ISSN 1822-7996 Ligita MELECE TAIKOMOJI EKONOMIKA: SISTEMINIAI TYRIMAI: 2010.4/1 Ingūna GULBE Juris HĀZNERS

The impact of globalization on food retailing in Latvia

ćFSFDFOUEFWFMPQNFOUT DPODFOUSBUJPOBOEDPOTPMJEBUJPOQSPDFTTBOEUSFOETJOUIFGPPE HSPDFSZ SFUBJM NBSLFUJO-BUWJBBSFBOBMZ[FEćFJNQBDUPGSFUBJMTFDUPSTDIBOHFTPOEBJSZDIBJOBSFBTTFTTFE BOETPNF JTTVFTSFHBSEJOHMPXQSJDFTPGEFMJWFSFENJMLBSFEFTDSJCFE Keywords: food, grocery , concentration, , dairy, Latvia.

4USBJQTOZKF BOBMJ[VPKBNJ OBVKBVTJ -BUWJKPT NBJTUP QSPEVLUʸ NBäNFOJOʐT QSFLZCPT SJOLPT QPLZʊJBJ  LPO- DFOUSBDJKBJSTVTJKVOHJNPQSPDFTBJəWFSUJOBNBTNBäNFOJOʐTQSFLZCPTTFLUPSJBVTQPWFJLJTQJFOJOJʸUJOLMVJ  apžvelgiamos mažos pieno supirkimo kainos. Raktiniai žodžiai:NBJTUBT NBäNFOJOʐNBJTUPQSFLZCB LPODFOUSBDJKB QSFLZCPTDFOUSBJ QJFOJOʐ -BUWJKB

JEL ClassificationT--2

Introduction great impact on farming, food businesses, other retailers, trade in processed food %VSJOHUIFMBTUUXPEFDBEFTUIFSFUBJMJOH products and diets. A “ revo- JOEVTUSZJTĕOEJOHJUTFMGJOBTUBUFPGDPO- MVUJPOwIBTCFFOVOEFSXBZJOEFWFMPQJOH TUBOUFWPMVUJPOBOEUSBOTGPSNBUJPO XIFSF DPVOUSJFTTJODFUIFFBSMZT4VQFSNBS- UIF HMPCBMJ[BUJPO  NFSHFST BOE BDRVJTJ- kets (here referring to all modern retail, tions, and technological developments XIJDI JODMVEFT DIBJO TUPSFT PG WBSJPVT have changed the retailing landscape formats such as supermarkets, hypermar- ESBTUJDBMMZ $POTUBOUJOJEFT FU BM    kets, and convenience and neighborhood ćF SBUF PG UIF TQSFBE PG TVQFSNBSLFUT TUPSFT  IBWF OPX HPOF XFMM CFZPOE UIF provided by international retailers (retail- initial upper- and middle-class clientele in ing internationalization), and process of many countries to reach the mass . grocery retail concentration in develop- 8JUIJO UIF GPPE TZTUFN  OPU POMZ USBEJ- ing and transition countries is an issue of UJPOBM SFUBJMFST BSF BČFDUFE CZ UIJT USFOE topical interest because of their potentially UPVDI CVUBMTPUIFXIPMFTBMF QSPDFTTJOH 

-JHJUB.&-&$&o%SPFD )FBEPG%FQBSUNFOUPG-BUWJBO4UBUF*OTUJUVUFPG"HSBSJBO&DPOPNJDT -FBEJOH Researcher, e-mail: [email protected]. *OHʷOB(6-#&o%SPFD )FBEPG%FQBSUNFOUPG-BUWJBO4UBUF*OTUJUVUFPG"HSBSJBO&DPOPNJDT FNBJMJO- guna@ Leading Researcher, *OHVOB!MWBFJMv. +VSJT)Ƀ;/&34o4DJFOUJĕDBTTJTUBOUPG-BUWJBO4UBUF*OTUJUVUFPG"HSBSJBO&DPOPNJDT FNBJM[email protected]. 70 Ligita MELECE, Ingūna GULBE, Juris HĀZNERS

and farm sectors (Reardon, Gulati, 2008). become increasingly concentrated, the bal- 5+PTMJOH  QSFEJDUFEUIBUTVQFSNBS- BODF PG QPXFS CFUXFFO QSJNBSZ QSPEVD- kets have come to dominate the retail dis- FSTBOEUIFJSDVTUPNFSTCFDPNFTTLFXFE tribution of food. 8IFUIFS UIFZ BSF XPSLJOH GPS SFUBJMFST "MBSHFOVNCFSPGBSUJDMFTXJUIUIFSF- or other intermediary traders or proces- sults of research have described the rapid sors, corporate buyers are increasingly spread of supermarkets and predicted its BCMFUPQBZTVQQMJFSTBUSBUFTCFMPXDPN- DPOUJOVBUJPOBOEBDDFMFSBUJPO"ęFS QFUJUJWF MFWFMT ćJT DBO CF UIF DBTF FWFO USBOTJUJPO QFSJPE XBT TUBSUFE JO $FOUSBM in ostensibly competitive retail markets. and Eastern Europe, inter alia Latvia, 4.D$PSSJTUPO  BSHVFTUIBU GPS&V- XIFSF UIF SFUBJM TFDUPS XBT QSJWBUJ[FE rope, agricultural economists should give and some domestic-capital market chains more attention to imperfect competition in HSBEVBMMZ FNFSHFE *O UIF NJEEMF PG UIF the food arena, given that European food T UIF NBTTJWF JOĘPXT PG GPSFJHO EJ- marketing practices suggest the presence SFDUJOWFTUNFOUGPMMPXFEBOEMBSHFGPSNBU PG PMJHPQPMJTUJD TUSVDUVSFT BOE HSPXJOH NPEFSO SFUBJM TFDUPS XJUI TVQFSNBSLFUT NBSLFUQPXFS18%PCTPO  TUBUFT BOEIZQFSNBSLFUTXBTEFWFMPQFEćFSF- UIBUSFUBJMCVZFSQPXFSNBZEJTUPSUUIFSF- structuring of retail sector is the result of tail market, and may also have immediate the three processes of horizontal integra- BOEEFUSJNFOUBMFČFDUTPODPNQFUJUJPOBU tion, vertical integration and globalization the upstream market level, particularly in (Hendrickson et al., 2001). the areas of food processing and farm pro- Many industrialized countries have duction. restructured their food chains in recent The aim of the study is to estimate de- decades, and have shifted from manufac- velopments and concentration in the gro- UVSFSBOEQSPEVDFSQPXFSUPSFUBJMQPXFS DFSZSFUBJMNBSLFUJOUIF#BMUJD4UBUFTBOE  "OEFST )PMMJOHTXPSUI .VS- particularly Latvia, and its impact on dairy QIZ   8IJUFIBMM "TTPDJBUFT    chain. 3FUBJMFSTBSFOPXJOBQPTJUJPOUPEJDUBUF The tasks PG UIF TUVEZ BSF UP SFWJFX UFSNT UP GPPE NBOVGBDUVSFST XIP UIFO trends and issues of retail globalization force changes back through the system to and concentration; to estimate the devel- the farm level. Perhaps 50-75 percent of PQNFOUBOEDPODFOUSBUJPOPG#BMUJD4UBUFT UIFUPUBMOFUQSPĕUGPSMBSHFSFUBJMFSTDPNFT grocery market and make comparison GSPNSFUBJMFSGFFTGSPNTMPUUJOHBMMPXBODFT  CFUXFFO UIFN UP FWBMVBUF -BUWJBT GPPE display fees, presentation fees, “pay-to- retail development, concentration, struc- TUBZwGFFTBOEGBJMVSFGFFT )FOESJDLTPOFU ture and their trends; to estimate impact of BM  (MPCBMMZ UIFSFJTHSPXJOHDPO- processes in grocery retail on food chain cern that the concentration of economic oFNQIBTJ[FPOEBJSZ QBSUJDVMBSMZPONJML QPXFSCZUIFJOEVTUSJFTBMPOHUIFMJOLCF- primary producers or farmers in Latvia. UXFFOQSJNBSZQSPEVDFSTBOEDPOTVNFSTo The principal materials used for the UIF USBEFST  QSPDFTTPST  BOE SFUBJMFST o JT TUVEJFTBSFBTGPMMPXTEJČFSFOUTPVSDFTPG BČFDUJOH UIF QSPĕUBCJMJUZ BOE MJWFMJIPPET literature, research papers and the reports PGQSJNBSZQSPEVDFSTBOEXPSLFST #VSDI  of institutions, published and unpublished -BXSFODF   EBUB GSPN $FOUSBM 4UBUJTUJDBM #VSFBV PG As processing and retail markets -BUWJB $4#  BT XFMM BT UIF VOQVCMJTIFE THE IMPACT OF GLOBALIZATION ON FOOD RETAILING IN LATVIA 71

JOGPSNBUJPOGSPNSFUBJMĕSNTSFDFJWFECZ VOEFSUBLFOCZUSBOTOBUJPOBMSFUBJMFSTćF BVUIPST WJB QIPOF JOUFSWJFXT 6OGPSUV- DMBTTJD EJTUJODUJPO NBEF IFSF JT CFUXFFO nately, as the scope of the information on AHMPCBMBOEANVMUJOBUJPOBMTUSBUFHJFTBOEJU GPPESFUBJMJOHQSPWJEFECZPďDJBMTUBUJTUJDT FDIPFTEJTUJODUJPONBEFCFUXFFOABHHSFT- JTSBUIFSOBSSPX FWFOGPPESFUBJMUVSOPWFS TJWFMZJOEVTUSJBMBOEAJOUFMMJHFOUMZGFEFSBM is no longer calculated), the study com- TUSBUFHJFT BOE CFUXFFO HMPCBM ADBUFHPSZ piles information gathered from various LJMMFST BOE DPSQPSBUF QBSFOUT *O CPUI sources (private consultancies, market re- DBTFT UIFGPSNFSNPEFMJTBTTPDJBUFEXJUI TFBSDI DPNQBOJFT  JOEVTUSZ FYQFSUT  ćF format standardization, a centralized bu- estimations of several important indica- reaucracy, export of management ideas and tors vary depending on source. cultures from the core, and the pursuit of ćF TVJUBCMF RVBMJUBUJWF BOE RVBOUJUB- economies of scale in purchasing, market- tive research methods have been used for JOHBOEMPHJTUJDTćFSFBSF 5BCMF EJČFS- various solutions in the process of study: FOUGBDUPST XIJDIDPVMEJOĘVFODFJOUFSOB- analysis and synthesis; logical and abstrac- tionalization processes of retail, inter alia tive constructional; correlation-regression GPPEćFUPQUIJSUZDPNQBOJFTBDDPVOUGPS analysis; data grouping and comparing; around one third of global grocery sales, expert and etc. and in many countries including the UK, UIFUPQĕWFTVQFSNBSLFUTBDDPVOUGPS PSNPSFPGHSPDFSZTBMFT #VSDI -BXSFODF  The development and  *OUIJTDBTFUIFJNQBDUTPGJODSFBT- concentration of grocery retail ing concentration, particularly at the buyer markets in the Baltic States level, are perhaps most keenly felt by small QSPEVDFST BTUIJTJTXIFSFUIFEJTQBSJUZJO ćF JOUFSOBUJPOBMJ[BUJPO PG SFUBJMJOH JT B QPXFS JT HSFBUFTU 3FUBJMFST CVZFS QPXFS much understudied element of contempo- has been strengthened further as both the SBSZ HMPCBMJ[BUJPO QSPDFTTFT $PF    IJHI GSFRVFODZ PG OFX QSPEVDU MBVODIFT $IBSBDUFSJ[JOH IPX JOUFSOBUJPOBMJ[BUJPO and the international procurement strat- has been undertaken is to consider that FHJFT CZ SFUBJMFST JOUFOTJĕFT DPNQFUJUJPO the degree of management centralization among suppliers for getting access to retail

Table 1 Factors influencing retail internationalization

‘Push’ factors Facilitating factors ‘Pull’ factors Perceived/imminent saturation Use of surplus capital/access to Unexploited markets in domestic markets cheaper sources of capital Spreading of risk Entrepreneurial vision )JHIFSQSPĕUQPUFOUJBM $POTPMJEBUJPOPGCVZJOHQPXFS *OEVDFNFOUTGSPNTVQQMJFSTUP $POTVNFSNBSLFUTFHNFOUTOPUZFU FOUFSOFXNBSLFUT exploited Public policy constraints Removal of barriers to entry "DDFTTUPOFXNBOBHFNFOU Economic conditions *OGPSNBUJPOBOEDPNNVOJDBUJPO Reaction to manufacturer interna- technologies tionalisation Maturity of format 'PMMPXJOHFYJTUJOHDVTUPNFSTBCSPBE Source: adapted from Coe, 2004. 72 Ligita MELECE, Ingūna GULBE, Juris HĀZNERS

Table 2 Estimated market shares by largest retailers in the Baltic States, %, 2008

Estonia Latvia 3*.* 22 21 8 VP Market 6 23 44 *,*$PPQFSOJD -820 Aibe - 5 5 ETK 25 - - Selver 18 - - 6 - - &-7* -7- *FQJSLVNVHSVQB -4- /PSGB --12 Source: adapted from Strategic VANTAGE Consulting, 2009.

TIFMGTQBDF $BQSJDF 7PO4DIMJQQFOCBDI  BNCJUJPOT UP EFWFMPQ UIF #BMUJD GPPE SF- 2008). UBJMNBSLFUXJUIGPDVTPOEJTDPVOUTUPSFT Grocery or food retail markets in all *OJUJBMMZ QMBOOFE TUPSF PQFOJOHT XFSF #BMUJD 4UBUFT IBWF CFFO HSPXJOH VOUJM SF- CBDLFE CZ UIF BDRVJTJUJPO PG OVNFSPVT cently. Estimated market shares by largest TJUFTJOBMMUISFF#BMUJD4UBUFT-JEMIBEBMTP SFUBJMFSTJOUIF#BMUJD4UBUFTTIPXTPNFTJN- IJSFETPNFTUBČJOCPUI&TUPOJBJO-BUWJB JMBSJUJFTBOETPNFEJČFSFODFT 5BCMF  )PXFWFS OPDPOTUSVDUJPOXBTBQQBSFOUMZ ćF BOOVBM SBUF PG NBSLFU FYQBOTJPO TUBSUFEBOZXIFSF*O-JEMBOOPVODFE JO-JUIVBOJBBUJTTPNFXIBUTMPXFS UIBU FOUSZ FČPSUT UP DFBTF EVF UP TFWFSBM UIBO JO -BUWJB BOE &TUPOJB XIFSF NBS- reasons - strong local competition in dis- LFUT HSPX  PO QSFWJPVT ZFBS 4USB- counter segment, increasing land prices UFHJD7"/5"(&$POTVMUJOH  5PUBM GPSTJUFT EJďDVMUJFTUPHFUQFSNJTTJPOTUP OVNCFSPGTUPSFTJTPOEFDMJOFXIJMFUPUBM convert residential estates to commercial retail space expands continuously. Hy- QSPQFSUJFTBOETUBďOHQSPCMFNT QFSNBSLFUTBSFUIFSFUBJMGPSNBUXJUIUIF NPTUSBQJEHSPXUIBOEBDDPVOUGPSBCPVU PGUPUBMGPPESFUBJMTBMFTJOUIF#BMUJD Food retail market 4UBUFT*O&TUPOJBUIFTIBSFPGIZQFSNBS- concentration kets in total retail sales has reached almost 4VQFSNBSLFUTXJUIWBSJPVTTUPSFTJ[FT ćF BWBJMBCMF JOGPSNBUJPO GSPN /PSUI BSFUIFGPSNBUXJUITUBCMFNBSLFUTIBSFBU "NFSJDB  8FTUFSO &VSPQF BOE HMPCBM BCPVUćFOVNCFSPGEJTDPVOUTUPSFT TPVSDFT TIPXT UIBU TBMFT DPODFOUSBUJPO JT JT HSPXJOH "CPVU  PG GPPE TBMFT BSF JODSFBTJOH $POOPS    0&$%  HFOFSBUFE JO EJTDPVOU TUPSFT ćF PQFO 16) pointed out that there are probably air market places still have not lost their many causes for these rather high levels of importance and their share is the highest SFUBJMTBMFTDPODFOUSBUJPO CVUUIFGPMMPX- JO-JUIVBOJBXIJMFJO&TUPOJBJUJTTVCTUBO- ing are certainly most prominent among UJBMMZMPXFS(FSNBOSFUBJMFS-JEMIBEHSFBU them: THE IMPACT OF GLOBALIZATION ON FOOD RETAILING IN LATVIA 73

 $IBOHFTJODPOTVNFSTIPQQJOHIBC- 8IJMF # %PNB[MJDLZ   BSHVFT UIBU its, linked to demographic, transportation, the cases of oligopoly are much more com- BOEJODPNFDIBOHFT XIJDIUFOEUPGBWPS mon and in this market structure, there iPOFTUPQw XFFLMZTIPQQJOH FTQFDJBMMZGPS BSFBGFXTFMMFSTTVDIUIBUBHSFBUEFBMPG fast moving consumer goods; JOUFSEFQFOEFODFFYJTUTCFUXFFOUIFĕSNT  $IBOHFTJOBQQMJDBUJPOPGDPNQVUFS JO UIF NBSLFU ćF BDUJPOT PG BOZ POF PG technology to retailing (especially point UIFN MPXFSJOH QSJDF  DIBOHJOH QSPEVDU PGTBMFTDBOOJOH XIJDIUFOEUPDSFBUFPS TUZMF FUD XJMMIBWFBQSPGPVOEFČFDUPO reinforce economies of scale in retailing, UIFPUIFSĕSNTJOUIFNBSLFU PQFOUIFXBZUPNBKPSTUPDLNBOBHFNFOU A measure of market concentration TBWJOHT JODMVEJOH EJSFDU EFBMJOH XJUI JT )FSĕOEBIM)JSTDINBO *OEFY  ))* NBOVGBDUVSFST BOEHSBOUSFUBJMFSTVOJRVF )JSTDINBO    ))* JT B DPNNPOMZ access to valuable consumer spending data BDDFQUFE NFBTVSF PG UIF TJ[F PG ĕSNT JO JO DPOOFDUJPO XJUI DVTUPNFS MPZBMUZ SF- relation to the industry/retail and an indi- bates); cator of the amount of competition among  $IBOHFT JO NBSLFUJOH TPQIJTUJDB- UIFN 3IPBEFT  ćF))*PGBNBS- tion and capability of large retailers, i.e. LFUJTDBMDVMBUFECZTVNNJOHUIFTRVBSFT HSFBUFSBCJMJUZBOEXJMMJOHOFTTUPTFMMQSJ- of the percentage market shares held by vate brands. UIFSFTQFDUJWFĕSNT.BSLFUTJOXIJDIUIF 4XFEJTISFTFBSDIFST "TQMVOE 'SJCFSH  ))*JTCFUXFFOBOEQPJOUTBSF  TUSFTTFEUIBUPMJHPQPMZUIFPSJFTUZQJ- considered to be moderately concentrated DBMMZ QSFEJDU B OFHBUJWF SFMBUJPO CFUXFFO BOEUIPTFJOXIJDIUIF))*JTJOFYDFTTPG ĕSN DPODFOUSBUJPO BOE UIF JOUFOTJUZ PG 1800 points are considered to be concen- DPNQFUJUJPO'JSTU JOBMBSHFUPXOBMMĕSNT USBUFE5SBOTBDUJPOTUIBUJODSFBTFUIF))* EP OPU DPNQFUF XJUI FBDI PUIFS NBSLFU by more than 100 points in concentrated EFĕOJUJPO TFDPOE SFUBJMFSTJOBSFHJPOBM markets presumptively raise antitrust con- NBSLFU BSF OPU POMZ TQBUJBMMZ EJČFSFOUJ- cerns. BUFECVUBMTPEJČFSJOUFSNTPGTFSWJDFBOE *U IBT EFWJTFE B TJNQMF NFBTVSF UP QSPEVDUSBOHFBOEĕOBMMZ UIFSFUBJMQSJDF gauge the extent of concentration in a MFWFMXJMMBMTPCFJOĘVFODFECZJOQVUDPTUT  market and, therefore, the likelihood of XIJDIBSFQBSUMZEFUFSNJOFECZUIFJOUFO- DPNQFUJUJPO %PNB[MJDLZ    ćJT TJUZ PG DPNQFUJUJPO BNPOH XIPMFTBMFST measure is called the concentration ratio

Table 3 The structure of grocery retail market in the Baltic States, 2008

Estonia Latvia Lithuania Firm % Firm % Firm % 1 ETK Grupp 25 VP Market 23 VP Market 44 2 Rimi Eesti 22 Rimi Latvia 21 *LJ 20 3 A-Selver 18 *,* 8 /PSGB3FUBJM 12 4 4PPNF40, 8 Elvi 7 Rimi Lithuania 8 ))* 2123 1064 2501 $3 73% 58% 83% Source: adapted from Strategic VANTAGE Consulting, 2009. 74 Ligita MELECE, Ingūna GULBE, Juris HĀZNERS

o$3 XIJDIDBOCFVTFGVMJOBTTFTTJOHUIF -JUIVBOJBTBOE &TUPOJBTGPPE SFUBJM NBS- EFHSFFPGDPODFOUSBUJPOJONBSLFUT$3JT LFU))*WBMVFTTIPVMECFDPOTJEFSFEIJHI the percent of sales in a market (or market 7BOBHT   7BOBHT  1BBM[PX    TIBSF PGUIFGPVSMBSHFTUĕSNTJOUIFNBS- ćF-BUWJBO))*JOEFYJTPOBWFSBHFMFWFM LFU XIJDIDPNNPOMZIBTCFFOJOEJDBUFE XIJMFJUFYDFFETUIFHFOFSBMMZMPXMFWFMPG BT$3ćFMBSHFSUIFDPODFOUSBUJPOSBUJP  Eastern European countries (Fig. 1). UIF NPSF NBSLFU QPXFS UIF MBSHFTU ĕSNT are likely to possess and, therefore, the less DPNQFUJUJPO JO UIF NBSLFU ćF TNBMMFS Grocery retail structure in the the concentration ratio, the greater is the Baltic States BNPVOUPGDPNQFUJUJPO*UJTDBMDVMBUFECZ TRVBSJOH UIF NBSLFU TIBSF PG FBDI ĕSN selling area is above 2500 m2. competing in the market and then sum- Stores handle a large variety of products ming the resulting numbers. - food, household, cosmetics, toiletries, "TTIPXOJOUBCMF 5BCMF JO&TUPOJB QFSTPOBMDBSFQSPEVDUT HJęT LJUDIFOXBSF  $3JT XIJDINFBOTUIBUGPVSMBSH- electrical appliances, audio/video/photo FTUQMBZFSTDPNNBOEKVTUPWFSNBSLFU UFDIOJRVFT  DBTTFUUFT  ĕMNT  UPZT  BQQBSFM  TIBSFBOETDPSF))*WBMVFBU TPUIF and shoes. are mainly self- NBSLFUJTDPODFOUSBUFE*O-BUWJB UIFĕSTU TFSWJDFE CVU UIFSF DBO CF TFDUJPOT XJUI four largest players command under 60% over the counter sales. Supermarkets have NBSLFU TIBSF BOE UIF TDPSFT ))* WBMVF selling area 300 m2 to 2500 m2, and they at 1064, thus the market is competitive. handle food, household, cosmetics, toilet- *O -JUIVBOJB $3 JT  BOE ))* WBMVF ries, personal care products, gifts, apparel, at 2501, so the market is concentrated. and shoes. Supermarkets are mainly self- $PNQBSFE UP PUIFS &VSPQFBO DPVOUSJFT  TFSWJDFE CVU UIFSF DBO CF TFDUJPOT XJUI

3500 3319

3000 2501 2500 2123 2000 1777 1698 1616 1500 HHI index 1160 1064 1064 1000 849 737 690 426 500 93 0 SE LT EE IE UK CR PL LV DE SK HU CZ RO BG

Fig. 1. HHI index in selected European countries, 2007

Source: adapted from Irish Food Board, Food and Drinks Industry Day 2008 - Market Overviews. THE IMPACT OF GLOBALIZATION ON FOOD RETAILING IN LATVIA 75

9000 8000 Lithuania 7000 Latvia 6000 r 5000 Estonia

Numbe 4000 3000 2000 1000 0 Hypermarkets Supermarkets Large groceries Small groceries Kiosks/ Fuel stations newsstends

Fig. 2. The type and number of food stores/outlets in the Baltic States, 2007

Source: authors’ construction based on ACNielsen, 2007. over the counter sales. Hypermarkets and foods are predominantly purchased in su- supermarkets are located mainly in urban QFSNBSLFUTćFOVNCFSPGTQFDJBMTUPSFT  areas. Large groceries have selling areas especially in beverages and confectionery, from 100 m2 to 300 m2. Large groceries is on decline. Retailers are increasingly es- sell food, but stores also can handle house- UBCMJTIJOHUIFJSPXOEJTUSJCVUJPODFOUFSTUP hold, cosmetics, toiletries, personal care CFDPNFNPSFJOEFQFOEFOUGSPNXIPMFTBM- products. Small groceries have selling area ers and distributors and thus improving CFMPX  Nƭ 4NBMM HSPDFSJFT TFMM GPPE  MPHJTUJDTPGHPPET"QBSUUXPMBSHFTUSFUBJM- but stores also can handle household, cos- FST  3*.* BOE .BYJNB  OVNCFS PG JOEF- metics, toiletries, personal care products. pendent stores and chains decreasing due ,JPTLT BSF NBJOMZ PVUMFUT XJUI OPOĕYFE UPDIBOHJOHPXOFSTIJQPSNFSHJOH'PPE TUSVDUVSF XIFSFUIFQSPEVDUTBSFVTVBMMZ stores are increasingly becoming parts of CFJOHTPMEUISPVHIUIFTNBMMPQFOXJOEPX DIBJOTPSFTUBCMJTIDPPQFSBUJPOXJUIDPN- on one side. Kiosks are located mainly in mon management, logistics, purchasing DJUZ TRVBSFT  NBJO TUSFFUT  USBJO BOE CVT BOE NBSLFUJOH GVODUJPOT ćF TUSPOH- TUBUJPOTBOEJOTJEFTQFDJBMPVUMFUT0VUMFUT FTU HSPVQT BSF #BMUTUPS  "*#&  *FQJSLVNV in gas stations sell packed food and drinks. HSVQB BOE &MWJ ćF NPTU SFNBSLBCMF JT ćFUZQFBOEOVNCFSPGGPPETUPSFTPVU- #BMUTUPSXIJDIIBTBNCJUJPVTQMBOTUPDPN- MFUT JO UIF #BMUJD 4UBUFT BSF TIPXO JO UIF QFUFXJUISFUBJMNBSLFUTIBSFPG3JNJBOE ĕHVSF 'JH  .BYJNB ćBU IBT FOBCMFE UIF TVDDFTT PG Grocery retail in Latvia.ćFGPPESF- the discount retailers such as Supernetto, tail sales structure has changed over the Leader Price and discount stores under last decade. According to the results of UIF.BYJNBCSBOEćFSBQJEEFWFMPQNFOU TVSWFZEPOFCZ#BMUJD%BUB)PVTF   of hypermarkets and supermarkets has the role of open-air markets has some- BEEFEUPUIFQPXFSPGSFUBJMDIBJOT"GFX XIBU GBEFE /FWFSUIFMFTT  TUJMM DVTUPNFST retailers like Sky, and mc2 run QSFGFS NBSLFUT XIFO GSFTI GBSN QSPEVDF POMZBGFXTUPSFTXJUIBGPDVTPOQSFNJVN JT TPVHIU XIJMF QBDLFE BOE SFBEZNBEF QSPEVDUTTVDIBTEFMJDBUFTTFOćF-BUWJBO 76 Ligita MELECE, Ingūna GULBE, Juris HĀZNERS

6000 y = -186.83x + 5770.8 R2 = 0.86 5000

4000

3000

2000 Number of stores 1000

0 2001 2002 2003 2004 2005 2006 2007 2008

Fig. 3. The dynamics of number of food stores in Latvia, 2001-2008

Source: authors’ calculations based on unpublished data from CSB.

food retail sector is the most fragmented OJĕDBOU DPFďDJFOUPGEFUFSNJOBUJPO32 JOUIF#BMUJDTBOEUIFTIBSFTPGMPDBMSFUBJM  Sϟ CZ 'JH  chains. .FBOXIJMF OVNCFSPGCJHTIPQT XJUI ćFUPUBMOVNCFSPGGPPETUPSFTTJODF sales space < 1000 m2) after statistically 2001 in Latvia has declined statistically sig- TJHOJĕDBOUJODSFBTFBUBCPVUGPVSUJNFTIBT

6000 y = 5.6905x + 57.143 120 R2 = 0.66 5000 100

4000 80

3000 60

2000 40

1000 20 Number of stores > 100 sq.m Number of stores < 1000 sq.m 0 0 2001 2002 2003 2004 2005 2006 2007 2008

<20 20-50 50-120 120-400 400-1000 1000+ Trendline 1000+

Fig. 4. The trend of number of food stores by sales’ space in Latvia, 2008

Source: authors’ calculations based on unpublished data from CSB. THE IMPACT OF GLOBALIZATION ON FOOD RETAILING IN LATVIA 77 declined to pre-crisis levels as in 2004-2005 BMTP B QSJDFRVBMJUZ JNBHF QSPCMFN $VS- (R2 Sϟ T 'JH  rently the company operates 37 medium Rimi - UIFDPNQBOZPXOFECZ4XFEJTI TJ[FE TUPSFT DPVOUSZXJEF )PXFWFS  UIF *$" "# 3JNJ #BMUJD JT UIF CJHHFTU QMBZFS company focuses on Riga city, but the de- JO-BUWJBOGPPESFUBJM3*.*IBTIZQFSNBS- WFMPQNFOUQMBOTJODMVEFPQFOJOHPGOFX kets, supermarkets and discount stores and TUPSFT.FHPJTBLFZQMBZFSJOUIF#BMUTUPS  28% share in Latvian food retail market. -BUWJBO GPPE SFUBJMFST DPPQFSBUJPO XJUI ćFNBJOHSPXUIQPUFOUJBMJTTFFOJO4V- some 400 stores and has 15 cafés thus in QFSOFUUPEJTDPVOUTUPSFTDIBJO3*.*IBT UPUBMPQFSBUFTGPPESFUBJMPCKFDUT BCPVUTUPSFT)ZQFSNBSLFUTBSFMPDBUFE 6OUJMUIFBDRVJTJUJPOCZ*,* NeldaXBT in Riga and big cities - Jelgava, Ventspils, UIFĕęIMBSHFTUSFUBJMFSćFDPNQBOZXBT -JFQBKB  BOE %BVHBWQJMT 4VQFSNBSLFUT QSJWBUFMZPXOFE4UPSFTJODMVEFTVQFSNBS- are located all over the country, mostly LFUT NFEJVNBOETNBMMTJ[FETIPQTćF JOUPXOTćFDPSQPSBUFJNBHFPG3JNJJT stores are located in Riga and Riga district. BTTPDJBUFEXJUICFUUFSRVBMJUZXIFODPN- /FMEBPQFSBUFTDBGÏTBOESFTUBVSBOUTBOE QBSFEUPPUIFSQMBZFSTMJLF.BYJNB "$/- BĕWFTUBSIPUFM#BMUJD#FBDI)PUFMJO+VS- ielsen, 2007). NBMB*O/FMEBPQFOFEBCSBOEOFX Maxima Latvia is the second larg- premium class food supermarket Debes- FTU SFUBJMFS XJUI  NBSLFU TIBSF ćF NBOOB XJUI IJHIFS QSJDFT ćF DPNQBOZ OFUXPSL JT PXOFE CZ -JUIVBOJBO 6"# has broad catering business integrated into 7JMOJBVT 1SFLZCB ćF DPNQBOZ IBT IZ- the food retail. permarkets, supermarkets and medium SKY is a franchise run from Germany. sized stores. Maxima is the market leader ćFDPNQBOZGPDVTFTPOMBSHFTVQFSNBS- JOUFSNTPGOVNCFSPGTUPSFT XIJDIBSFPO LFUTJO3JHBXJUIWFSZTVDDFTTGVMTUPSFMP- BWFSBHFSFHBSEFEBTMPXFSQSJDFMFWFMUIBO DBUJPOT ćF TUPSFT BSF VQTDBMF HSPDFSZ 3JNJ"MUIPVHIXPSLJOHXJUIEJTUSJCVUPST  shopping places. DPNQBOZIBTJODSFBTJOHPXOJNQPSUPQFS- ćF -BUWJBO GPPE SFUBJM NBSLFU DPN- BUJPOT$VSSFOUMZDPNQBOZPQFSBUFTTPNF QSJTFTĕWFNBJOGPSNBUTPSUZQFT)ZQFS- 111 stores. Hypermarkets are located in markets are located in big cities, mainly as Riga, but supermarkets are located all over QJWPUQPJOUTPGTIPQQJOHDFOUFSTćFSFBSF the country.  IZQFSNBSLFUT JO PQFSBUJPO BU QSFTFOU Elvi is the third largest retailer, and it 4VQFSNBSLFUT BSF SFUBJM OFUXPSLT PQFSBU- JT MPDBMMZ PXOFE ćF DPNQBOZ PQFSBUFT ing either as integrated units or franchise about 70 medium sized stores on franchise TUPSFT0WFSTVQFSNBSLFUTBSFMPDBUFE terms. Elvi stores have united logistics sys- JO DJUJFT  UPXOTIJQT BOE TIPQQJOH DFOU- UFNćFDPNQBOZQMBOTBEEJOHBOVNCFS FST%JTDPVOUFSTXJUIUIFMPXFTUQSJDFTBSF of cafés. PQFSBUFECZTVQFSNBSLFUOFUXPSLT4PNF MegoJTUIFGPVSUIMBSHFTUSFUBJMFSXIPTF  EJTDPVOU TUPSFT BSF MPDBUFE JO UPXOT PXOFST BSF #SJUJTI DPNQBOJFT &VSPUSBOT Medium supermarkets and convenience #BMUJDBOE*OUFSTUPS-PHJTUJD.FHPHPUPČ TUPSFT BSF MPDBUFE JO UPXOT ćF OVNCFS to a fast/strong start in the market, but later of medium stores stands at 440. Small in- IJUIBSEFSUJNFTXJUIEFDMJOJOHTBMFT QSPĕU- dependent groceries are located all over ability and store closures. Mego had prob- UIFDPVOUSZćFOVNCFSPGTNBMMTUPSFTJT MFNT XJUI TPNF QPPS TUPSF MPDBUJPOT BOE PWFS 0UIFSQPJOUTPGTBMFBSFLJPTLT  78 Ligita MELECE, Ingūna GULBE, Juris HĀZNERS

shops at fuel stations, pharmacies, perfum- TIBSF ćF &TUPOJBO 4FMWFS HSPVQ KVTU SF- eries, household and chemical stores. DFOUMZIBTFOUFSFE-BUWJBćFPQFSBUPSIBT ćFOVNCFSPGIZQFSNBSLFUTJO-BUWJB QMBOTUPPQFOTUPSFTCZUIFFOEPG IBT EPVCMFE TJODF  'JHVSF  CFMPX Established market shares of retailers TIPXTUIFTIBSFTPGTBMFTUVSOPWFSCZTUPSFT and customer loyalty stated in opinion polls GPSNBUPSUZQFJO-BUWJBćFTVQFSNBSLFUT BMMPXTQMJUUJOHSFUBJMNBSLFUTDFOFJOGPVS IBWFIJHIFTUTIBSFPGTBMFTUVSOPWFSo  TFHNFOUT 'JH XIFSFWFSUJDBMBYJTTIPX BOEUPHFUIFSXJUIIZQFSNBSLFUTTBMFTUVSO- customer loyalty based upon the purchases PWFSJUNBLFTBSPVOEUIFIBMGPGBMMPS at the store during the last 12 months; hori- [POUBMBYJTTIPXSFTQFDUJWFNBSLFUTIBSFPG Small UIFSFUBJMFSćFCPYJTTQMJUCZEJWJEJOHMJOFT 25% ESBXOBUUIFQPJOUTPGDBMDVMBUFEBSJUINF- Hypermarkets tic average loyalty and market share and: 13% the upper left segment indicates potential Medium market leader position; the upper right seg- 14% ment indicates the existing market leader QPTJUJPO UIF MPXFS MFę TFHNFOU JOEJDBUFT Supermarkets UIF TUBUVT PG OFX FOUSBOU PS iWVMOFSBCMFw Other 36% 12% QPTJUJPOUIFMPXFSSJHIUTFHNFOUJOEJDBUFT UIFiPVUTJEFSwPSMPTFSQPTJUJPO ćF QPTJUJPO PG UXP NBSLFU MFBEFST Maxima and Rimi is rather distinctive, Fig. 5. The shares of sales’ turnover by store’s type in Latvia, 2007 XIJMFUIFPUIFSTBSFNPTUMZJOOFXFOUSBOU QPTJUJPO 'JH ćFPOMZFYDFQUJPOJT&MWJ Source: adapted from Strategic VANTAGE Consulting, HSPVQXJUIUIFQPUFOUJBMUPKPJOUIFNBS- 2007. LFUMFBEFST/POFPGUIFSFUBJMFSTTIPVMECF considered an outsider. ćFNPTUOPUJDFBCMFDPOTPMJEBUJPOIBQ- QFOFEJOCFUXFFO*$"#BMUJD"#BOE ,FTLP'PPEXIFO3JNJ#BMUJDXBTGPSNFE  Impact of retail concentration enabling the company to secure the mar- on food chain ket leader position in the food retail in #BMUJDT "ęFS UIF NFSHFS 3JNJ NBOBHFT ćFESJWJOHGPSDFTPGJODPNFHSPXUI EF- stores under the names Rimi, Supernetto mographic shifts, globalization and techni- BOE BDRVJSFE $JUZNBSLFU TUPSFT VOEFS cal change have led to a reorganization of Rimi brand. VP Market changed the brand GPPETZTUFNTGSPNGBSNUPQMBUFćFDIBS- UP.BYJNB#BMUJKBBOEQVUUIFEJTDPVOUFST acteristics of supply chains - particularly Saulute operated by the company under the role of supermarkets - linking farmers Maxima brand. Finnish unveiled have changed, from consumption and re- UIFĕSTUIZQFSNBSLFU1SJTNBJO-BUWJBJO UBJMUPXIPMFTBMF QSPDFTTJOH QSPDVSFNFOU  ćF -JUIVBOJBO SFUBJMFS *,* TUBSUFE BOEQSPEVDUJPOćJTIBTIBEBESBNBUJD PQFSBUJOHJO-BUWJBJOXJUISBUIFSMPX FČFDU PO TNBMMIPMEFS GBSNFST  QBSUJDV- NBSLFUT TIBSF  CVU UIF SFDFOU BDRVJTJUJPO MBSMZ JO EFWFMPQJOH DPVOUSJFT .D $VM- PG/FMEBOFUXPSLIBTJODSFBTFEJUTNBSLFU lough et al., 2008; Vermeulen et al., 2008). THE IMPACT OF GLOBALIZATION ON FOOD RETAILING IN LATVIA 79

72% Maxima

RIMI

Potential leaders Leaders

Elvi

Loyalty Average Mego IKI Outsider beta top! Aibe Average New entrants 0% 0% 30% Market share

Fig. 6. The positions in the Latvia’s market of major retailers, 2007

Source: authors’ calculations and construction.

Supermarkets have come to dominate the XJUI CFUUFS DPOUSBDUT  JU JT QPTTJCMF UP retail distribution of food at least in sev- XFBLFOUIFOFHPUJBUJOHQPTJUJPOPGGBSN- FSBM&VSPQFBODPVOUSJFTćJTEPNJOBUJPO FSTDPPQFSBUJWFT'BSNFSTFOEVQXJUIUIF has been of serious concern to farmers and small change. their organizations, though there is no evi- *OUIFDBTFPGNJML JOUIF6,UIFZHFU dence that the returns to farmers have suf- the commodity price and then potentially GFSFEćFNBJOFČFDUTFFNTUPIBWFCFFO as little as 3% of the remainder once pro- BSFOFXFEFNQIBTJTPORVBMJUZ XIJDINBZ EVDUJPO DPTUT BSF SFNPWFE "T $PNNPO IBWFQSPWFESBUIFSCFOFĕDJBMJOQSFQBSJOH Agriculture Policy intervention is reduced producers for the rigors of global compe- BDSPTT &VSPQF  NPSF GBSNFST XJMM CF FY- UJUJPO#VUUIFQPUFOUJBMQSFTVNBCMZFYJTUT posed to these market forces. Suppliers for oligopsonistic exploitation of the farm- of agricultural and private-label goods JOHTFDUPSCZUIFQPXFSGVMSFUBJMFST EP MJUUMF CFUUFS *G DPNQFUJUJPO CFUXFFO *OUIF&6 BOEJONBOZXFMMEFWFMPQFE supermarkets is strong enough to ensure countries, suppliers are in practice limited UIBUQSPĕUTBSFSFUVSOFEUPUIFDPOTVNFS to bargaining over amounts much smaller UISPVHI MPXFS QSJDFT BOE CFUUFS TFSWJDF  than the full retail margin. And this is only UIFOUIJOHTBSFBTUIFZTIPVMECF#VUJO BOVQQFSMJNJUPOXIBUTVQQMJFSTDBOTF- reality, certainly in the UK, local competi- DVSF o EPNFTUJD DPNQFUJUJPO XJMM SFEVDF UJPOJTPęFOXFBLoTPUIFDPOTVNFSMPTFT UIFUBLFZFUGVSUIFS ćBOBTTPVMJT   PVU 0UIFS DPVOUSJFT NBZ XFMM ĕOE UIBU *G SFUBJM QSJDFT DPOUJOVF SJTJOH  BMM UIF UIFZTVČFSJOUIFTBNFXBZ extra gains accrue to the supermarkets. ćFTF QPMJDJFT  XIJDI BSF XJEFMZ Suppliers are then in a position to divide BEPQUFE BDSPTT 0&$% DPVOUSJFT 4BEVO  BOEDPORVFSGBSNFST#ZCVZJOHPČTPNF  ĕOEUIFJSKVTUJĕDBUJPOJOUIFOFFE 80 Ligita MELECE, Ingūna GULBE, Juris HĀZNERS

to prevent the possible negative externali- the same amount is spent in a supermar- ties generated by big-boxes on local com- LFUćFTBNFBNPVOUJTXPSUINPSFXJUI munities (e.g. congestion, damages to the local schemes as it stays in the vicinity environmental décor) and, in particular, XIFSFJUTWBMVFJODSFBTFTBTJUJTSFJOWFTUFE to protect the survival of smaller retailers many times over. BOEUIFBNFOJUJFTUIFZQSPWJEFoTVDIBT S. Murphy (2006) argues that the indus- QFSTPOBMJ[FEBOEMPDBMTFSWJDFGSPNOFX trialization of the food system, including sources of competitive pressure. DFOUSBMJ[FE BOE DPODFOUSBUFE SFUBJM QPXFS  UK researchers (Fox, Vorley, 2004) QPTFTTQFDJĕDDIBMMFOHFTGPSTNBMMGBSNFST  argue that as increasing scale of retail is especially those living in developing coun- premised on the expectation that larger tries. Unless farmers are organized or oper- buyers can extract more favourable terms ating very large farms, they cannot provide from suppliers in order to deliver price UIFSFMJBCMFTVQQMZBOERVBMJUZSFRVJSFECZ deflation to customers, there is a risk of a TVQFSNBSLFUT ćF BSSJWBM PG JOUFSOBUJPOBM shrinking share of overall value for actors supermarkets into local food markets in de- GVSUIFSVQUIFTVQQMZDIBJOoJFQSJNBSZ veloped and developing countries alike can QSPEVDFST BOE BHSJDVMUVSBM XPSLFST "T contribute to the marginalization of pro- XFMM BT SFEVDJOH UIFJS QPUFOUJBM SFUVSOT  ducers in the food system, but there are op- evidence suggests that this process also QPSUVOJUJFTGPSGBSNFSTUPFYQMPJUXJUIUIF tends to push risk back up the supply arrival of supermarkets, especially if they chain to the most vulnerable rural sectors. are organized into larger . 4PNFUJNFTUSJHHFSFECZUIFXJEFOJOHHBQ CFUXFFOGBSNHBUFBOESFUBJMQSJDFT GBSNFS QSPUFTUTTQFDJĕDBMMZEJSFDUFEBUTVQFSNBS- Issues of Latvia’s dairy chain kets have taken place in recent years in the 6,  'SBODF  (FSNBOZ  *SFMBOE  /FUIFS- &#.D$VMMPVHIFUBM  QPJOUFEPVU MBOET 4XJU[FSMBOEBOE4QBJO JOBNBSLFE that the implications of the reorganization departure from typical action aimed at the of supply chains and resulting transforma- TFBUTPGQVCMJDQPMJUJDBMQPXFS tion of food systems for food security, and *UXBTGPVOEUIBUUIFQSFTTVSFPGDIFBQ in particular, rural poverty and the dairy imports and the scrooge-like stranglehold sector have garnered a fair amount of at- XIJDIUIFTVQFSNBSLFUTDIBJOTJO*SFMBOE tention. IBWFPOUIFWFHFUBCMFTFDUPS MFęIJNXJUI For assessment of impact of food OPBMUFSOBUJWF 8IFMBO  #FTJEFT ( QSPDFTTJOH BOE SFUBJMT DPODFOUSBUJPO BOE Holt and A. Amilien (2007) underline the internationalization on primary produc- importance of local food and short retail ers or farmers as an example in Latvia the XBZ BOE$)JMM  GPVOEUIBUNPOFZ EBJSZ DIBJO IBT CFFO DIPTFO  XIJDI IBT spent on locally-produced food generates several levels from primary production BMNPTUUXJDFBTNVDIJODPNFGPSUIFMPDBM UPFOEDPOTVNFSXJUIEJČFSFOUQSPDFTTFT  economy as the same amount spent in a HPBMTBOENBSLFUTJUVBUJPOT)PXFWFS BMM UZQJDBM TVQFSNBSLFU  XIFSF UIF SFTVMUT PG involved parties are mutually connected TVSWFZ TIPX UIBU FWFSZ b TQFOU XJUI B EVF EFNBOEPČFS BOE TVQQMZDVTUPNFS MPDBM GPPE JOJUJBUJWF JT XPSUI b GPS UIF relationships (Fig. 7). MPDBM BSFB  DPNQBSFE XJUI KVTU b XIFO 'PS QSPDFTT FTUJNBUJPO JO -BUWJB ĕWF THE IMPACT OF GLOBALIZATION ON FOOD RETAILING IN LATVIA 81

Milk producers

Milk processors

S/C S/C „Rīgas S/C „Rīgas S/C „Talsu S/C „Valmieras piena piensaimnieks piensaimnieks” „Tukuma piens” kombināts piens”

Wholesale

S/C „RIMI Latvija” S/C „Maxima Latvija” Other

Retail

End consumers

Fig. 7. Latvia’s dairy chain

Source: authors’ construction based on data from Kuplā, Tarvāne, 2008.

NJML QSPDFTTPST IBT CFFO DIPTFO  XIJDI ćFUSFOETPGMJRVJENJMLTQSJDFJOUIF DPOUSPMBSPVOEPGXIPMFEBJSZNBSLFU XIPMFNJMLDIBJOTIPXTUBUJTUJDBMMZTJHOJĕ- TIBSF BOESFTVMUTBSFTIPXOJOUIFĕHVSF DBOUJODSFBTF DPFďDJFOUPGEFUFSNJOBUJPO ćF EBJSZ QSPEVDUT BSF CFJOH CPVHIU JO for delivered milk - R2 = 0.31, r = 0.55; UIF HSPTT CZ 3*.* -BUWJB  .BYJNB -BUW- ϟ   GPS XIPMFTBMF NJML  32 = 0.84, JKB  /&-%"  *FQJSLVNV (SVQB  1SJTNB  SϟGPSSFUBJMNJML32 = 0.82, 1BMJOL  4LBJ #BMUJKB GSPN NJML QSPDFTTJOH Sϟ CVUUIFHSPXUIPGEFMJW- FOUFSQSJTFT PS EBJSJFT "4 v3ʚHBT QJFOB FSFENJMLTQSJDFJTMPXFSUIBOJOUIFPUIFS LPNCJOʆUTw  "4 v7BMNJFSBT QJFOTw  "4 DIBJOTTUBHFT-JLFXJTF UIFUSFOETPGQSJDF v3ʚHBTQJFOTBJNOJFLTw "4v5VLVNBQJFOTw  JOUIFXIPMFLFĕSDIBJOGSPNUP "4v5BMTVQJFOTBJNOJFLTwBOEUIFOTPMEJO TIPXBMTPTUBUJTUJDBMMZTJHOJĕDBOUJODSFBTF the retail for end consumer. DPFďDJFOU PG EFUFSNJOBUJPO GPS EFMJW- Evaluation of trends of delivered milk ered milk - R2  Sϟ prices trends and milk and dairy products GPS XIPMFTBMF LFĕS  32    S   prices in the further stages of chain has been ϟGPSSFUBJMLFĕS32  S EPOFGPSUIFOJOFZFBSQFSJPE   ϟ XIFSFHSPXUIPGEFMJWFSFENJML ćF SFTVMUT PG BOBMZTFT  JOEJDBUF 'JH JTMPXFSUIBOXIPMFTBMFBOESFUBJMQSJDFPG  'JH   TUBUJTUJDBMMZ TJHOJĕDBOU JODSFBTF end or processed product. PG UIF QSJDFT GSPN  UP   CVU UIF *UDPNQMJFTXJUITJUVBUJPOJOPUIFS&6 QSJDFTJOUIFSFUBJMTFDUPSIBWFHSPXODPO- DPVOUSJFT GPSFYBNQMF JO*SFMBOE ćBOBT siderably more than in the processing and TPVMJT    QSPĕUT GSPN TVQFSNBSLFU especially in production stage. milk have increased by €150 million as 82 Ligita MELECE, Ingūna GULBE, Juris HĀZNERS

y = 0.0098x + 0.1103 y = 0.0342x + 0.138 y = 0.0501x + 0.1732 0.70 R2 = 0.31 R2 = 0.84 R2 = 0.82 0.60 Delivered

0.50 Whole s ale

0.40 Retail

LVL 0.30 Trend delivered Trend 0.20 whole s ale Trend retail 0.10

0.00 2002 2003 2004 2005 2006 2007 2008 2009

Fig. 8. The trends of delivered milk, wholesale milk and milk retail prices (LVL) in the Latvia’s dairy chain, 2001-2009

Source: authors’ calculations based on unpublished data from CSB and Latvian Dairy Committee.

a result of double-digit percentage price XIPMFTBMFBOESFUBJMQSJDFTPGNJMLBOEDPU- rises in 2008, but farmers have received UBHFDIFFTF BSHVFUIBUSFUBJMDIBJOCFOFĕUT less than a third of the gains. NPTU TJODFSFUBJMFSTNBSLVQIBTCFFOPO 4,VQMʆBOE*5BSWʆOF  BOBMZ[JOH BWFSBHFCFUXFFOBOEEVSJOHUIF

y = 0.0098x + 0.1103 y = 0.0342x + 0.138 y = 0.0501x + 0.1732 0.70 R2 = 0.31 R2 = 0.84 R2 = 0.82 0.60 Delivered

0.50 Whole s ale

0.40 Retail

LVL 0.30 Trend delivered Trend 0.20 whole s ale Trend retail 0.10

0.00 2002 2003 2004 2005 2006 2007 2008 2009

Fig. 9. The trends of delivered milk, kefir wholesale and retail prices (LVL) in the Latvia’s dairy chain, 2001-2009

Source: authors’ calculations based on unpublished data from CSB and Latvian Dairy Committee. THE IMPACT OF GLOBALIZATION ON FOOD RETAILING IN LATVIA 83

NPOUIT$PNQBSJOHEFMJWFSFENJMLPSSBX XJUIWBSJPVTTUPSFTJ[FTBSFUIFGPSNBUXJUI NJMLQSJDFHSPXUIEVSJOHUIPTFUXPZFBST  stable market share at about 32%. BOE XIPMFTBMFQSJDFHSPXUI JUJT During latest eight years (2001-2008) DPODMVEFEUIBUTBMFTQSJDFIBTHSPXONPSF the total number of stores is on statistically than milk purchase prices. Above men- TJHOJĕDBOUEFDMJOFXIJMFUPUBMSFUBJMTQBDF tioned authors conclude that retailers pay FYQBOET DPOUJOVPVTMZ BOE UIJT HSPXUI JT GPSUIFEFMJWFSFENJMLXJUIJOEBZT BOE TUBUJTUJDBMMZ TVCTUBOUJBM JO -BUWJB ćF FY- therefore dairy processing enterprises have pansion of retail chains has contributed to BDUFE MJLF iJOUFSFTUGSFF MPBOFSTw UP SFUBJM- JODSFBTFJOUXPXBZUSBEFPGGPPEQSPEVDUT ers, and the retailer has invested these free CFUXFFO#BMUJD4UBUFT NFBOT JO UIFJS EFWFMPQNFOU BOE HSPXUI  ćF-BUWJBTGPPESFUBJMNBSLFUDPNQSJTFT XIJMF UIF MBDL PG UIF TBNF ĕOBODFT IBT GPMMPXJOHNBJOGPSNBUTPSUZQFTIZQFSNBS- possibly prevented dairy processing enter- kets, supermarkets, discounters, medium QSJTFTHSPXUIBOESFBDIJOHUIFQPUFOUJBMMZ supermarkets and convenience stores, small IJHIMFWFM*UNFBOTUIBUJOUIJTNBSLFUUIFSF independent groceries, small stores and JT EJTQSPQPSUJPOBUF EJTUSJCVUJPO PG QPXFS other points of are kiosks, shops in fuel CFUXFFO EBJSZ QSPDFTTJOH FOUFSQSJTFT BOE TUBUJPOT ćF TVQFSNBSLFUT IBWF IJHIFTU SFUBJMDPNQBOJFT XIPBSFBCMFUPJOĘVFODF TIBSFPGTBMFTUVSOPWFSo BOEUPHFUIFS delivery price i.e., those retail companies XJUIIZQFSNBSLFUTTBMFTUVSOPWFSJUNBLFT XIPIBWFNBSLFUQPXFS BSPVOEUIFIBMGPGBMMPS ćFEBJSZDIBJOXBTDIPTFOUPBTTFTT UIF GPPE QSPDFTTJOH JNQBDU BOE SFUBJMT Conclusions concentration and internationalization on primary producers or farmers as an exam- ćF MBUFTU EFWFMPQNFOUT JO GPPE SFUBJM JO ple in Latvia, since it provides several lev- UIF#BMUJD4UBUFTTIPXTFWFSBMGFBUVSFTDPN- els from primary production to end con- NPOUPBMMUISFFDPVOUSJFT XIFSFUIFUPUBM TVNFSXJUIEJČFSFOUQSPDFTTFT HPBMTBOE OVNCFSPGGPPETUPSFTJTEFDMJOJOH XIJMF NBSLFU TJUVBUJPOT ćF SFTVMUT PG BOBMZTFT UIFBWFSBHFTBMFTBSFBJODSFBTFT)PXFWFS  of delivered milk prices trends and dairy the process of grocery retail concentra- QSPEVDUTQSJDFTJOUIFGVSUIFSDIBJOJOEJ- tion and consolidation is still going on in DBUFTUBUJTUJDBMMZTJHOJĕDBOUJODSFBTFPGUIF BMMUISFF#BMUJDDPVOUSJFT CVUJO-BUWJBJUJT QSJDFTGSPNUJMM CVUUIFQSJDFTJO TMPXFSUIBOJOPUIFS#BMUJD4UBUFTBOEUIF UIFSFUBJMTFDUPSIBWFHSPXONPSFDPOTJE- -BUWJBTGPPESFUBJMTFDUPSJTUIFNPTUGSBH- erably than in the processing and especially NFOUFE  XIJDI DIBSBDUFSJ[FE XJUI MPXFS PO QSPEVDUJPO TUBHF ćFSF JT EJTQSPQPS- )FSĕOEBIM)JSTDINBO*OEFYBOEDPODFO- UJPOBUFEJTUSJCVUJPOPGQPXFSJOEBJSZNBS- tration ratio. LFU CFUXFFONJMLQSPEVDFSTPSGBSNFST ćF TIBSF PG CPUI IZQFSNBSLFUT BOE BOE EBJSZ QSPDFTTJOH FOUFSQSJTFT  XIFSF discount stores in food retail had in- processing enterprises have stronger mar- DSFBTFE XIFSFIZQFSNBSLFUTBSFUIFSFUBJM LFU QPXFS   CFUXFFO EBJSZ QSPDFTTJOH GPSNBU XJUI UIF NPTU SBQJE HSPXUI BOE FOUFSQSJTFTBOESFUBJMDPNQBOJFT XIPBSF account for about 18% of total food retail able to influence delivery price i.e., those TBMFTJOUIF#BMUJD4UBUFTBOETVQFSNBSLFUT SFUBJMDPNQBOJFTXIPIBWFNBSLFUQPXFS 84 Ligita MELECE, Ingūna GULBE, Juris HĀZNERS

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OPNJDTPYBDVL.FNCFSTKPIOUIBOBTTPVMJT EPO*OUFSOBUJPOBM*OTUJUVUFGPS&OWJSPONFOUBOE milk/europe-s-farmers-.pdf [Accessed May 23, %FWFMPQNFOU 8BHFOJOHFO8BHFOJOHFO6OJWFS- > TJUZ3FTFBSDI$FOUSF 7BOBHT  "   $PNQFUJUJPO JO #BMUJD SFUBJM 8IFMBO ,  4VQFSNBSLFUTCFJOHCMBNFE HSPDFSZ NBSLFUT #BMUJD *OGPSNBUJPO $FOUSF GPS GPSGSFTIHSPXFSTFYPEVT*SJTI'BSNFS+PVSOBM  Economic Policy Studies. 'BSN.BOBHFNFOU.BSDI*OUFSOFUBDDFTT 7BOBHT  "  1BBM[PX  "   $PNQFUJUJPO JO IUUQXXXGBSNFSTKPVSOBMJFGBSNJOHJOEFY UIF-BUWJBOBOE#BMUJD(SPDFSZ3FUBJM.BSLFUT TIUNM<"DDFTTFE.BZ > 44&3JHB#*$&141BQFS/P4UPDLIPMN4DIPPM 8IJUFIBMM"TTPDJBUFT  (SPDFSZSFUBJM%F- of Economics: Riga. UFSNJOBOUTPGQSJDFTJOUIFSFUBJMTFDUPS*O1SJDF 7FSNFVMFO 4FUBM  $IBJO8JEF-FBSOJOH %FUFSNJOBUJPOJOUIF"VTUSBMJBO'PPE*OEVTUSZ GPS *ODMVTJWF "HSJGPPE .BSLFU %FWFMPQNFOU " A Report. guide to multi-stakeholder processes for linking *SJTI'PPE#PBSE 'PPEBOE%SJOLT*OEVTUSZ%BZ TNBMMTDBMFQSPEVDFSTUPNPEFSONBSLFUTo-PO- .BSLFU0WFSWJFXT

ćFQBQFSTVCNJUUFE.BSDI  Prepared for publication: June 01, 2010

Ligita MELECE, Ingūna GULBE, Juris HĀZNERS GLOBALIZACIJOS POVEIKIS LATVIJOS MAISTO PREKIŲ MAŽMENINEI PREKYBAI Santrauka

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