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Supermarkets

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Super Power for Supermarkets
ICSA researcher Gillian Westbrook takes a closer look at the power of supermarkets In the current recessionary times, it seems that price wars for food are going to be an increasing part of the retail landscape. To gain competitive advantage, retailers respond by reducing prices, a strategy that suggests to the shopper that the retailer is making less profit on their goods than in previous times. Consumers are pleased to save a few euro on their weekly shop, and are probably blissfully unaware of just who is taking the hit for the price reduction. Farmers, however, know only too well from whom the margins are being sought. Producer margins have been eroding year on year, leaving many farmers reflecting on how the economics of their business seemed more attractive thirty years ago. The relationship between farm-gate price and the rising high levels of retail and supply concentration are not mutually exclusive and should not be underestimated. There have been many factors that have impacted on farm-gate prices. BSE for example, occurred at a time when there was a major shift in EU retail concentration and very likely created opportunities for retailers to exert their power over suppliers. Various aspects of market consolidation and issues concerning food safety have all had serious detrimental consequences to the farmer. Unlike BSE, however, the matter of eroding farm-gate prices and the power of the retailers to control prices has received limited research. The Retailers The multi-nationals have gained a significant portion of the market share of retail sales in Ireland and in the rest of Europe over the past 15 years. Not surprisingly, a pattern exists between lower prices being paid to farmers and retail dominance. Furthermore, if, as suggested by some large retailers, margins remain the same, one would expect to see parallel price

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