s own regional distribution centres and taken from there to the shops in large HGVs, replacing local deliveries direct to the store in smaller vehicles. 773

Every year the UK trucks 300 million tonnes of food, drink and agricultural products around the country. This traffic generates 41 billion tonne-kilometres (the transport of one tonne of food over one kilometer) and account for 28% of the total tonne-kilometres travelled by freight in the UK.774

And this is on the rise. Since 1991 food-related tonne-kilometres have grown by 26.6%.775

• 'Out-of-town' supermarkets have led to a massive dependence on car use for shopping. Between 1975 and 1990, distance travelled to shops increased by 60% – and now three- quarters of supermarket customers travel by car.776

• One metric ton of food transported by road in the United Kingdom travelled an average distance of 77 miles in 1998 compared with 51 miles in 1978.777

This means more fuel used to transport food….

The energy used by UK road food transport grew by 33% between 1978 and 1999.778

….and higher emissions, which contribute to climate change

779 CO2 emissions from food transport increased by 12% from 1992 to 2002. By 2002 UK food transport was producing 19 million tonnes of carbon dioxide. Ten million of these

165 tonnes were emitted in the UK and almost all of them were from road transport.780This 781 represented 1.8% of the total annual UK CO2 emissions.

By other calculations, food transport accounts for 3.5% of the UK’s total CO2 emissions, with just under 1% from car-based shopping. 782 Indeed, customers travelling to supermarkets now account for a significant part of the ‘food miles’ problem. By 1996 the average shopper was traveling 22km each week to do the shopping.783

The costs of rising traffic and emissions are enormous

• The direct environmental, social and economic costs of food transport are over £9 billion each year.784 A typical out-of-town superstore causes €38,000 worth of congestions, pollution and associated damage to the local community every week.785

• Another study in 2005 estimates that the transport of agricultural and food produce currently imposes external costs of £2.35 billion per year.786

• The real cost of the average weekly UK food basket per person – £24.79 – would be £2.91 more if externalities and subsidies are included. Shopping transport alone would add 41 pence.787

788

Airfreight

More food is now travelling by air than ever before and this has severe implications for the environment. CO2 emissions attributed to international aviation have increased by 87% between 1990 and 2001.789

166 Even produce that is available closer to the end market is flown across the Atlantic at short notice. For instance, the US supplied 0.4% of UK lettuce consumption in 1997. One supermarket explained that they use the US as a ‘standby’ source if the weather effects UK and European availability.790

• More than 44,000 tons of California-produced food alone are transported by air to other US states each year.791

• The weight of airfreight handled in the UK increased by 50% between 1994 and 2004.792 And food is the largest sector (by weight) of all air-freighted goods.793

• Transport of food by air has the highest CO2 emissions per tonne, and is the fastest growing mode of food transport. Total UK airfreight of food doubled between 1989 and 1999 – and it is predicted to increase at 7.5% each year until 2010.794 Although air freight of food accounts for only 1% of UK tonne- kilometres, it produces 11% of the food transport CO2 (or equivalent) emissions.795

• Air transport accounts for a significant proportion of CO2 emissions (13%) although it accounts for less than 1% of tonne kilometres796

797

167

‘Organic’ emissions

Organic food is free from many pesticides which harm the environment, but much organic food is processed and packaged to the same extent of other food. In California just five huge farms control half of the state’s $400 million organic produce market.798 This domination of organic farming by large companies means that similar methods of distribution are used – with just the same impacts on the environment.

“Someone in Oakland who buys a bottle of Heinz organic ketchup may rightly suspect that the tomatoes were grown in California, reasonably close to home. However, they are unlikely to know that those California- grown tomatoes were shipped to Ontario, Canada to be processed and bottled before returning to retail shelves in Oakland, a round trip of 5,000 miles”799

International Society for Ecology and Culture

And imports of organic food are common, so the emissions from transporting organic produce remains high.

• In 2003-2004, 56% of all organic food by value in the UK was imported.800

• A study in November 2004 found that half of the organic beef and pork from Tesco was imported. The beef was mainly from Argentina and Australia and the pork was from Denmark.801

The energy involved……

Because of the systemic transportation of food around the world, very often it takes more energy to transport the food than the food itself actually contains.

• The fossil fuel energy required to ship a head of lettuce from Salinas Valley, California to Washington D.C. is 36 times the food energy that the lettuce provides.802 And for every calorie of iceberg lettuce flown in from Los Angeles to Western Europe, 127 calories of transport fuel are used.803

• The UK ships parsnips from Australia and carrots from South Africa. Every calorie of carrot imported requires 66 calories of energy to get it here.804

168 • To import 1kg of asparagus from California to Europe requires four litres of fuel.805

• Around 90% of the orange juice concentrate processed in Germany comes from Brazil – and therefore travels an average of 12,000 km. The transport of this concentrate uses around 40 million litres of fuel each year, causing 100,000 tons of CO2 emission.806

• Strawberries from Israel travel 3,100 km to Germany – just one kilogramme requires the use of 1.3 litres of fuel.807

• A kilogramme of grapes from South Africa will use 4.3 litres of fuel on their 10,000 km voyage – releasing 11 kg of carbon dioxide and 74 kg of nitrogen into the atmosphere.808

If considered in terms of electrical energy, the costs of food transport are startling…

Flying a kilo of mange tout 5000 miles from Zambia uses an incredible 130,000 MJ.809 Given that just one megajoule (MJ) of energy will light a 100-watt light bulb for 2.8 hours,810 that kilo of mange-tout could keep a 100-watt light bulb glowing strong for 364,000 hours… that’s over 40 years.

Food miles: a local comparison…

Buying locally drastically reduces the polluting impacts of food transport. A recent British study showed that purchase of local apples resulted in an almost 3,000% reduction in energy use and 87% lower carbon dioxide emissions than apples imported from New Zealand.811

• In Europe, if spring onions were grown and bought locally, there would be 300 times less CO2 emissions than if they were flown in from Mexico and taken home from a supermarket in a car.812

• If Iowans bought just 10% more of their food from within the state, they could collectively save 7.9 million pounds of CO2 emissions a year. And if Japanese families consumed local food instead of imported food, the impact would be equivalent to reducing household energy use by 20%.813

The table below is taken from a Canadian study. It found that locally produced food items in a farmer’s market had travelled an average of 101 km. The same study compared similar items purchased in a nearby supermarket and found that the same imported supermarket food items had travelled an average of 5,364 km.814 Some examples are particularly striking. Lamb chops flown from New Zealand to Canada travelled 193 times

169 further than Canadian produced lamb chops by the time they were purchased by consumers. But the New Zealand lamb chops produced over one thousand times as much CO2 because they were flown in – one kilo of New Zealand lamb producing an incredible 815 eight kilos of CO2.

Source: Foodshare report816

And this locally produced food is often cheaper. A UK study found that local produce in local, independent stores was 17% cheaper than non-discounted food in chain stores. Imported produce was 20% more expensive.817

Despite the environmental costs, food continues to be sourced from global producers and transported long distances to the eventual consumer.

• Data from Sainsbury’s shows that only a third of its UK sales by value were of British food – £6 billion out of £18 billion in sales818

• At the height of the British apple season, only 39% of apples stocked by the average supermarket were British.819

170

What’s the price of them apples?

One survey looked at the country of origin and the varieties of apple on sale in the largest five supermarket chains and in greengrocers during October 2005 – the peak of the UK apple season. 32% of apple varieties were sourced from outside the EU – twice as many as the last time similar survey was undertaken just two years before (when Tesco and Asda only sourced 16% from outside the EU).820

171 Food Swapping

The global food supply system does not just distribute food types to countries which cannot produce those foods themselves. In many cases countries are simply swapping food. ‘Swapped commodities’ refer to instances when technically the same produce is both imported and exported. In the UK ‘swapped’ commodities presently amount to 5.23 million tonnes every year.821

• In 1998, Britain imported 61,400 tonnes of poultry meat from the Netherlands In the same year it exported 33,100 tonnes of poultry meat back to the Netherlands.822

• Britain imported 240,000 tonnes of pork in 1998 and 125,000 tonnes of lamb while it exported 195,000 tonnes of pork and 102,000 tonnes of lamb.823

• In 1997 the UK imported 126 million litres of liquid milk and exported 270 million litres. In the same year the UK imported 23,000 tonnes of milk powder and exported 153,000 tonnes. Most was exported outside the European Union.824

• In one year, the port of New York City exported $431,000 worth of California almonds to Italy, and imported $397,000 worth of Italian almonds to the United States.825

• Germany imports 10.06 million litres of apple juice concentrate from France, while France imports 21.6 million litres of apple juice concentrate from Germany. And what's more, Germany imports 40.8 million litres from China and 179.9 million litres from Turkey – and it exports 161.7 million litres to the US.826

And this has some sad consequences.

• Since 1970 some 60% of the UK’s apple orchards have been lost and the UK now imports half a million tonnes a year, half from outside the EU. This is a crop ideally suited to the UK’s climate.827

• A 2001 study estimates that even if all the UK’s home-grown fruit was consumed domestically, the UK could be only 5% self-sufficient in fruit.828

• Even home reared beef has probably been fed on soya protein imported from the Americas or the Far East.829 Imports of soya, maize, molasses and other feedstuffs together account for roughly a quarter by weight of all animal feed consumed in the UK.830 Millions of acres of land in Latin America for example are producing cattle fodder for the European market. These are known as ‘Ghost Acres’.831

172

Animal Transport

And this unsustainable demand for meat means live animals are also being transported over long distances – to be slaughtered in centralised, large-scale slaughterhouses.

• Livestock production traded across international borders has increased from 4% in the early 1980s to approximately 10%.832

• Over 6 million tonnes of live animals were transported by HGV within the UK in 2002.833

• In 2002, 5 million live animals were imported to the UK and 41 million exported.834

• Between 1994 and 2004, U.S. imports of Canadian hogs increased from 670,000 pigs to about 8.6 million.835

Distances over which live animals are transported within Europe have increased due to the closure of many small local abattoirs partly as a result of charging systems for hygiene inspections. The increased movement of stock poses a new threat as it increases the risk of spreading epidemics throughout a region’s farms. Reductions in live animal movements could help to reduce the rates of spread of animal diseases.836

A recent survey showed that 52% of EU citizens said that they did not take animal welfare considerations into account when buying meat. Overall, 74% of consumers believe they can improve animal welfare through their shopping choices, and 57% are willing to pay more for animal welfare-friendly food products. But the poll also reveals consumers were concerned that such products are difficult to identify.837

Every year in the UK, around one million broiler chickens die in transit.838

173 Production and storage

The rise of pre-prepared foods, combined with consolidation in the food industry as a whole, has led to the development of large, centralised processing and storage facilities.

In Ireland, for example, most potatoes are now sold pre-packed. In 2004, pre-packs accounted for 95% of retail sales.839

The washing and pre-packing of potatoes requires new infrastructure. Growers have invested over €65m in storage facilities over the last ten years. The Irish government has invested a further €20m in grants. There is now in excess of 360,000 tonnes storage capacity of which 117,000 tonnes is refrigerated. Most of the latter is concentrated in the hands of growers farming over 50 hectares.840

The investment has enabled all-year-round supply of potatoes.841 But the benefits, especially in the case of refrigerated storage space, come at huge environmental cost.

174 Refrigeration

Food is refrigerated more in store and in transit. Refrigeration is a key non-transport issue to consider when assessing overall energy consumption and greenhouse gas emissions in the food system.842

• The largest single use of energy in a supermarket is refrigeration. Refrigerated cabinets and storage units use half of a supermarket’s total energy – roughly 2-3 million kilowatts per hour annually – for a 35,000 square foot store.843

And retailers are expanding their offerings of refrigerated food. Chilled ready meals are one of the supermarkets’ most profitable product categories, not least because they are mostly private labels. In the UK, 97% of sales in the ‘refrigerated complete ready meals’ category are for private label brands.844

Major retailers are major consumers of energy

Supermarkets use large amounts of energy. Approximately 3% of the electric energy consumed in Sweden is used in supermarkets. A breakdown of the energy usage shows that typically 47% is used for refrigeration system, 27% for illumination, 13% for fans and climate control, 3% for kitchen, 5% for outdoor usage and 5% for other uses.845

• 48% of a typical Sainsbury’s store’s energy use – 3.2 million kilowatts per hour per year – is consumed by refrigeration.846

Cool chains - how refrigerated supply chains are increasing consolidation and energy use

The following information is taken from a presentation delivered by Marks and Spencers. It details the British food store’s strategy for sourcing fresh produce and the tight control of the ‘cool chain’ required to stock its refrigerated shelves.

175 These are extracts from a slide show 1 presentation made by UK retailer Marks & Spencer at the “CCA Convention “ in Billund held on 24th May 2004

The slides are a fine illustration of many of the problems that this report highlights.

Slide 1 Says: 80% pre-packed 100% chilled

Means: We use lots of packaging materials and lots of energy to refrigerate almost three quarters 2 of our stock.

Slide 2 Says: Chilled 70% Ambient 27% Frozen 3%

Means: We make lavish use of energy because 73% of our food is either frozen or chilled.

Slide 3 Says: Local road freight 16% Int. road freight 24% 3 Sea freight 40% Air freight 20%

Means: We use lots of energy to transport our food because almost a quarter of it travels internationally by road. And a staggering 20% of our fresh produce travels by air, often from the other side of the world.

Slide 4 Says: Where the produce comes from. Another Slide in the presentation listed sources as: Africa >90 £m Asia 20 £m 4 Australasia 20 £m Central America >30 £m EU (approx 50% Spain) >160 £m (Spain >80 £m) Middle East <10 £m North America >40 £m Oceana < 5 £m Rest of Europe 10 £m South America 40 £m Means: Our fresh produce is sourced globally, in fact our supply chain stretches as far as Polynesia. This means we have to use lots of energy to transport it. Especially when so much 176 of it comes by, carbon intensive, air freight. Slide 5 5 Says: Cooled in the field, then blast and hydro cooled, pre-packed, then blast cooled. Transported in refrigerated containers.

Means: We make lavish use of energy to refrigerate our food. And we push our costs to the very bottom of the supply chain by pre- packing and labelling on the farm.

Slide 6 Says: Produce travels to airport, flown to Europe, by road to Distribution Centre. Refrigerated all the way. All auditable.

Means: We make lavish use of energy to transport our food by air (refrigerated every 6 step of the way). Everything is “auditable” so we know that our suppliers are complying with our private standards. All our produce is private label which means the supply chain belongs to us even if we don’t actually own it. Instead of owning it we use partner/suppliers, preferred wholesalers and contract farmers.

Slide 7 Says: Price based on cost of production rather than the marketplace.

Means: Our supply chain is closed. It is not influenced by open markets. Small producers are likely to be excluded. (“Price based on cost of production” suggests use of open book 7 pricing where M&S decides profit margin and return on capital suppliers are to receive.) Another slide in the presentation headed “Cost – Where we need to get to” states that “Rationalisation won’t stop with growers & packers”

Slide 8 Says: Retailers working with less packers and less but bigger growers (the Asda/Wal-Mart model). Perishables becoming more important. Volumes shipped worldwide. Faster more efficient distribution needed.

Means: We want to consolidate our supply chain even more and work with fewer packers and growers. This will mean larger farms, 8 extensive monoculture and will lead to a new round of growers excluded from the market.

Like many retailers we follow also Asda/Wal- Mart’s lead.

We plan to ship more food worldwide. And because we want to do it faster and more efficiently this will probably mean our shippers are to be further consolidated. It also 177 means we are likely to make more use of airfreight and just-in-time deliveries. Slide 9 9 Says: Contrasts structure of present supply chain with structure of desired supply.

Means: We want to consolidate our supply chain even more and we plan to outsource many of our core retail functions. In addition, our relationships and commitment to existing supply chain partners is now to be outsourced.

Slide 10 Says: Desire more retail/logistics interaction. Desire for one stop shop.

Means: Single logistics provider, likely to become conduit for company’s private 10 standards and responsible for enforcing them.

More interaction with logistics provider means tighter integration with company’s systems, especially IT. Logistics provider will be required to make a substantial investment and risks becoming a captive supplier subject to “exit power”. “One stop shop” arrangement suggests use of “open book pricing” where retailer decides suppliers profit margin and return on investment.

Slide 11 Says: Establishment of a code of conduct. Looking for partners they can trust.

Means: We will establish a new set of private 11 standards. While relationships are important to us, you are about to replace many of our existing supply chain partners. But, we promise to be more committed to you than we are to them.

Slide 12 Says: Get colder. Get cheaper. Get faster. Get closer.

Means: Use more, energy intensive, refrigeration.

Push down prices. Further consolidate the supply chain. And, because producers usually end up with the biggest share of price cuts, this 12 will lead to bigger farms, further exclusion of smaller producers and longer supply chains.

Get faster suggests an energy intensive “just in time” supply chain and more use of carbon intensive airfreight.

“Understand your end customer” means “we’re only responding to consumer demand”. 178

Logistics firms gear up for cool chains

In response to the retailer’s plea, large transport and logistics companies are gearing themselves up for this energy intensive form of food distribution.

Cargolux Airlines of Luxembourg, which claims to be Europe’s largest all-cargo airline.847 By December 2006 the company hopes to provide end-to-end cooling systems for transporting supermarkets’ fresh produce.

Cargolux says it will carry “more than 100 tonnes of fresh fruits, vegetables, fish, and flowers at a precise temperature over intercontinental distances without landing”.848

Perishable cargo makes up 10% of its tonnage each year and Cargolux’s sales manager says he expects this to grow by up 20% by the end of 2010. Its perishables originate from the company’s stations in Africa, Pakistan, Thailand, the US, South America as well as from Amsterdam, Brussels, Frankfurt, Paris and the UK. During the last few years the company’s perishable products operation has grown by 7-10% each year849

Cargolux predicts that the sector will move towards the processing of fresh produce at its origin.

“The trend from South Africa, with regards to fruit products carried by air, is towards the higher value, processed, fresh seasonal fruits, already peeled and sliced, and mixed into fruit salads with their juices, to be ready for display on the shelves of European supermarkets”850 Freshinfo News, paraphrasing the sales manager of Cargolux

British airways forcast growth of airfreight in perishables to grow at about 9% percent each year851

All this refrigeration is damaging the environment in different ways. For one thing, it produces Hydrofluorocarbons and Polyfluorocarbons (HFCs and PFCs), which are now the primary causes of Ozone depletion.

The Ozone layer is a separate issue to climate change, although it is frequently damaged by the same pollutants.

HFCs and PFCs also have a ‘radiative’ reinforcing effect. By trapping heat in the atmosphere – just like CO2 – they are also harmful greenhouse gases. Some analyses project that their impact will reach 4–10% of the global total by 2100 and double that if not controlled.852

179 Processing

Consumption of processed foods is rising. Processed food travels far further than non- processed and its total energy consumption, including the processing stage, is some 15 times greater than non-processed food.853

The costs of corn The energy required to produce, process, package, and distribute a can of corn is six times the food energy contained in that very same corn. The packaging alone uses more than twice the energy of production. Driving the corn home from the store and preparing it also uses more energy than production. And what’s more, canned corn is quite typical in its energy intensity.854

855

• Processing accounts for about one-third of the energy use in the U.S. food system. Each calorie of processed food consumes about 1,000 calories of energy.856

180

Some estimated energy inputs for processing various foods are:

• Canned fruits and vegetables: 575 kcal/kg.857

• Frozen fruits and vegetables: 1,815 kcal/kg.858

• Breakfast cereals: 15,675 kcal/kg.859

Worse still is that processed food tends to require more packaging. Food packaging waste accounts for 17.5% of UK household waste.860 (See the following section, ‘Consumption’.)

Processing food to increase its shelf life often requires food to be heated or dehydrated. These treatments require significant amounts of energy.

• Process heating uses approximately 29% of total energy in the food industry. 861

• Process cooling and refrigeration uses around 16% of all energy inputs for the food industry.862

Cutting carrots

Just two companies (Grimmway and Bolthouse) process 90% of the carrots in California. Grimmway and its contract growers harvest carrots from 40,000 acres over the course of a year.

Many of these carrots will be washed, soaked, de-topped, brushed, size sorted, cut, size sorted again, electronically color sorted, hydro-cooled, stored, retrieved, peeled, polished, size-sorted yet again, hand-sorted, hydro-cooled again, electronically scanned, packaged, boxed, topped with ice, stored again, retrieved again and, at last, shipped.

Just 30% of those processed carrots end up in the bag. The rest is whittled away or chopped off, or rejected entirely as too yellow, too blemished or too crooked. About two- 863 thirds of the company’s unprocessed carrots make it to the store shelves.

Another study found the energy needed for a fast food-type hamburger – including, amongst other things, beef, bun, lettuce, cheese, pickles, and onions – was estimated to be between 24 and 65 MJ per kilogram. Unsurprisingly ground beef required the most energy of all.864

Approximately half of all energy end-use consumption is used to change raw materials into products (process use). Processing uses 78% of electricity, with 48% used for machine drive and 25% for process cooling and refrigeration865

181 • 10 energy units are spent for every energy unit of food on our dinner table.866

• 1,000 energy units are used for every energy unit of processed food.867

A huge proportion of the cost of food is due to these stages in food manufacturing.

• At least 40% of the industry shipment value is added through energy intensive manufacturing 868

182 Consumption

The major environmental impact associated with consumption is waste.

The food system produces an enormous amount of waste, in the form of both packaging and food.

Waste occurs at every stage of the value chain. Naturally, the largest share comes at the end of the chain. Food packaging accounts for around 12% of all waste. Households in the UK throw away enough edible food to feed 250,000 people.869

The disposal of the food system’s waste products has several implications for the environment.

Waste

“We have lost touch with the processes that bring it to the table and we don't notice the inefficiency.”870 Timothy Jones, University of Arizona

Europe is creating more and more rubbish. Each year in the European Union alone we throw away 1.3 billion tonnes of waste - some 40 million tonnes of it hazardous. This amounts to about 3.5 tonnes of solid waste for every man, woman and child, according to European Environment Agency statistics.871

Add to this total a further 700 million tonnes of agricultural waste. It is clear that treating and disposing of all this material - without harming the environment - becomes a major problem.872

Here are some of the ways in which packaging and food waste threaten the environment:

• Pollution of ground and surface water

• Soil contamination and nature deterioration

• Health risks from emissions of hazardous gases

• Global warming through emissions of gases from landfill sites (methane) and waste incineration

183 By 2020, the OECD estimates, we could be generating 45% more waste than we did in 1995.873

The modern food system is inherently wasteful.

• Around 25% of the material introduced to the food chain is wasted.874

• In the UK, the food sector accounts for over a third of all waste, a total of 17 million tonnes. Approximately 15% arises from food manufacturing and a further 21% from distribution, retailing and consumption.875

This waste falls into two categories – packaging waste and food waste. These are examined below.

Packaging waste

The modern food system is highly dependent on packaging. The boxes, bags and packets that contain our food account for 10-12% of the value of all food products.876

Packaging waste is on the increase…

• More than two-thirds of packaging waste is related to the consumption of food.877

• At current trends, packaging waste in Europe will rise to 77 million tonnes by 2008, an increase of 18%.878

• Packaging waste represents about 17% of municipal solid waste2 by weight and 3% of the total waste stream. 879

Overall, more than half of all plastic packaging is used to package food.

• The European packaging market produced 12.3 million tonnes of plastics in 1998.

The food packaging market – an overview

Packaging is big business. The value of the global packaging market is around $400bn.880

2 Municipal solid waste (MSW) is defined as ‘waste from households, as well as other waste which, because of its nature or composition, is similar' (European Commission).

184 • The largest European packaging manufacturer, Tetra Pak, has sales almost on a par with food processor Cadbury Schweppes ($8.3bn compared with the confectioner’s $10.1bn).881

• The UK’s largest food and drink packager, Rexam, accounts for approximately 2.5% of the annual world use of aluminum (560, 457 tonnes in 2004).882

And food packaging is a major part of the packaging industry:

• Food and drink account for 70%, in terms of volume,883 and 48%, in terms of value,884 of all packaging worldwide.

• Between 2004 and 2008 the UK market for food and drink packaging is forecast to rise by 3%, reaching an estimated £5.944bn.885 Paper & board will account for an estimated 43% of total sales by 2008. Plastics will represent 39% of the food packaging market, with an estimated value of £1767.5m.886

• The European market for plastics used in food and beverage packaging is set for dramatic growth. A survey suggests total sales will have risen from €3.92 billion in 2000 to €5.71 billion in 2007, equivalent to an annual growth rate of 5.5%. Principal growth engines for the market include the rising sales of convenience foods and ready meals.887

But increases in food consumption alone do not explain the rise in the amount of packaging used for our food. Other factors affect the way food is packaged.

• Increasing number of one-person households – smaller portions which means more packaging.

• Ageing population – development of easy-open features which may require more material per pack.

• More women working full-time outside the home; families tending not to eat together - more ready-meals which need more sophisticated packaging; small portions avoid food wastage, but need more packaging.

• Health concerns - demand for fewer preservatives, means more packaging to provide same shelf-life; encouraging children to eat fruit – small portions packaged to appeal; increased demand for tamper-evidence and child-resistant closures, means more material per pack.888

185 Packaging waste – the facts

• EEA projections show that packaging waste volumes are likely to continue to increase by about 50% between 2000 and 2020 in the EU-15.889 More than two- thirds of this packaging waste is related to the consumption of food.890

• More than half of the total packaging in Sweden is associated with the food supply chain.891

• Over the period 1997 to 2001 the amount of packaging waste generated increased by 7% across the EU as a whole. The EEA estimates that this trend is set to continue, and the amount of packaging waste could increase by 18% from 65 million tonnes in 2000 to 77 million tonnes in 2008.892

• Packaging waste represents about 17% of municipal solid waste by weight and 3% of the total waste stream. For some materials, such as glass, plastics and paper/cardboard, packaging waste represents a high share of the total material waste, about 70% for glass, 60% for plastics and 40% for paper and cardboard. 893

• On average, across the whole of the European Union, the amount of waste packaging generated per head of population increased from 161kg in 1997 to 169kg in 1999.894

• Packaging makes up around a quarter of UK household waste. Nearly 70% of this is food-related. So food packaging waste accounts for 17.5% of total household waste. Food waste accounts for 17% of this total. Therefore, 34.5% of household waste is associated with the food supply chain.895

• The Waste and Resources Action Programme (WRAP) puts this figure slightly higher. It estimates that around half of UK household rubbish originates from supermarkets and convenience stores.896

Nevertheless, packaging is only a part of total waste in the food value chain. In fact, most waste is food waste – peelings and trimmings in the processing stage, or food that has been damaged in transit, unsold, or left on a plate.

186 Food Waste

Much of the food that we buy is not eaten:

• A USDA study estimated that US wastes 43 billion kilogrammes of food a year – an incredible 27% of US food production, but the true figure is as much as 50% according to another major research project.897

• A 2004 study for the Department of Environment, Food and Rural Affairs (DEFRA) estimates that 3%-6% of purchased food is discarded and food waste is 10%-20% of the food consumed..898 Other studies put this figure as high as 30- 40%.899

• It is estimated that the food wasted in the UK is worth between £8bn and £16bn a year900 and that the edible food thrown away could feed more than 250,000 people.901

• The food and drink sector produces about seven million tonnes of waste per year, most of which is food waste - making it the biggest manufacturing producer of industrial waste. And this figure is growing by around 5% per year.902

• The US Environmental Protection Agency (EPA) found that 21.9 million tons of food waste was generated in 1997, representing the third largest category of solid waste (10.1% of the total, by weight).903

Food is lost at every stage of the value chain:

In agriculture, some 30%-40% by weight of all food grown can be lost.904 More slips away at the processing stage. The UK food manufacturing industry throws away at least 1m tonnes a year.905 But most food is wasted at the final stages in the value chain.

Retailers

• According to Biffa, one of the UK’s largest waste handlers, supermarkets and other retailers throw out about 500,000 tonnes of food a year.906

• In the US, each year supermarkets, restaurants and convenience stores toss out approximately 27 million tons of edible food worth $30 billion907

Food service

187

• A study on food losses in four food service institutions in Stockholm, Sweden, found that about one-fifth of the food is lost. Plate waste is the single largest source of loss, at 11–13% of the amount of food served.908

Consumers

• In the UK, 30-40% of all food is never eaten. In the last decade the amount we binned went up by 15%. Every year each of us throws away over £400 worth of food - £20 billion in total. 909

• According to Biffa Waste Services, UK households now throw out more than supermarkets and the food processing industry combined. Food waste is roughly one third by weight of all the waste produced by households.910

• A recent report for Prudential Insurance found that 61% of people admit to throwing out at least one bag of salad each week without even removing the packaging. A similar percentage threw away unused loaves of bread and fruit, while slightly fewer threw out milk, cheese and meat. Also regularly wasted were prepared meals.911

• The average UK family now throws out about 2.7kg (6lb) of food per person per week.912

• A typical US household wastes 14% of all food purchased. 15% of that includes products still within their expiry date, but never opened.913

Reasons

The changing structure of the food chain is not only shaping food production, but also the production of food waste. The examples below highlight the impacts that contracting, standards, retailer concentration and increased consumption of convenience foods can have on waste:

• Food surpluses used to go through wholesalers. But this market now accounts for just 15% of sales, and it does not have the capacity to take extra food.914

• WRAP estimates that 35-40% of biodegradable household waste originates from purchases made in the four major food retailers.915

188 • Chilled ready meals may appear to be more profitbale for retailers, but their shorter shelf life makes them prone to losses through wastage.916

In addition, standards imposed on farmers, which specify the size and shape of produce, may force them to plough up or dispose of large amounts of perfectly good fruit and vegetables.917

189 Waste Disposal

There are several forms of waste disposal, or ‘municipal solid waste management’. The options include:

• Landfill

• Incineration

• Recycling

• Composting

• Anaerobic digestion

• Mechanical biological treatment

918

190 All of these methods of waste disposal have environmental impacts. They all involve emissions of CO2 and other pollutants, noise, odour and congestion from vehicles supporting waste and by-products to and from treatment plants.

But some forms of waste disposal are more environmentally damaging than others, particularly landfill.

Landfill

Landfill is one of the main ways to dispose of packaging and food waste:

• Most of what we throw away is either burnt in incinerators, or dumped into landfill sites (67%).919

• UK government figures show that 17 million tonnes of food worth up to £20bn a year are being put into landfill, even though approximately 25% of it could be safely eaten by people or animals, or turned into compost and energy. The cost of throwing food waste into landfills is more than £175m a year.920

Landfill is causing serious environmental damage

• Landfilling not only takes up more and more valuable land space, it also causes air, water and soil pollution, discharging carbon dioxide (CO2) and methane (CH4) into the atmosphere and chemicals and pesticides into the earth and groundwater. This, in turn, is harmful to human health, as well as to plants and animals.921

• And what's more, few materials degrade in landfills. Even naturally biodegradable products may not degrade due to lack of air and moisture that bacteria need to thrive. As a result, if a landfill was to be opened up 20 years into the future, many of the packaging materials would still be recognisable.922

• Landfill gas is roughly 50% methane.923 According to the EPA, methane is 21 times more efficient at trapping heat than carbon dioxide (CO2) and so is a major cause of global warming.924

• In the US, methane is responsible for 10.6% of global warming damage from human sources. Of this, 35.8% is from landfill gas. Therefore, 3.8% of U.S. global warming damage is from methane in landfill gas.925

191 Despite widespread recognition of the environmental risks, most waste continues to be discharged to landfill:

• According to the UK’s Department for Environment Food and Rural Affairs, in the case of food waste there is “an imperative for disposal away from landfill”.926 But retailers still dispose of large amounts of biodegradable food waste in this way. In 2004, Tesco says it sent 131,000 tonnes of waste to landfill, of which “the majority was food”. Sainsbury's sent 91,000 tonnes to landfills, of which at least 70,000 tonnes is believed to be waste food.927

Moreover, this waste could be put to better use:

• Landfilled waste from food production has been estimated at 2.7 million tonnes per annum, much of which is organic matter. This is, if nothing else, a potential source of energy, and may also be the source of useful materials for other applications. Most of this value is currently written off as unrecoverable.928

Recycling

As an alternative to landfill, recycling can reduce emissions of greenhouse gases and other pollutants since less energy is required to manufacture goods from recycled sources.

The amount of recycling is increasing across Europe:

(Source: The Packaging Federation)929

In the UK, 12 billion plastic carrier bags and 29 billion food and drink cans are thrown away every year.930

192

Export

Another, more recent ‘alternative’ to landfill is the export of waste to landfill sites in other countries, such as China. This dumping of waste in other countries is a growing trend….and concern.

• The UK exported 27% of its packaging waste in 2004 compared to just 4% in 1998931

• New government figures suggest that exports to China are running at 200,000 tonnes of plastic rubbish and 500,000 tonnes of paper and cardboard a year - a huge increase on just three years ago.932

• China drives the global waste trade, importing more than 3m tonnes of waste plastic and 15m tonnes of paper and cardboard a year.933

• Major UK supermarket chains are now sending their waste to China to be recycled. Sainsbury's for instance sends 5,000 tonnes of plastic to China a year.934

193 Human health

This section refers mainly to consumer health.

The first part considers the question of biosecurity, or how safe our food is from contamination. High-profile threats to biosecurity include BSE (mad cow disease) and E coli bacteria. The food industry is demanding greater traceability of food through the value chain. But as the industry consolidates, it may well be creating the conditions that allow diseases to spread.

The second part takes a brief look at a common public health issue – obesity.

Biosecurity

Food is a source of health and nutrition. But it is also a carrier of disease:

• According to the World Health Organisation, food-borne pathogens are responsible for 70% of the roughly 1.5 billion annual episodes of diarrhea and 3 million deaths of children under the age of 5.935

• A UK government survey in August 2001 revealed that two-thirds of fresh chickens in British supermarkets and butchers shops are infected with food poisoning bacteria.936

• BSE cost the US beef industry $4 billion in 2004.937

And the chemicals used in farming are finding their way onto our plates.

• Processed grains, such as bread and pasta, and certain fruits, such apples, peaches, grapes, and pears, are often highly contaminated with organophosphates, a family of chemicals accounting for 70% of the insecticides applied in the US.938 939

Industrial farming creates the conditions that give rise to disease, while the global nature of food value chains means that these diseases can soon spread rapidly:

• According to the Food and Agriculture Organization, the spread of avian flu from Pakistan to China may have been facilitated by the rapid scaling-up of poultry and pig operations and the massive geographic concentration of livestock from industrial animal farms in Thailand, Vietnam and China.940

194 • Most outbreaks of Escherichia coli (E. coli) have been associated with the rise of rapid automated slaughter practices and industrial feedlots systems as the means of raising cattle.941

• A study of cancer causing compounds in farmed and wild salmon found that each of the 14 substances tested were present in higher concentrations in the salmon that had been farmed.942

• Of the 18,000 tonnes of antibiotics used each year for medical and agricultural purposes in the US, 12,600 tonnes are for ‘non-therapeutic’ treatment, in order to promote farm animal growth. According to the World Health Organization and FAO, the widespread use of these drugs in the livestock industry is helping to breed antibiotic-resistant microbes, and making it harder to fight diseases amongst both animals and humans alike.943

Consolidation in the food industry as a whole may also lead to unsafe practices. Despite the better monitoring and enforcement of ‘standards’, the economic squeeze caused by consolidation means that suppliers further down the chain will be tempted by corner- cutting. The incorporation of cheap protein – such as chicken litter or bone meal – into animal feed could save a processor thousands of pounds.

As most people by now know, the result of this particular industrial efficiency was the appearance of bovine spongiform encephalopathy (BSE), or Mad Cow Disease, which killed 175,000 cows in Britain before the government ordered the killing of an additional 2.5 million animals in an attempt to eliminate the disease.944 945

Traceability systems mean that outbreaks of disease can be quickly pin-pointed and products recalled. Traceability is also becoming a unique selling point. For retailers, biosecurity can be a source of competitive advantage – the ability to trace products back to source is one way supermarkets can differentiate their products from those of their rivals.

In future, the need to simultaneously meet the demand for cheap, safe and convenient products on one hand and the need to maintain production efficiency and profitability, one the other hand, is a challenge facing all actors in the industry.946

195 Obesity Oil to fat…

The current structure of the food system seems to encourage unhealthy eating. The rise in convenience foods, growing portion sizes, and increased accessibility of restaurant meals all contribute to the rise in obesity.

For example, research shows that ounce for ounce, foods eaten away from home are more calorie-dense than foods prepared at home.947 A typical American child now gets a quarter of his or her vegetables in the form of French fries or potato chips.948

• Obesity is the cause of 63% of heart attacks in Western Europe and 28% of heart attacks in Central and Eastern Europe.949

• Europeans with obesity problems are more than twice as likely to suffer a heart attack as those who are not obese.950

• In the US, diet-related chronic diseases account for nearly two-thirds of all deaths each year.951

• Today, 3 out of 10 Americans are obese and close to two-thirds are overweight or obese.952

Fast-food chains argue that consumers are free to choose what not to eat – but research to suggest that strong tastes for fat, sugar, and salt are hard-wired into humans.953

196 Appendix: the food supply chain – in detail

This section looks at the food supply chain in more detail. It provides facts and figures for every step in the chain. It begins with retailers, before moving on to processors, producers and consumers, and a final section on food service.

197 Retailers

Retail now dominates the control of food supply. As the final link between the supply chain and consumer, retailers have grown in scale and power. Over past two decades, a few major companies have consolidated and are now expanding their businesses across the globe. This first section of this report looks at these seismic shifts in the global food retail sector – focusing on Europe, the expansion of retail chains and formats into Central and Eastern Europe and the astonishing growth of low-cost discount stores. It provides the essential background detail to the rest of this report.

The Four Trends: Globalisation, Horizontal integration, Concentration and Internationalisation

Retailers now operate in a globalised market. As trade becomes increasingly blind to national boundaries, a single global marketplace has emerged. Food is sourced from – and distributed around – the world and companies are consolidating to survive. A few, large companies are succeeding – exploiting enormous economies of scale to streamline their supply chains. These companies are grabbing ever-larger shares of the market in food and this leads to extreme concentration within the retail market.

The 30 largest supermarket chains now account for about one third of all food sales worldwide.954

Over the past decade or so, the appetites of retailers for mergers and takeovers has led to the emergence of a small group of ‘proto-global’ retail transnational corporations firmly committed to international expansion. These firms include Wal-Mart, Ahold, Carrefour and a new and significant addition, Tesco.955 Between 1980 and 2001, each expanded the number of countries where it operated by at least 270%.956

Globalisation

As the world’s food systems converge, towards a hybrid of U.S. and European practices,957 researchers predict that as few as three or four global supermarket companies – among them, Carrefour, Royal Ahold, and Wal-Mart – will control the distribution of food to consumers worldwide.958

This figure is similar to an estimate made by Royal Ahold’s chairman who predicted that only 5-8 supermarket leaders will survive globally.959

198 In fact, 51 of the 100 largest economies in the world are corporations and food retailers are now among these new economic powerhouses. The global retailer Wal-Mart has a value bigger than Sweden’s GDP and is one of the world’s top 20 economic entities.960

• In 2003, the world’s top 30 grocery retailers were active in 88 countries, an increase of nearly 70% since 1997.961 • And total sales of the world’s 30 largest food retailers rose by 53% during 2002, with some firms registering a two-fold increase in sales.962

The reason for globalization is simple: growth….. Food is a mature market, but there are plenty of countries in the world where food retail has not yet developed and consolidated. Retail growth in these countries offsets increasingly stagnant western European markets963 and international sales have become important to many retailers’ growth strategies.

International expansion since the late 1990s has not been just a defensive reaction to over-dependence on home markets. It is also fuelled by the retailers’ need to sustain earnings growth. In other words, pressure from financial institutions to secure profits has driven this trend.964 This international expansion is clear to see in black and white:

• In 1990 Ahold was present in two countries and Carrefour in six. Wal-Mart and Tesco were only present in their home markets. By 2002, however, Ahold was present in a total of 21 countries, Carrefour in 29, Wal-Mart in 11, and Tesco in13.965 And, today, nearly half of Tesco’s square footage is overseas.966

• Wal-Mart’s international division now makes up nearly one-fifth of the company’s total sales.967 Wal-Mart announced in 2005 that it wants its foreign sales percentage to rise to 30%.968

199

Top 30 Grocery Retailers Worldwide 2004

Horizontal integration

What is horizontal integration? Horizontal integration is when a firm expands across its own area of the market – for example, when one retailer acquires another retailer, or one chicken processor acquires another chicken processor. In food retail, firms that are successful in their domestic markets tend to try and expand overseas, Often they do this by merger or aquisition. This benefits them in three ways:

• new and wider market opportunities • synergies and increases in cost efficiency

200 • the ability to obtain established retail brands from across the world

Mergers and acquisitions create the “synergy effect”, enabling companies to benefit from economies of scale. An increase in buying volume increases the bargaining power in relation to manufacturers. But just as important is the transplanting of a successful format. Operators possess a competitive advantage in the professionalism of their format-specific marketing and management. These companies see more advantages in transferring their concepts themselves than in licensing them to third parties.969

Over the past few years, a wave of acquisitions has taken place in the global food retail market, as companies buy and gain the retail infrastructure of their competitors.

• XXX WHEN At least 300 reported food merger and acquisition transactions have occurred globally every year for the last 5 years.970

• In 2001 alone, there were 57 identified deals amongst the top 30 retailers – involving more than 7,000 stores, and representing around €38.4 billion worth of net sales.971

• Between 1996 and 1999, there had been 385 mergers in the US grocery industry with the acquired companies having combined annual sales in excess of US$67 billion.972

Carrefour: a case in point In 2005 Carrefour acquired hypermarkets in Brazil and Poland, and it bought majority stakes in retail chains in Turkey (Gima and Endi)973, Cyprus, Italy and Romania. The net result: by the end of 2004, Carrefour was trading from 42 hypermarkets, 77 supermarkets and 239 discount stores in Poland, the Czech Republic, Slovakia and Turkey.974 In addition to this, determined to win in the discount format, Carrefour declared its intention to buy low-cost French supermarket Penny Market from Germany's Rewe.975

Retailers can also reshuffle their hands by simply swapping stores with each other. That way companies who are strong in one market and weak in another can swap with companies who have equal and opposite strengths.

• In October 2005, Tesco announced that it will swap six stores and two building projects in Taiwan, in return for 11 Carrefour stores in the Czech Republic and four stores in Slovakia. Both companies were making losses in the areas which they swapped.976 For the two large retailers, the exchange was mutually beneficial.

201

Concentration

This is happening worldwide All these mergers and buy-ups lead to a very concentrated retail market. Fewer and larger transnational corporations are rapidly taking a growing share of the global market in food. 30 retailers account for a third of global food sales now, but that proportion is growing and the number of companies controlling those sales is diminishing.

• The global market share of the top six grocery retailers worldwide is set to rise to nearly 20% in 2008, up from 15.4% in 2003.977

• And Wal-Mart’s share is forecast to rise from 6.7% to 8.6% in the same timeframe.978

Inserted here will be a table demonstrating the concentration forecasts (region by region) of the top ten global retailers: 2003-2008.

TABLE CR-10 (global, by region)

XXX concentration ratio’s explain

Some national markets are oligopsonies XXX CONCENTRATION RATIOSXX

‘Strong oligopsony’ is a market dominated by a few buyers. It is considered to occur when the four firm concentration ratio is above 50%.979 Many grocery markets around the world are oligopsonies:

• In France, in 2000 the top five grocery retailers had an 81% share of the market.980

202 • In the late 1990s the top three supermarket chains in Australia had 75.4% of the grocery market. Now, the top two account for over 75% of Australian grocery sales.981

• In 2003, the top 5 food retailers in the US accounted for 46% of total US sales, almost double the 24% share just six years before.982 Wal-Mart is predicted to control 35% of US food-store-industry sales by 2007.983

Emerging Markets

“The company [Carrefour] knows what it is good at – hypermarket retailing – and it has a history of rolling out this format in ever-distant markets.”984 Mintel, European Retail Digest, 2003

In future, more than half of the growth in global food retail is expected to be in emerging markets.985 Almost all population growth over the next 25 years is predicted to take place in urban centres in low- to middle-income countries, and the global retailers are structuring their organisations to meet this demand.

But, there are also other reasons why foreign markets are attractive:

• Restrictive planning legislation in western Europe have prompted large operators to look further a field for growth opportunities.986 • Market saturation or monopoly problems in the domestic market. 987 • Weaker competition or higher profit margins in the foreign markets988

“global retailing was characterized in the mid-to-late 1990s then by the efforts of an elite group of firms to leverage their increasing core-market scale and the free cash flow for expansionary investment which those markets provided, in order to secure the longer-term higher growth opportunities offered by the emerging markets.”989

The big food retailers are moving into emerging markets at breakneck pace and this trend can be witnessed throughout the world:

• In Latin America, global multinationals now constitute on average 70-80% of the top five supermarket chains per country.990 Supermarkets now control 50–60% of the food retail sector in Latin America – a phenomenal increase from 10–20% in only 10 years.991

203 • Tesco’s operating space in Central and Eastern Europe and East Asia is set to rise to 50.2% of the group’s total operating space by 2007. Up from just 8.1% in 1998.992

• In Thailand, Tesco has become the clear market leader since its arrival in 1997, with its investments accounting for over 5% of all inward foreign direct investment since 1998.993

• Just two multinational companies operating in Nicaragua – CSU (Corporación de Supermercados Unidos) and US PriceSmart – hold 56.4% of the supermarket sector of Nicaragua.994

204 China: foreign firms moving in

The modern food chain comprises around one-quarter of the China’s food retail sales.995 Carrefour entered mainland China in 1995 and in the following six years it built 27 stores there996. By 2001 supermarket shares in the sales of packaged and processed food in urban China had increased by more than 50% from only two years before.997

Supermarkets in China are estimated to turn over US$40 billion of food annually. This is 35% of urban food retailing, and growing fast.998

Carrefour, the world ’s second largest retailers, for the first time, launched 435 private label products in its 46 stores across 23 Chinese cities last year. These Carrefour-branded products include foods, daily necessities and clothes, and are sold only in Carrefour hypermarkets in China. They are priced at around four-fifths the price of the non-private label products.999

In China, Carrefour’s first Dia discount store was opened in 2003, and there are now 164 Dia outlets. Carrefour hopes to open 200 a year over the next few years.1000

Carrefour, for example, recently announced plans to build 10 to 15 new stores each year, one-third of which will be in tne centre and western areas, Spar has also recently entered China, with plans to build 15 hypermarkets in the next three years.1001

For instance, Carrefour, the largest foreign retailer in China, has relocated its regional headquarter for central and western China from Shanghai to Chengdu, the capital city of Sichuan province. Such relocation reflects that the retail giant has been trying hard to consolidate its foothold in China ’s western region. Recently, Carrefour has stated its intention to open 10-15 new stores each year, and about one-third of these stores will be located in the central and western areas. Meanwhile, Walmart, another international retail giant, has begun its penetration into the second-tier cities and the inland regions. Reliable sources say that Walmart is currently negotiating with 10 second-tier c cities, including Jinhua in Zhejiang and Wuhu in Anhui, about opening new stores in these cities. With its aggressive expansion plan, Walmart plans to have over 90 stores nationwide by the end of 2006. Apart from Carrefour and Walmart, Germany-based Metro AG also claimed that it would focus on the northeastern area and was set to open new stores in Dalian, Shenyang, Harbin and Changchun. Lotus Supercenter of Thailand and Auchan of France,are also speeding up their expansion in the western area.1002

205 1003

Strategies for expansion There are many reasons why retailers have sought growth in markets abroad:

New formats: the rise of the bigger superstore

As the concentration of an internationalized market expands, the world is witnessing a rise in the number of superstores and hypermarkets. Wal-Mart Supercenters range from 180,000 to 225,000 square feet.1004 XXX HOW MANY FOOTBALL FIELDS Because of the size of these formats, most are located outside town centres.

• Global store numbers for the top 30 retailers are set to rise by 13% between 2005 and 2009, from 140,700 to 159,000. The large majority of these stores will be opened in Asia & Australasia, Central & Eastern Europe and Latin America.1005 • Between 1999 and 2004, the global numbers of hypermarkets and superstores increased by 20% from 19,356 to more than 23,000 outlets.1006 • Meanwhile the number of discount stores shot up by 37% between 1999 and 2004, rising from 21,060 to nearly 29,000 outlets. Discount stores are forecast to grow by 22% between 2005 and 2009, increasing their numbers to 37,000.1007

206 And the major retailers are also taking an ever-greater share of the convenience market.

• The number of convenience stores developed by the Top 30 grocery retailers worldwide increased by 40% from 23,820 to 33,441 units. This will likely swell to almost 40,000 units by 2009.1008

Despite a less concentrated retail market than Europe, the US has seen an astonishing growth of superstore formats. With a 72% share of US ‘supercenter’ sales,1009 Wal- Mart’s 1,672 ‘supercenters’ account for approximately 42% of its total sales. Their growth has catapulted Wal-Mart to $80 billion in food sales, or $1 out of every $6 spent at retail.1010 And while Wal-Mart plans to open 1,000 new Supercenters in the U.S. by 2010,1011 the superstore formats are putting smaller shops out of business.

• Studies in the US have shown that five years after opening a new Wal-Mart, sales of stores within a 20-mile radius fall by an average of 19%.1012For every new Supercenter that Wal-Mart opens, two local supermarkets will close. 1013

• Since Wal-Mart’s expansion into Iowa, where it now has 60 outlets, a number of stores have shut down, including: 555 grocery stores, 298 hardware stores, 293 building suppliers, 161 variety shops, 158 women’s stores, and 116 pharmacies.1014

207

Top transnational retailers: company profiles

The major retailers have global ambitions. Only five of the top 30 grocery retailers operate in just one domestic market. The rest have substantial and growing foreign sales. Walmart’s estimated annual US stores sales of $285 billion is nearly five times its nearest domestic competitor Kroger Co.1015

Wal-Mart

Number of countries: 11 Number of stores: 5,170 Number of employees: 1.6m Country of origin: USA Wal-Mart is the world’s largest retailer, selling to more than 138 million customers per week worldwide. It is the market leader in three countries. Internationally, the company continues to expand. It already has a presence in the UK and Germany, and is looking at opportunities in Russia, India, Italy, Turkey and in Latin America. It also plans to accelerate store openings in China and expand into smaller Chinese cities.1016 Wal-Mart’s 1,672 supercenters account for approximately 42% of total sales.1017

Carrefour

Number of countries: 29 Number of stores: 11,000 Number of employees: 430,000 Country of origin: France Carrefour is the largest European retailer, operating three main formats: hypermarket, supermarket, and hard discount. Its global reach spans five countries in Latin America, six in North Africa and the Middle East, eight in South East Asia and 11 in Europe. It is the market leader in nine countries worldwide.

Metro Group

Number of countries: 30 Number of stores: 2,447 Number of employees: 251,556 Country of origin: Germany

208 Metro has a strong focus on Central & Eastern European markets such as Russia and the Ukraine. The company recently entered Moldova (December 2004) and Serbia & Montenegro (January 2005).

Royal Ahold

Number of countries: 21 Number of stores: 4,000 Number of employees: 206,441 Country of origin: Netherlands Following an accounting scandal at a US subsidiary in February 2003, Ahold has withdrawn from several markets and decided to refocus its attention on Europe, as part of its ‘road to recovery’ plan. The company has significant operations through subsidiaries in its domestic market, the Netherlands, and in Eastern Europe, especially Slovakia, Poland and the Czech Republic.

Tesco

Number of countries: 13 Number of stores: 2,365 Number of employees: 335,750 Country of origin: UK The vast majority of Tesco stores (1780) are in the UK. The company recently entered Turkey (2003) and China (2004) and operates in 6 countries in Europe. Worldwide it is the market leader in 5 countries. In 2006 Tesco announced plans to enter the US convenience store sector.

REWE

Number of countries: 13 Number of stores: 11,665 Number of employees: 196,224 Country of origin: Germany Founded in 1927, REWE is a cooperative owned by some 3,000 of its independent retail members. The majority of its sales (59%) are in Germany, where it has 9,841 stores. The company has an additional 2,999 stores in Western and Eastern Europe, with Western Europe accounting for 77% of these foreign sales.

209

Costco

Number of countries: 8 Number of stores: 450 (warehouses) Number of employees: 113,000 Country of origin: USA Costco Wholesale Corporation operates membership warehouses based on low prices. The size of each warehouse is approximately 139,000 square feet. Stores offer about 4,000 products to 42 million cardholders.

AEON

Number of countries: 11 Number of stores: 4,000 Number of employees: 194,978 Country of origin: Japan AEON is the largest supermarket chain in Japan, where it has 690 stores. It is the holding company for 148 operations in Asia and the US.

A closer look at Europe’s food retail market

The European consumer market is made up of 519 million people spread over 35 countries, spending €700 billion in supermarkets.1018 Europe has been at the centre of a transformation in food retail. Concentration levels are among the highest in the world and many of today’s global retailers started their expansion from domestic European markets.

Mergers have dominated European food retail over the past decade or so, leading to greater and greater economies of scale in retailer supply and distribution networks.

• Between 1990 and 1998, there were 55 food retailer mergers across Europe.1019

• In 2002 alone, over 180 deals led to nearly 23,500 stores changing hands1020

210 • In Europe, the biggest single deal in 2003 was Rewe's acquisition of the Swiss group Bon appétit, which added €2.1 billion in retail sales.1021

Wal-Mart buys Asda In June 1999 Wal-Mart acquired Asda in a deal worth £6.7bn.1022 The UK company immediately started a price war and continues to drive down retail prices. In 2003, Asda overtook Sainsbury’s to become the UK’s second biggest retailer behind Tesco. But the company has faced criticism for its policy of making exclusive contracts with a small group of ‘preferred suppliers’.1023

Morrisons buy Safeway In 2004 Morrisons acquired Safeway for £3bn to expand its regional coverage. Yet the costs of integrating Safeway have been greater than expected.1024 Soon after the acquisition, the monopoly commission asked Morrison to sell 50 stores and management complications have led to an estimated 200 store closures across the country.1025 The tussle at the top for a dominant share of the UK retail market is still being played out.

As the European single market has lowered many borders – mergers are happening between firms on an international level.

• In 1998, almost half Europe’s €10.8 billion worth of food retail mergers were acquisitions or alliances outside domestic markets – against only 20% five years before.1026

Concentration

In Europe, concentration levels are extremely high. In 2004, the top 30 European grocery retailers captured a combined market share of 63.5%.1027 Incredibly it looks as if the big companies dominating the European food retail market are set to become even bigger.

• In Western Europe concentration levels are higher than on the continent generally. The combined market share of Western Europe’s top 30 grocers is expected to rise to 71.5% in 2009 from 68% in 2004.1028

• In 2009, just 10 retailers in Europe will account for 37.8% of European grocery sales.1029

• The top 10 European grocery retailers will increase their global share from 22.7% to 36.8% between 2000 and 2010.1030

211 To be amongst Europe’s top ten, today’s retailers need annual sales of more than Euros 29 billion.

Europe: Top 30 Grocery Retailers, 2004

212

213 Market share by country

Below is a quick country by country lowdown of Western Europe’s food retail market. It provides a good overview of just how concentrated the markets in food sales have become.

74% of the UK’s grocery market is currently controlled by four companies (Tesco, Asda, Sainsburys and Morrisons).1031 Accounting for more than £1 in every £8 spent on the UK high street,1032 Tesco controls more than 30% of the overall British grocery market. It has been calculated that Tesco has the largest market share in 67 out of 120 postal districts around the country, while Asda controls 23, Sainsbury’s 14 and Morrisons 13. In 14 districts, Tesco has more than 40% of the market and in five towns more than 45% of the market. Tesco has accumulated enough land to develop up to 180 new stores.1033

In Germany, the largest four grocery firms (Metro Group, Rewe Group, Edeka/AVA Group and Aldi Group) have 56% of the total grocery market.1034 In 2003, the top five food and beverage retailers accounted for 73% of national sales and the top ten accounted for 90% national sales.1035

France, Belgium, Spain and the Netherlands all have highly concentrated food retial markets. In France the concentration of the four largest food retailers (Carrefour, ITM, Leclerc, and Casino) is 63%.1036 The largest grocery firms in the Netherlands (Ahold, Casino, Sperwer, and Makro/Metro) account for 66% of grocery sales. 1037 In Spain the top four firms (ElCorte Ingles, Carrefour, Mercadona, and Eroski) control 62% of grocery sales.1038 Belgium is similar, as the four firms (Carrefour, Delhaize LE Lion, Colrupt and Cora Delhaize) take 64% of sales.1039

Italy’s market remains relatively fragmented with the top four taking 36% of grocery sales (Coop Italia, Auchan/Rinascente, Carrefour and Conrad).1040 But the top five chains in Austria cover nearly 90% of the domestic market. The retail market share of REWE Austria alone in 2003 was 36% while the market share of Spar accounted for 34.2%.1041

Market concentration in the northern European countries of Denmark, Norway, Sweden, and Finland is especially high. The largest three retailers in each country have up to 95% of the total market share.1042 In Sweden, the wholesale and retail food market is dominated by three nationwide groups, ICA (37.3%), Coop (18.3%) and Axfood (18.2%). Together they account for almost 75% of the commodity retail market.1043 A few central wholesale organizations (LK-Group, S-Group, Tradeka/Elanto, Spar Group, Wihuri and Stockmann) dominate the Finnish food industry with a combined market share of nearly 80%.1044 And in Norway four retail chains (Norgesgruppen A/S, ICA Norge A/S, Coop, and Rema 1000 Norge) control 99% of all retail stores and also dominate grocery sales through gas stations and kiosks.1045

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Formats in Europe:

The big stores grow… Every food retail market is different. France is clearly the heartland of the hypermarket, first established by Carrefour in 1963. Germany is renowned for the hard discount stores originally developed by Aldi. Superstore retailing and their complementary convenience stores such as Tesco Express and Sainsbury’s Local is the main feature of the UK retail landscape.1046

Supermarket growth has happened across Europe. In Italy, for example, between 1996 and 2000, the number of supermarkets rose from 3,696 to 6,413 – an increase of 74%.1047 And throughout Europe, all of the major retail formats will continue to rise.

…and the small stores become fewer

The rising number of big and discount formats comes at a cost. Despite the rising numbers of hypermarkets. the number of individual food stores is in fact falling, as small shops go out of business. All over Europe, the story is the same: supermarket chains move in, small independent shops shut down. There has been a litany of closures across the continent.

• In Spain the number of traditional and self-service stores fell from 54,448 to 43,193 between 1999 and 2003. In the same period the number of supermarkets increased from 12,565 to 13,720.1048

215 • In 1960 there were 23,900 small retailers in Austria1049 and there were still 20,000 in 1970. By 2003, the number of food shops had dropped to just 6,0831050

• In Italy, the arrival of superstores known as 'ipermercati' has resulted in the closure of 370,000 small, family-run businesses – including half of the country's corner groceries – since 1991.1051

• Between 1985 and 2000, the number of independent grocery retailers in Britain fell from 47,068 to 28,319. The number of butchers fell from 23,000 to 9,721 in the same period.1052 More than 20% of independent food shops closed in the four years before 2004. 2,000 closed down in 2004 alone.1053

Concentrated Convenience: the UK leads the way… Despite small food store closures in the UK, the rise of the chain convenience store has been stellar. There are presently 53,653 small convenience stores in the UK. Researchers predict that by 2009 this market will shrink slightly to 51,950 stores with an enormous market value of £29 billion1054

Serial consolidation since 2002 has resulted in fewer, larger operators controlling the convenience market. Musgrave bought Budgens. Tesco bought Europa and T&S Stores. Co-op bought Balfour, Local Plus and Alldays. Sainsbury’s bought Bell Stores. Somerfield bought Aberness.1055 The large retailers are moving into the small store market.

Tesco’s recent acquisition of 21 petrol stations from Morrisons takes the number of convenience stores it operates to almost 580. The retailer now has 6% of the highly fragmented convenience store market1056 and plans to double the number of Tesco Express convenience stores to 1,200.1057

In a strategy code-named ‘Project-Disco, Wal-Mart’s Asda has recently announced that it will open a new chain of discount convenience stores, stocking only a limited range of goods to challenge Sainsbury’s and Tesco’s convenience stores1058

Expansion into Central and Eastern Europe (CEE)

As Western Europe’s market approaches saturation point, the large retailers are looking to continue their growth. New markets have emerged within Europe and economic

216 growth has accelerated since EU enlargement. Europe’s major retailers are expanding into Central and Eastern Europe at a rate of knots.

Until recently Poland’s food retail market was mostly a Polish affair, but by 2002, no less than 13 of the world’s top 30 grocery retailers had a presence there.1059

Expansion in Central and Eastern Europe is taking place in two phases. International retailers moved first into markets in Central Europe, such as Poland, the Czech Republic and Hungary. Now, as markets in Central Europe have become more concentrated, retailers are starting to look further a field, to the relatively untapped markets of Eastern Europe.

With a grocery market worth €187.8 billion, compared to the UK’s €176.7 billion, Eastern Europe is a tempting prospect for food retailers.1060

Concentration: East follows West

In the former Communist region of Central Europe, concentration is progressing a lot faster than in West, although from a much lower level. The story is the same: fewer retailers are taking larger chunks of food sales. The combined market share of the top 30 grocery retailers operating in the region is set increase to 59.5% in 2009 from 48% in 2004.1061 The retailers are rapidly transforming the food retail scene.

• The leading five food retailers in Lithuania, Slovenia, Estonia and Hungary command over 65% of food sales.1062

• The top five companies in Croatia, Latvia and the Czech Republic have a 35-65% share of the food retail market.1063

• The top ten retailers in Poland are all foreign-owned. Large retail chains are expected to account for 45–50% of Poland’s total food sales by the end of 2005.1064

Recent retailer manoeuvres in CEE

In 2005 the top five companies command less than 24% of the Bulgarian food retail market,1065 but this situation looks set to change. REWE has announced its intention to have 50 hypermarkets in Bulgaria by 2010. The group will invest more than €220m in the country in the next three to five years.1066

217 Tesco planned to add more than 30 stores in Central and Eastern Europe in 2005. The firm already has just under 200 stores across Hungary, the Czech Republic, Slovakia and Poland.1067

Meanwhile, Ahold has acquired 57 stores in the Czech Republic from Austria-based firm Julius Meini in a deal rumoured to be between €20 to €40 million. This will increase the number of Albert supermarkets in the Czech Republic to approximately 250.1068

Formats go East

By 2009, Metro Group is forecast to become the largest retailer in Central and Eastern Europe, ahead of Russian group Pyaterochka, the current leader. Ahold is set to be the third largest.1069 The expansion of the major retailers has of course come hand in hand with larger formats. So the same things are happening in Eastern Europe as happened in Western European markets. The hypermarkets and discount stores arrive and thrive while the smaller shops go out of business.

• Supermarket sales in Eastern Europe are forecast to expand by 150% to just under €9 billion for the leading retailers by 2009.1070 Supermarkets are the most common type of store in Slovakia and in the urban areas of Kiev.1071

• Hypermarkets are popular in the Czech Republic and Hungary, where they account for 35% and 29% of shoppers respectively. 1072

• Discount chains account for nearly a quarter of all food shops in Poland and 22% in Czech Republic and 20 % in Hungary. 1073

And although small stores still dominate in the emerging markets of Romania or Serbia and Montenegro,1074 if the present trends are anything to go by, their future looks bleak.

218 219

Hungary

In Hungary the concentration of the market is striking. The top 10 retailers now account for 89% of the market. This compares with just 22% in food processing and 7% in agriculture.1075

1076

The rise of the Hungarian Hypermarkets In 1997 a mere five hypermarkets existed with only 5% of the country’s food retail sales, Six years later the number of hypermarkets had risen twlevefold with 24% of the total food sales – over half of them are owned by Tesco.

Looking further east….

Similar concentration in the food retail market looks sure to follow in Russia. Investment analysts A.T. Kearney publish a list ranking emerging markets in terms of their suitability for foreign retail investment. When the list was first published in 1995, Poland and Czech Republic both featured in the top 10. Now neither makes the list. Given that major retailers have since entered both these countries, the analysis seems to provide a good indication of future shifts in the retail market.

220 In 2005 a string of Eastern European countries appeared on the list. Slovenia came 5th, followed by Latvia in 6th and Croatia in 7th. Slovakia, Bulgaria, Macedonia, Lithuania, Hungary, Bosnia-Herzegovina and Romania all made the top 30.1077

Russia and the Ukraine rate highly on the index for 2005. Russia was ranked 2nd and the Ukraine 3rd. Those markets are set to expand as the supermarket chains move in.

• By 2020, Russia will have taken over from Germany and France to become the largest food and grocery market in Europe. In the next 15 years the Russian market will be worth €375bn, almost three times more than its current €134bn.1078

• Metro is expanding its cash & carry network and has just opened its first hypermarket in Russia.

Discounters

Discounters are growing fast in Europe are the most extreme example of recent trends in the food supply chain – driving down prices whatever the cost. Discounters are food retailers that offer goods at low prices and on a large scale. They are also known as “value sellers”. The number and market share of discounters across Europe have risen relentlessly over the past decade.

Discounters share some the following common characteristics:

• Aggressive and unambiguous “low price” strategy. With strong cost control, there is a relentless focus on driving down cost, from head office to stores.1079 • Standardised shop formats with simple equipment and no frills. • Limited number of lines, most of them private label.1080 A typical store range for is only 600-1,500 lines.1081 • Efficient logistics programme. Aldi’s logistics and operation system works on a 12% gross margin.1082 • Aggressive expansion programme. Aldi and Lidl are opening new stores across Europe. Aldi has a “real estate” section on its website, looking for offers of raw land or retail space in areas with a population of 15,000 or more. Lidl’s website notes that it has more than 4,000 stores in Europe, and that it is seeking real estate in areas with a population of 5,000 plus.

221 Germany Germany is the ‘discount’ nation of Europe and discounters are still growing in strength, controlling nearly 40% of the German grocery market. The market is dominated by Lidl and Aldi.

• Hypermarkets and discounters now account for about 60% of all retail food and beverage sales, despite accounting for less than one-quarter of all the outlets.1083

• Discount stores took 38.4% of the German retail food sales, up from 26.3% in 2003.1084

• All regular German grocery retailers experienced a considerable sales drop in 2002, but sales at leading discount chains Aldi and Lidl grew by up to 15%.1085 Frozen food sales at the two leading discounters are thought to have grown by an even faster rate – by up to 20%.1086

This breakneck growth comes at a cost. The main association of German retailers issued a report on in March 2004 blaming Aldi and other “hard discounters” for running 35,000 small shops out of business last year. Bavarian dairy farmers have picketed Aldi stores, which they blame for a ruinous 15% plunge in milk prices since 2001.1087

The Rest of Europe

Don’t discount the Discounters as a German phenomenon. Discounter share is increasing rapidly across Europe. They have grown their share over the past decade in all but two of the top 16 European markets. They now account for more than 15% of the total European grocery retail market.1088

222

• Discounters sales are set to grow by 35% across Europe to €154bn by 2009. The discount store is the fastest growing format across the region, with an additional 10,000 stores due to open over the next five years.1089

• Some 47% of all new retail outlets opened in Europe since 1991 have been discount stores. Collectively, they have opened an average of 3.5 stores every day since that year.1090

• The combined share of Aldi and Schwarz Group (Lidl, Kaufland) is set to rise to 7% of the entire European food retail market in 2009 from 6.2% in 2004.1091

1092

Discounters are growing faster than other formats

Although discounters still occupy a lower share in total grocery sales in the UK, they have experienced tremendous growth in an otherwise stagnant market.1093 Further-a-field, Carrefour’s first Dia discount store was opened in China in 2003, and there are now 164 Dia outlets. Carrefour hopes to open 200 a year over the next few years.1094

Lidl expanded into the Czech Republic in 2003 and Hungary in 2004 and earlier this year Rewe’s Penny Markets opened in Romania.1095 Foreign hypermarket operators in Poland, the Czech Republic, Hungary and Slovakia are being hit hard by the Aldi, Lidl and Kaufland hard discount operations which are forcing them to lower their prices.1096 As a result, some of the major supermarket retailers are beginning to copy the format. Tesco has recently opened a discount supermarket concept in the Czech Republic, designed to compete head-on with the fast growing discounters.1097

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Company profiles

Aldi The Aldi Group is the world’s leading discount food chain with more than 6,000 stores.1098 It took 16.7% of the German grocery retail market in 20031099 and increased its sales by 7.3% over the following year to €26.3 billion.1100 According to a poll conducted by AC Nielsen, German consumers spend about $21 per visit to Aldi compared to $23 in hypermarkets, $15 in other discount stores, and $13 in supermarkets.1101

Here’s the story…

In 1946, Karl and Theo Albrecht took over their mother’s small grocery store in Germany’s Ruhr Valley. Over the next decade, they expanded Aldi (short for “Albrecht Discount”) across West Germany, growing to over 300 stores by 1960. A year later, after a disagreement over whether to sell cigarettes in their stores, the brothers split their grocery business into Aldi Süd and Aldi Nord. Ever since, both companies have been legally and organizationally separate. Aldi has expanded internationally, first into Austria, then into Benelux and the US. In 1979 Aldi Süd purchased the American grocery chain Trader Joe’s. The sluggish German economy has actually supported Aldi’s continued growth.1102

224

• Aldi’s operating margin in some regions of Germany is as high as 9.3%, according to McKinsey. 1103 • By 2003, 90% of Germans lived within 15 minutes of an Aldi store1104 • The reclusive Albrecht brothers had also become Germany’s richest men, amassing a combined fortune of more than €30 billion. 1105 • 89% of German households shopped at least once at Aldi last year, according to Nuremberg-based market researcher GfK1106 • Aldi boasts awesome margins, huge market clout, and seemingly unstoppable growth – including an estimated sales increase of 8% a year since 1998.1107

Lidl

Lidl & Schwarz began as a wholesale business in the 1930s. The first Lidl discounter opened in 1973, imitating Aldi’s basic, no frills model. In 1984, the Schwarz group also opened its first Kaufland discount hypermarket. Corporate restructuring in 1999 split Lidl and Kaufland into separate entities, though they share common ownership by Lidl & Schwarz.

1989 marked the start of Lidl’s aggressive international expansion. Beginning with Italy, Spain and the UK, the discounter then expanded into Benelux and the Nordic regions by the mid-1990s. Lidl’s expansionary focus has shifted towards the former Eastern Bloc, (Hungary, Poland, and the Czech Republic) and even announced plans to enter Canada.

Kaufland has grown in importance within the group. Its sales have increased thanks to acquisitions (Magnet/Grosso from Tengelmann in 2000 and Familia’s Bremke and Horster chain in 2003). By 2003 it was the largest hypermarket operator in Germany, ahead of Metro’s Real. 1108

• Today Lidl & Schwarz is the 7th largest European grocery retailer, operating in 15 countries, and generating combined revenue of €34 billion.1109 • By the end of 2003 it had operations in 15 European markets and during 2004 it has entered three new markets – Slovakia and Norway in September and Hungary in November.1110 • In 2003, the Lidl discount division generated 52% of its sales in Germany. France is Lidl’s most important market, outside Germany, and is estimated to deliver 19% of divisional sales. The UK (7.9%), Spain (5.8%) and Italy (4.0%) are also important markets. 1111

Carrefour (Dia) Carrefour’s discount division Dia is number one in Portugal and Greece and number two

225 in Spain. It accounts for 7% of the group’s massive turnover, which is dominated by its hypermarket format (59%).

Mercadona The soft discounter operates exclusively in Spain. Its market share nearly quadrupled in five years to 12.6% in 20021112

Tengelmann (Plus) This company runs hard discounters in Czech Republic, Poland, Portugal and Spain and soft discounters in Austria, Germany, Hungary.

REWE (Penny) Like Tengelmann, REWE is adept at adapting to local markets. It operates hard discounters in Austria, Czech Republic, France Hungary, Italy and soft discounters in Germany and Romania.

Dansk (Netto) Netto is the leading discounter in Denmark where it has 362 stores. Netto opened its first UK store in Leeds in 1990 and now runs 136 stores across the country. Netto is also present in Sweden, Germany, and Poland.

Secrecy Discounters are highly secretive. They give little information away on their websites, are typically adverse to publicity and their telephone numbers tend not to be listed.

The US branch of Aldi - Trader Joe’s – doesn’t name its foreign owners on its website and won’t talk about them.

“Since we are privately held, we don’t disclose any information about our business practices, sales, operationals, or marketing strategies” 1113

Trader Joe’s media-relations manager

Information on Discounters is notoriously hard to come by. A recent report on private labels conducted by ACNielsen had some notable gaps in its research:

“On looking specifically at the coverage of Private Label activity, certain exclusions should be noted that may have affected the country specific trends observed. For example, data from the hard discounters Lidl and Aldi was not included for the following countries: Lidl: Czech Republic, Slovakia, Austria, Finland, France, Greece, Ireland, Netherlands, Norway, Portugal and Sweden.

226 Aldi: Australia (liquor), Denmark, Ireland, France, Netherlands (Private Label products), United States.”1114

ACNielsen, The Power of Private Labels, 2005

German companies with at least 5,000 employees and $167 million in annual sales are under legal obligation to disclose their results and consult with unions. A former employee says Aldi carved the Aldi Group into 60 separate operating units as a way to circumvent this German disclosure law.1115

Discounter success is all down to private label The success of discounters is in part down to the cost-efficiency of selling food under their own brand names. Every discounter sells a large proportion of its food under private label.

• 95% of Aldi’s sales are private label1116 • Spain’s Mercadona increased its private label share from about 3% in 1997 to 51% in 20021117 • Half of KwikSave’s UK grocery sales are private label1118

227

Processors

Processors manufacture and often package the food grown by farmers. They turn potatoes into frozen French fries; cows into mince; chickpeas into dry chickpeas; cocoa, flavourings and sugar into chocolate bars. As consumers, much of our food has been processed in some way. This section looks at the globalization of the food manufacturing industry and looks to the already concentrated US processing market as an example of where consolidation trends are leading.

Processors are a mixed bag: they encompass a range of companies from drinks manufacturers to meat packers. Increasingly they are co-ordinating their production with the primary stages of agriculture and so the distinction between producer and manufacturer is becoming more and more blurred.

For example the J.R. Simplot Company is a food and agribusiness corporation based in Idaho. It is one of the world’ largest frozen-potato processors, annually producing 3 billion pounds of french fries and other potato ‘products’ worldwide. It also farms over 80,000 Simplot-owned acres of farmland – many of which are growing the potatoes it processes.

Processors bring together raw foodstuffs and churn out higher value food ‘products’ – among the results are ready meals and frozen foods synthesizing sometimes dozens of separate ingredients. This processing is big business. The global processed food market was worth a whopping $3.24 trillion in 2004.1119 High-value and processed foods now account for two-thirds of all agricultural trade1120 and the European food and drink industry takes a large slice of that pie:

• The EU's food and drink industry is the largest manufacturing sector in the EU. In 2002, it accounted for 13.6% of the total EU-15 manufacturing sector1121

• In 2003 the turnover of the food and drink industry in the EU25 amounted to €799bn.1122

• In 2003 the top four European food processing countries were France, Germany, the UK and Italy – each with annual sales of over €100 billion1123

Trends The same trends of horizontal integration, concentration and internationalisation have been felt in the processing industry, but to a lesser extent. A few multinationals (Unilever, Diageo, Danone, Cadbury Schweppes) compete on the global market with

228 global brands and a large range of products, while smaller enterprises serve local markets and concentrate on regional preferences.1124

Europe's food and drink industry, however, remains quite fragmented. The top ten food and drink producers in Europe's largest countries still account for only about 14% of the market - a low level compared with grocery retailing (42%) and pharmaceuticals (35%).1125 The industry employs 4.1m people in Europe, with almost two-thirds of those working in small and medium sized firms.1126

Horizontal integration

But while the European food manufacturing market is still relatively fragmented, a surge in merger and acquisitions within the industry is forecast for the next few years.1127 In the future it seems certain there will be fewer and larger companies manufacturing our food.

“As global competition hots up and as the retailers become increasingly international, we can be in little doubt that food companies will be looking to strengthen their position by further consolidation in their core markets”1128 Neil Sutton, head of PWC's corporate finance food division

• Between 2000 and 2004, there were over 1800 food deals in Europe valued at around €48bn.1129 • The largest move in 2004 was the purchase of Weetabix by Hicks, muse, Tate & Furst (HMTF) for €915 million • There are clearly fewer companies around. Between 1997 and 2002 the number of food manufacturing enterprises in the UK registered for VAT fell by 11.9%1130

229 1131

1132

As the big become bigger there will be an inevitable slow-down of mergers and acquisitions. Since 2002, the number of deals has dropped in most European countries, but significant consolidation amongst food companies continues to take place in the UK and Spain.

230 1133

The numbers of mergers are only one indicator of consolidation. While the number of ‘merger and acquisition’ deals in the UK fell from 69 in 2003 to 56 the following year, the average value of these deals increased to €24m from €98m in 2003. As the big get bigger, the deals become bigger and fewer mergers are required to achieve massive consolidation.1134

This projected consolidation is driven by a desire for bigger profits. Analysis of the beer, confectionery, spirits and yoghurt production markets found that the category leader in any national market typically earned margins up to twice those of competitors half its size.1135

Concentration As food processors become bigger, these newly expanded companies are controlling ever larger portions of the market. The result of this merger activity is an increasingly concentrated market in the processing of food.

• In 2001, 0.9% of companies in the EU-25’s food and drink sector accounted for over 51.5% of total sales.1136 • 78.9% of Europe’s food and drink sector are small companies (1-9 employees) They account for only 7.3% of sales.1137

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Top transnational processors: the company profiles

232 1138

Company profiles

Nestlé

Number of countries: 86 Products: beverages, baby food, pet food, chocolate, confectionery Brands: Nescafe, Perrier, Shredded Wheat, KitKat, Polo Number of employees: 247,000 Headquartered in Vevey, Switzerland, Nestlé is the world’s largest food and beverage company. It runs 511 factories in 86 countries and employs 253,000 people of over 100 nationalities. Its 8,500 brands are sold in almost every country in the world. In addition to food products, Nestlé owns about 75% of Alcon Inc. (ophthalmic drugs, contact-lens solutions, and equipment for ocular surgery) and almost 27% of cosmetic giant L'Oréal. A new arrangement with L’Oréal is part of a longer-range plan to transform itself from a food company to a health and well-being company with a strong line of neutraceuticals aimed at affluent retirees.1139

Cargill Inc.

233

Number of countries: 59 Products: grain, sugar, feed and fertilizer Brands: Diamond Crystal (salt), Gerkens (cocoa), Honeysuckle White (poultry), and Sterling Silver (fresh meats) Number of employees: 124,000 As the leading American grain producer, Cargill’s mission statement is to be “the global leader in nourishing people”1140. It is the largest private company in the US, 85% owned by descendants of the founding Cargill and MacMillan families. The company recently said it would merge its fertiliser operations with publicly listed IMC Global and carve out some of its riskier capital markets operations into a hedge fund.1141 The commodities it trades in and processes feed billions of consumers round the world every day and include all the eggs used in McDonald's stores in the US. (IMPROVE)

Kraft Foods

Number of countries: 151 Products: Cheese, chocolate, cereal Brands: Philadelphia, Milka, Shredded Wheat Number of employees: 98,000 Kraft is 85% owned by tobacco company Philip Morris, which took control in 1988. Kraft Foods operates two divisions, in North America and Europe. Its global brands cover beverages, snacks, desserts, cheese and other enhancers, pizzas and convenience meals.

Unilever

Number of countries: 88 Products: margarine, soups and sauces, ready meals, ice cream, shampoo and skin care Brands: PG Tips, Ben & Jerry’s, Vaseline Number of employees: 279,000 Unilever was founded in 1930, with the merger of soap maker Lever Brothers and margarine producer Margarine Uni, who combined forces to secure bulk imports of palm oil (a major raw material in soaps and spreads). The company continues to offer an assortment of food and consumer products.

ConAgra

Number of countries: 35 Products: prepared and frozen food

234 Brands: Slim Jim, La Choy, MaMa Rosa’s Number of employees: 39,000 ConAgra has recently moved away from raw foods to focus on branded, ‘value-added’ products. The company has sold its fresh beef, pork and chicken processing businesses and has acquired several well known US food brands. In the US, the company is the largest supplier of foodservice and restaurants. It also remains one of the top buyers and processors of grain in the US. ConAgra retains an agricultural products division, which sells seed, chemicals and fertilizer products to farmers.

Pepsico

Number of countries: 200 Products: beverages and snacks Brands: Pepsi, Sunny Delight, Doritos, Frappucino (for Starbucks) Number of employees: 143,000 Pepsico makes, markets and sells carbonated and non-carbonated drinks and grain based snacks. The company consists of Frito-Lay North America, PepsiCo Beverages North America, PepsiCo International and Quaker Foods North America. PepsiCo differs from its competitor The Coca-Cola Company, having three times as many employees, larger revenues, and a much more expensive stock price, but a smaller net profit.

Coca-Cola

Number of countries: 200 Products: beverages Brands: Coca-Cola, Diet Coke, Minute Maid Number of employees: 50,000 Sells about 400 drink brands, including coffees, juices, sports drinks, and teas, in about 200 nations. More than 70% of the company’s income is from outside the US. The Coca- Cola Company owns four of the world’s top five soft-drink brands (Coca-Cola, Diet Coke, Fanta, and Sprite). Although it does no bottling itself, the company owns about 36% of Coca-Cola Enterprises, the largest Coke bottler in the world.

Diageo

Number of countries: 80 Products: Beers, wines, spirits Brands: Guinness, Baileys, Johnnie Walker, Smirnoff Number of employees: 20,000

235 Diageo was formed in 1997, following the merger of Guinness and GrandMet and is headquartered in London. The company sells its products in 180 markets around the world.

Mars

Number of countries: 65 Products: confectionery, pet food, main meal food Brands: Mars, Whiskas, Uncle Ben’s, Dolmio Number of employees: Mars is one of the world’s largest privately-owned businesses. Mars, Incorporated now operates its three core businesses - snackfood, petcare and main meal food - under the Masterfoods name in most parts of the world. Outside the Masterfoods structure, Mars also operates a smaller business, MEI/Drinks Group, which makes drinks vending machines.

Danone

Number of countries: 120 Products: dairy, water Brands: Evian, Volvic, Activia Number of employees: 90,000 Worldwide Danone is number one in fresh dairy products, number one in bottled water (by volume), and number two in biscuits and cereal products. Evian, which sells 1.5 billion bottles every year, is present in 125 countries. Today nearly 31% of Danone’s sales are in emerging markets. Danone’s target is to do 40% of business in emerging markets and 60% in developed countries. It is already a market leader in China and Indonesia.

Source: Company websites, Hoovers, Yahoo finance, TMCnet.com

Processors in the US: leading the way in concentration

Processing in Europe is less concentrated than in the US. In Europe, consolidation trends have been retailer led whereas in the US they have begun further up the supply chain.1142 US agricultural markets are dominated by a small number of enormous processing firms and nowhere is this concentration more apparent than in meat processing.

236 The market for value-added meat processing has risen dramatically. In 1974 only 6% of broilers were marketed to foodservice operators and retailers as further processed products (such as burgers, breaded strips, and nuggets). By 2001, the share of these ‘further-processed products’ had soared to 46.5%.1143

Since the late 1980s, the concentration ratios for the top four companies in each of the different meat processing industries show an astonishing and rapidly rising level of concentration.

• The top four beef packers made up 83.5% of the market in 2003 • The top four pork packers made up 64% of the market in 2003 • The top four broiler processors made up 56% of the market in 2003 • The top four turkey processors made up 51% of the market in 20031144

237

The same is true for other agricultural sectors • the top four firms control 60% of terminal grain handling1145 • the top four firms control 80% of soybean crushing1146 • the top four firms control 61% of flour milling1147 • the top three firms control 81% of corn exports1148

Two companies, Cargill and ADM, are in the top groups for all these categories of concentration.1149 Cargill's corporate goal is to double in size every five to seven years – and it says it has achieved this for the past 40 years.1150

Concentration in Europe

Cargill’s consolidation in Europe control of European food manufacturing looks to be strengthening as well.

• Cargill purchased a Russian food-oil refinery worth €46.1 million in February 2005, thereby expanding its reach in the main vegetable oil market for the Central and Eastern European region. 1151

• Cargill also acquired the Romanian oilseed maker Olpo Podari in May 2005. Cargill now has a comprehensive network of grain storage facilities in the Romanian grain belt. New construction will give Cargill one of the largest oil factories in south-east Europe.1152

238

In certain sectors, consolidation and concentration in Europe seems to be following the US lead. In UK there are signs already emerging of a number of very large, internationally operating dairy companies. The NFU urges major dairy manufacturers to explore joint initiatives with those overseas to increase economies of scale and better exploit markets.1153

“While size is not everything, it will assist in reducing supply chain costs and developing a competitive advantage for those companies that do consolidate.”1154

UK National Farmers Union

Input Suppliers

Input suppliers are involved with the production of food itself. The market for farm inputs – from the supply of seeds, to the sales of herbicides and pesticides – has globalised over the past few decades, leading to market concentration. In other words, a very small number of companies are producing the supplies farmers need. This has been a major worry in the EU, calling for anti-trust and merger-control enforcement.

Recent consolidation in agricultural industry research and development has led to the formation of “life science” and “crop solution” companies that apply biotechnology to the agrochemical and agriculture industries.1155

This section examines the agrochemical companies and the seed companies separately, but recognises there are many overlaps between the two industries. Companies now routinely manufacture genetically engineered crops that are resistant to the herbicides they also produce. The industry in agricultural input supplies has become increasingly integrated.

Agrochemicals

Agrochemicals: horizontal integration, concentration and internationalisation

The global agrochemical sector is already huge and trends suggest it is getting bigger. Crop protection products such as insecticides, fungicides and herbicides accounted for US $27 billion in 20031156. This surged to US $32.6 billion in 2004 - the largest single

239 year growth for 10 years. 1157 It now stands at $35.4 billion.1158 The most noticeable trend is the increased share of herbicides and reduced share of insecticides.1159

Bayer’s acquisition of Aventis CropScience saw the leading group of seven agrochemical firms dwindle to six1160 and the agrochemicals market is now so concentrated that just a handful of firms control over three quarters of global sales.

• Six companies accounted for 73% of the agrochemicals market in 2002, 81% in 2003, and 77% in 2004.1161

• The two largest companies (Bayer and Syngenta) now command 37% of all agrochemical sales.1162

• Three companies (Bayer, Syngenta and BASF) have a 61% share of the Latin American market for pesticides and GM crops.1163

1164

240 1165

Seed Companies

Seed Companies: horizontal integration, concentration and internationalisation

Only 25 years ago, not one of the 7,000 seed producers had an identifiable share of the commercial seed market. Since then, there has been massive consolidation in the seed industry and the manipulation of seeds has become increasingly sophisticated, enabling firms to manufacture seeds with specific traits for specific climates and soils.

“control and ownership of seeds – the first link in the food chain – has far- reaching implications for global food security.” 1166 ETC Group, 2005

The commercial seed industry has a total worldwide market of approximately US$21 billion per annum.1167 While the market is significantly smaller than the pesticide market, it has become just as concentrated. The last year has seen a dramatic rise in seed industry takeovers. Acquisitions by Monsanto, Dupont and Syngenta – all among the world’s top- ranking pesticide firms – have consolidated these firms as the major players.

• In 2002 the top ten seed corporations accounted for one-third of the world's commercial seed sales.1168

• Now, only three years later, just ten companies control half of the world’s commercial seed sales.1169

World’s Top 10 Seed Companies + 1

241 Company 2004 seed sales (US Millions)

1. Monsanto (US) $2,2771 + $526 + Seminis (acquired by Monsanto 3/05) pro forma = $2,803 2. DuPont/Pioneer (US) $2,600 3. Syngenta (Switzerland) $1,239 4. Groupe Limagrain (France) $1,0442 5. KWS AG (Germany) $ 6223 6. Land O’ Lakes (US) $ 5384 7. Sakata (Japan) $ 4165 8. Bayer Crop Science (Germany) $ 3876 9. Taikii (Japan) $ 3667 10. DLF-Trifolium (Denmark) $ 3208 11. Delta & Pine Land (US) $ 315 1170

Major Players: profiles

There are four ‘billion dollar plus’ companies in the market.

Monsanto Monsanto is the world’s leading pesticide manufacturers and is the global leader in agricultural biotechnology. Between 1996 and 1998, Monsanto followed a strategy of buying out and forming relationships with the majority of U.S. and international seed companies.1171 Monsanto's stated goal is to strive to “integrate insect protection and weed control into seeds.”1172

Monsanto acquired Seminis – a world leader in vegetable seeds – for $1.4 billion in January 2005,1173 acquiring the capacity to supply over 3,500 seed varieties to fruit and vegetable growers in 150 countries.1174 The acquisition has given Monsanto a dominant position in the fast-growing vegetable seed market.. According to Monsanto gross profit (as percent of sales) is higher for vegetables than for soybeans or for corn.1175

• In 2004, Monsanto’s biotech seeds and trait technology accounted for 88% of the total GM crop area worldwide.1176 • Monsanto’s biotech trait acreage covered 175.7 million acres in 2004 – roughly the size of Zambia. (one acre = .4047 hectare)1177 • For cucumbers, Monsanto controls 38% of the global seed market1178 • Between 1996 and 2003, according to the company, Monsanto increased its share of US corn farmers’ input expenditures from 7% to 20%.1179

Dupont

242 Dupont led the way in consolidating the commerical seed market.1180 Knocked from its top-spot as a result of Monsanto’s manouevre with Seminis, Dupont still commands seed sales of $US 2.6 billion. The company has subsidiaries “on every crop-producing continent of the world.”1181

Syngenta Syngenta was formed in 2000 when Novartis merged with AstraZeneca’s agribusiness. In 2004, 52% of Syngenta’s seed sales came from field crops with the rest coming from vegetables and flowers. Its annual seed sales are worth US$1.2 billion.1182

Group Limagrain Limagrain is an independent cooperative and the European leader for maize and wheat seeds. Its subsidiary, Vilmorin Clause & Cie, is the world leader for commercial home garden seeds. Limagrain’s 2004 turnover for field seeds, vegetable seeds and garden seeds was just over US $1 billion.

Life science mergers and alliances

The mergers and acquisitions in the input supply sector represent not just a consolidation of seed companies and pesticide sellers, but a consolidation of the entire food chain. For example, when Monsanto and Cargill undertook a joint venture in 19981183, they controlled seed, fertilisers, pesticides, farm finance, grain collection and processing, livestock-feed processing, livestock production and slaughtering, as well as several processed-food brands. Similar alliances have formed across the food supply chain. ConAgra subsidiary United Agri Products (seeds, pesticides, fertilisers) and DuPont (chemicals) set up a joint venture to explore ‘developmental businesses’.1184

Biotechnology and GM

Genetic Modification (GM) technology is now integral to the strategies of all the major seed companies. Despite controversy and lack of public acceptance, the market in GM seeds is growing.1185 Genetically modified seeds now account for one quarter of the total value of the commercial seed market worldwide.1186

In the USA almost all of the GM crops have been engineered to increase crop yield: either the crop has been engineered to have herbicide resistance or to prevent insect attack by producing an insect toxin from the bacterium Bacillus thuringiensis (Bt). Now that genetically modified seeds are being used, companies such as Monsanto gain even more control over the food chain. These seeds were originally developed to strengthen insect and virus resistance. But recently companies have been producing plants engineered to resist or respond only to their own agrochemicals.

243

• Monsanto sells seeds that produce crops engineered to tolerate heavier doses of its best-selling herbicide, ‘Roundup’.

In 2004 an estimated 200 million acres were devoted to GM crops (about 2% of the total global agricultural land), grown by 8 million farmers in 17 nations.1187 The US is by far the largest grower of GM crops, followed by Argentina, Canada, Brazil, China.

• The market for biotechnology seed traits (such as herbicide tolerance and insect resistance) has mushroomed from $280 million in 1996 to $4.6 billion in 2004 – this is a 17-fold increase over only nine years.1188

• Just one company – Monsanto – accounts for over 90% of GM crops grown worldwide.1189

• In the US in 2004 GM herbicide-resistant varieties were expected to constitute 86% of all soybean hectares and 40% of maize.1190

The growth and concentration in the biotech and GM sectors is concerning. The excessively broad intellectual property rights given to some companies can hinder the market for innovation.1191 But the main implications explored in this report are those for the environment. These are explored in Section 3.

244 Producers

As global retailers and manufacturers exercise supply chain management and sourcing on an increasingly international level, farmers are now competing to sell their produce on a global market.

Farmers have lost their traditional position as the essential suppliers of food. They no longer control the know-how of farming, increasingly relying upon the ‘crop solutions’ of input suppliers and adapting to the livestock production methods imposed by processors. Traditional farming activity such as the rearing and slaughtering of chicken is now no longer seen as farming in some US states:

“Farming… does not include…the production of poultry or poultry products”

Minnesota Statutes1192

The massive consolidations of the food retail, manufacturing and agricultural inputs industries have seen farmers reeling from the consequences. Quite simply, there are fewer buyers buying farm produce. High competition means farms must grow larger to reduce costs through economies of scale. Farms have had to become more efficient, specialized and operationally hi-tech to cope with falling margins.

This section looks at the growing concentration and specialization of farming and highlights some of the consequences – namely, spiraling farm incomes and the demise of the small farm.

Trends

World output of food per head has gone up by some 25% over the past 40 years, even though land use has grown by only 10% and world population has increased by 90%.1193 European farmers have become more productive, but at what cost?

Since the 1980s European farms have become larger whilst the number of farmers has shrunk.1194 This has been more dramatic in some European countries than others. The main environmental issues related to agriculture reflect two dominant trends in farming:

• intensification and specialization in some areas • marginalization and abandonment in others

Both these processes involve a move away from traditional forms of low-input, labour- intensive agriculture to more intensive farming using hi-tech agricultural methods.1195 The EU agri-foods market is one of the largest in the world and EU farms are

245 comparatively productive in global terms. But as agriculture becomes more specialized and less labour intensive, farming as a traditional way of life is in decline.

The drop in the number of young people taking up farming is a case in point. Between 1990 and 2003, the number of agricultural holders under 35 fell in every European country, in many cases by more than half. In France the number fell from 120,800 to 54,370.1196

Concentration

Insights from the US…

The US provides a textbook case-study of concentration in farming. Seventy years ago there were nearly seven million US farms.1197 Today, after the onslaught of industrial agriculture, those numbers have tumbled to less than 2 million.1198 Large farms are now producing the majority of America’s food.

• In 1997 just 2% of U.S. farms accounted for half of all agricultural sales1199 The vast majority of U.S. farms are small family farms (91%), but they account for just 28% of production. 1200

• Today, five giant farms control half of the state’s $400 million organic produce market.1201

• The share of sales attributed to large farms increased steadily from 51% in 1982 to 72% in 1997.1202 In 2001 ‘very large’ (farms with annual sales of over $500,000) increased their share of the value of production from 32% to 44%.1203

Concentration has been underway for at least a century. It took 17% of U.S. farms to produce 50% of farm sales in 1900. Now the situation has changed dramatically and small farms are being forced either out of work or to diversify.

• More than half of US farm households lose money farming.1204

• Between 1987 and 1992, the US lost an average of 32,500 farms per year. 80% of these were family-run. 1205

• Family farm households now earn 91% of their income from sources other than farming.1206

• The state of Missouri lost about 75% of its hog farmers over the ten years since large-scale contract operations first entered the state.1207

246

There are now fewer and larger farms involved in the primary production of food supply and the same trend has been witnessed across North America. Between 1980 and 1997, the number of farms in Canada fell from nearly 320,000 to 280,000, while the average size in acres grew from 275 to 610 acres.1208

Producers have had to adapt to the massive consolidations downstream in the food value chain. This has resulted in the rapid development of large-scale, intensive agriculture. In California, for example, retail consolidation drove a group of produce companies - including Teixera Farms, PacFresh Produce, Gold Coast Packaging, A&A Farming, Byrd Farms and Church Brothers - to form one large company, FreshKist Produce. This massive new conglomerate expects to ship an estimated 15-20 million cartons of Californian produce to global destinations each year.1209

However, the small farms are left to deal with the land. Although small farm groups accounted for only 32% of total US agricultural production, they collectively held 72% of farm assets, including 74% of the land acreage owned by farms. As custodians of this huge share of farmland, small farms play a major role in US environmental land management.1210

Europe

The very same shifts in agricultural production have been experienced in Europe. Farmers have been run out of business as only the largest and most specialised survive. Farms are becoming bigger, as agriculture becomes more intensified.

• Between 1990 and 2003, the total number of large agricultural holdings (more than 50 hectares) increased in almost every European country1211

• In Germany, the number of large agricultural holdings increased from 56,280 in 1990 to 83,540 in 2003. In France the number of large farms grew by 22,750 in the same time period.1212

As the number of large farms increased, a far higher number of smaller farms in Europe has been lost. There are now far fewer farmers involved in agriculture. The six founding members of Europe’s Common Agricultural Policy had 22 million farmers in 1957. By 2003 that number had fallen to just seven million.1213

“Small farms will be eliminated as the mass-oriented global food system closes its markets to them.”1214

247 • Between 1990 and 2003, the total number of farms fell in almost every European country.1215 In Germany, the total number of farms fell from 653,000 to 412,000.1216 France alone lost 309,000 farms1217

• Denmark lost 60% of its farms between 1970 and 1999,1218 with the number of dairy factories in Denmark falling from 1,350 in 1960 to just 45 in 1999.1219

• In 1999, 200,000 farmers and 600,000 beef producers gave up agriculture.1220

• In 2002, 400 farming jobs were being lost each week in the UK1221

Those farmers that have survived are suffering the effects lower farm prices. Retail competition has driven down the prices of agricultural produce. In the UK for example, for every pound’s-worth of food sold at retail, farmers earn on average only 34 pence - a share that has dropped by 28% since the late 1980s.1222 The drop in margins is much higher for particular farm outputs and the price paid often falls below the cost of production. In a 2003 survey, 52% of British dairy farmers, 37% of fruit and vegetable growers and 31% of livestock farmers said they were getting paid the same or less than the cost of production.1223

• Between 1995 and 2004, producer prices fell in every European country.1224

• In 1950 a UK farmer could earn a living with 15 cows, now, in real terms to earn the same living, the farmer needs 120 cows1225

• Farm incomes in the UK have fallen by 60% since 1995 (after doubling between 1990 and 1995). 25% of full-time farmers in England have diversified incomes.1226

• Agriculture provides 44% of Polish family incomes but comprises only 6% of the country's GDP.1227

The graph below shows a steep fall in the net farm income for general cropping in the UK from a high of a £100,000 per farm to less than £15,000.1228

248 1229

Increasing Specialisation

Those farms that have not been forced to close down have been driven to specialise their methods and produce. Not so long ago, the small farms of a region would produce a wide range of products for nearby consumers. In today’s globalised food system, however, every region is pushed to specialise in whichever commodity its farmers can produce most cheaply – and to offer that product on global markets.

• In the EU four agricultural companies account for 24% of all pig slaughterhouses and the largest pig producer is Smithfield, which produces about 5% of Poland’s pigs.1230 • The top 10 integrated broiler producers account for about 36% of the European broiler production.1231

Concentration and specialization in the poultry industry In 2003, Aviagen – one of the largest chicken breeders in the world – changed hands in a leveraged finance deal worth €367 million. The company breeds pedigree birds for the production of broiler chickens and turkeys. Aviagen supplies poultry to 250 customers in 85 countries and has a massive 47% share of the world market for chicken breeding.1232

249 In 2005 Aviagen was acquired by the Erich Wesjohann Group. The Erich Wesjohann Group holds a 50% global market share of the breeder market for poultry eggs.1233

Consumers

Everyone is a consumer. We are the final stage of food supply: buying and consuming the food produced, processed, distributed and sold by the different parts of the food supply chain. Yet over the last few decades the consumer’s relationship with food supply has changed dramatically.

Three major factors are shaping consumer preferences: price, convenience and quality. We are spending less money on food and much less time preparing it. We also demand our food to be of a consistently high quality.

These preferences are being expressed in the context of a rapidly rising human population and shifting demographics. If present trends continue, the world’s urban population will equal the global rural population by around 2017.1234 So half of the world’s consumers will look to the supermarket formats – currently dominating urban food supply – for these three things: price, convenience and quality.

People are spending less on food

There is one clear trend. People are spending less on food as a percentage of their income. In the check-out aisles of supermarkets at least, food is becoming – in relative terms – cheaper.

In the past decade household expenditure on food has fallen as a percentage of family income in every European country.1235 And the trend is very much the same elsewhere. The cost of food in America continues to decline as a portion of family income — from 50% in the 19th century to 10.1% today.1236

There is a trend across Europe towards price convergence1237 – a single food retail market with standardized prices reflecting standardized methods of production and distribution. Regional differences of course persist. In Central and Eastern Europe for example, households still spend on average 15-20% of total income on food,1238 but in many other European countries this proportion has fallen to far lower levels:

250

• Irish consumers spent only 6.6% of their incomes on food in 2004 down from 17.5% only 11 years earlier.1239

• UK consumers spent £147.7bn on food and drink in 20041240 - food expenditure is currently represents only 8.9% of UK incomes. 1241

We are becoming accustomed to the cheap food delivered by the ‘everyday low prices’ of retailers.1242 For example, consumer food prices in the UK rose by 0.6% between 2003 and 2004 compared to all items which rose by 1.3%.1243

Convenience

Lifestyles are changing. Europeans are spending less money on food and, crucially, less time preparing it. Food processors argue that home-food lifestyles are changing and that less basic food preparation with simple foods such as flour, sugar and eggs is being done in the home.

• Time saving products and 'quick fixes' are important to 82% of European and US consumers.1244 • The average time spent making a meal fell from an hour in 1980 to 20 minutes in 1999.1245 The length of time for food preparation at home is forecast to be only 8 minutes in 2010.1246 • In 2000, only 10% of adult time in the UK was spent on cooking, dish washing and eating.1247

Convenience has become a crucial feature of the modern diet. Consumers now expect consistent, quality processed products that are table-ready. This has led to the rise of ‘convenience’ foods: food meant to be consumed with little or no preparation, whether at home or away. In order to minimize or eliminate cooking time, these foods are highly processed, heavily packaged, and are crammed full of additives, all of which compromise the nutritional value of the food.

As convenience helps drive innovation in the European food and drink industry,1248 many new food products are designed to be eaten on the run or while ‘multi-tasking’. New lines of ‘meals-on-a-stick’, for example, are being targeted at web-surfing teenagers, who keep one hand on the computer mouse, leaving only one hand free for eating.1249

The market in convenience is booming:

251 • Prepared meal consumption in Europe and America is forecast to double in ten years, to exceed US$40bn by 2009, up from US$29bn in 1999.1250 • Nearly two-thirds of households buy ready-meals.1251

The pursuit of convenience is changing food consumption patterns. More people are shopping in supermarkets, buying frozen food and eating in restaurants and fast-food outlets:

• For more than 90% of the UK population, a supermarket is the main or sole place of shopping1252 • In Europe within 15 years out of home and retail sales of food will be equal1253 • UK consumers eat 50 kilograms of frozen food per year1254 and a quarter of all UK households do not buy any fresh meat.1255 • In the US, money spent on food at home as a proportion of total food expenditure has fallen from nearly 75% in 1962 to 55% in 2002. The share for food eaten away from home has risen from 28% to just over 45%.1256

A greater interest in 'quality'

While price and convenience are driving food purchases, a much wider range of consumer concerns have emerged since the 1990s. Quality has become a catch-all phrase referring to the taste and appearance of food, but ranging even to the food’s health value and the methods used to produce the food.1257

In the future, consumers, especially in more affluent counties, can be expected to become even more demanding as they become more discerning and better informed of the impact of food production on their personal health and the environment.1258

252 1259

Organic growth

The organic sector presently accounts for only a tiny proportion of global food production. But growth within this sector reflects a rising interest in the methods used to produce food. The global market for organic food was £15.5 billion in 20041260 and 24 million hectares of farmland are now managed to organic standards.

Western Europe still accounts for more than half of global organic food sales and consumption of organic produce rose in many European countries in 2004, following a couple of years of consolidation. • Over the next three years, sales of organic food are expected to reach $7.3 billion and 3.3% of Italy's entire food consumption.1261 • Around three-quarters of UK households buy some organic food during the year.1262 • Sales of organic food in the US were $6.5 billion in 1999.1263 This has now risen to over $7 billion.1264

The increased demand for organic food has led to a growth in specialised retailers, such as natural food supermarkets. Natural food supermarkets offer less-processed foods and

253 more foods free of preservatives, hormones, and ‘artificial’ ingredients. Natural food supermarket chains, such as Whole Foods Market and Wild Oats Markets in the US, grew rapidly in the 1990s through mergers and acquisitions.1265

Retailers are also quick to respond to these developments. 60% of organic goods bought in Italy are expected to be sold in supermarkets by 20041266 and organically produced food is now being sourced by retailers and sold under private label.1267

Healthy food There is a rising interest in health food and there is increasing research by the food industry to develop what are described as ‘functional foods’. Growing concerns over rising obesity levels in the world have led some manufacturers to develop foods to meet a rising consumer demand for value-added health food products. ‘Functional food’ is not just healthy, nutritious produce. It is food that has had ingredients incorporated into it to provide a specific medical or physiological benefit, such as pro-biotic yoghurts and margarines containing cholesterol-reducing ingredients.

“It begins to resemble more the world of pharmaceuticals than the food and drink sector”1268 Peel Holroyd, former senior agriculturalist for Marks and Spencer

Whilst still very much in its nascent stages, this sector of the food industry looks set grow:

• In 2004, sales of functional foods were worth $31.1 billion – 56% of this was functional dairy products 1269

• In the UK, the functional food and drink sector grew by 159% between 1999 and 2001 to be valued at £667m.1270

• In the fast evolving economies of Latin America, the Asia Pacific and Eastern Europe, functional food sales grew by 9.6% in 2004. Research predicts that functional food sales by value will rise by 28% between 2005 and 2009 in the emerging economies of Brazil, Hungary, China, Poland, Russia, Mexico and South Korea. 1271 In Brazil functional dairy sales made up 11% of all dairy sales in 2004. 1272

Consumers are eating much more meat

254 As we demand cheaper, more convenient and higher quality food it seems we are also demanding more meat. Global meat production has increased more than five-fold since 1950.1273 Annual meat consumption in developed countries increased from 57 kilograms per person in the 1960s1274 to 80 kilograms now.1275

For Americans the figure is even higher. In 1999, the average U.S. citizen consumed a whopping 124 kilogrammes of meat.1276

While consumers in rich countries spend a large share of their food budget on meat, a higher proportion of the food budget is spent on cereal in poorer countries.1277 In the US, 27% of the food budget is spent on meat, compared with just 6% in Kenya.1278

But as incomes rise, consumers in emerging economies will buy less low value cereals and start buying higher value livestock products.1279 In 1980, people in developing countries made up 76% of the global population and consumed one-third of the world’s meat and milk.1280 By 2020, people in presently developing countries are expected to account for 66% of direct consumption of meat and 60% of milk consumption.1281

• As recently as 1995 Filipinos ate 21 kilograms of meat per person per year. Since then, average consumption has soared to almost 30 kilograms per year.1282

• Annual average meat consumption per person in lesser developed countries increased from 10 kilograms between 1961 and 1971 to about 26 kg at the turn of the last century.1283

These changes are having a massive impact on the location and supply routes of meat production throughout the world. High income countries are producing less meat and developing economies are producing more.

• In 1980, high income OECD countries produced 45% of the world meat while Asia and the Near East produced less than 20%. Less than 20 years later in 1998, the share of meat production in high income OECD countries fell to just 36% while Asia accounted for 38%.1284

Factory farming is the fastest growing method of animal production worldwide.1285 Feed lots are presently responsible for 43% of the world’s beef and more than half of the world's pork and poultry are raised in factory farms.1286 Increased consumption of meat and milk means more pressure on land and water resources.1287

If Europeans shifted towards the American level of meat consumption patterns, land requirements will rise by 17%.1288 The implications of this are explored fully in Section 3.

255 1289

Food Service Sector

The food service sector – in particular fast-food – has experienced an incredible rate of growth in the past fifty years. People in developed economies are eating out more, as

256 fast-food chains proliferate. Catering to an increased demand for convenience, food service has mushroomed and challenged the predominance of food retail.

“Retailers soon realized that their biggest competitors were not other stores but fast food or quick service restaurants.”1290

Now, ‘channel-blurring’, frequently occurs as gas stations and retail stores, such as Wal- Mart and Target, are hosting foodservice chains like Pizza Hut and Taco Bell.1291 McDonald’s currently has outlets inside nearly 700 (out of 2,374) Wal-Mart stores across the United States, and almost 200 outlets in Chevron and Amoco gas service stations.1292

Trends

Consumer demand for convenience has led to a recent rise in people eating out. Nowhere has this trend been more evident than in the US.

• In the US, consumers are buying nearly half their food at restaurants and takeout establishments,1293 from 28% in 1962 to 47% in 2003.1294

• From 1963 to 1991, the number of fast food restaurant establishments in the United States rose nearly five-fold from 39,680 to 193,392.1295

And fast food is swiftly taking a bigger slice of the cake.

• The proportion of away-from-home food expenditures on fast food increased from 29.3% to 34.2% between 1982 and 1997, while the restaurant proportion decreased from 41% to 35.7%.1296

• The number of fast food outlets now outnumber the table service restaurants1297

• The simulated net effect of all developments in the U.S. population is to lift per capita spending by about 6 percent on fast food between 2000 and 2020.1298

One major reason for the growth in food service is a change in the composition of households. A single person spends almost $3 more per person each week at each type of out-of-home food establishment than an otherwise identical person who is married and has live-at-home children.1299 Traditional households (‘a married couple with live-at- home children’) accounted for 30.2% of all households in 1980. This is set to fall to only 16.7% by 2020.1300

257 European spending more on fast-food

In Europe the situation is lagging behind by a few years, but present trends suggest that more and more Europeans are regularly leaving the kitchen behind and dining out. Consumption of food and drink in places other than homes has risen from about 32% of total consumption in 1995 to 35% in 2000. This is expected to approach 38% by 2005. This development is boosting wholesale demand from the food service sector by 4-5% a year across Europe - around treble the growth rate of retail demand for wholesale.1301

• People in the UK are expected to spend half of their food budget on out-of-home food by 2020.1302 and it is forecast that UK food service sales could be £10 billion in 20081303

• Italians have eaten 141% more meals outside the home in the past ten years.1304

Concentration

The food service industry has become increasingly concentrated over the years and the fast-food industry in the US demonstrates this trend the best. Just a few well-recognised brands dominate the US fast-food sector: McDonald's; KFC; Burger King; Pizza Hut; Wendy’s; Subway; Taco Bell; Domino's Pizza; Starbucks; Applebee's Neighborhood Grill & Bar.

• The 10 largest chains had combined sales in 2004 of $117.3 billion, representing 49.4% of the Top 400's total sales. 1305

• The 100 largest chains account for 86.2% of the sales of the top 400 fast food companies.1306

And this is an international phenomenon. The top US chains are taking their ‘services’ across the globe, expanding into ever-wider markets.

• There were 120,530 units of the 10 largest US chains operating globally at the end of 2004.1307

• In 1968 McDonald’s operated about one thousand restaurants. In 2002 it had about 30,000 restaurants worldwide and opens up almost two thousand new ones each year.1308

• McDonald's and Burger King take 91% of the UK’s burger market.1309

• In the food service industry, US-based Yum Brands has 33,000 restaurants – including Taco Bell, Pizza Hut, and KFC – in over 100 countries, and is especially focusing on expansion in China, Mexico, and South Korea.1310

258

• In 1987, Kentucky Fried Chicken (KFC) opened the first foreign-owned fast food restaurant in Beijing. Fifteen years later, KFC boasts more than 600 stores in China and total fast food sales top US$24 billion a year. 1311

259

1 ‘It is all about the value chain’, The Financial Times, Ian Bikerton, 24 February 2006 2 Grocery and Food Service Trends, National Farm Products Council (Canada), 2004 3 ‘Antitrust Analysis of Supermarket Retailing: Common Global Concerns that Play Out in Local Markets’, Ronald W. Cotterill, Food Marketing Policy Center Research Report, No. 88 Food Marketing Policy Center, University of Connecticut Department of Agricultural and Resource Economics, July 2005 http://www.fmpc.uconn.edu/publications/rr/rr88.pdf 4 ‘Wake up to the old-fashioned power of the new oligopolies’, Barry Lynn, Financial Times, 2 February 2006 5 A2 Economics: Oligopoly, Economics Revision Focus 2004, tutor2u, http://www.tutor2u.net/economics/revision_focus_2004/A2_Oligopoly.pdf 6 A2 Economics: Oligopoly, Economics Revision Focus 2004, tutor2u, http://www.tutor2u.net/economics/revision_focus_2004/A2_Oligopoly.pdf 7 Economic Concentration and Structural Change In the Food and Agriculture Sector: Trends, Consequences and Policy Options, Prepared by the Democratic Staff of the Committee on Agriculture, Nutrition, and Forestry, United States Senate, Tom Harkin, Iowa, Ranking Democratic Member , October 29, 2004 8 A2 Economics: Oligopoly, Economics Revision Focus 2004, tutor2u, http://www.tutor2u.net/economics/revision_focus_2004/A2_Oligopoly.pdf 9 www.bized.ac.uk 10 'Modernizing Africa's Agro-Food Systems: Analytical Framework and Implications for Operations', Africa Region Working Papers, World Bank, Washington DC, 2003, http://www.worldbank.org/afr/wps/ 11 When the Market Comes to You – Or Not, The Dynamics of Vertical Coordination in Agri-food Chains in Transition, Johan F.M. Swinnen, ECSSD, The World Bank, 24 February 2005 http://lnweb18.worldbank.org/ECA/ECSSD.nsf/0/84d9aba9fd13e32085256fb300519c4f/$FILE/ VC%20version%20%2024%20Feb%202005.pdf 12 ‘Wake up to the old-fashioned power of the new oligopolies’, Barry Lynn, Financial Times, 2 February 2006 13 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 14 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 15 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 16 Lawrence H. Summers quoted in ‘Managing Global Supply/Demand Chains: The Food Sector’, Sloan Industry Centers Annual Meeting, The Food Industry Center, University of Minnesota, December 2002, http://web.mit.edu/ipc/www/pubs/articles/kinsey.pdf 17 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 18 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187

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19 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 20 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 21 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 22 ‘The Food Chain - Survival of the Biggest: Supermarket Giants Crush Central American Farmers’, Celia W. Dugger, New York Times, December 2004 23 ‘Business case description, TOPS Supply Chain Project, Thailand’, KLICT International Agri Supply Chain Development, Dave Boselie, 31 January, 2002, http://www.klict.org/docs/BCsk011.pdf 24 ‘Business case description, TOPS Supply Chain Project, Thailand’, KLICT International Agri Supply Chain Development, Dave Boselie, 31 January, 2002 http://www.klict.org/docs/BCsk011.pdf 25 ‘Business case description, TOPS Supply Chain Project, Thailand’, KLICT International Agri Supply Chain Development, Dave Boselie, 31 January, 2002 http://www.klict.org/docs/BCsk011.pdf 26 ‘Business case description, TOPS Supply Chain Project, Thailand’, KLICT International Agri Supply Chain Development, Dave Boselie, 31 January, 2002 http://www.klict.org/docs/BCsk011.pdf 27 ‘Business case description, TOPS Supply Chain Project, Thailand’, KLICT International Agri Supply Chain Development, Dave Boselie, 31 January, 2002 http://www.klict.org/docs/BCsk011.pdf 28 ‘Business case description, TOPS Supply Chain Project, Thailand’, KLICT International Agri Supply Chain Development, Dave Boselie, 31 January, 2002 http://www.klict.org/docs/BCsk011.pdf 29 ‘Business case description, TOPS Supply Chain Project, Thailand’, KLICT International Agri Supply Chain Development, Dave Boselie, 31 January, 2002 http://www.klict.org/docs/BCsk011.pdf 30 ‘Business case description, TOPS Supply Chain Project, Thailand’, KLICT International Agri Supply Chain Development, Dave Boselie, 31 January, 2002 http://www.klict.org/docs/BCsk011.pdf 31 Business case description, TOPS Supply Chain Project, Thailand, KLICT International Agri Supply Chain Development, Dave Boselie, January 31, 2002 32 ‘Business case description, TOPS Supply Chain Project, Thailand’, KLICT International Agri Supply Chain Development, Dave Boselie, 31 January, 2002 http://www.klict.org/docs/BCsk011.pdf 33 ‘Business case description, TOPS Supply Chain Project, Thailand’, KLICT International Agri Supply Chain Development, Dave Boselie, 31 January, 2002 http://www.klict.org/docs/BCsk011.pdf

Credence claims

34 ‘Not all sweetness and light: new cultural geographies of food’, S. Freidberg, Social and Cultural Geography 4, 3-6, 2003

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35 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 36 ‘Governance in global value chains’, John Humphrey and Hubert Schmitz IDS Bulletin, Vol 32, No 3, 2001, http://www.globalvaluechains.org/publications/HumphreySchmitz.pdf 37 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 38 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 39 ‘Traceability in the U.S. Food Supply: Economic Theory and Industry Studies’, Elise Golan, Barry Krissoff, Fred Kuchler, Linda Calvin, Kenneth Nelson, and Gregory Price, United States Department of Agriculture Economic Research Service Agricultural Economic Report Number 830, March 2004 http://www.ers.usda.gov/publications/aer830/aer830.pdf 40 ‘Traceability in the U.S. Food Supply: Economic Theory and Industry Studies’, Elise Golan, Barry Krissoff, Fred Kuchler, Linda Calvin, Kenneth Nelson, and Gregory Price, United States Department of Agriculture Economic Research Service Agricultural Economic Report Number 830, March 2004 http://www.ers.usda.gov/publications/aer830/aer830.pdf 41 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 42 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 43 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 44 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 45 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 46 ‘New Directions in Global Food Markets’, A. Regmi and M. Gehlhar, USDA, Agriculture Information Bulletin Number 794, February 2005, http://www.ers.usda.gov/publications/aib794/aib794.pdf 47 ‘New Directions in Global Food Markets’, A. Regmi and M. Gehlhar, USDA, Agriculture Information Bulletin Number 794, February 2005, http://www.ers.usda.gov/publications/aib794/aib794.pdf 48 ‘Traceability in the U.S. Food Supply: Economic Theory and Industry Studies’, Elise Golan, Barry Krissoff, Fred Kuchler, Linda Calvin, Kenneth Nelson, and Gregory Price, United States Department of Agriculture Economic Research Service Agricultural Economic Report Number 830, March 2004 http://www.ers.usda.gov/publications/aer830/aer830.pdf

Traceability

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49 ‘The Barcode With a Conscience’, Diann Daniel, CIO Magazine, 1 March 2005 http://www.cio.com/archive/030105/tl_supply.html 50 A comparative study of East and West Europe's food retailers' buying behaviour, 7th Cross- Cultural Research Conference, Cancun, Mexico, Blunch, N. J., H. Skytte and L. Esbjerg, 1999, cited in How changes in consumer behaviour and retailing affect competence requirements for food producers and processors, Klaus G. Grunert, MAPP, Centre for Research on Customer Relations in the Food Sector, The Aarhus School of Business, Denmark, 2003 http://www.farmfoundation.org/documents/KlausgrunertHVP-paper3-13-03_000.pdf 51 ‘Traceability in the U.S. Food Supply: Economic Theory and Industry Studies’, Elise Golan, Barry Krissoff, Fred Kuchler, Linda Calvin, Kenneth Nelson, and Gregory Price, United States Department of Agriculture Economic Research Service Agricultural Economic Report Number 830, March 2004 http://www.ers.usda.gov/publications/aer830/aer830.pdf 52 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 53 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 54 Traceability in Food Processing Chains: State of the art and future developments, Version: 1.0, Raoul Vernède, Floor Verdenius, Jan Broeze ([email protected]), 20 October 2003, http://www.klict.org/docs/PPtrace.pdf 55 Traceability in Food Processing Chains: State of the art and future developments, Version: 1.0, Raoul Vernède, Floor Verdenius, Jan Broeze ([email protected]), 20 October 2003, http://www.klict.org/docs/PPtrace.pdf 56 ‘Traceability in the U.S. Food Supply: Economic Theory and Industry Studies’, Elise Golan, Barry Krissoff, Fred Kuchler, Linda Calvin, Kenneth Nelson, and Gregory Price, United States Department of Agriculture Economic Research Service Agricultural Economic Report Number 830, March 2004 http://www.ers.usda.gov/publications/aer830/aer830.pdf 57 ‘Traceability in the U.S. Food Supply: Economic Theory and Industry Studies’, Elise Golan, Barry Krissoff, Fred Kuchler, Linda Calvin, Kenneth Nelson, and Gregory Price, United States Department of Agriculture Economic Research Service Agricultural Economic Report Number 830, March 2004 http://www.ers.usda.gov/publications/aer830/aer830.pdf 58 ‘Traceability in the U.S. Food Supply: Economic Theory and Industry Studies’, Elise Golan, Barry Krissoff, Fred Kuchler, Linda Calvin, Kenneth Nelson, and Gregory Price, United States Department of Agriculture Economic Research Service Agricultural Economic Report Number 830, March 2004 http://www.ers.usda.gov/publications/aer830/aer830.pdf 59 ‘Traceability in the food animal industry and supermarket chains’, R.G. Pettitt, Ministry of Agriculture, Fisheries and Food, Revue Scientifique et Technique International Office of Epizootics. August 2001 60 ‘Traceability in the U.S. Food Supply: Economic Theory and Industry Studies’, Elise Golan, Barry Krissoff, Fred Kuchler, Linda Calvin, Kenneth Nelson, and Gregory Price, United States Department of Agriculture Economic Research Service Agricultural Economic Report Number 830, March 2004 http://www.ers.usda.gov/publications/aer830/aer830.pdf 61 ‘Global Powers of Retailing 2005’, Deloitte & Touche, USA, January 2005 http://www.deloitte.com/dtt/cda/doc/content/US_CB_GlobalPowers2005.pdf 62 ‘Tracking Pork from Pen to Plate’, Advances in Pork Production, Volume 15, pg. 33, John Webb, Maple Leaf Foods Inc, 30, 2004, http://www.banffpork.ca/proc/2004pdf/p033-Webb- TrackingPork.pdf

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63 Traceability in Food Processing Chains: State of the art and future developments, Version: 1.0, Raoul Vernède, Floor Verdenius, Jan Broeze ([email protected]), 20 October 2003, http://www.klict.org/docs/PPtrace.pdf 64 ‘Tracking Pork from Pen to Plate’, Advances in Pork Production, Volume 15, pg. 33, John Webb, Maple Leaf Foods Inc, 30, 2004, http://www.banffpork.ca/proc/2004pdf/p033-Webb- TrackingPork.pdf 65 ‘Tracking Pork from Pen to Plate’, Advances in Pork Production, Volume 15, pg. 33, John Webb, Maple Leaf Foods Inc, 30, 2004, http://www.banffpork.ca/proc/2004pdf/p033-Webb- TrackingPork.pdf 66 ‘Maple Leaf Foods Launches DNA Pork Traceability Program’, Pyxis Genomics press release, 27 January 2004 http://www.pyxisgenomics.com/pr13.html 67 ‘Tracking Pork from Pen to Plate’, Advances in Pork Production, Volume 15, pg. 33, John Webb, Maple Leaf Foods Inc, 30, 2004, http://www.banffpork.ca/proc/2004pdf/p033-Webb- TrackingPork.pdf 68 ‘A High-Tech Race To Corral Mad Cow’, Business Week, 1 March 2004 69 ‘A High-Tech Race To Corral Mad Cow’, Business Week, 1 March 2004 70 ‘Tracking Pork from Pen to Plate’, Advances in Pork Production, Volume 15, pg. 33, John Webb, Maple Leaf Foods Inc, 30, 2004, http://www.banffpork.ca/proc/2004pdf/p033-Webb- TrackingPork.pdf 71 ‘Tracking Pork from Pen to Plate’, Advances in Pork Production, Volume 15, pg. 33, John Webb, Maple Leaf Foods Inc, 30, 2004, http://www.banffpork.ca/proc/2004pdf/p033-Webb- TrackingPork.pdf 72 ‘The Barcode With a Conscience’, Diann Daniel, CIO Magazine, 1 March 2005 http://www.cio.com/archive/030105/tl_supply.html 73 ‘The Barcode With a Conscience’, Diann Daniel, CIO Magazine, 1 March 2005 http://www.cio.com/archive/030105/tl_supply.html 74 ‘"RFID in action" database focuses on food sector’, www.foodproductiondaily.com, Ahmed ElAmin, 6 September 2005 http://www.foodproductiondaily.com/news/ng.asp?n=62320- idtechex-wal-mart-rfid 75 Future Innovation Today, 2005, Consumer Packaging Report http://www.rexam.com/files/pdf/Rexam_Consumer_Packaging_Report_2005.pdf 76 "RFID in action" database focuses on food sector, Food production daily, Ahmed ElAmin, 06/09/2005 http://www.foodproductiondaily.com/news/ng.asp?n=62320-idtechex-wal-mart-rfid 77 'Supply chain project links RFID with Internet', www.foodproductiondaily.com, 26th August 2005, http://www.foodproductiondaily.com/news/ng.asp?n=62116-rfid-epcglobal-fresh-produce 78 'From Supply Push to Demand Pull: Agribusiness Strategies for Today's Consumers', Martinez & Stewart, Economic Research Service, USDA, 2003 http://www.ers.usda.gov/amberwaves/november03/Features/supplypushdemandpull.htm 79 'Food for Thought', a Quarterly Newsletter on the North American Food Processing Industry, Deloitte & Touche, (Winter 2003-2004) 80 ‘Top Down Competition in the Food Industry: Trends and Implications’, Strategic Forum Discussion Paper, Sparks Companies Inc, US, September 2003 http://www.mda.state.mn.us/ams/whitepapers/topdown.pdf 81 ‘Survey: Agriculture and technology: growing pains’, The Economist, 23 March 2000 82 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 83 ‘Tesco, This Sceptered Aisle’, The Economist, 4 August 2005, print edition 84 ‘Tesco, This Sceptered Aisle’, The Economist, 4 August 2005, print edition

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85 ‘Tesco, This Sceptered Aisle’, The Economist, 4 August 2005, print edition 86 ‘Tesco, This Sceptered Aisle’, The Economist, 4 August 2005, print edition 87 A Comparative Study of Asia Strategy: Wal-Mart versus Carrefour, Paper presented at the The Seventh International Conference on Global Business and Economic Development.Miao-Que Lin, Fu Jen Catholic University, China.Wen-Kuei Liang Tatung University, China, http://blake.montclair.edu/~cibconf/conference/DATA/Theme5/China.pdf 88 Traceability in Food Processing Chains: State of the art and future developments, Version: 1.0, Raoul Vernède, Floor Verdenius, Jan Broeze ([email protected]), 20 October 2003, http://www.klict.org/docs/PPtrace.pdf 89 ‘Tracking Pork from Pen to Plate’, Advances in Pork Production, Volume 15, pg. 33, John Webb, Maple Leaf Foods Inc, 30, 2004, http://www.banffpork.ca/proc/2004pdf/p033-Webb- TrackingPork.pdf

Standards

90 ‘Standardization policies for network technologies: The flux between freedom and order revisited’, P. A. David, in Standards,Innovation, and Competitiveness: The Politics and Economics of Standards in National and Technical Environments, R. Hawkins, R. Mansell, and J. Skea (eds) UK, cited in ‘Shaping Value Chains for Development: Global Value Chains in Agribusiness’, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB- GTZ066187 91 ‘Supermarket expansion in Latin America and Asia: implications for food marketing systems’, Thomas Reardon, et al, in New Directions in Global Food Markets / AIB-794, Economic Research Service/USDA, 2003 http://www.ers.usda.gov/publications/aib794/aib794f.pdf 92 Trading away our rights: women working in global supply chains, Oxfam, 2004, http://www.oxfam.org.uk/what_we_do/issues/trade/downloads/trading_rights.pdf 93 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 94 Retail Sector Responses to Changing Consumer Preferences: the European Experience, J. Codron, K. Grunert, E. Giraud-Heraud, L. Soler, and A. Regmi, Economic Research Service, U.S. Department of Agriculture, 2003 http://ceco.polytechnique.fr/fichiers/ceco/publications/pdf/2005-07-05-1042.pdf 95 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 96 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 97 Fulponi cited in Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB- GTZ066187 98 The Rapid Rise of Supermarkets in Latin America and Asia: Fundamental Effects on domestic Agrifood Systems and Trade, Reardon, Paper presented at the Global Market for High-Value Food Workshop, Economic Research Service USDA (February 2003)

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99 ‘Picky stores force farmers to dump veg.’, Jonathan Leake, Environment Editor, The Sunday Times, July 17 2005 100 Globalization, Quality Management and Vertical Coordination in Food Chains of Transition Countries, Liesbeth Dries and Johan F.M. Swinnen, paper prepared for the 92nd EAAE seminar on ‘Quality Management and Quality Assurance in Food Chains’, Göttingen, 2004 101 ‘Consolidation, Multinationalisation, and Competition in Brazil: Impacts on Horticulture and Dairy Products Systems’, Elizabeth M. M. Q. Farina, Development Policy Review, 20: 4 441, September 2002 102 ‘Consolidation, Multinationalisation, and Competition in Brazil: Impacts on Horticulture and Dairy Products Systems’, Elizabeth M. M. Q. Farina, Development Policy Review, 20: 4 441, September 2002 103 ‘Globalisation and livestock’, Agriculture 21, FAO, Spring 2005, http://www.fao.org/ag/magazine/0504sp1.htm 104 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 105 ‘Traceability in the food animal industry and supermarket chains’, R.G. Pettitt, Ministry of Agriculture, Fisheries and Food, Revue Scientifique et Technique International Office of Epizootics. August 2001 106 ‘Traceability in the food animal industry and supermarket chains’, R.G. Pettitt, Ministry of Agriculture, Fisheries and Food, Revue Scientifique et Technique International Office of Epizootics. August 2001 107 Changing Structure of Global Food Consumption and Trade, ed. Anita Regmi, Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, Agriculture and Trade Report. WRS-01-1, May 2001, http://www.ers.usda.gov/publications/wrs011/wrs011.pdf 108 Changing Structure of Global Food Consumption and Trade, ed. Anita Regmi, Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, Agriculture and Trade Report. WRS-01-1, May 2001, http://www.ers.usda.gov/publications/wrs011/wrs011.pdf 109 Changing Structure of Global Food Consumption and Trade, ed. Anita Regmi, Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, Agriculture and Trade Report. WRS-01-1, May 2001, http://www.ers.usda.gov/publications/wrs011/wrs011.pdf 110 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 111 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 112 ‘Farmers and supermarkets in Asia’, FAO Magazine, Spotlight 2005 113 The Rapid Rise of Supermarkets in Latin America: Challenges and Opportunities for Development, Reardon and Berdegue, Development Policy Review 20 (4) 371-378 (2002) 114 Links among Supermarkets, Wholesalers, and Small Farmers in Developing Countries: Conceptualization and Emerging Evidence, Thomas Reardon, et al, 2005, http://www.ifpri.org/events/seminars/2005/smallfarms/sfproc/SO2_Reardon.pdf

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115 ‘Supermarket expansion in Latin America and Asia: implications for food marketing systems’, Thomas Reardon, et al, in New Directions in Global Food Markets / AIB-794, Economic Research Service/USDA, 2003 http://www.ers.usda.gov/publications/aib794/aib794f.pdf 116 ‘The Food Chain - Survival of the Biggest: Supermarket Giants Crush Central American Farmers’, Celia W. Dugger, New York Times, December 2004 117 ‘Consolidation, Multinationalisation, and Competition in Brazil: Horticulture and Dairy Products Systems’, Farina, Development Policy Review 20 (4) 441-457, (2002), http://www.fundacaofia.com.br/pensa/pdf/papers_jornais/abstract_dev_policy.pdf 118 Performance Measures and Category Management Has Arrived for Foodservice Distribution 119 Manufacturing for Mass Merchandisers Are You Hooked?’, K. T. Higgins 3 January 2004, http://www.foodengineeringmag.com/CDA/ArticleInformation/coverstory/BNPCoverStoryItem/0 ,6326,120293,00.html 120 ‘Market Dynamics and Issues’, David Telford Head of Industry Business Development, SAP (UKI), 8 September 2005, http://www70.sap.com/uk/worldtour/presentations/ConsumerProducts/marketdynamics.pdf 121 'From Supply Push to Demand Pull: Agribusiness Strategies for Today's Consumers', Martinez & Stewart, Economic Research Service, USDA, 2003 http://www.ers.usda.gov/amberwaves/november03/Features/supplypushdemandpull.htm; 'Wal- Mart Outlines RFID Expansion Plans June 17, 2004', Laurie Sullivan, Information Week, 14th June 2004, http://www.informationweek.com/story/showArticle.jhtml?articleID=22100511 122 ‘Operating The Wal-mart way, How the world’s largest retailer influences your industry’, Food Systems Insider, Kristal Arnold, 1 July 2005, http://www.foodsystemsinsider.com/articles/0507/0507walmartway.htm 123 ‘Manufacturing for Mass Merchandisers Are You Hooked?’, www.foodengineeringmag.com, Kevin T. Higgins, 1 March 2004, http://www.foodengineeringmag.com/CDA/ArticleInformation/coverstory/BNPCoverStoryItem/0 ,6326,120293,00.html 124 ‘Manufacturing for Mass Merchandisers Are You Hooked?’, www.foodengineeringmag.com, Kevin T. Higgins, 3 January 2004, http://www.foodengineeringmag.com/CDA/ArticleInformation/coverstory/BNPCoverStoryItem/0 ,6326,120293,00.html 125 ‘Consolidation, Multinationalisation, and Competition in Brazil: Horticulture and Dairy Products Systems’, Farina, Development Policy Review 20 (4) 441-457, 2002 http://www.fundacaofia.com.br/pensa/pdf/papers_jornais/abstract_dev_policy.pdf 126 ‘Supermarket Buying Power, Global Commodity Chains and Smallholder Farmers in the Developing World’, Human Development Report 2005, Human Development Report Office occasional paper, United Nations Development Programme, Oli Brown, 2005, http://hdr.undp.org/docs/publications/background_papers/2005/HDR2005_Brown_Oli_4.pdf 127 The Governance of Global Value Chains, Gary Gereffi, Duke University, John Humphrey, Institute of Development Studies, Timothy Sturgeon, Massachusetts Institute of Technology, Forthcoming in Review of International Political Economy, November, 2003 128 ‘Growers' Market’, Felicity Lawrence, The Guardian, May 17, 2003 129 The Governance of Global Value Chains, Gary Gereffi, Duke University, John Humphrey, Institute of Development Studies, Timothy Sturgeon, Massachusetts Institute of Technology, Forthcoming in Review of International Political Economy, November, 2003 130 ‘Globalization, urbanization and changing food systems in developing countries’, Food and Agriculture Organisation of the United Nations (FAO), 2004, http://www.fao.org/documents/show_cdr.asp?url_file=/docrep/007/y5650e/y5650e04.htm

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131 ‘Supermarket Buying Power, Global Commodity Chains and Smallholder Farmers in the Developing World’, Human Development Report 2005, Human Development Report Office occasional paper, United Nations Development Programme, Oli Brown, 2005, http://hdr.undp.org/docs/publications/background_papers/2005/HDR2005_Brown_Oli_4.pdf 132 ‘Supermarket Buying Power, Global Commodity Chains and Smallholder Farmers in the Developing World’, Human Development Report 2005, Human Development Report Office occasional paper, United Nations Development Programme, Oli Brown, 2005, http://hdr.undp.org/docs/publications/background_papers/2005/HDR2005_Brown_Oli_4.pdf 133 The Governance of Global Value Chains, Gary Gereffi, Duke University, John Humphrey, Institute of Development Studies, Timothy Sturgeon, Massachusetts Institute of Technology, Forthcoming in Review of International Political Economy, November, 2003 134 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 135 Links among Supermarkets, Wholesalers, and Small Farmers in Developing Countries: Conceptualization and Emerging Evidence, Thomas Reardon, et al, 2005, http://www.ifpri.org/events/seminars/2005/smallfarms/sfproc/SO2_Reardon.pdf 136 Supermarket Expansion in Latin America and Asia Implications for Food Marketing Systems, Thomas Reardon, C. Peter Timmer, and Julio A. Berdegué, in A. Regmi and M. Gehlar (eds), New Directions in Global Food Markets, USDA/ERS Agriculture Information Bulletin No. (AIB794), February 2005 http://www.ers.usda.gov/publications/aib794/aib794f.pdf 137 "Access of small tomato growers to supermarket and traditional markets in Nicaragua", Fernando Balsevich, Thomas A. Reardon, Julio A. Berdegué, Michigan State University, Regoverning Markets, International Livestock Research Institute, http://www.regoverningmarkets.org/regions/latin_america/documents/Small_Tomato_Producers_ in_NicaraguaEng.pdf

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138 ‘Agroindustrialization of the global agrifood economy: bridging development economics and agribusiness research’, Cook, M. and Chaddad, F., Agricultural Economics, Vol 23 No 3: 2000, cited in: Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 139 Contracts, Markets and Prices: organizing the production and use of agricultural commodities, James MacDonald et al., United States Department of Agriculture, Agricultural Economic Report Number 837, November 2004, http://www.ers.usda.gov/publications/aer837/aer837.pdf 140 Integration, Coordination, and Concentration in the Fresh Fruit and Vegetable Industry, Carolyn Dimitri, Economic Research Service/USDA, 1999 141 Contract Farming: Partnerships for Growth, FAO, 2001 142 WHEN THE MARKET COMES TO YOU - OR NOT, The Dynamics of Vertical Coordination in Agri-food Chains in Transition, Johan F.M. Swinnen, ECSSD, The World Bank, 24 February 2005, http://lnweb18.worldbank.org/ECA/ECSSD.nsf/0/84d9aba9fd13e32085256fb300519c4f/$FILE/ VC%20version%20%2024%20Feb%202005.pdf

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143 Integration, Coordination, and Concentration in the Fresh Fruit and Vegetable Industry, Carolyn Dimitri, Economic Research Service/USDA, 1999 144 Links among Supermarkets, Wholesalers, and Small Farmers in Developing Countries: Conceptualization and Emerging Evidence, Thomas Reardon, et al, 2005, http://www.ifpri.org/events/seminars/2005/smallfarms/sfproc/SO2_Reardon.pdf 145 Linking Small Farmers to Global Markets: Role of Contracting Farming and Cooperatives in Asian Countries - Purushottam K. Mudbhary - Policy Assistance Branch - Regional Office for Asia and the Pacific 146 Vertical Coordination in the Agro-Food Industry and Contract Farming: A Comparative Study of Turkey and the USA, Erkan Rehber, Food Marketing Policy Center, Research Report No. 52, February 2000 147 Linking Small Farmers to Global Markets: Role of Contracting Farming and Cooperatives in Asian Countries - Purushottam K. Mudbhary - Policy Assistance Branch - Regional Office for Asia and the Pacific 148 Economic Concentration and Structural Change In the Food and Agriculture Sector: Trends, Consequences and Policy Options, Prepared by the Democratic Staff of the Committee on Agriculture, Nutrition, and Forestry, United States Senate, Tom Harkin, Iowa, Ranking Democratic Member, October 29, 2004 149 Contracts, Markets and Prices: organizing the production and use of agricultural commodities, James MacDonald et al., United States Department of Agriculture, Agricultural Economic Report Number 837, November 2004, http://www.ers.usda.gov/publications/aer837/aer837.pdf 150 Contracts, Markets and Prices: organizing the production and use of agricultural commodities, James MacDonald et al., United States Department of Agriculture, Agricultural Economic Report Number 837, November 2004, http://www.ers.usda.gov/publications/aer837/aer837.pdf 151 ‘Farm Business Practices Coordinate Production With Consumer Preferences’, Steve Martinez and David E. Davis, Economic Research Service, USDA Food Review, Vol. 25, Issue 1, May 2002, http://www.ers.usda.gov/publications/FoodReview/May2002/frvol25i1g.pdf 152 Structural and Financial Characteristics of U.S. Farms: 2001 Family Farm Report, Robert A. Hoppe, editor. Resource Economics Division, Economic Research Service, U.S. Department of Agriculture. Agriculture Information Bulletin No. 768, 2001, http://www.ers.usda.gov/publications/aib768/aib768.pdf 153 Structural and Financial Characteristics of U.S. Farms: 2001 Family Farm Report, Robert A. Hoppe, editor. Resource Economics Division, Economic Research Service, U.S. Department of Agriculture. Agriculture Information Bulletin No. 768, 2001, http://www.ers.usda.gov/publications/aib768/aib768.pdf 154 Structural and Financial Characteristics of U.S. Farms: 2001 Family Farm Report, Robert A. Hoppe, editor. Resource Economics Division, Economic Research Service, U.S. Department of Agriculture. Agriculture Information Bulletin No. 768, 2001, http://www.ers.usda.gov/publications/aib768/aib768.pdf 155 Structural and Financial Characteristics of U.S. Farms: 2001 Family Farm Report, Robert A. Hoppe, editor. Resource Economics Division, Economic Research Service, U.S. Department of Agriculture. Agriculture Information Bulletin No. 768, 2001, http://www.ers.usda.gov/publications/aib768/aib768.pdf 156 U.S. Hog Marketing Contract Study, Glenn Grimes, Professor Emeritus, and Ron Plain, Professor, University of Missouri, Dept of Agricultural Economics Working Paper No. AEWP

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2005-01, January 2005, http://www.dass.missouri.edu/AgEcon/department/workingpapers/aewp2005-1.pdf 157 Production Contracts, Issue Report, Farm Foundation, May 2004 158 Supermarket Challenges and Opportunities for Fresh Fruit and Vegetable Producers and Shippers: Lessons from the US Experience, Dr. Roberta L. Cook, Department of Agricultural and Resource Economics, University of California, Davis, May 24, 2004 159 Supermarket Expansion in Latin America and Asia Implications for Food Marketing Systems, Thomas Reardon, C. Peter Timmer, and Julio A. Berdegué, in A. Regmi and M. Gehlar (eds), New Directions in Global Food Markets, USDA/ERS Agriculture Information Bulletin No. (AIB794), February 2005 http://www.ers.usda.gov/publications/aib794/aib794f.pdf 160 The Rapid Rise of Supermarkets in Central and Eastern Europe: Implications for the Agrifood Sector and Rural Development, Liesbeth Dries, Katholieke Universiteit Leuven, Thomas Reardon, Michigan State University, Johan F.M. Swinnen, The World Bank and Katholieke Universiteit Leuven, 2005 161 The Rapid Rise of Supermarkets in Central and Eastern Europe: Implications for the Agrifood Sector and Rural Development, Liesbeth Dries, Katholieke Universiteit Leuven, Thomas Reardon, Michigan State University, Johan F.M. Swinnen, The World Bank and Katholieke Universiteit Leuven, 2005 162 The Rapid Rise of Supermarkets in Central and Eastern Europe: Implications for the Agrifood Sector and Rural Development, Liesbeth Dries, Katholieke Universiteit Leuven, Thomas Reardon, Michigan State University, Johan F.M. Swinnen, The World Bank and Katholieke Universiteit Leuven, 2005 163 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 164 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 165 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 166 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 167 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 168 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 169 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 170 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 171 U.S. Hog Marketing Contract Study, Glenn Grimes, Professor Emeritus, and Ron Plain, Professor, University of Missouri, Dept of Agricultural Economics Working Paper No. AEWP 2005-01, January 2005

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172 ‘Farm Business Practices Coordinate Production With Consumer Preferences’, Food Review, Vol 25, Issue 1, http://www.ers.usda.gov/publications/FoodReview/May2002/frvol25i1g.pdf 173 USDA Contracts, Market and prices: organizing the production and use of agricultural commodities, Agricultural Economic Report Number 837, http://www.ers.usda.gov/publications/aer837/aer837.pdf 174 ‘Polish Delegation Investigates American Agribusiness’, T. Garrett, Animal Welfare Institute Quarterly, 1999/2000 http://www.awionline.org/pubs/Quarterly/99_00_Fall_Winter.PDF; and Company website, http://www.smithfieldfoods.com/Understand/Polish/ 175 ‘Polish factory farms cause a stink’, Julianna Kettlewell, 24 November 2004 http://news.bbc.co.uk/1/hi/sci/tech/4035081.stm 176 Company website, http://www.smithfieldfoods.com/Understand/Polish/ 177 ‘Show Me the Sows’, Betsy Freese, Agriculture Online, 28 September 2005 http://www.agriculture.com/ag/story.jhtml?storyid=/templatedata/ag/story/data/050928porkpower houses.xml&catref=ag9010 178 ‘Snouts in the Trough’, reprinted from The Ecologist, Robert Kennedy Jr., December 2003/January 04, http://www.warmwell.com/smithfieldmar04.html 179 ‘Polish Farmers Raise a Stink Over U.S. Agribusiness Giant’, Washington Post, Glenn Frankel, 2 February 2004, http://www.washingtonpost.com/ac2/wp- dyn?pagename=article&contentId=A4101-2004Feb1¬Found=true 180 ‘Polish factory farms cause a stink’, BBC News in Poland, Julianna Kettlewell, 24 November 2004, http://news.bbc.co.uk/1/hi/sci/tech/4035081.stm 181 ‘Snouts in the Trough’, reprinted from The Ecologist, Robert Kennedy Jr., December 2003/January 04, http://www.warmwell.com/smithfieldmar04.html 182 ‘Polish Farmers Raise a Stink Over U.S. Agribusiness Giant’, Washington Post, Glenn Frankel, 2 February 2004, http://www.washingtonpost.com/ac2/wp- dyn?pagename=article&contentId=A4101-2004Feb1¬Found=true 183 FARMING AND FOOD, Collaborating for Profit, English Farming and Food Partnerships, 2003, http://www.effp.com/StellentEFFPLIVE/groups/public/documents/coop_reports/farmingandfood _coll_ia42e622d0.hcsp#P20_197 184 ‘On Track: News and views from the Royal Agricultural College’, Royal Agricultural College Issue 10, 2002 185 Contracts, Markets and Prices: organizing the production and use of agricultural commodities, James MacDonald et al., United States Department of Agriculture, Agricultural Economic Report Number 837, November 2004, http://www.ers.usda.gov/publications/aer837/aer837.pdf 186 'Structural Changes in U.S. Agriculture: Implications for small farms', Gebremedhin and Christy, Journal of Agricultural and Applied Economics, 28-, 57-66, July 1996, cited in 'Economic Concentration and Structural Change in the Food and Agriculture Sector: Trends Consequences and Policy Options', prepared by the Democratic staff of the Committee on Agriculture, Nutritiion and Forestry, United States Senate, October 2004 187 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 188 ‘Global production networks in retailing: supply chain implications for East Asia and Eastern Europe’, GPN Working Paper 9, prepared as part of the ESRC Research Project R000238535: Making the Connections: Global Production Networks in Europe and East Asia. August 2004 189The Farm Crisis: How we are Killing the Small Farmers, Steven Gorelick, US Programs Director, ISEC

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190 Economic Fallacies of Industrial Hog Production, John Ikerd, University of Missouri , Presented at Sustainable Hog Farming Summit, sponsored by Water Keepers Alliance, White Plains, NY, held at New Bern, NC, January 11, 2001, http://www.ssu.missouri.edu/faculty/jikerd/papers/EconFallacies-Hogs.htm 191 Economic Fallacies of Industrial Hog Production, John Ikerd, University of Missouri, presented at Sustainable Hog Farming Summit, White Plains, NY, held at New Bern, NC, January 11, 2001, http://www.ssu.missouri.edu/faculty/jikerd/papers/EconFallacies-Hogs.htm 192 Factory Hog Farming: The Big Picture, Hogwatch, Nov 2002, http://www.environmentaldefense.org/documents/2563_FactoryHogFarmingBigPicture.pdf 193 Factory Hog Farming: The Big Picture, Hogwatch, Nov 2002, http://www.environmentaldefense.org/documents/2563_FactoryHogFarmingBigPicture.pdf 194 Factory Hog Farming: The Big Picture, Hogwatch, Nov 2002, http://www.environmentaldefense.org/documents/2563_FactoryHogFarmingBigPicture.pdf 195 Report on the FAO/AFMA/FAMA Regional Workshop on the Growth of Supermarkets as Retailers of Fresh Produce’, 4-7 October 2004, http://www.fao.org/ag/ags/subjects/en/agmarket/docs/afmaklrep.pdf 196 Wholesale markets in the era of supermarkets and hypermarkets – Developments in Central and Eastern Europe, Andrew W. Shepherd, Agricultural Marketing Group, FAO, Rome, May 27th 2004 197 ‘The food retailing revolution: experience from Poland’, Rapeepun Jaisaard, World Bank, Workshop Review: Agriculture, Agri-Business and the Retail Sector in South-East Europe, 2004 http://www.eastagri.org/meetings/index.asp?id=7 198 Report on the FAO/AFMA/FAMA Regional Workshop on the Growth of Supermarkets as Retailers of Fresh Produce’, 4-7 October 2004 http://www.fao.org/ag/ags/subjects/en/agmarket/docs/afmaklrep.pdf 199 Links among Supermarkets, Wholesalers, and Small Farmers in Developing Countries: Conceptualization and Emerging Evidence, Thomas Reardon, et al, 2005, http://www.ifpri.org/events/seminars/2005/smallfarms/sfproc/SO2_Reardon.pdf 200 The implications of supermarket development for horticultural farmers and traditional marketing systems in Asia, A. Shepherd, Agricultural Management, Marketing and Finance service (AGSF) FAO, Rome 2005 http://www.fao.org/ag/ags/subjects/en/agmarket/docs/asia_sups.pdf 201 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 202 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 203 Livestock Price Reporting Issues, CRS Report for Congress, RS20070, Dec 1999, http://www.ncseonline.org/NLE/CRSreports/Agriculture/ag-53.cfm 204 Livestock Price Reporting Issues, CRS Report for Congress, RS20070, Dec 1999, http://www.ncseonline.org/NLE/CRSreports/Agriculture/ag-53.cfm 205 Contracts, Markets and Prices: organizing the production and use of agricultural commodities, James MacDonald et al., United States Department of Agriculture, Agricultural Economic Report Number 837, November 2004, http://www.ers.usda.gov/publications/aer837/aer837.pdf

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206 The Many Faces of Power in the Food System , Department of Justice / Federal Trade Commission Workshop on Merger Enforcement, C. Robert Taylor , February 17, 2004 207 Supermarket Challenges and Opportunities for Fresh Fruit and Vegetable, Producers and Shippers: Lessons from the US Experience, Dr. Roberta L. Cook, Department of Agricultural and Resource Economics, University of California, Davis, paper presented at the Conference on Supermarkets and Agricultural Development in China – Opportunities and Challenges, Shanghai, China, May 24, 2004, http://www.agmrc.org/NR/rdonlyres/30ADD429-D9DA-4382-AD79- BAADE4CD816F/0/supermarketchallenges.pdf 208 Livestock Price Reporting Issues, CRS Report for Congress, RS20070, Dec 1999, http://www.ncseonline.org/NLE/CRSreports/Agriculture/ag-53.cfm

Vertical coordination

209 Links among Supermarkets, Wholesalers, and Small Farmers in Developing Countries: Conceptualization and Emerging Evidence, Thomas Reardon, et al, 2005, http://www.ifpri.org/events/seminars/2005/smallfarms/sfproc/SO2_Reardon.pdf 210 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 211 Globalization, urbanization and changing food systems in developing countries, FAO, 2004, http://www.fao.org/documents/show_cdr.asp?url_file=/docrep/007/y5650e/y5650e04.htm 212 Wholesale markets in the era of supermarkets and hypermarkets – Developments in Central and Eastern Europe, Andrew W. Shepherd, Agricultural Marketing Group, FAO, Rome, May 27th 2004 213 Changes in Food Retailing in Asia: Implications of Supermarket Procurement Practices for Farmers and Traditional Marketing Systems, Agricultural Management, Marketing and Finance service (AGSF) occasional paper 8 FAO, Rome 2005 http://www.fao.org/ag/ags/subjects/en/agmarket/docs/agsf8.pdf 214 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 215 Wise moves: exploring the relationship between food, transport and CO2: ‘Section 4: the influences shaping the food supply chain’, Transport 2000 Trust, London, 2003 http://www.fcrn.org.uk/pdf/wise_moves.pdf 216 Structural Change and Globalisation of the German Retail Industry, Social Science Research Center Berlin, Michael Wortmann October 2003 217 ‘Factory Gate Pricing’ IGD Research, Free Factsheets, 2006 http://www.igd.com/CIR.asp?menuid=83&cirid=452 218 ‘Australian Retail Grocery Supply Chain Study, A study in to the changes and associated implications’, Oliver Sargent, Director of Performance Improvement, PricewaterhouseCoopers, 5th April 2005, http://www.laa.asn.au/__data/page/150/s_Presentation2.pdf

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219 ‘Australian Retail Grocery Supply Chain Study, A study in to the changes and associated implications’, Oliver Sargent, Director of Performance Improvement, PricewaterhouseCoopers, 5th April 2005, http://www.laa.asn.au/__data/page/150/s_Presentation2.pdf 220 ‘Australian Retail Grocery Supply Chain Study, A study in to the changes and associated implications’, Oliver Sargent, Director of Performance Improvement, PricewaterhouseCoopers, 5th April 2005, http://www.laa.asn.au/__data/page/150/s_Presentation2.pdf 221 ‘Perception and understanding of distribution and factory gate pricing’, Scottish Food and Drink, May 2003 222 ‘Electronic Systems in the Food Industry: Entropy, Speed and Sales’, The Retail Food Industry Center, J. Kinsey, University of Minnesota, September 2000 http://e- conomy.berkeley.edu/conferences/9-2000/EC-conference2000_papers/JeanKinsey.pdf 223 ‘Is your organisation built for the consumer?’, Harvard Business School Working Knowledge, M. Lagace, 18 March 2002, http://hbswk.hbs.edu/item.jhtml?id=2837&t=bizhistory&noseek=one 224 Electronic Systems in the Food Industry: Entropy, Speed and Sales, Jean Kinsey, University of Minnesota, The Retail Food Industry Center, September 2000 225 Electronic Systems in the Food Industry: Entropy, Speed and Sales, Jean Kinsey, University of Minnesota, The Retail Food Industry Center, September 2000 226 Electronic Systems in the Food Industry: Entropy, Speed and Sales, Jean Kinsey, University of Minnesota, The Retail Food Industry Center, September 2000 227 Electronic Systems in the Food Industry: Entropy, Speed and Sales, Jean Kinsey, University of Minnesota, The Retail Food Industry Center, September 2000 228 Electronic Systems in the Food Industry: Entropy, Speed and Sales, Jean Kinsey, University of Minnesota, The Retail Food Industry Center, September 2000 229 The Category Captain and the Consolidating Food Industry, American Antitrust Institute, Albert A. Foer, 2001 230 A Second Look at Category Management, Federal Trade Commission (USA) Speeches, Thomas B. Leary 231 ‘Shelf-Determination’ , Forbes Magazine, Brandon Copple, 2002 232 ‘Perception and understanding of distribution and factory gate pricing’, Scottish Food and Drink, May 2003 233 ‘Shelf-Determination’ , Forbes Magazine, Brandon Copple, 2002 234 Trading away our rights: women working in global supply chains, Oxfam, 2004, http://www.oxfam.org.uk/what_we_do/issues/trade/downloads/trading_rights.pdf 235 Frozen Food Age, Supermarkets: The "Category Captain" in the Next Millennium, Christopher W. Hoyt, 1999 236 Food for thought, PricewaterhouseCoopers insert (56) into Retail & Consumer Worlds, Jan 2006 237 Grocery and Food Service Trends, National Farm Products Council (Canada), 2004 238 Buying your way into trouble?, Insight Investment, 2004 239 Traceability in the U.S. Food Supply: Economic Theory and Industry Studies, United States Department of Agriculture Economic Research Service, Agricultural Economic Report Number 830, Elise Golan, Barry Krissoff, Fred Kuchler, Linda Calvin, Kenneth Nelson, and Gregory Price, March 2004, http://www.ers.usda.gov/Publications/AER830/AER830fm.pdf 240 Traceability in the U.S. Food Supply: Economic Theory and Industry Studies, United States Department of Agriculture Economic Research Service, Agricultural Economic Report Number 830, Elise Golan, Barry Krissoff, Fred Kuchler, Linda Calvin, Kenneth Nelson, and Gregory Price, March 2004, http://www.ers.usda.gov/Publications/AER830/AER830fm.pdf 241 ‘On Track: News and views from the Royal Agricultural College’, Royal Agricultural College Issue 10, 2002

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242 ‘Ahold Sells Stake in Central American Joint Venture to Wal-Mart’, Progressive Grocer, 21 September 2005 http://www.progressivegrocer.com/progressivegrocer/firc_new/search/article_display.jsp?schema =&vnu_content_id=1001140407 243 ‘Wal-Mart Announces Central American Investment’, Wal-Mart Press release, 20 September 2005, http://walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=26&contId=5646 244 Economic concentration and structural change in the food and agricultural sector: Trends, consequences and policy options, Democratic Staff of the Committee on Agriculture, Nutrition and Forestry, United States Senate, Tom Harkin, Iowa, Ranking Democratic Member, October 2004 245 ‘Farm Business Practices Coordinate Production With Consumer Preferences’, Food Review, Vol 25, Issue 1, http://www.ers.usda.gov/publications/FoodReview/May2002/frvol25i1g.pdf 246 Concentration in agricultural markets, Hendrickson and William Heffernan, Department of Rural Sociology -- University of Missouri, February, 2002 247 ‘It is all about the value chain’, The Financial Times, Ian Bikerton, 24 February 2006 248 ‘Rolling in the Aisles: The new ad medium’, Carlos Grande, The Financial Times, 16 June 2003 249 ‘Let's Innovate For Chocolate’, Andrew Harrison, The Financial Times, 17 June 2003 250 John Owen of Starcom Motive, quoted in ‘Rolling in the Aisles: The new ad medium’, Carlos Grande, The Financial Times, 16 June 2003 251 ‘The New Publishers’, Dawn Hynes, The Financial Times, 16 June 2003 252 ‘Every Little Helps: TESCO’, Jeremy Smith, The Ecologist, 1 September 2004, http://www.theecologist.org/archive_detail.asp?content_id=318 253 John Owen of Starcom Motive, quoted in ‘Rolling in the Aisles: The new ad medium’, Carlos Grande, The Financial Times, 16 June 2003 254 ‘The New Publishers’, Dawn Hynes, The Financial Times, 16 June 2003 255 Association of Publishing Agencies: Advancing Customer Publishing, Press Pack, 23 January 2005 www.apa.co.uk/cgi-bin/docs.pl/5/APA_press_pack.pdf 256 ‘Roy Morgan Readership Estimates for the United Kingdom for the period to February 2005’, Roy Morgan International, http://www.roymorgan.com/news/press-releases/2005/388/ 257 Association of Publishing Agencies: Advancing Customer Publishing, Press Pack, 23 January 2005 www.apa.co.uk/cgi-bin/docs.pl/5/APA_press_pack.pdf 258 ‘The New Publishers’, Dawn Hynes, The Financial Times, 16 June 2003 259 Top 50 Total Average Net Circulation/Distribution, ABC Concurrent Release Period July – December 2004, http://www.polestar-group.com/elearningDownloads/ABC%20analysis%20Jul- Dec%202004%20@%20Feb%202005.doc 260 ‘Roy Morgan Readership Estimates for the United Kingdom for the period to February 2005, http://www.roymorgan.com/news/press-releases/2005/388/ 261 ‘The New Publishers’, Dawn Hynes, The Financial Times, 16 June 2003 262 ‘The New Publishers’, Dawn Hynes, The Financial Times, 16 June 2003 263 ‘Keep the Customer Satisfied’, Association of Publishing Agencies, 23 January 2005 http://www.apa.co.uk/cgi-bin/go.pl/features/article.html?uid=482 264 ‘The New Publishers’, Dawn Hynes, The Financial Times, 16 June 2003 265 ‘Every little email helps for Tesco’, Stephen Brook, Guardian Media, 14 November 2005 266 ‘Every little email helps for Tesco’, Stephen Brook, Guardian Media, 14 November 2005 267 ‘Clicks, Bricks and Bargains’, The Economist, 1 December 2005, http://economist.com/business/displaystory.cfm?story_id=5253010 268 'Every little email helps for Tesco', Stephen Brook, Guardian Media, 14 November 2005

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Buyer Power

269 CIES Top of Mind Survey, The Food Business Forum, 2005, 270 Supermarket Practices: The need for EU wide action, Whateley, Judith, Agribusiness Accountability Initiative (AAI) EU Regulating Supermarkets Working Group, http://www.agribusinessaccountability.org/pdfs//305_Concerns-about-supermarket-practices.pdf 271 ‘Exploiting Buyer power: lessons from the British grocery trade’, Antitrust Law Journal No. 2 (2005), Paul W. Dobson, 2005, http://www.antitrustinstitute.org/recent2/384.pdf 272 ‘Exploiting Buyer power: lessons from the British grocery trade’, Antitrust Law Journal No. 2 (2005), Paul W. Dobson, 2005, http://www.antitrustinstitute.org/recent2/384.pdf 273 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 274 Supermarket Practices: The need for EU wide action, Whateley, Judith, Agribusiness Accountability Initiative (AAI) EU Regulating Supermarkets Working Group, http://www.agribusinessaccountability.org/pdfs//305_Concerns-about-supermarket-practices.pdf 275 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 276 Supermarket Practices: The need for EU wide action, Whateley, Judith, Agribusiness Accountability Initiative (AAI) EU Regulating Supermarkets Working Group, http://www.agribusinessaccountability.org/pdfs//305_Concerns-about-supermarket-practices.pdf 277 FARMING AND FOOD, Collaborating for Profit, English Farming and Food Partnerships, 2003, http://www.effp.com/StellentEFFPLIVE/groups/public/documents/coop_reports/farmingandfood _coll_ia42e622d0.hcsp#P20_197 278 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 279 ‘Manufacturing for Mass Merchandisers Are You Hooked?’, www.foodengineeringmag.com, Kevin T. Higgins, Senior Editor, 1 March 2004, http://www.foodengineeringmag.com/CDA/ArticleInformation/coverstory/BNPCoverStoryItem/0 ,6326,120293,00.html 280 ‘Exploiting Buyer power: lessons from the British grocery trade’, Antitrust Law Journal No. 2 (2005), Paul W. Dobson, 2005, http://www.antitrustinstitute.org/recent2/384.pdf 281 Supermarket Practices: The need for EU wide action, Whateley, Judith, Agribusiness Accountability Initiative (AAI) EU Regulating Supermarkets Working Group, http://www.agribusinessaccountability.org/pdfs//305_Concerns-about-supermarket-practices.pdf 282 Globalization of food presents challenges and opportunities to ag suppliers, Dr Roberta Cook, UC Davis, May 2003 283 ‘Global production networks in retailing: supply chain implications for East Asia and Eastern Europe’, GPN Working Paper 9, prepared as part of the ESRC Research Project R000238535: Making the Connections: Global Production Networks in Europe and East Asia. August 2004

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284 ‘Top Down Competition in the Food Industry: Trends and Implications’, Strategic Forum Discussion Paper, Sparks Companies Inc, US, September 2003 http://www.mda.state.mn.us/ams/whitepapers/topdown.pdf 285 Not on the Label, Felicity Lawrence, Penguin Books London, 2004 286 ‘Opening of the 23rd Carrefour hypermarket in Thailand’, 1 December 2005, http://www.carrefour.com/english/groupecarrefour/ouvthailande011205.jsp 287 ‘Global production networks in retailing: supply chain implications for East Asia and Eastern Europe’, GPN Working Paper 9, prepared as part of the ESRC Research Project R000238535: Making the Connections: Global Production Networks in Europe and East Asia. August 2004 288 ‘Exploiting Buyer power: lessons from the British grocery trade’, Antitrust Law Journal No. 2 (2005), Paul W. Dobson, 2005, http://www.antitrustinstitute.org/recent2/384.pdf 289 ‘Exploiting Buyer power: lessons from the British grocery trade’, Antitrust Law Journal No. 2 (2005), Paul W. Dobson, 2005, http://www.antitrustinstitute.org/recent2/384.pdf 290 'The Big Brands Go Begging in Europe', Business Week Online, 21 March 2005 http://www.businessweek.com/magazine/content/05_12/b3925071_mz054.htm 291 ‘GNX and WWRE Complete Merger Transaction to Form Agentrics’, Agentrics website, http://www.agentrics.com/press_room/release_002.htm 292 A Comparative Study of Asia Strategy: Wal-Mart versus Carrefour, Paper presented at the The Seventh International Conference on Global Business and Economic Development.Miao-Que Lin, Fu Jen Catholic University, China.Wen-Kuei Liang Tatung University, China, http://blake.montclair.edu/~cibconf/conference/DATA/Theme5/China.pdf 293 The Rapid Rise of Supermarkets in Central and Eastern Europe: Implications for the Agrifood Sector and Rural Development, Liesbeth Dries, Katholieke Universiteit Leuven Thomas Reardon, Michigan State University Johan F.M. Swinnen, The World Bank and Katholieke Universiteit Leuven, 2005 294 Economic concentration and structural change in the food and agricultural sector: Trends, consequences and policy options, Tom Harkin, Iowa, Ranking Democratic Member Democratic Staff of the Committee on Agriculture, Nutrition and Forestry United States Senate, October 2004 295 Economic concentration and structural change in the food and agricultural sector: Trends, consequences and policy options, Tom Harkin, Iowa, Ranking Democratic Member Democratic Staff of the Committee on Agriculture, Nutrition and Forestry United States Senate, October 2004 296 Economic concentration and structural change in the food and agricultural sector: Trends, consequences and policy options, Tom Harkin, Iowa, Ranking Democratic Member Democratic Staff of the Committee on Agriculture, Nutrition and Forestry United States Senate, October 2004 297 ‘Growing pains survey: Agriculture and technology’, The Economist, Shereen El Feki, 23 March 2000 http://www.economist.com/surveys/displayStory.cfm?story_id=295632 298 Food Marketing Costs: A 1990’s Retrospective, Food Marketing – USDA, Howard Elitzak, 2000 299 Food Marketing Costs: A 1990’s Retrospective, Food Marketing – USDA, Howard Elitzak, 2000 300 ‘Family Farms: The Next Endangered Species?’ Australian Nuffield Farming Scholar, Steve Dilley: "Perivale Orchards Pty Ltd", July 2004 301 Concentration in food supply and retail chains, Agriculture and Natural Resources Team of the Department for International Development (DFID) and Tom Fox and Bill Vorley of the International Institute for Environment and Development (IIED), London, August 2004 http://dfid-agriculture-consultation.nri.org/summaries/wp13.pdf 302 'Supply chain project links RFID with Internet', www.foodproductiondaily.com, 26th August 2005, http://www.foodproductiondaily.com/news/ng.asp?n=62116-rfid-epcglobal-fresh-produce

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303 Trading away our rights: women working in global supply chains, Oxfam, 2004, http://www.oxfam.org.uk/what_we_do/issues/trade/downloads/trading_rights.pdf 304 Tasmania: One potato more, Linking Lives & Livelihoods, 2003 305 'Supply chain project links RFID with Internet', www.foodproductiondaily.com, 26th August 2005, http://www.foodproductiondaily.com/news/ng.asp?n=62116-rfid-epcglobal-fresh-produce 306 ‘Trading Away Our Rights: women working in global supply chains’, Oxfam, 2004, http://www.oxfam.org.uk/what_we_do/issues/trade/downloads/trading_rights.pdf 307 'Supply chain project links RFID with Internet', www.foodproductiondaily.com, 26th August 2005, http://www.foodproductiondaily.com/news/ng.asp?n=62116-rfid-epcglobal-fresh-produce 308 Trading away our rights: women working in global supply chains, Oxfam, 2004, http://www.oxfam.org.uk/what_we_do/issues/trade/downloads/trading_rights.pdf 309 ‘Global production networks in retailing: supply chain implications for East Asia and Eastern Europe’, GPN Working Paper 9, prepared as part of the ESRC Research Project R000238535: Making the Connections: Global Production Networks in Europe and East Asia. August 2004 310 ‘Farm Business Practices Coordinate Production With Consumer Preferences’, Steve Martinez and David E. Davis, Economic Research Service, USDA FoodReview, Vol. 25, Issue 1, May 2002 http://www.ers.usda.gov/publications/FoodReview/May2002/frvol25i1g.pdf 311 ‘Asda looks for single milk supplier’, Dairy Reporter.com, 23 January 2004 312 ‘Asda's selection of Arla shakes up UK dairy industry’, CEE-Food Industry.com, 1 June 2004 313 ‘Solid results from Arla Foods UK’, FoodPrductionDaily.com, 15 June 2004 314 ‘Tesco, Sainsbury rejig milk supply arrangements’, FoodAndDrinkEurope.com, 27 August 2004 315 Report suggests bad deal for UK dairy suppliers, FoodAndDrinkEurope.com, 8 September 2004 316 ‘Arla to close two UK plants’, FoodAndDrinkEurope.com, 1 October 2004 317 ‘UK milk processors clash over prices’, FoodProductionDaily.com, 2 December 2004 318 ‘Arla seeks to heal UK milk price rift’, Dairy Reporter.com, 25 January 2005 319 ‘Dairy closures show difficult state of industry’, FoodProductionDaily.com, 20/01/2005 320 ‘Arla To Cut Prices By 0.35ppl’, MDC Datum, 27 May 2005 321 Arla, Dairy Crest to profit from UK milk shake-up, FoodAndDrinkEurope.com, 9 May 2005 322 ‘Joseph Heler to Cut Milk Price’, MDC Datum, 2 June 2005 323 ‘Arla attacked over milk price cuts’, DairyReporter.com, 7 June 2005 324 ‘Arla Maintain Price Cut’, MDC Datum, 23 June 2005 325 ‘Wiseman To Cut Milk Price’, MDC Datum, 29 June 2005 326 ‘Golden Vale Make 0.3ppl Price Cut’, MDC Datum, 31 August 2005 327 ‘Arla Cuts Price by 0.35ppl for September’, MDC Datum, 9 September 2005 328 ‘Farmgate milk prices’, MDC Datum, 13 September 2005 329 ‘First Milk Cut Milk Price’, MDC Datum, 22 September 2005 330 ‘Dairy Crest contract losses to hit profits’, Chris Mercer, DairyReporter.com, 29 September 2005 331 ‘Dairy Crest contract losses to hit profits’, Chris Mercer, DairyReporter.com, 29 September 2005 332 ‘Dairy Crest contract losses to hit profits’, Chris Mercer, DairyReporter.com, 29 September 2005 333 ‘Dairy Crest Cut Liquid Price by 0.275ppl’, MDC Datum, 17 October 2005 334 ‘Longslow to Close Dairy’, MDC Datum, 11 October 2005 335 ‘UK Dairy officials to meet OFT amid rising tension’, Chris Mercer, DairyReporter.com, 23 November 2005 336 ‘Arla UK revels in branded dairy rise’, Chris Mercer, DairyReporter.com, 1 December 2005 337‘Liquid milk retail price increases’, MDC Datum, 24 January 2006

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338 ‘Wiseman holds February Price’, MDC Datum, 31 January 2006 339 ‘Arla Cut Prices by 0.3ppl’, MDC Datum, 1 February 2006 340 ‘Wiseman Cut Price by 0.65ppl’, MDC Datum, 1 March 2006 341 ‘Wiseman Cut Price by 0.65ppl’, MDC Datum, 1 March 2006 342 ‘Exploiting Buyer power: lessons from the British grocery trade’, Antitrust Law Journal No. 2 (2005), Paul W. Dobson, 2005, http://www.antitrustinstitute.org/recent2/384.pdf 343 ‘Exploiting Buyer power: lessons from the British grocery trade’, Antitrust Law Journal No. 2 (2005), Paul W. Dobson, 2005, http://www.antitrustinstitute.org/recent2/384.pdf

Private label

344 ‘It is all about the value chain’, The Financial Times, Ian Bikerton, 24 February 2006 345 ‘Private Label Trends Worldwide 2004’, Planet Retail Press Release, 3rd December 346 ‘Private Label Trends Worldwide 2004’, Planet Retail Press Release, 3rd December 347 ‘Snapshot US Market Trends, Private Label Food & Beverage Products’, Foreign Agricultural Service, USDA, (February 2005) 348 Retail Sector Responses to Changing Consumer Preferences: the European Experience, J. Codron, K. Grunert, E. Giraud-Heraud, L. Soler, and A. Regmi, Economic Research Service, U.S. Department of Agriculture, 2003 http://ceco.polytechnique.fr/fichiers/ceco/publications/pdf/2005-07-05-1042.pdf 349 New Directions in Global Food Markets, ed. Anita Regmi and Mark Gehlhar, Agriculture Information Bulletin Number 794, USDA, February 2005, http://www.ers.usda.gov/publications/aib794/aib794fm.pdf 350 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 351 Shaping Value Chains for Development: Global Value Chains in Agribusiness, John Humphrey, commissioned by Federal Ministry for Economic Cooperation and Development, 2005, http://www.ids.ac.uk/ids/global/pdfs/humphrey-gtz.pdf?RecID=BIB-GTZ066187 352 'Private Label: seizing a greater share of the global shelf', Euromonitor, 18th February 2005, http://www.euromonitor.com/article.asp?id=4606 353 'Power of Private Label 2005: A review of Growth Trends Around the World', ACNielsen Global Services (September 2005), http://www2.acnielsen.com/reports/documents/2005_privatelabel.pdf 354 'Power of Private Label 2005: A review of Growth Trends Around the World', ACNielsen Global Services (September 2005), http://www2.acnielsen.com/reports/documents/2005_privatelabel.pdf 355 'Power of Private Label 2005: A review of Growth Trends Around the World', ACNielsen Global Services (September 2005) http://www2.acnielsen.com/reports/documents/2005_privatelabel.pdf 356 ‘Global production networks in retailing: supply chain implications for East Asia and Eastern Europe’, GPN Working Paper 9, prepared as part of the ESRC Research Project R000238535: Making the Connections: Global Production Networks in Europe and East Asia. August 2004 357 'Power of Private Label 2005: A review of Growth Trends Around the World', ACNielsen Global Services (September 2005) http://www2.acnielsen.com/reports/documents/2005_privatelabel.pdf 358 'Private Label: Their Role for Retailers & their impact on Competition', 'Trends in Retail Competition: Private Labels, Brands and Competition Policy', A symposium on the Role of

279

Private Labels in Competition between Retailers and between Suppliers, The Institute of European and Comparative Law, June 2005 359 ‘In Favor or Out of Favor? Effects of Store Brand Introduction on Retailer Pricing of National Brands’, Sergio Meza, New York University, K. Sudhir, Yale School of Management, 2004 360 'The Big Brands Go Begging in Europe', Business Week Online, 21 March 2005, http://www.businessweek.com/magazine/content/05_12/b3925071_mz054.htm 361 'The Big Brands Go Begging in Europe', Business Week Online, 21 March 2005, http://www.businessweek.com/magazine/content/05_12/b3925071_mz054.htm 362 'Power of Private Label 2005: A review of Growth Trends Around the World', ACNielsen Global Services (September 2005), http://www2.acnielsen.com/reports/documents/2005_privatelabel.pdf 363 Food for thought, Deloitte & Touche, Winter 2003/2004 364 ‘Unilever struggles in home market’, Food and Drink Europe, 05/08/2005 365 'The Big Brands Go Begging in Europe', Business Week Online, 21 March 2005, http://www.businessweek.com/magazine/content/05_12/b3925071_mz054.htm 366 Private Label: Threat to Manufacturers, Opportunity for Retailers, The Boston Consulting Group, 2003 367 In Favor or Out of Favor? Effects of Store Brand Introduction on Retailer Pricing of National Brands Sergio Meza, New York University K. Sudhir, Yale School of Management 2004 368 ‘The role of strategic pricing by retailers in the success of Store Brands’ Sergio Meza, New York University, K Sudhir, Yale School of Management, January 2003 369 Private Label: Threat to Manufacturers, Opportunity for Retailers, The Boston Consulting Group, 2003 370 Win-Win Strategies at Discount Stores, ERIM (Erasmus Research Institute of Management) report, ERS-2005-050-MKT, September 2005, https://ep.eur.nl/bitstream/1765/6924/1/ERS+2005+050+MKT.pdf 371 'Power of Private Label 2005: A review of Growth Trends Around the World', ACNielsen Global Services (September 2005), http://www2.acnielsen.com/reports/documents/2005_privatelabel.pdf 372 Win-Win Strategies at Discount Stores, ERIM (Erasmus Research Institute of Management) report, ERS-2005-050-MKT, September 2005, https://ep.eur.nl/bitstream/1765/6924/1/ERS+2005+050+MKT.pdf 373 Win-Win Strategies at Discount Stores, ERIM (Erasmus Research Institute of Management) report, ERS-2005-050-MKT, September 2005, https://ep.eur.nl/bitstream/1765/6924/1/ERS+2005+050+MKT.pdf 374 'Power of Private Label 2005: A review of Growth Trends Around the World', ACNielsen Global Services (September 2005), http://www2.acnielsen.com/reports/documents/2005_privatelabel.pdf 375 ‘Private label growth cut intor manufacturers’ market’, Ahmed ElAmin, www.foodproductiondaily.com, 28 September 2005, http://www.foodproductiondaily.com/news/ng.asp?id=62858-acnielsen-private-label 376 'Private Label Set for Global Growth', www.privatelabelmag.com, (2005), http://www.privatelabelmag.com/pdf/pli_summer2005/15.cfm 377 'Power of Private Label 2005: A review of Growth Trends Around the World', ACNielsen Global Services (September 2005), http://www2.acnielsen.com/reports/documents/2005_privatelabel.pdf 378 'The Big Brands Go Begging in Europe', Business Week Online, 21 March 2005, http://www.businessweek.com/magazine/content/05_12/b3925071_mz054.htm 379 'US Store Brands May Outsell National Ones', Lucia Moses, Supermarket News, 14 March 2005

280

380 'Private Label Set for Global Growth', www.privatelabelmag.com, (2005), http://www.privatelabelmag.com/pdf/pli_summer2005/15.cfm 381 Private Label: Threat to Manufacturers, Opportunity for Retailers, The Boston Consulting Group, 2003 382 Retail Sector Responses to Changing Consumer Preferences: the European Experience, J. Codron, K. Grunert, E. Giraud-Heraud, L. Soler, and A. Regmi, Economic Research Service, U.S. Department of Agriculture, 2003 http://ceco.polytechnique.fr/fichiers/ceco/publications/pdf/2005-07-05-1042.pdf 383 Retail Sector Responses to Changing Consumer Preferences: the European Experience, J. Codron, K. Grunert, E. Giraud-Heraud, L. Soler, and A. Regmi, Economic Research Service, U.S. Department of Agriculture, 2003 http://ceco.polytechnique.fr/fichiers/ceco/publications/pdf/2005-07-05-1042.pdf 384 Retail Sector Responses to Changing Consumer Preferences: the European Experience, J. Codron, K. Grunert, E. Giraud-Heraud, L. Soler, and A. Regmi, Economic Research Service, U.S. Department of Agriculture, 2003 http://ceco.polytechnique.fr/fichiers/ceco/publications/pdf/2005-07-05-1042.pdf 385 ‘New Directions in Global Food Markets’, Agriculture Information Bulletin Number 794, ed. Anita Regmi and Mark Gehlhar, USDA, February 2005 386 ‘New Directions in Global Food Markets’, Agriculture Information Bulletin Number 794, ed. Anita Regmi and Mark Gehlhar, USDA, February 2005 387 'US Store Brands May Outsell National Ones', Lucia Moses, Supermarket News, 14 March 2005 388 'Power of Private Label 2005: A review of Growth Trends Around the World', ACNielsen Global Services (September 2005), http://www2.acnielsen.com/reports/documents/2005_privatelabel.pdf 389 ‘Private Label and Branding’, Supermarket Strategic Alert, Special Report, 2004, www.supermarketalert.com 390 The UK Competition Commission cited in ‘Private Label: Their Role for Retailers & their impact on Competition', 'Trends in Retail Competition: Private Labels, Brands and Competition Policy', A symposium on the Role of Private Labels in Competition between Retailers and between Suppliers, The Institute of European and Comparative Law, (June 2005) 391 'Power of Private Label 2005: A review of Growth Trends Around the World', ACNielsen Global Services (September 2005), http://www2.acnielsen.com/reports/documents/2005_privatelabel.pdf 392 In Favor or Out of Favor? Effects of Store Brand Introduction on Retailer Pricing of National Brands Sergio Meza, New York University K. Sudhir, Yale School of Management 2004 393 The changing face of the global food industry, presentation OECD conference the Hague, Jan- Willem Grievink, 6 Feb 2003

Section 2

394 ‘Making Western Agriculture More Sustainable’, Folke Gunther, Foundation for the Economics of Sustainability (FEASTA), http://www.feasta.org/documents/feastareview/guenther.htm 395 Total Midyear Population for the World: 1950-2050, US Census Bureau, http://www.census.gov/ipc/www/worldpop.html

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707 The salmon feed industry hard ball game or oligopoly, Betrand Charron, 1999 708 Diminishing Returns: An investigation into the Five Multinational Corporations that Control British Columbia’s salmon farming industry, RainCoast Conservation Society, S.Cox, December 2004, www.raincoast.org/files/DiminishingReturns_final.pdf 709 Nutreco Annual Report 2004, Nutreco Corporate website, http://www.nutreco.com/pdf/annualreport_2004_EN.pdf 710‘Infinite Growth: The Myth of the Chilean Salmon farming industry’, Public Policy Statement No.6, Terram Publications, Sept 2002 711 Turning the Tide, Royal Commission for Environmental Pollution, Dec 2004, p.123 http://www.rcep.org.uk/fishreport.htm 712 Turning the Tide, Royal Commission for Environmental Pollution, Dec 2004, p.123 http://www.rcep.org.uk/fishreport.htm 713 Turning the Tide, Royal Commission for Environmental Pollution, Dec 2004, p.123 http://www.rcep.org.uk/fishreport.htm 714 Turning the Tide, Royal Commission for Environmental Pollution, Dec 2004, p.123 http://www.rcep.org.uk/fishreport.htm 715 Recipe for Disaster: Supermarkets’ Insatiable Appetite for Seafood, Greenpeace, 2005 http://www.greenpeace.org.uk/MultimediaFiles/Live/FullReport/7281.pdfA 716 Recipe for Disaster: Supermarkets’ Insatiable Appetite for Seafood, Greenpeace, 2005 http://www.greenpeace.org.uk/MultimediaFiles/Live/FullReport/7281.pdfA 717 The State of World Fisheries and Aquaculture, FAO, Rome, 2004 p.36 ftp://ftp.fao.org/docrep/fao/007/y5600e/y5600e01.pdf 718 ‘The promise of a blue revolution’, The Economist print edition, Aug 7th 2003 719 ‘Infinite Growth: The myth of the Chilean salmon farming industry’, Public Policy Statement No. 6, Terram Publications, Sept 2002 720 Diminishing Returns - An Investigation into the Five Multinational Corporations that Control British Columbia’s Salmon Farming Industry, Raincoast Conservation Society, December 2004, p8, www.raincoast.org/files/DiminishingReturns_final.pdf 721 Turning the Tide, Royal Commission for Environmental Pollution, Dec 2004, p.140 [Figure adapted from Environmental risk assessment and communication in coastal aquaculture, Nautilus Consultants, 2002] Available at: http://www.nautilusconsultants.co.uk/pdfs/Aqua%20Env%20Risk%20Assessment.pdf 722 ‘Infinite Growth: The myth of the Chilean salmon farming industry’, Public Policy Statement No. 6, Terram Publications,, Sept 2002 723 ‘Dead Zones Increasing in World's Coastal Waters’ Janet Larsen, Earth Policy Institute, June 16, 2004, http://www.earth-policy.org/Updates/Update41.htm 724 The environmental cost of Chilean salmon farming, Terram Publications, Public Policy Statement No. 5, January 2002 725 ‘The dead sea cells’, Paul Brown, The Guardian, Saturday May 17 2003 726 ‘The dead sea cells’, Paul Brown, The Guardian, Saturday May 17 2003 727 ‘Infinite Growth: The myth of the Chilean salmon farming industry’, Public Policy Statement No. 6, Terram Publications,, Sept 2002 728 ‘The dead sea cells’, Paul Brown, The Guardian, Saturday May 17 2003 729 Diminishing Returns - An Investigation into the Five Multinational Corporations that Control British Columbia’s Salmon Farming Industry, Raincoast Conservation Society, December 2004, p16, www.raincoast.org/files/DiminishingReturns_final.pdf 730 ‘Farm sea lice plague wild salmon’, BBC News, Tuesday, 29 March, 2005 http://news.bbc.co.uk/2/hi/science/nature/4391711.stm 731 ‘Farm sea lice plague wild salmon’, BBC News, Tuesday, 29 March, 2005 http://news.bbc.co.uk/2/hi/science/nature/4391711.stm

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732 ‘Mass Fish Kill still unreported, "Unacceptable" delay in action, say FoE’, Friends of the Earth, Thursday 6th April 2000, http://www.foe-scotland.org.uk/press/pr20000403.html 733 ‘Questions and Answers about Transgenic Fish’, US Food and Drug Administration, 2005 http://www.fda.gov/cvm/transgen.htm 734 Turning the tide, Royal Commission on Environmental Pollution, Dec 2004, p.139 http://www.rcep.org.uk/fishreport.htm 735 ‘Questions and Answers about Transgenic Fish’, US Food and Drug Administration, 2005 http://www.fda.gov/cvm/transgen.htm 736 ‘Transgenic fish’, The Centre for Food Safety, www.centreforfoodsafety.org 737 Protecting Wild Atlantic Salmon from Impacts of Salmon Farming, a country-by-country progress report, Porter, G, World Wildlife Fund for Nature and Atlantic Salmon Federation, WWF, Washington DC, 2003 http://www.worldwildlife.org/oceans/pdfs/osloresprogress.pdf 738 ‘Marine Harvest Norway loses 31 Million NOK on escape’, www.fishupdate.com, 13 September, 2005 http://www.fishupdate.com/news/fullstory.php/aid/3061/Marine_Harvest_Norway_loses_31_Mill ion_NOK_on_escape.html

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739‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 740 ‘Reducing Food Miles – ‘Green Propaganda or Sound Business Sense?’, The logistics business, (2000), http://www.logistics.co.uk/db_pdf/reducing_food_miles_69.pdf, Accessed 21/10/05 741 ‘Fruit sorting area’, Muller, 2004, http://www.muller.co.uk/ourLife/tour/fruit.php 742 ‘Reducing Food Miles – ‘Green Propaganda or Sound Business Sense?’, The logistics business, (2000), http://www.logistics.co.uk/db_pdf/reducing_food_miles_69.pdf, Accessed 21/10/05 743 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 744 ‘The European Perishable Market, Opportunities and threats for South America’, Gert- JanJansen, YDL Management Consultants 745 ‘Asda plans to double share of local produce’, Susie Mesure, The Independent, 28 September 2005, http://www.findarticles.com/p/articles/mi_qn4158/is_20050928/ai_n15615753 746 ‘Globalization, urbanization and changing food systems in developing countries’, The state of food insecurity in the world (SOFI) 2004, Economic and Social Department, FAO, 2004 http://www.fao.org/documents/show_cdr.asp?url_file=/docrep/007/y5650e/y5650e04.htm 747 Globalization of food presents challenges and opportunities to ag suppliers, Dr Roberta Cook, UC Davis, May 2003 748 The evolving global marketplace for fruits and vegetables, Dr Roberta Cook, UC Davis, 2003 749 ‘Food and Climate Change’, East Anglia Food Link, (2005), http://www.eafl.org.uk/downloads/FoodAndClimateChange.doc 750 ‘Checking the food odometer: Comparing food miles versus conventional product sales to Iowa institutions’ Rich Pirog Andrew Benjamin, Iowa State University 2003 751 ‘Ripe for Change: Rethinking California's Food Economy’, The International Society for Ecology and Culture, Katy Mamen, Steven Gorelick, Helena Norberg-Hodge, Diana Deumling, Helena Norberg-Hodge and Steven Gorelick, (May 2004)

298 http://www.isec.org.uk/articles/RipeForChange.pdf 752 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 753 ‘Wise Moves Exploring the relationship between food, transport and CO2’, Transport 2000 trust, (2003), http://www.crn.org.uk/pdf/wise_moves.pdf Accessed 23/11/05 754 ‘Wise Moves Exploring the relationship between food, transport and CO2’, Transport 2000 trust, (2003), http://www.crn.org.uk/pdf/wise_moves.pdf Accessed 23/11/05 755 The Farm Crisis: How we are Killing the Small Farmers, Steven Gorelick, US Programs Director, ISEC, http://www.isec.org.uk/articles/farm.html 756 ‘Ripe for Change: Rethinking California's Food Economy’, The International Society for Ecology and Culture, Katy Mamen, Steven Gorelick, Helena Norberg-Hodge, Diana Deumling, Helena Norberg-Hodge and Steven Gorelick, (May 2004) http://www.isec.org.uk/articles/RipeForChange.pdf 757 ‘Checking the food odometer: Comparing food miles versus conventional product sales to Iowa institutions’ Rich Pirog Andrew Benjamin, Iowa State University, 2003 http://www.leopold.iastate.edu/pubs/staff/files/food_travel072103.pdf 758 ‘Food, Fuel, and Freeways: An Iowa perspective on how far food travels, fuel usage, and greenhouse gas emissions’, Rich Pirog, Timothy Van Pelt, Kamyar Enshayan, Ellen Cook, Leopold Center for Sustainable Agriculture, 2001, http://www.leopold.iastate.edu/pubs/staff/ppp/food_mil.pdf 759 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 760 ‘Wise Moves Exploring the relationship between food, transport and CO2’, Transport 2000 trust, (2003), http://www.crn.org.uk/pdf/wise_moves.pdf Accessed 23/11/05 761 ‘Short paths to efficiency : an ecological and economical approach for a regional food supply’, Wuppertal Institute for Climate, Environment and Energy, (2004), http://www.wupperinst.org/download/food-transport/demmeler.pdf 762 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 763 ‘UNEP Energy Group: Transport’, UNEP, (2005), http://www.uneptie.org/energy/act/tp/ 764 Indicator fact sheet, TERM 2002 02 EU — Transport emissions of greenhouse gases by mode, European Environmental Agency, http://themes.eea.eu.int/Sectors_and_activities/transport/indicators/consequences/TERM02,2002/ TERM_2002_02_EU_Transport_emissions_of_greenhouse_gases.pdf 765Four points above from Greenhouse gas emission trends in Europe, 1990-2000, European topic centre on air and climate change, European environmental agency 766‘Stopping the Great Food Swap: Relocalising Europe’s Food Supply, C. Lucas, 2001 http://www.carolinelucasmep.org.uk/publications/greatfoodswap.html 767 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 768 ‘Ripe for Change: Rethinking California's Food Economy’, The International Society for Ecology and Culture, Katy Mamen, Steven Gorelick, Helena Norberg-Hodge, Diana Deumling, Helena Norberg-Hodge and Steven Gorelick, (May 2004) http://www.isec.org.uk/articles/RipeForChange.pdf 769 ‘Life cycle modelling CO2 emissions for lettuce, apples and Cherries’, Department of Transport, (2002), http://www.dft.gov.uk/stellent/groups/dft_freight/documents/pdf/dft_freight_pdf_508272.pdf 770 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 771 Sign up for your climate change loyalty card, Sustain, 2001

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772 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 773 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 774 ‘Wise Moves Exploring the relationship between food, transport and CO2’, Transport 2000 trust, (2003), http://www.crn.org.uk/pdf/wise_moves.pdf Accessed 23/11/05 775 ‘Wise Moves Exploring the relationship between food, transport and CO2’, Transport 2000 trust, (2003), http://www.crn.org.uk/pdf/wise_moves.pdf Accessed 23/11/05 776‘What's wrong with supermarkets?’, Corporate Watch, April 2002 http://www.corporatewatch.org.uk/?lid=705 777 ‘Food, Fuel, and Freeways: An Iowa perspective on how far food travels, fuel usage, and greenhouse gas emissions’, Rich Pirog, Timothy Van Pelt, Kamyar Enshayan, Ellen Cook, Leopold Center for Sustainable Agriculture, 2001, http://www.leopold.iastate.edu/pubs/staff/ppp/food_mil.pdf 778 ‘Food and Climate Change’, East Anglia Food Link, (2005), http://www.eafl.org.uk/downloads/FoodAndClimateChange.doc 779 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 780 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 781 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 782 ‘Wise Moves Exploring the relationship between food, transport and CO2’, Transport 2000 trust, (2003), http://www.crn.org.uk/pdf/wise_moves.pdf Accessed 23/11/05 783 ‘Food and Climate Change’, East Anglia Food Link, (2005), http://www.eafl.org.uk/downloads/FoodAndClimateChange.doc 784 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 785 ‘What's wrong with supermarkets?’, Corporate Watch, April 2002 http://www.corporatewatch.org.uk/?lid=705 786 ‘Farm costs and food miles: An assessment of the full cost of the UK weekly food basket’, Food Policy, J.N. Pretty a,¤, A.S. Ball a, T. Lang b, J.I.L. Morison, (2005), www.sciencedirect.com 787 ‘Farm costs and food miles: An assessment of the full cost of the UK weekly food basket’, Food Policy, J.N. Pretty a,¤, A.S. Ball a, T. Lang b, J.I.L. Morison, (2005), www.sciencedirect.com 788 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 789 ‘How Can We Reduce Carbon Emissions From Transport?’, Tyndall Centre, June 2004 http://www.tyndall.ac.uk/research/theme2/final_reports/it1_7.pdf 790 ‘Life cycle modelling CO2 emissions for lettuce, apples and Cherries’, Department of Transport, (2002), http://www.dft.gov.uk/stellent/groups/dft_freight/documents/pdf/dft_freight_pdf_508272.pdf 791 ‘Ripe for Change: Rethinking California's Food Economy’, The International Society for Ecology and Culture, Katy Mamen, Steven Gorelick, Helena Norberg-Hodge, Diana Deumling, Helena Norberg-Hodge and Steven Gorelick, (May 2004) http://www.isec.org.uk/articles/RipeForChange.pdf 792 ‘Transport Statistics Bulletin’, Department for Transport, (2005), http://www.dft.gov.uk/stellent/groups/dft_transstats/documents/downloadable/dft_transstats_610 429.pdf, Accessed 18/11/05

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793 ‘Wise Moves Exploring the relationship between food, transport and CO2’, Transport 2000 trust, (2003), http://www.crn.org.uk/pdf/wise_moves.pdf Accessed 23/11/05 794 ‘Stopping the Great Food Swap: Relocalising Europe’s Food Supply, C. Lucas, 2001 http://www.carolinelucasmep.org.uk/publications/greatfoodswap.html 795 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 796 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 797 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 798 ‘Ripe for Change: Rethinking California's Food Economy’, The International Society for Ecology and Culture, Katy Mamen, Steven Gorelick, Helena Norberg-Hodge, Diana Deumling, Helena Norberg-Hodge and Steven Gorelick, (May 2004) http://www.isec.org.uk/articles/RipeForChange.pdf 799 ‘Ripe for Change: Rethinking California's Food Economy’, The International Society for Ecology and Culture, Katy Mamen, Steven Gorelick, Helena Norberg-Hodge, Diana Deumling, Helena Norberg-Hodge and Steven Gorelick, (May 2004) http://www.isec.org.uk/articles/RipeForChange.pdf 800 ‘Information Statement: Organic Food’, Institute for Food Science and Technology, February 2005, http://www.ifst.org/hottop24.htm 801 ‘Asda, Morrisons and Tesco shun UK organic beef and pork’, Soil Association, 4 August 2005 http://www.soilassociation.org/web/sa/saweb.nsf/0/3b5b57f40d5c0ce580256fdd00365da2?Open Document 802 Fighting Global Warming at the Farmer’s Market: The Role of Local Food Systems in Reducing Greenhouse Gas Emissions, S. Bentley, R. Barker, Food Share Research in Action Report, April 2005, http://www.foodshare.net/resource/files/ACF230.pdf 803 Eating Oil – Food in a Changing Climate, A Sustain/Elm Farm Research Centre Report 2001 804 ‘Reducing Food Miles – ‘Green Propaganda or Sound Business Sense?’, The logistics business, (2000), http://www.logistics.co.uk/db_pdf/reducing_food_miles_69.pdf, Accessed 21/10/05 805 ‘Stopping the Great Food Swap: Relocalising Europe’s Food Supply, C. Lucas, 2001 http://www.carolinelucasmep.org.uk/publications/greatfoodswap.html 806 ‘Lebensmittel auf Reisen’, Umweltjournal, September 2001, http://www.umweltjournal.de/fp/archiv/AfA_naturkost/LMaufReisen4.php 807 ‘Lebensmittel auf Reisen’, Umweltjournal, September 2001, http://www.umweltjournal.de/fp/archiv/AfA_naturkost/LMaufReisen4.php 808 ‘Lebensmittel auf Reisen’, Umweltjournal, September 2001, http://www.umweltjournal.de/fp/archiv/AfA_naturkost/LMaufReisen4.php 809 ‘Farming Matters! 'Food for Thought'’, Food for Thought , (2005), http://www.farmingmatters.org.uk/fft05/food%20miles.html 810 Food, Fuel, and Freeways: An Iowa perspective on how far food travels, fuel usage, and greenhouse gas emissions, R. Pirog, T. Van Pelt, K. Enshayan, E. Cook, Leopold Center for Sustainable Agriculture, 2001, http://www.leopold.iastate.edu/pubs/staff/ppp/food_mil.pdf 811 Food, Fuel, and Freeways: An Iowa perspective on how far food travels, fuel usage, and greenhouse gas emissions, R. Pirog, T. Van Pelt, K. Enshayan, E. Cook, Leopold Center for Sustainable Agriculture, 2001, http://www.leopold.iastate.edu/pubs/staff/ppp/food_mil.pdf 812Eating Oil – Food in a Changing Climate, A Sustain/Elm Farm Research Centre Report 2001

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813 ‘Going Local on a Global Scale: Rethinking Food Trade in the Era of Climate Change, Dumping, and Rural Poverty’ Kirsten Schwind, Institute for Food and Development Policy, 2005, http://www.foodfirst.org/backgrouders/goinglocal 814 ‘Fighting Global Warming at the Farmer’s Market: The Role of Local Food Systems in Reducing Greenhouse Gas Emissions’, S. Bentley, R. Barker, Food Share Research in Action Report, April 2005, http://www.foodshare.net/resource/files/ACF230.pdf 815 ‘Fighting Global Warming at the Farmer’s Market: The Role of Local Food Systems in Reducing Greenhouse Gas Emissions’, S. Bentley, R. Barker, Food Share Research in Action Report, April 2005, http://www.foodshare.net/resource/files/ACF230.pdf 816 Fighting global warming at the farmer’s market: the role of local food systems in reducing greenhouse gas emissions, Stephen Bentley and Ravenna Barker, A FoodShare Research in Action Report, Second Edition, April 2005, http://www.foodshare.net/resource/files/ACF230.pdf 817 ‘Life cycle modelling CO2 emissions for lettuce, apples and Cherries’, Department of Transport, (2002), http://www.dft.gov.uk/stellent/groups/dft_freight/documents/pdf/dft_freight_pdf_508272.pdf 818 ‘Wise Moves Exploring the relationship between food, transport and CO2’, Transport 2000 trust, (2003), http://www.crn.org.uk/pdf/wise_moves.pdf Accessed 23/11/05 819 ‘What's wrong with supermarkets?’, Corporate Watch, April 2002 http://www.corporatewatch.org.uk/?lid=705 820 ‘Britain’s Supermarkets Still not Supporting Native Apples’, Friends of the Earth Media Briefing, November 2005, http://www.foe.co.uk/resource/media_briefing/applesurvey.pdf 821 ‘Farm costs and food miles: An assessment of the full cost of the UK weekly food basket’, Food Policy, J.N. Pretty a,¤, A.S. Ball a, T. Lang b, J.I.L. Morison, (2005), www.sciencedirect.com 822 ‘Stopping the Great Food Swap: Relocalising Europe’s Food Supply, C. Lucas, 2001 http://www.carolinelucasmep.org.uk/publications/greatfoodswap.html 823 ‘Stopping the Great Food Swap: Relocalising Europe’s Food Supply, C. Lucas, 2001 http://www.carolinelucasmep.org.uk/publications/greatfoodswap.html 824 ‘Reducing Food Miles – ‘Green Propaganda or Sound Business Sense?’, The logistics business, (2000), http://www.logistics.co.uk/db_pdf/reducing_food_miles_69.pdf, Accessed 21/10/05 825 ‘Going Local on a Global Scale: Rethinking Food Trade in the Era of Climate Change, Dumping, and Rural Poverty’, Food First Institute for Food and Development Policy, (Spring/Summer 2005), http://www.foodfirst.org/files/pdf/backgrounders/goinglocal.pdf 826Auf der Suche nach einer nachhaltingen Enrnaehrung, Beatrix Tappeser, Alexandrea Baier, a.o. 1999 827 ‘Stopping the Great Food Swap: Relocalising Europe’s Food Supply, C. Lucas, 2001 http://www.carolinelucasmep.org.uk/publications/greatfoodswap.html 828 ‘Stopping the Great Food Swap: Relocalising Europe’s Food Supply, C. Lucas, 2001 http://www.carolinelucasmep.org.uk/publications/greatfoodswap.html 829 ‘Reducing Food Miles – ‘Green Propaganda or Sound Business Sense?’, The logistics business, (2000), http://www.logistics.co.uk/db_pdf/reducing_food_miles_69.pdf, Accessed 21/10/05 830 ‘Wise Moves Exploring the relationship between food, transport and CO2’, Transport 2000 trust, (2003), http://www.crn.org.uk/pdf/wise_moves.pdf Accessed 23/11/05 831 ‘Reducing Food Miles – ‘Green Propaganda or Sound Business Sense?’, The logistics business, (2000), http://www.logistics.co.uk/db_pdf/reducing_food_miles_69.pdf, Accessed 21/10/05

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832 The globalizing livestock sector: impact of changing markets, Food and Agriculture Organization (FAO) committee on agriculture, Nineteenth Session, Rome, 13-16 April 2005, http://www.fao.org/docrep/meeting/009/j4196e.htm 833 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 834 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 835 ‘Market integration of the north american animal products complex’, USDA, (May 2005), http://www.ers.usda.gov/Publications/ldp/may05/ldpm13101/ 836 ‘The Validity of Food Miles as an Indicator of Sustainable Development’, DEFRA, (2005), http://statistics.defra.gov.uk/esg/reports/foodmiles/final.pdf 837 'Consumers questioned about animal welfare and processors' ethics', By Ahmed ElAmin, www.meatprocess.com, 16th November 2005 838 ‘Local Food, Global Situation: Increased international trade in food is putting the livelihoods of small producers across the world at risk’, The Ecologist, May 2002 839 Expenditure Review of Programmes in the Potato Sector, Department of Agriculture and Food, Ireland, April 2004, http://www.agriculture.gov.ie/publicat/publications2004/potato_sector_review.pdf 840 Expenditure Review of Programmes in the Potato Sector, Department of Agriculture and Food, Ireland, April 2004, http://www.agriculture.gov.ie/publicat/publications2004/potato_sector_review.pdf 841 Expenditure Review of Programmes in the Potato Sector, Department of Agriculture and Food, Ireland, April 2004, http://www.agriculture.gov.ie/publicat/publications2004/potato_sector_review.pdf 842 ‘Life cycle modelling CO2 emissions for lettuce, apples and Cherries’, Department of Transport, (2002), http://www.dft.gov.uk/stellent/groups/dft_freight/documents/pdf/dft_freight_pdf_508272.pdf 843 ‘Investigation Of Secondary Loop Supermarket Refrigeration Systems’, California Energy Commission, (2004), http://www.energy.ca.gov/reports/2004-04-23_500-04-013.PDF 844 'Power of Private Label 2005: A review of Growth Trends Around the World', ACNielsen Global Services (September 2005) 845 ‘Heat recovery and floating condensing in supermarkets’, Energy and Buildings, Jaime Arias, Per Lundqvist, (2005), www.sciencedirect.com 846 J Sainsbury 1998 Report, http://www.jsainsbury.co.uk/files/reports/er1998/reporting/content_energyuse.htm 847 ‘Airfreight looks set to soar’, Freshinfo News, 24 November 2005 http://www.freshinfo.com/index.php?s=n&ss=nd&sid=37814.html 848 ‘Airfreight looks set to soar’, Freshinfo News, 24 November 2005 http://www.freshinfo.com/index.php?s=n&ss=nd&sid=37814.html 849 ‘Airfreight looks set to soar’, Freshinfo News, 24 November 2005 http://www.freshinfo.com/index.php?s=n&ss=nd&sid=37814.html 850 ‘Airfreight looks set to soar’, Freshinfo News, 24 November 2005 http://www.freshinfo.com/index.php?s=n&ss=nd&sid=37814.html 851 ‘Airfreight looks set to soar’, Freshinfo News, 24 November 2005 http://www.freshinfo.com/index.php?s=n&ss=nd&sid=37814.html 852 ‘Emissions and environmental impacts from air-conditioning and refrigeration systems’, International Journal of Refridgeration, James M. Calm, (2002), www.sciencedirect.com 853 ‘Reducing Food Miles – ‘Green Propaganda or Sound Business Sense?’, The logistics business, (2000), http://www.logistics.co.uk/db_pdf/reducing_food_miles_69.pdf, Accessed 21/10/05

303

854 ‘Eating Up the Earth: How Sustainable Food Systems Shrink our Ecological Footprint’, Redefining Progress, Diana Deumling, Mathis Wackernagel, Chad Monfreda, (July 2003), http://www.agron.iastate.edu/courses/agron515/eatearth.pdf 855 Life Cycle-Based Sustainability Indicators for Assessment of the U.S. Food System, Martin C. Heller and Gregory A. Keoleian, University of Michigan, 2000 856 ‘How Sustainable Agriculture Can Address the Environmental and Human Health Harms of Industrial Agriculture’, Johns Hopkins Bloomberg School of Public Health, Leo Horrigan, Robert S. Lawrence, and Polly Walker, (May 2002), http://ehp.niehs.nih.gov/members/2002/110p445-456horrigan/horrigan-full.html 857 ‘How Sustainable Agriculture Can Address the Environmental and Human Health Harms of Industrial Agriculture’, Johns Hopkins Bloomberg School of Public Health, Leo Horrigan, Robert S. Lawrence, and Polly Walker, (May 2002), http://ehp.niehs.nih.gov/members/2002/110p445-456horrigan/horrigan-full.html 858 ‘How Sustainable Agriculture Can Address the Environmental and Human Health Harms of Industrial Agriculture’, Johns Hopkins Bloomberg School of Public Health, Leo Horrigan, Robert S. Lawrence, and Polly Walker, (May 2002), http://ehp.niehs.nih.gov/members/2002/110p445-456horrigan/horrigan-full.html 859 ‘How Sustainable Agriculture Can Address the Environmental and Human Health Harms of Industrial Agriculture’, Johns Hopkins Bloomberg School of Public Health, Leo Horrigan, Robert S. Lawrence, and Polly Walker, (May 2002), http://ehp.niehs.nih.gov/members/2002/110p445-456horrigan/horrigan-full.html 860 Wise Moves Exploring the relationship between food, transport and CO2, 2003, Transport 2000 trust, http://www.fcrn.org.uk/pdf/wise_moves.pdf 861 ‘Energy Usage In The Food Industry’, ACEEE - American Council for an Energy Efficient Economy, Dr. Martin Okos, Dr. Nishant Rao, Sara Drecher, Mary Rode, and Jeannie Kozak, (1998), http://www.aceee.org/pubs/ie981.htm 862 ‘Energy Usage In The Food Industry’, ACEEE - American Council for an Energy Efficient Economy, Dr. Martin Okos, Dr. Nishant Rao, Sara Drecher, Mary Rode, and Jeannie Kozak, (1998), http://www.aceee.org/pubs/ie981.htm 863‘The sun never sets on the brothers Grimm’, The Bakersfield Californian, quoted in ‘Any way you slice it, it takes a tough bearing to bring a carrot down to size’, Dodge Reliance Magazine, Vol. 16, http://www.dodgereliance.com/pdf/magazine/volume_16/drmagvol16_any_way_you_slice.pdf 864 Food, Fuel, and Freeways: An Iowa perspective on how far food travels, fuel usage, and greenhouse gas emissions, R. Pirog, T. Van Pelt, K. Enshayan, E. Cook, Leopold Center for Sustainable Agriculture, 2001, http://www.leopold.iastate.edu/pubs/staff/ppp/food_mil.pdf 865 ‘Energy Usage In The Food Industry’, ACEEE - American Council for an Energy Efficient Economy, Dr. Martin Okos, Dr. Nishant Rao, Sara Drecher, Mary Rode, and Jeannie Kozak, (1998), http://www.aceee.org/pubs/ie981.htm 866 ‘Current food production system due for collapse’, Institute of Science in Society, (2005), http://www.i-sis.org.uk/SustainableWorldInitiativeF.php Accessed 01/12/05 867 ‘Current food production system due for collapse’, Institute of Science in Society, (2005), http://www.i-sis.org.uk/SustainableWorldInitiativeF.php Accessed 01/12/05 868 ‘Energy Usage In The Food Industry’, ACEEE - American Council for an Energy Efficient Economy, Dr. Martin Okos, Dr. Nishant Rao, Sara Drecher, Mary Rode, and Jeannie Kozak, (1998), http://www.aceee.org/pubs/ie981.htm

Consumption

304

869 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 870 'Why the middle class go scavenging in dustbins', James Bone, The Times, 26 November 2005 871 ‘Waste’, European Commission website. Last updated: Wednesday, August 17, 2005 http://europa.eu.int/comm/environment/waste/index.htm 872 ‘Waste’, European Commission website. Last updated: Wednesday, August 17, 2005 http://europa.eu.int/comm/environment/waste/index.htm 873 ‘Waste’, European Commission website. Last updated: Wednesday, August 17, 2005 http://europa.eu.int/comm/environment/waste/index.htm 874 Food surplus; reduction, recovery and recycling, Fareshare, 2004 http://www.totalfood2004.com/johnston_files/frame.htm 875 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 876 Packaging for sustainability: Packaging in the context of the product, supply chain and consumer needs, IEEP Report, Sept 2004, http://www.incpen.org/ 877 Household consumption and the environment, EEA Report No11/2005, http://reports.eea.eu.int/eea_report_2005_11/en/EEA_report_11_2005.pdf 878Packaging for sustainability: Packaging in the context of the product, supply chain and consumer needs, IEEP Report, Sept 2004, http://www.incpen.org/ 879 Packaging for sustainability: Packaging in the context of the product, supply chain and consumer needs, IEEP Report, Sept 2004, http://www.packcoun.com.au/IEEP%20report%2010- 04.pdf 880 Packaging – a very productive resource, UK market report 2004, The Packaging Federation, June 2005, http://www.packagingfedn.co.uk/who_we_are/reports/PF_report_4.pdf 881 Packaging – a very productive resource, UK market report 2004, The Packaging Federation, June 2005, http://www.packagingfedn.co.uk/who_we_are/reports/PF_report_4.pdf 882 Environmental and Social update 2004, Rexam, 2004 http://www.corporateregister.com/data/showp.pl?num=11988 883 Future Innovation Today, Consumer Packaging Report 2005/2006, Rexam Corporate website http://www.rexam.com/files/pdf/Rexam_Consumer_Packaging_Report_2005.pdf 884 Packaging – a very productive resource, UK market report 2004, The Packaging Federation, June 2005, http://www.packagingfedn.co.uk/who_we_are/reports/PF_report_4.pdf 885 ‘Food and Drink Packaging’, Packaging Magazine, 1 July 2004 http://www.packagingmagazine.co.uk/news/general/04_07_01_002.shtml 886 ‘Food and Drink Packaging’, Packaging Magazine, 1 July 2004 http://www.packagingmagazine.co.uk/news/general/04_07_01_002.shtml 887 Frost and Sullivan, cited in ‘Nanotechnologies and nanosciences, knowledge-based multifunctional materials & new production processes and devices’, European Commission Research article, 23 February 2004 http://europa.eu.int/comm/research/industrial_technologies/print.cfm?file=/comm/research/indust rial_technologies/articles/article_735_en.html 888 Adapted from: Packaging for sustainability, IEEP Report, Sept 2004 889 Household consumption and the environment, EEA Report No11/2005, http://reports.eea.eu.int/eea_report_2005_11/en/EEA_report_11_2005.pdf 890 Household consumption and the environment, EEA Report No11/2005, http://reports.eea.eu.int/eea_report_2005_11/en/EEA_report_11_2005.pdf 891 A sustainable food supply chain - A Swedish Case Study, Cecilia Persson

305

892 ‘Presentation to the conference: Packaging our Futures’, European Environment Agency, 1-2 March 2004, cited in Packaging for sustainability: Packaging in the context of the product, supply chain and consumer needs, IEEP Report, Sept 2004, http://www.incpen.org/ 893 Packaging for sustainability: Packaging in the context of the product, supply chain and consumer needs, IEEP Report, Sept 2004 http://www.packcoun.com.au/IEEP%20report%2010-04.pdf 894 Packaging for sustainability: Packaging in the context of the product, supply chain and consumer needs, IEEP Report, Sept 2004 http://www.packcoun.com.au/IEEP%20report%2010-04.pdf 895 Wise Moves Exploring the relationship between food, transport and CO2, 2003, Transport 2000 trust, http://www.fcrn.org.uk/pdf/wise_moves.pdf 896 'Wasteful retailers bury corporate responsibility' By Anita Awbi, Food and Drink Europe, 8th November 2005 http://www.foodanddrinkeurope.com/news/ng.asp?n=63769-marks-and-spencer-waste-recycling 897 'Why the middle class go scavenging in dustbins', James Bone, The Times, 26 November 2005 898 Review of Environmental and Health Effects of Waste Management: Municipal Solid Waste and Similar Wastes, Enviros et al, DEFRA, March 2004 899 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 900 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 901 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 902 'Wasteful retailers bury corporate responsibility', Anita Awbi, Food and Drink Europe, 8th November 2005 http://www.foodanddrinkeurope.com/news/ng.asp?n=63769-marks-and-spencer-waste-recycling 903 Environmental Implications of the Foodservice and Food Retail Industries, Terry Davies, David M. Konisky, Discussion Paper 00-11, March 2000 904 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 905 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005 http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 906 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 907 ‘Retailers Offer Food That Is Convenient, But Sometimes Unprofitable’, University of Arizona News, 2005 http://uanews.opi.arizona.edu/cgibin/WebObjects/UANews.woa/1/wa/goSBSArticle?ArticleID=1 0381 908 ‘Food losses in food service institutions Examples from Sweden’, Rebecka Engstroma, Annika Carlsson-Kanyama, Food Policy, 2004, www.sciencedirect.com 909 ‘The best meal you'll never have!’, bbc.co.uk, 2004, http://www.bbc.co.uk/radio4/science/costingtheearth_20050414.shtml 910 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 911 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 912 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html

306

913 'Why the middle class go scavenging in dustbins', James Bone, The Times, 26 November 2005 914 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 915 Draft Food Industry Sustainability Strategy (FISS), public consultation period 4 April – 30 June 2005, DEFRA, April 2005, http://www.defra.gov.uk/corporate/consult/fiss/draft-fiss.pdf 916 A Review of the UK Food Market, Prepared by Ruth Huxley For Cornwall Agricultural Council and Cornwall Taste of the West, June, 2003 917 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 918 http://europa.eu.int/comm/environment/waste/studies/pdf/climate_change.pdf 919 ‘Waste’ European Commission website. Last updated: Wednesday, August 17, 2005 http://europa.eu.int/comm/environment/waste/index.htm 920 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 921 ‘Waste’ European Commission website. Last updated: Wednesday, August 17, 2005 http://europa.eu.int/comm/environment/waste/index.htm 922 A Consumer's Wrap-up on Packaging, Iowa State University, 1991 923 ‘Primer on Landfill Gas as "Green" Energy’, by Mike Ewall, Energy Justice Network, July 29, 1999, updated February 10, 2000, http://www.energyjustice.net/lfg/ References: Air Emissions from Municipal Solid Waste Landfills - Background Information for Proposed Standards and Guidelines Document # is EPA/450/3-90/011A. EPA, March 1991 http://www.epa.gov/ttn/atw/landfill/landflpg.html#TECH ‘Growth of the Landfill Gas Industry,’ Chapter 10 of the Renewable Energy Annual 1996 report by the U.S. Department of Energy's Energy Information Administration, http://www.eia.doe.gov/cneaf/solar.renewables/renewable.energy.annual/chap10.html 924 ‘Primer on Landfill Gas as "Green" Energy’, by Mike Ewall, Energy Justice Network, July 29, 1999, updated February 10, 2000, http://www.energyjustice.net/lfg/ Reference: EPA's Greenhouse Gas Inventory http://yosemite.epa.gov/oar/globalwarming.nsf/content/ResourceCenterPublicationsGHGEmissio nsUSEmissionsInventory2004.html 925 ‘Primer on Landfill Gas as "Green" Energy’, by Mike Ewall, Energy Justice Network, July 29, 1999, updated February 10, 2000, http://www.energyjustice.net/lfg/ Reference: EPA's Greenhouse Gas Inventory 926 Draft Food Industry Sustainability Strategy (FISS), public consultation period 4 April – 30 June 2005, DEFRA, April 2005, http://www.defra.gov.uk/corporate/consult/fiss/draft-fiss.pdf 927 ‘More than 30% of our food is thrown away - and it's costing billions a year’, John Vidal, The Guardian, 2005, http://www.guardian.co.uk/waste/story/0,12188,1460219,00.html 928 Mass balance study into waste arising from the food and drink processing industries, 2004, Biffaward, http://www.biffaward.org/downloads/projectfiles/2182-00335.pdf 929 Packaging - a very productive resource, The Packaging Federation, June 2005 http://www.packagingfedn.co.uk/who_we_are/reports/PF_report_4.pdf 930 The Strategy for sustainable farming and food: facing the duture, DEFRA, 2002, http://www.defra.gov.uk/farm/sustain/newstrategy/strategy.pdf 931 Packaging - a very productive resource, The Packaging Federation, June 2005 http://www.packagingfedn.co.uk 932 ‘The UK's new rubbish dump: China’, The Guardian Monday September 20, 2004 http://www.guardian.co.uk/waste/story/0,12188,1308278,00.html 933 ‘The UK's new rubbish dump: China’, The Guardian Monday September 20, 2004

307 http://www.guardian.co.uk/waste/story/0,12188,1308278,00.html 934 ‘The UK's new rubbish dump: China’, The Guardian Monday September 20, 2004 http://www.guardian.co.uk/waste/story/0,12188,1308278,00.html

Human Health

935 Changing Structure of Global Food Consumption and Trade, Agriculture and Trade Report WRS-01-1., Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, Anita Regmi, (ed), May 2001, http://www.ers.usda.gov/publications/wrs011/wrs011.pdf 936 ‘Industrial animal agriculture – the next global health crisis?’, World Society for the Protection of Animals, 2004 http://www.globalforumhealth.org/Forum8/Forum8- CDROM/Posters/Garces,%20L.doc 937 ‘A High-Tech Race To Corral Mad Cow’, Business Week, 1 March 2004 938 ‘Ripe for Change: Rethinking California's Food Economy’, The International Society for Ecology and Culture, Katy Mamen, Diana Deumling, Helena Norberg-Hodge and Steven Gorelick, (May 2004), http://www.isec.org.uk/articles/RipeForChange.pdf 939 ‘Ripe for Change: Rethinking California's Food Economy’, The International Society for Ecology and Culture, Katy Mamen, Diana Deumling, Helena Norberg-Hodge and Steven Gorelick, (May 2004), http://www.isec.org.uk/articles/RipeForChange.pdf 940 ‘Industrial animal agriculture – the next global health crisis?’, World Society for the Protection of Animals, 2004 http://www.globalforumhealth.org/Forum8/Forum8- CDROM/Posters/Garces,%20L.doc 941 ‘Industrial animal agriculture – the next global health crisis?’, World Society for the Protection of Animals, 2004 http://www.globalforumhealth.org/Forum8/Forum8- CDROM/Posters/Garces,%20L.doc 942 'World Review of Fisheries and Aquaculture', FAO, (2004), ftp://ftp.fao.org/docrep/fao/007/y5600e/y5600e01.pdf 943 ‘Industrial animal agriculture – the next global health crisis?’, World Society for the Protection of Animals, 2004 http://www.globalforumhealth.org/Forum8/Forum8- CDROM/Posters/Garces,%20L.doc 944 ‘Ripe for Change: Rethinking California's Food Economy’, The International Society for Ecology and Culture, Katy Mamen, Diana Deumling, Helena Norberg-Hodge and Steven Gorelick, (May 2004), http://www.isec.org.uk/articles/RipeForChange.pdf 945 ‘Ripe for Change: Rethinking California's Food Economy’, The International Society for Ecology and Culture, Katy Mamen, Diana Deumling, Helena Norberg-Hodge and Steven Gorelick, (May 2004), http://www.isec.org.uk/articles/RipeForChange.pdf 946 'Overview of the world broiler industry: implications for the Philippines', Graduate School of Agricultural and Resource Economics & School of Economics, Hui-Shun (Christie) Chang, (2005), http://www.une.edu.au/febl/GSARE/arewp05_8.pdf 947 'The Price is Right: Economics and the Rise in Obesity', Jayachandran N. Variyam, (2005), http://www.ers.usda.gov/AmberWaves/February05/Features/ThePriceIsRight.htm 948 ‘Fast Road to Fat City’, Eating Well, April/May 2005, http://www.eatingwell.com/articles_recipes/nutrition_images/aprmay05fastfood.pdf 949 European Cardiovascular Disease Statistics 2005 edition, British Heart Foundation Health Promotion Research Group, Department of Public Health, University of Oxford, 2005, http://www.ehnheart.org/files/statistics%202005-092711A.pdf

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950 European Cardiovascular Disease Statistics 2005 edition, British Heart Foundation Health Promotion Research Group, Department of Public Health, University of Oxford, 2005, http://www.ehnheart.org/files/statistics%202005-092711A.pdf 951 'Moving Toward the Food Guide Pyramid: Implications for U.S. Agriculture.', U.S. Department of Agriculture, By C. Edwin Young, Market and Trade Economics Division, and Linda Scott Kantor, (1999), http://www.ers.usda.gov/publications/aer779/aer779.pdf 952 The Price is Right: Economics and the Rise in Obesity, Jayachandran N. Variyam, (2005), http://www.ers.usda.gov/AmberWaves/February05/Features/ThePriceIsRight.htm 953 The Price is Right: Economics and the Rise in Obesity, Jayachandran N. Variyam, (2005), http://www.ers.usda.gov/AmberWaves/February05/Features/ThePriceIsRight.htm

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1080 ‘Win-Win Strategies at Discount Stores’, ERIM (Erasmus Research Institute of Management) report, ERS-2005-050-MKT, September 2005, https://ep.eur.nl/bitstream/1765/6924/1/ERS+2005+050+MKT.pdf 1081 Responding to discount, a new business model for food retailers?, Coca Cola Retailing research council and McKinsey&co, August 2005, http://www.coke.net/CCRRC/europe/spotlight_study/RespondingToDiscount_English.pdf 1082 Irish Times, November 1999 1083 Germany Retail Food Sector Report 2004, USDA Foreign Agricultural Service GAIN (Global Agriculture Information Network) Report, 2004, http://www.fas.usda.gov/gainfiles/200411/146118049.pdf 1084 Germany Retail Food Sector Report 2004, USDA Foreign Agricultural Service GAIN (Global Agriculture Information Network) Report, 2004, http://www.fas.usda.gov/gainfiles/200411/146118049.pdf 1085 ‘Win-Win Strategies at Discount Stores’, ERIM (Erasmus Research Institute of Management) report, ERS-2005-050-MKT, September 2005, https://ep.eur.nl/bitstream/1765/6924/1/ERS+2005+050+MKT.pdf 1086 ‘Hot Items in cool market’, Private Label magazine, Karsten Knothe, Spring 2003 1087 ‘The Next Wal-Mart?’, www.businessweek.com, 26 April 2004, http://www.businessweek.com/magazine/content/04_17/b3880010.htm 1088 Responding to discount, a new business model for food retailers?, Coca Cola Retailing research council and McKinsey&co, August 2005, http://www.coke.net/CCRRC/europe/spotlight_study/RespondingToDiscount_English.pdf 1089 ‘Discounters set to increase their presence across Western and Central Europe’, Planet Retail cited in www.fastmoving.co.za, 14 July 2005, http://www.fastmoving.co.za/contentView?id=1139&folder-id=485 1090 Responding to discount, a new business model for food retailers?, Coca Cola Retailing research council and McKinsey&co, August 2005, http://www.coke.net/CCRRC/europe/spotlight_study/RespondingToDiscount_English.pdf 1091 ‘Discounters set to increase their presence across Western and Central Europe’, Planet Retail cited in www.fastmoving.co.za, 14 July 2005, http://www.fastmoving.co.za/contentView?id=1139&folder-id=485 1092 Lidl – the discounter to watch, IGD, 26 November 2004, http://www.igd.com/CIR.asp?menuid=50&cirid=1317 1093 ‘Win-Win Strategies at Discount Stores’, ERIM (Erasmus Research Institute of Management) report, ERS-2005-050-MKT, September 2005, https://ep.eur.nl/bitstream/1765/6924/1/ERS+2005+050+MKT.pdf 1094 From Beijing to Budapest: winning brands, winning formats, PriceWaterhouseCoopers, October 05, http://www.pwc.com/extweb/pwcpublications.nsf/docid/16C4E471BFF2B1A985257099005AA AFA/$File/food-for-thought_oct05-n55_1.pdf 1095 From Beijing to Budapest: winning brands, winning formats, PriceWaterhouseCoopers, October 05, http://www.pwc.com/extweb/pwcpublications.nsf/docid/16C4E471BFF2B1A985257099005AA AFA/$File/food-for-thought_oct05-n55_1.pdf 1096 From Beijing to Budapest: winning brands, winning formats, PriceWaterhouseCoopers, October 05, http://www.pwc.com/extweb/pwcpublications.nsf/docid/16C4E471BFF2B1A985257099005AA AFA/$File/food-for-thought_oct05-n55_1.pdf

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1097 ‘Discounters set to increase their presence across Western and Central Europe’, Planet Retail cited in www.fastmoving.co.za, 14 July 2005, http://www.fastmoving.co.za/contentView?id=1139&folder-id=485 1098 'Trader Joe's: Billions from Nuts, Veggies, and Two-Buck Chuck’, Corporate Board Member Magazine, Bonnie Azab Powell, May/June 2004, http://www.boardmember.com/issues/archive.pl?article_id=11879 1099 ‘Win-Win Strategies at Discount Stores’, ERIM (Erasmus Research Institute of Management) report, ERS-2005-050-MKT, September 2005, https://ep.eur.nl/bitstream/1765/6924/1/ERS+2005+050+MKT.pdf 1100 ‘Grocery Stores, Food Retailers and Supermarkets in Germany’, Euromonitor, September 2005, http://www.euromonitor.com/Grocery_stores_food_retailers_and_supermarkets_in_Germany_(m mp) 1101 Germany Retail Food Sector Report 2004, USDA Foreign Agricultural Service GAIN (Global Agriculture Information Network) Report, 2004, http://www.fas.usda.gov/gainfiles/200411/146118049.pdf 1102 Responding to discount, a new business model for food retailers?, Coca Cola Retailing research council and McKinsey&co, August 2005, http://www.coke.net/CCRRC/europe/spotlight_study/RespondingToDiscount_English.pdf 1103 ‘The Next Wal-Mart?’, www.businessweek.com, 26 April 2004, http://www.businessweek.com/magazine/content/04_17/b3880010.htm 1104 Responding to discount, a new business model for food retailers?, Coca Cola Retailing research council and McKinsey&co, August 2005, http://www.coke.net/CCRRC/europe/spotlight_study/RespondingToDiscount_English.pdf 1105 Responding to discount, a new business model for food retailers?, Coca Cola Retailing research council and McKinsey&co, August 2005, http://www.coke.net/CCRRC/europe/spotlight_study/RespondingToDiscount_English.pdf 1106 ‘The Next Wal-Mart?’, www.businessweek.com, 26 April 2004, http://www.businessweek.com/magazine/content/04_17/b3880010.htm 1107 ‘The Next Wal-Mart?’, www.businessweek.com, 26 April 2004, http://www.businessweek.com/magazine/content/04_17/b3880010.htm 1108 Responding to discount, a new business model for food retailers?, Coca Cola Retailing research council and McKinsey&co, August 2005, http://www.coke.net/CCRRC/europe/spotlight_study/RespondingToDiscount_English.pdf 1109 Responding to discount, a new business model for food retailers?, Coca Cola Retailing research council and McKinsey&co, August 2005, http://www.coke.net/CCRRC/europe/spotlight_study/RespondingToDiscount_English.pdf 1110 ‘Lidl – the discounter to watch’, IGD, 26 November 2004, http://www.igd.com/CIR.asp?menuid=50&cirid=1317 1111 ‘Lidl – the discounter to watch’, IGD, 26 November 2004, http://www.igd.com/CIR.asp?menuid=50&cirid=1317 1112 ‘Win-Win Strategies at Discount Stores’, ERIM (Erasmus Research Institute of Management) report, ERS-2005-050-MKT, September 2005, https://ep.eur.nl/bitstream/1765/6924/1/ERS+2005+050+MKT.pdf 1113 'Trader Joe's: Billions from Nuts, Veggies, and Two-Buck Chuck’, Corporate Board Member Magazine, Bonnie Azab Powell, May/June 2004, http://www.boardmember.com/issues/archive.pl?article_id=11879 1114 Power of Private Label 2005: A review of Growth Trends Around the World, ACNielsen Global Services, September 2005

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1115 'Trader Joe's: Billions from Nuts, Veggies, and Two-Buck Chuck’, Corporate Board Member Magazine, Bonnie Azab Powell, May/June 2004, http://www.boardmember.com/issues/archive.pl?article_id=11879 1116 Power of Private Label 2005: A review of Growth Trends Around the World, ACNielsen Global Services, September 2005 1117 ‘Win-Win Strategies at Discount Stores’, ERIM (Erasmus Research Institute of Management) report, ERS-2005-050-MKT, September 2005, https://ep.eur.nl/bitstream/1765/6924/1/ERS+2005+050+MKT.pdf 1118 ‘Win-Win Strategies at Discount Stores’, ERIM (Erasmus Research Institute of Management) report, ERS-2005-050-MKT, September 2005, https://ep.eur.nl/bitstream/1765/6924/1/ERS+2005+050+MKT.pdf 1119 'Sweeteners top growth in food additives market', www.confectionerynews.com 29 September 2004 1120 Trading away our rights: women working in global supply chains, Oxfam, 2004, http://www.oxfam.org.uk/what_we_do/issues/trade/downloads/trading_rights.pdf 1121 EU-25 Food Processing Ingredients Sector, The EU's Food and Drink Industry 2005, USDA Foreign Agricultural Service GAIN (Global Agriculture Information Network) Report (Number: E35067), 2005 1122 EU-25 Food Processing Ingredients Sector, The EU's Food and Drink Industry 2005, USDA Foreign Agricultural Service GAIN (Global Agriculture Information Network) Report (Number: E35067), 2005 1123 EU-25 Food Processing Ingredients Sector, The EU's Food and Drink Industry 2005, USDA Foreign Agricultural Service GAIN (Global Agriculture Information Network) Report (Number: E35067), 2005 1124 CIAA Reflection Paper on Food and Drink Industry Competitiveness, Confederation des industries agro-alimentaires de l’ue (CIAA), July 2005, http://etp.ciaa.be/documents/CIAA%20Reflection%20Paper%20on%20Food%20and%20Drink% 20Industry%20Competitiveness.pdf 1125 'Feeding Growth: the role of private equity in the food and drink industry', 3i Sector Report, Economist Intelligence Unit, 2003 1126 CIAA Reflection Paper on Food and Drink Industry Competitiveness, Confederation des industries agro-alimentaires de l’ue (CIAA), July 2005, http://etp.ciaa.be/documents/CIAA%20Reflection%20Paper%20on%20Food%20and%20Drink% 20Industry%20Competitiveness.pdf 1127 ‘Food sector: analysis and opinion on M&A activity across Europe’, Corporate Finance Insights 2005, PriceWaterhouseCoopers, 2005, http://www.pwcglobal.com/Extweb/service.nsf/docid/0B444AD0DFAD865080256D430035E26 E/$file/2174_Food_Insights.pdf 1128 'Acquisitions in Europe poised to rise', www.cee-foodindustry.com, 25 July 2005, http://www.cee-foodindustry.com/news/ng.asp?n=61485-pwc-acquisitions-europe 1129 ‘Food sector: analysis and opinion on M&A activity across Europe’, Corporate Finance Insights 2005, PriceWaterhouseCoopers, 2005, http://www.pwcglobal.com/Extweb/service.nsf/docid/0B444AD0DFAD865080256D430035E26 E/$file/2174_Food_Insights.pdf 1130 ‘Wise moves: exploring the relationship between food, transport and CO2’, Transport 2000 Trust, London, 2003 1131 ‘Food sector: analysis and opinion on M&A activity across Europe’, Corporate Finance Insights 2005, PriceWaterhouseCoopers, 2005, http://www.pwcglobal.com/Extweb/service.nsf/docid/0B444AD0DFAD865080256D430035E26 E/$file/2174_Food_Insights.pdf

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1132 ‘Food sector: analysis and opinion on M&A activity across Europe’, Corporate Finance Insights 2005, PriceWaterhouseCoopers, 2005, http://www.pwcglobal.com/Extweb/service.nsf/docid/0B444AD0DFAD865080256D430035E26 E/$file/2174_Food_Insights.pdf 1133 ‘Food sector: analysis and opinion on M&A activity across Europe’, Corporate Finance Insights 2005, PriceWaterhouseCoopers, 2005, http://www.pwcglobal.com/Extweb/service.nsf/docid/0B444AD0DFAD865080256D430035E26 E/$file/2174_Food_Insights.pdf 1134 'Acquisitions in Europe poised to rise', www.cee-foodindustry.com, 25 July 2005, http://www.cee-foodindustry.com/news/ng.asp?n=61485-pwc-acquisitions-europe 1135 'Feeding Growth: the role of private equity in the food and drink industry', 3i Sector Report, Economist Intelligence Unit, 2003 1136 CIAA Reflection Paper on Food and Drink Industry Competitiveness, Confederation des industries agro-alimentaires de l’ue (CIAA), July 2005, http://etp.ciaa.be/documents/CIAA%20Reflection%20Paper%20on%20Food%20and%20Drink% 20Industry%20Competitiveness.pdf 1137 CIAA Reflection Paper on Food and Drink Industry Competitiveness, Confederation des industries agro-alimentaires de l’ue (CIAA), July 2005, http://etp.ciaa.be/documents/CIAA%20Reflection%20Paper%20on%20Food%20and%20Drink% 20Industry%20Competitiveness.pdf 1138 ‘From the Farm to the Table: The Transformation of North American Food Processing and Implications for the Environment’, Pan-American Partnership for Business Education, Guy Stanley, L’École des HÉC (Montréal) 1139 ‘From the Farm to the Table: The Transformation of North American Food Processing and Implications for the Environment’, Pan-American Partnership for Business Education, Guy Stanley, L’École des HÉC (Montréal) 1140 Taken from the Cargill website, http://www.cargillbrandidentity.com/strategy/vision.htm 1141 Cargill: Company Profile, C. Daniel, Financial Times, London, UK, February 25, 2004, Page 7 1142 The Global Food System: A Research Agenda, Report to the Agribusiness Accountability Initiative, Conference on Corporate Power in the Global Food System, William Heffernan, Ph.D. and Mary Hendrickson, Ph.D., 2005 1143 From Supply Push to Demand Pull: Agribusiness Strategies for Today's Consumers, Martinez & Stewart, Economic Research Service, USDA, 2003 http://www.ers.usda.gov/amberwaves/november03/Features/supplypushdemandpull.htm 1144 Concentration of agricultural markets, Mary Hendrickson and William Heffernan, Department of Rural Sociology, University of Missouri, Columbia, January 2005, http://www.foodcircles.missouri.edu/CRJanuary05.pdf 1145 ‘Economic Impact and Impacts of Continuing to Proceed as We Are Now’, Sustainable Agriculture Newsletter, Volume 10, Issue 11, Neil E. Harl, November 2002, http://www.econ.iastate.edu/faculty/harl/EconomicImpact.pdf 1146 ‘Economic Impact and Impacts of Continuing to Proceed as We Are Now’, Sustainable Agriculture Newsletter, Volume 10, Issue 11, Neil E. Harl, November 2002, http://www.econ.iastate.edu/faculty/harl/EconomicImpact.pdf 1147 ‘Economic Impact and Impacts of Continuing to Proceed as We Are Now’, Sustainable Agriculture Newsletter, Volume 10, Issue 11, Neil E. Harl, November 2002, http://www.econ.iastate.edu/faculty/harl/EconomicImpact.pdf 1148 ‘Economic Impact and Impacts of Continuing to Proceed as We Are Now’, Sustainable Agriculture Newsletter, Volume 10, Issue 11, Neil E. Harl, November 2002, http://www.econ.iastate.edu/faculty/harl/EconomicImpact.pdf

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1149 ‘Economic Impact and Impacts of Continuing to Proceed as We Are Now’, Sustainable Agriculture Newsletter, Volume 10, Issue 11, Neil E. Harl, November 2002, http://www.econ.iastate.edu/faculty/harl/EconomicImpact.pdf 1150‘Consolidation in the Food and Agricultural System’, Report to the National Farmers Union, prepared by Dr. W. Heffernan, Dr. M. Hendrickson, Dr. R. Gronski, University of Missouri, 1999 1151 ‘Cargill expands vegetable oil market in Russia’, Food Production Daily, 26 January 2005, http://www.foodnavigator.com/news/ng.asp?n=57596-cargill-expands-vegetable 1152 ‘Cargill buys Romanian oilseed processing plant’, Food Production Daily, 27 May 2005, http://www.foodproductiondaily.com/news/ng.asp?id=60286-cargill-buys-romanian 1153 ‘A Vision For The Dairy Industry’, National Farmers Union, September 2005 http://www.nfu.org.uk/stellentdev/groups/public/documents/policypositions/avisionforthedairyi_i a432169a4.pdf 1154 ‘A Vision For The Dairy Industry’, National Farmers Union, September 2005 http://www.nfu.org.uk/stellentdev/groups/public/documents/policypositions/avisionforthedairyi_i a432169a4.pdf 1155 'Concentration and Technology in Agricultural Input Industries', Agriculture Information Bulletin Number 763, Economic Research Service, USDA, King, March 2001 1156 Agrochemicals in China: China Risks and Rewards, PricewaterhouseCoopers, December 2004 1157 ‘Agrochemical markets soar – pest pressures or corporate design’, Pesticides news 68, June 2005, http://www.agribusinessaccountability.org/pdfs/324_Agrochemical-Markets-Soar.pdf 1158 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1159 ‘Agrochemical markets soar – pest pressures or corporate design’, Pesticides news 68, June 2005, http://www.agribusinessaccountability.org/pdfs/324_Agrochemical-Markets-Soar.pdf 1160 ‘Oligopoly inc. concentration in corporate power’, ETC group communiqué, November/December 2003 http://www.etcgroup.org/documents/Comm82OligopNovDec03.pdf 1161 ‘Agrochemical markets soar – pest pressures or corporate design’, Pesticides news 68, June 2005, http://www.agribusinessaccountability.org/pdfs/324_Agrochemical-Markets-Soar.pdf 1162 ‘Agrochemical markets soar – pest pressures or corporate design’, Pesticides news 68, June 2005, http://www.agribusinessaccountability.org/pdfs/324_Agrochemical-Markets-Soar.pdf 1163 ‘Agrochemical markets soar – pest pressures or corporate design’, Pesticides news 68, June 2005, http://www.agribusinessaccountability.org/pdfs/324_Agrochemical-Markets-Soar.pdf 1164 ‘Agrochemical markets soar – pest pressures or corporate design’, Pesticides news 68, June 2005, http://www.agribusinessaccountability.org/pdfs/324_Agrochemical-Markets-Soar.pdf 1165 ‘Agrochemical markets soar – pest pressures or corporate design’, Pesticides news 68, June 2005, http://www.agribusinessaccountability.org/pdfs/324_Agrochemical-Markets-Soar.pdf 1166 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1167 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1168 'Corporate control over seeds: Limiting Access and Farmers' Rights', Mulvany, Patrick, IDS Bulletin, Volume 36, Number 2, pp. 68-73, Institute of Development Studies, June 2005 1169 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm

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1170 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1171 ‘PANNA Corporate Profile: Monsanto Company’, Pesticide Action Network North America, http://www.panna.org/campaigns/caia/corpProfilesMonsanto.dv.html#_edn10 1172 ‘Products & Solutions’, www.monsanto.com, 18 July 2005 1173 ‘Survey: Agriculture and technology: growing pains’, The Economist, 23 March 2000 1174 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1175 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1176 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1177 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1178 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1179 Monsanto & Genetic Engineering: Risks for Investors, Analysis of company performance on intangible investment risk factors and value drivers, Innovest Group, prepared for As You Sow Foundation and funded by the Center for Food Safety, January 2005 1180 ‘Survey: Agriculture and technology: growing pains’, The Economist, 23 March 2000 1181 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1182 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1183 ‘Statement on: Industrial Concentration in the Agri-food Sector’, L. Guyau, World Farmers Congress, Egypt, May 2002 1184 ‘Statement on: Industrial Concentration in the Agri-food Sector’, L. Guyau, World Farmers Congress, Egypt, May 2002 1185 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1186 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1187 ‘Genetically Modified: Food for Thought’, Abraham and Suprapto, Natural Selections, Rockefeller University, October 2005, http://selections.rockefeller.edu/cms/editorials/genetically- modified-food-for-thought.html 1188 ‘Global Seed Industry Concentration – 2005’, ETC group communiqué, Issue No. 90, September/ October 2005, Action Group on Erosion, Technology and Concentration, 6 September 2005, http://www.mindfully.org/Farm/2005/Global-Seed-Industry6sep05.htm 1189 ‘Agrochemical markets soar – pest pressures or corporate design’, Pesticides news 68, June 2005, http://www.agribusinessaccountability.org/pdfs/324_Agrochemical-Markets-Soar.pdf

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1227 ‘Water, Food and Farm Campaign Polish Farm Leaders Investigate Smithfield’, Sierra Club newsletter, http://maryland.sierraclub.org/newsletter/novdec99/Polish%20farmers.html 1228 ‘CHART 1.1 Trends in net farm income in the United Kingdom’, The farm business survey, defra statistics, http://statistics.defra.gov.uk/esg/publications/fiuk/2000/1income.pdf 1229 ‘CHART 1.1 Trends in net farm income in the United Kingdom’, The farm business survey, defra statistics, http://statistics.defra.gov.uk/esg/publications/fiuk/2000/1income.pdf 1230 The Global Food System: A Research Agenda, Report to the Agribusiness Accountability Initiative, Conference on Corporate Power in the Global Food System, William Heffernan, Ph.D. and Mary Hendrickson, Ph.D., 2005 1231 The Global Food System: A Research Agenda, Report to the Agribusiness Accountability Initiative, Conference on Corporate Power in the Global Food System, William Heffernan, Ph.D. and Mary Hendrickson, Ph.D., 2005 1232 ‘Chicken breeder Aviagen plans to rule the roost after changing hands in GBP 255m deal’, Scotland on Sunday, The Scotsman Publications Ltd., June 1, 2003 1233 ‘Aviagen becomes part of the Erich Wesjohann Group’, Genetics Science News, April 27, 2005 http://www.geneticsinfoport.com/node/3407?PHPSESSID=2c36f3d6dd0794848c769ec0b7863bd 1 1234 ‘Globalization, urbanization and changing food systems in developing countries’, The state of food insecurity in the world (SOFI) 2004, Economic and Social Department, FAO, 2004 http://www.fao.org/documents/show_cdr.asp?url_file=/docrep/007/y5650e/y5650e04.htm 1235 Eurostat 1236 ‘Food Retailing in the 21st Century —Riding a Consumer Revolution’, Food Marketing Institute Backgrounder, http://www.fmi.org/media/bg/foodretailing.pdf 1237 ACNielsen cited in ‘Price pressure on identical food brands across EU set to continue’, www.cee-foodindustry.com, 19 September 2005, http://www.cee- foodindustry.com/news/ng.asp?n=62593-acnielsen-brands 1238 Eurostat 1239 Eurostat 1240 Food and Drink Federation/Food From Britain / National Statistics, updated 4 Aug 2005, http://www.fdf.org.uk/industrystats.aspx 1241 Eurostat 1242 Wal-Mart company website, www.walmart.com 1243 ‘Industry Statistics’, Food and Drink Federation, 4 August 2005, http://www.fdf.org.uk/industrystats.aspx 1244 Datamonitor survey cited in ‘Mega-trends: convenience food and health to double in ten years’, www.foodnavigator-usa.com, 19 August 2005, http://www.foodnavigator- usa.com/news/ng.asp?n=61970-food-convenience-trends 1245 ‘Wise moves: exploring the relationship between food, transport and CO2’, Transport 2000 Trust, London, 2003 1246 The changing face of the global food industry, presentation OECD conference the Hague, Jan- Willem Grievink, 6 Feb 2003 1247 ‘Time use survey, 2001’, Key Note Fast Food – September Report, Key Note report, http://www.keynote.co.uk/FAST%20FOOD%20_%20SEPTEMBER_1%20KN%20version.pdf http://www.keynote.co.uk/ 1248 CIAA Reflection Paper on Food and Drink Industry Competitiveness, Confederation des industries agro-alimentaires de l’ue (CIAA), July 2005, http://etp.ciaa.be/documents/CIAA%20Reflection%20Paper%20on%20Food%20and%20Drink% 20Industry%20Competitiveness.pdf

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1249 ‘Ripe for Change: Rethinking California's Foood Economy’, The International Society for Ecology and Culture, K. Mamen, S. Gorelick, H. Norberg-Hodge, D. Deumling, May 2004 http://www.isec.org.uk/articles/RipeForChange.pdf 1250 ‘Mega-trends: convenience food and health to double in ten years’, Datamonitor survey cited in www.foodnavigator-usa.com, 19 August 2005, http://www.foodnavigator- usa.com/news/ng.asp?n=61970-food-convenience-trends 1251 ‘Wise moves: exploring the relationship between food, transport and CO2’, Transport 2000 Trust, London, 2003 1252 ‘Farmers struggle with the supermarket squeeze’, BBC News Online, 2 September 2004, http://news.bbc.co.uk/1/hi/business/3594908.stm 1253 The changing face of the global food industry, presentation OECD conference the Hague, Jan- Willem Grievink, 6 Feb 2003 1254 ‘Hot Items in cool market’, Private Label Magazine, Karsten Knothe, Spring 2003, http://www.privatelabelmag.com/pdf/pli_spring2003/frozen.cfm 1255 A Review of the UK Food Market, prepared by Ruth Huxley for Cornwall Agricultural Council and Cornwall Taste of the West, June 2003 1256 'Obesity Policy and the Law of Unintended Consequences', Amber Waves, Kuchler et al., Economic Research Service, USDA, June 2005 http://www.ers.usda.gov/AmberWaves/June05/Features/ObesityPolicy.htm 1257 Retail Sector Responses to Changing Consumer Preferences: the European Experience, J. Codron, K. Grunert, E. Giraud-Heraud, L. Soler, and A. Regmi, Economic Research Service, U.S. Department of Agriculture, 2003 http://ceco.polytechnique.fr/fichiers/ceco/publications/pdf/2005-07-05-1042.pdf 1258 Overview of the world broiler industry: implications for the Philippines, Working Paper Series in Agricultural and Resource Economics, No, 2005-8, ISSN 1442 1909, Hui-Shun (Christie) Chang, p.20, 2005, http://www.une.edu.au/febl/GSARE/arewp05_8.pdf 1259 Retail Sector Responses to Changing Consumer Preferences: the European Experience, J. Codron, K. Grunert, E. Giraud-Heraud, L. Soler, and A. Regmi, Economic Research Service, U.S. Department of Agriculture, 2003 http://ceco.polytechnique.fr/fichiers/ceco/publications/pdf/2005-07-05-1042.pdf 1260 ‘Organic Food sales Growing by £2.3 million a week as local markets boom', Soil Association Press Release, November 2005 1261 Italy: agri-food trade synopsis, Agriculture and Agri-food Canada, 2004, http://atn- riae.agr.ca/europe/3653_e.htm 1262 ‘Who’s Organic in the UK?’, Organic Food and Farming Report Summary 2004, Soil Association, 2004, http://www.soilassociation.org 1263 From Supply Push to Demand Pull: Agribusiness Strategies for Today's Consumers, Martinez & Stewart, Economic Research Service, USDA, 2003 http://www.ers.usda.gov/amberwaves/november03/Features/supplypushdemandpull.htm 1264 ‘Organic Food sales Growing by £2.3 million a week as local markets boom', Soil Association Press Release, November 2005 1265 From Supply Push to Demand Pull: Agribusiness Strategies for Today's Consumers, Martinez & Stewart, Economic Research Service, USDA, 2003 http://www.ers.usda.gov/amberwaves/november03/Features/supplypushdemandpull.htm 1266 Italy: agri-food trade synopsis, Agriculture and Agri-food Canada, 2004, http://atn- riae.agr.ca/europe/3653_e.htm 1267 Retail Sector Responses to Changing Consumer Preferences: the European Experience, J. Codron, K. Grunert, E. Giraud-Heraud, L. Soler, and A. Regmi, Economic Research Service, U.S. Department of Agriculture, 2003 http://ceco.polytechnique.fr/fichiers/ceco/publications/pdf/2005-07-05-1042.pdf

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1268 'Feeding Growth: the role of private equity in the food and drink industry', 3i Sector Report, Economist Intelligence Unit, 2003 1269 ‘Emerging Markets: Special Report’, Functional Foods and Nutraceuticals, NPIcenter, August 2005, http://ffnmag.texterity.com/ffnmag/200508/ 1270 'Feeding Growth: the role of private equity in the food and drink industry', 3i Sector Report, Economist Intelligence Unit, 2003 1271 ‘Emerging Markets: Special Report’, Functional Foods and Nutraceuticals, NPIcenter, August 2005, http://ffnmag.texterity.com/ffnmag/200508/ 1272 ‘Emerging Markets: Special Report’, Functional Foods and Nutraceuticals, NPIcenter, August 2005, http://ffnmag.texterity.com/ffnmag/200508/ 1273 'Factory Farming in the Developing World' Nierenberg, World Watch, May/June 2003, http://www.globalpolicy.org/socecon/hunger/economy/2004/may2003meat.pdf 1274 Let it Reign: the New Water Paradigm for Global Food Security, Swedish International Development Cooperation Agency, Commission on Sustainable Development, 2005 1275 'Factory Farming in the Developing World' Nierenberg, World Watch, May/June 2003, http://www.globalpolicy.org/socecon/hunger/economy/2004/may2003meat.pdf 1276 ‘How Sustainable Agriculture Can Address the Environmental and Human Health Harms of Industrial Agriculture’, L. Horrigan, R. S. Lawrence, and P. Walker Johns Hopkins Bloomberg School of Public Health, Baltimore, USA, May 2002 http://ehp.niehs.nih.gov/members/2002/110p445-456horrigan/horrigan-full.html 1277 Changing Structure of Global Food Consumption and Trade, Agriculture and Trade Report WRS-01-1., Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, Anita Regmi, (ed), http://www.ers.usda.gov/publications/wrs011/wrs011.pdf 1278 Changing Structure of Global Food Consumption and Trade, Agriculture and Trade Report WRS-01-1., Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, Anita Regmi, (ed), http://www.ers.usda.gov/publications/wrs011/wrs011.pdf 1279 Changing Structure of Global Food Consumption and Trade, Agriculture and Trade Report WRS-01-1., Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, Anita Regmi, (ed), http://www.ers.usda.gov/publications/wrs011/wrs011.pdf 1280 The globalizing livestock sector: impact of changing markets, Food and Agriculture Organization (FAO) committee on agriculture, Nineteenth Session, Rome, 13-16 April 2005, http://www.fao.org/docrep/meeting/009/j4196e.htm 1281 The globalizing livestock sector: impact of changing markets, Food and Agriculture Organization (FAO) committee on agriculture, Nineteenth Session, Rome, 13-16 April 2005, http://www.fao.org/docrep/meeting/009/j4196e.htm 1282 'Factory Farming in the Developing World' Nierenberg, World Watch, May/June 2003, http://www.globalpolicy.org/socecon/hunger/economy/2004/may2003meat.pdf 1283 Let it Reign: the New Water Paradigm for Global Food Security, Swedish International Development Cooperation Agency, Commission on Sustainable Development, 2005 1284 Changing Structure of Global Food Consumption and Trade, Agriculture and Trade Report WRS-01-1., Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, Anita Regmi, (ed), http://www.ers.usda.gov/publications/wrs011/wrs011.pdf 1285 'Factory Farming in the Developing World' Nierenberg, World Watch, May/June 2003, http://www.globalpolicy.org/socecon/hunger/economy/2004/may2003meat.pdf 1286 'Factory Farming in the Developing World' Nierenberg, World Watch, May/June 2003, http://www.globalpolicy.org/socecon/hunger/economy/2004/may2003meat.pdf

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1287 Let it Reign: the New Water Paradigm for Global Food Security, Swedish International Development Cooperation Agency, Commission on Sustainable Development, p.23, 2005 1288 'Consumption patterns and their effects on land required for Food’, Ecological Economics, 2002 www.sciencedirect.com 1289 Changing Structure of Global Food Consumption and Trade, Agriculture and Trade Report WRS-01-1., Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, Anita Regmi, (ed), http://www.ers.usda.gov/publications/wrs011/wrs011.pdf 1290 ‘Electronic Systems in the Food Industry: Entropy, Speed and Sales’, J. Kinsey, University of Minnesota, The Retail Food Industry Center, September 2000 1291 The Demand for Food Away From Home, Full-Service or Fast Food?, Stewart et al, Economic Research Service, Agricultural Economic Report 829, USDA, January 2004 1292 ‘Causes and consequences of fast food sales growth’, Away from home foods, January-April 1999, Mark. D. Jekanowski, http://www.ers.usda.gov/publications/foodreview/jan1999/frjan99b.pdf 1293 ‘Food Retailing in the 21st Century — Riding a Consumer Revolution’, Food Marketing Institute Backgrounder, http://www.fmi.org/media/bg/foodretailing.pdf 1294'The Price is Right', Amber Waves 20 Vol. 3, Variyam, Economic Research Service, USDA, February 2005, http://www.ers.usda.gov/AmberWaves/February05/Features/ThePriceIsRight.htm 1295 ‘Farm Business Practices Coordinate Production With Consumer Preferences’, USDA FoodReview, Vol. 25, Issue 1, Steve Martinez and David E. Davis, Economic Research Service, May 2002 http://www.ers.usda.gov/publications/FoodReview/May2002/frvol25i1g.pdf 1296 ‘Causes and consequences of fast food sales growth’, Away from home foods, January-April 1999, Mark. D. Jekanowski, http://www.ers.usda.gov/publications/foodreview/jan1999/frjan99b.pdf 1297 ‘Causes and consequences of fast food sales growth’, Away from home foods, January-April 1999, Mark. D. Jekanowski, http://www.ers.usda.gov/publications/foodreview/jan1999/frjan99b.pdf 1298 The Demand for Food Away From Home, Full-Service or Fast Food?, Stewart et al, Economic Research Service, Agricultural Economic Report 829, USDA, January 2004 1299 The Demand for Food Away From Home, Full-Service or Fast Food?, Stewart et al, Economic Research Service, Agricultural Economic Report 829, USDA, January 2004 1300 The Demand for Food Away From Home, Full-Service or Fast Food?, Stewart et al, Economic Research Service, Agricultural Economic Report 829, USDA, January 2004 1301 ‘A wholesale shift in European groceries’, The McKinsey Quarterly, 2003 number 1, Javier Castrillo, Jose Manuel Martinez, and Dieter Messner, 2003 1302 ‘Stakeholder accountability in the UK supermarket sector’, Race to the Top, International Institute for Environment and Development (iied), November 2004, http://www.esmeefairbairn.org.uk/docs/Race%20to%20the%20Top%20report.pdf 1303 ‘Key Note Fast Food – September Report’, Key Note report, http://www.keynote.co.uk/FAST%20FOOD%20_%20SEPTEMBER_1%20KN%20version.pdf http://www.keynote.co.uk/ 1304 Italy: agri-food trade synopsis, Agriculture and Agri-food Canada, 2004, http://atn- riae.agr.ca/europe/3653_e.htm 1305 ‘Take it from the top: The 2005 R&I Top 400 Chains display leadership and muscle’, Foodservice 411, July 2005 1306 ‘Take it from the top: The 2005 R&I Top 400 Chains display leadership and muscle’, Foodservice 411, July 2005

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