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”siempre precios bajos”
”everyday low prices”
”cheap gets cheaper”
”every little hel ps”
cheap gets cheaper”
”kampf um den letzten cent”
”value
”drive costs out of the sys tem”
”drive costs out of the system”
to shout about”
”cheap gets cheaper
The supermarkets are expanding in developing countries,
with enormous consequences for small farmers.
The Swedish Cooperative Centre has previously published
reports on the situation of farmers and growers in the South.
In this report we take a closer look at an increasingly distinctive
phenomenon: the expansion of global supermarkets.
”every little helps”
With the report “Small farmers – big markets” the Swedish
Cooperative Centre shows the speed of this process, the largest
players, reasons that contribute to the process, and eﬀects on consumers. The report also shows with the aid of concrete examples
how the situation of small farmers can be improved, through
organisation in the South and consumer power in the North.
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Facts fro
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No 4, D
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ISBN: 91-975940-3-2.
Stockholm, December 2006
Swedish Cooperative Centre/Kooperation Utan Gränser
Box 30214, SE-104 25 Stockholm, Sweden
Tel +46 8 657 47 00
Visitors: S:t Göransgatan 160 A, Stockholm
[email protected], www.utangranser.se
SCC & Vi Agroforestry Regional Office for Eastern Africa
P.O. Box 45767
Nairobi
Kenya
Tel +254 2 580 201
E-mail: [email protected]
SCC Regional Office for Southern Africa
70 Livingstone Avenue, 1 Verona Gardens
Harare
Zimbabwe
Tel +263-4-795 865 / 707494 / 737 492
SCC Regional Office for Latin America
Centro Cooperativo Sueco
Apartado 594-1150,
La Uruca, San José
Costa Rica
Tel +506 232 1895
Research and text: Anika Agebjörn and Nina Björstrand
Editors: Björn Lindh and Nina Björstrand
Translation from Swedish to English: Mike Gough
Layout: Pia Nygren Carlsson, PNK Design & Utbildning
This report was produced with financial assistance from Sida.
However, Sida has had no influence over its contents.
Printed at: Klippan, Sweden, December 2006 - www.ljungbergs.se
ISBN: 91-975940-3-2.
Contents
Poor farmers versus expanding supermarkets
2
Farmers in the South under pressure
4
Retail chains are becoming global
6
Social change is beneficial to supermarkets
11
Increasing demands on farmers
13
Ways forward in the South
17
Consumer power in the North
20
References
24
Swedish Cooperative Centre
Poor farmers versus
expanding supermarkets
Going to supermarkets to do our shopping is now part of daily
life in our part of the world. Very much the same process has
also started in Africa, Latin America and Asia. But while the
evolutionary process from small shops to modern self-service
stores and supermarkets was slow in Sweden, it is proceeding
at a furious pace in the South.
The driving forces behind this phenomenon are a small
number of large retail chain stores in the USA and Western
Europe. They do it either by establishing stores of their own
or by buying up local retail chain stores. The colossus among
the retail chains is Wal-Mart, an American corporation, and
the largest employer in the world.
The process has significant consequences for those people in
the South – almost two billion of them – who subsist as small
scale farmers. It is these poor smallholder farmers in particular
that the Swedish Cooperative Centre works with.
Today, people are already beginning to talk about the agricultural crisis in the developing world. International trade
agreements that are disadvantageous to the South; structural adjustment programmes; falling prices of raw materials;
powerful multinational retail giants; the subsidies given by the
rich countries to their own farmers: all these things have the
effect that the situation of farmers in the South is becoming
increasingly difficult. The expansion of convenience stores and
supermarkets adds to the pressure. The predominant pattern
in the countries where the supermarkets are expanding is that
they lead to fewer and fewer producers and suppliers. The mere
size of the retail chains makes it possible for them to force down
prices by playing off suppliers against each other.
Large quantities are at stake and those who do not succeed
in getting a contract with the large chain stores are at risk of
complete exclusion from the market. For agriculture as a whole,
the consequence is a growing gap between the farmers who
are excluded from the market and those who are able to continue. Smallholder farmers, without financial assets and without
2
the capacity to adapt, will not be able to hold their place on
the market. And the reverse side of the coin: farmers with assets
and the ability to adapt will be able to develop their farming
activities and will gain from this restructuring process.
An individual farmer in a poor country cannot stand up
to the enormous supermarkets and multinational retail chains
alone. Farmers must join together in interest groups and cooperatives to enable them to negotiate on relatively equal terms.
The support provided by our part of the world must be given to
different forms of farmers’ organisations. We must also use our
development cooperation funds to enable poor states to participate in drawing up the rules for retail chains – for example,
in respect of the environment, trade union rights, consumers’
rights and a great deal more.
We have the responsibility to exert pressure on companies
and governments through political parties and interest organisations. As consumers we also have the possibility to choose
“decent” products, i.e. products where a great deal of consideration has been given to the people involved and the environment
in their production. Labels on products help us to make the
right choices, but it is also important that we are on our guard
against new labels of the type that tend to increase confusion
among consumers rather than help poor farmers.
Everyone who shares the Swedish Cooperative Centre’s
vision: “a world free from poverty and injustice” has every reason to continue to keep an eye on the large retail chain stores
and demand that they accept their responsibility for the millions of people throughout the world who work to ensure that
the shelves in their stores, as well as their fruit and vegetable
displays, are full.
Björn Lindh
Chief Communication Officer
Small farmers – big markets
Petter Bolme
3
Farmers in the South under pressure
Miguel Alvarez
Farming is the most common occupation in the world. More
than a third of the world’s population live by farming. Most
of the farmers in the world live in developing countries. In
the poorest countries, up to two-thirds of the population are
farmers. Most of them are also smallholder farmers. Hitherto,
they have mainly produced for their own households and for
the local market.
Today they live dangerously. In this report we concentrate
on the ways in which their situation is affected as a consequence of the expansion of the retail chain stores in developing
countries. However, they are also being squeezed from several
other directions.
Greater degree of concentration in the food industry.
On markets that function properly there is free competition.
However, where large sections of the food market are concerned, the situation resembles an oligopoly, i.e. a couple or, at
most, a handful of large companies control the entire market.
4
This does not merely refer to the food stores, which this publication is all about, but also the long chain of intermediaries
that are to be found between the producer – the farmer – and
the consumer.
Whether the intermediaries are buyers, exporters, food
companies, importers or wholesalers, we see a trend towards
market domination by a small number of very large, usually
international, companies. The market for agricultural inputs
which the farmer is dependent on, for example seeds and
pesticides, is also controlled by a small number of large international corporations.
This is a trend that weakens the farmers’ negotiating position. While they may be obliged to pay a lot of money for
the goods they need themselves, such as seeds and fertilisers,
the prices of the products they sell such as vegetables, fruit
and other agricultural products are being reduced. As we shall
see, this is true not least when they sell their products to the
retail chains.
International agricultural policies .The EU and USA strongly
subsidise their own farmers and thereby contribute to distorting the world market for agricultural products. While they can
dump (i.e. sell products at a price which is below the cost of producing the products) their food surplus in poor countries, they
protect their own markets from competition. Many countries
in the South have been forced to lower their customs tariffs
for agricultural products, often as a result of pressure exerted
by the World Bank and International Monetary Fund (IMF).
Their imports have increased, which has had a negative effect
on the development of their own agriculture.
The very poorest countries are becoming increasingly dependent on imported food. At the same their food exports are
declining significantly. For many years, developing countries
have demanded that the EU and USA should reduce their
agricultural subsidies. The EU has offered to reduce its export
subsidies (which, however, only constitute a small proportion
of its total subsidies), while the USA has declared that it has
no intention of lowering its agricultural subsidies. This was the
reason for the breakdown of the World Trade Organisation’s
negotiations in the summer of 2006 and it would seem that it
is going to take a very long time before a solution to the problem is found.
Where agriculture is concerned, the same interests and needs
are not shared by all developing countries. Some countries, for
example China, India and Brazil, want to develop their agricultural exports and are therefore interested in lower agricultural tariffs throughout the world. Other developing countries,
often the poorer countries, do not have such great possibilities to invest in agricultural exports. They are more interested
in protecting their own farmers and their own local markets,
and therefore want to be able to retain their tariffs on imported food.
Petter Bolme
Falling prices for raw materials, including agricultural
products. In a recently published report, “The World Market
in Imbalance”, emphasis is given to the falling prices of raw
materials as a major reason for the global farming crisis.
Compared to the prices of industrial products, the prices of
raw material commodities have fallen by between 0.7 and 1.3
per cent per year during the entire post-war period. Raw materials are most often the most important export products of
developing countries. The prices of products such as coffee,
cocoa, tea and bananas have fluctuated considerably, but the
long-term trend is downwards. The terms of trade of the poor
countries are said to have deteriorated considerably.
Neither is it naturally best for smallholder farmers that countries
focus primarily on exporting agricultural products. Exports of
this type often derive from large-scale operations in plantations
that are run by foreign-owned corporations. They compete with
local agriculture for the best farming land, water and the labour
force, and thus force out the small farmers.
Stricter demands from buyers/consumers. Demands in
respect of products and the handling of products are being
increasingly intensified. These demands can be in the form of
national import rules and requirements in respect of hygiene.
However, they are often a question of voluntary certification
systems.
Since 1997, European retail chains, including Ahold, the
Metro Group and Tesco, have worked on the implementation of a standard known as Eurepgap (Euro-Retailer Produce
Working Group on Good Agricultural Practices). The standard consists of a number of rules that place high technical
and environmental requirements on producers that intend to
export products to affiliated retail chains in Europe. Eurepgap
contains 24 “major musts” (absolute requirements), 70 “minor
musts” (less strict requirements), and 54 recommendations.
All the absolute requirements focus on product security. Half
of them take up pesticides: those that may be used and how
they may be used.
Other voluntary certification systems are ecological and
ethical labelling systems, for example KRAV and Rättvisemärkt
(Fair Trade) in Sweden. These are discussed in the chapter on
Consumer Power in the North.
5
Retail chains are becoming global
Elisabeth Dalziel, Pressens Bild
International retail chains are gaining ground throughout the
world. Even locally or regionally owned retail chains are expanding. Today, one third of the food trade in the world is controlled by 30 retail chains.
We know some of the largest in Europe, for example
Carrefour, Metro Group, Ahold and Tesco. However, they are
small in comparison with the largest retail chain in the world,
Wal-Mart, the gigantic retail chain in the USA.
During the last ten years, most of the largest retail chains
have established a presence in Asia, Latin America and, to a
certain extent, Africa. Today, the area in which they are expanding most is the developing world. And the process is extremely
rapid. An evolution that took more than 50 years in Western
Europe and the USA – from the small manual store to the large
self-service supermarket – seems to be taking place in less than
ten years in large parts of the world.
In some cases it is the national retail chains that are growing
rapidly and are predominant in the grocery trade. In other cases,
and this is more common, it is the large multinational chain
stores that are taking over in one country after another. One
combination, which is not unusual, is that a local chain that
has worked hard for a number of years to become the biggest
6
on the national market is bought up by an international giant,
which thus, all at once, has a large proportion of a national
market in its hands. Another variation is that multinational
chains enter into joint ventures with chain stores in other parts
of the world.
Originally, supermarkets were mainly to be found in cities
and middle-class areas but now they are expanding further to
small towns, rural areas and poor areas. In a country like China
this process is taking place at a terrific pace.
Latin America
According to the UN Food and Agriculture Organisation, FAO,
sales in supermarkets in Latin America increased considerably
between 1988 and 1997, from an amount corresponding to
MUSD 213 in 1988 to MUSD 3 000 in 1997. Today, more
than 60 per cent of all food sold in Latin America is sold at
supermarkets. This means that an evolutionary process that
took 50 years in Western Europe and the USA took slightly
more than ten years in Latin America. However, the process varies from one country to another. Supermarkets have
taken the largest market shares in Argentina, Brazil, Chile,
Guatemala, Mexico, Colombia and Costa Rica, while sales
through supermarkets are much lower in, for example, Honduras,
Nicaragua, Bolivia and Ecuador.
Now the USA retail giant, Wal-Mart, is entering Central
America and Brazil on a wide front. Wal-Mart opened its first
store in Mexico in 1991. Today, the company’s turnover in
Mexico is larger than the entire country’s tourist industry, more
than MUSD 10 400 per year according to the New York Times.
It is the country’s largest employer with more than 100 000
employees.
In March 2006, Wal-Mart took over a regional chain store,
CARHCO, Central American Retail Holding Company, which
had 369 stores. In December 2005, Wal-Mart bought up 140
stores in a national retail chain, Sonae, in Brazil. This doubled, all at once, its presence there, according to Wal-Mart’s
website.
The French company, Carrefour, also has 48 000 employees in Brazil, and a market of more than 50 million people,
according to the FAO.
Asia
The process started later in Asia but has gained ground even
more rapidly. In 1995, there were 2 500 supermarkets in
China, mainly in the south-east part of the country. In 2002,
there were more than 50 000. Their share of the total retail trade
in the country increased from 0.18 per cent to more than 11
per cent during the same period.
Today, a tremendous expansion is taking place in the interior of China. Among the first multinational retail chains
to establish a presence in China was Carrefour, which built
two hypermarkets in Beijing and Shanghai in 1995. In 2001,
Carrefour had 28 hypermarkets in China and this year, 2006,
Carrefour opened its 76th hypermarket. Tesco is not far behind. In 2005, Tesco had 39 hypermarkets and plans to open
a further 12 in 2006.
There are also other companies that are active there. In
2001, Wal-Mart had 22 hypermarkets in China and the
German Metro Group had 15, according to a research group
working on a project entitled Regoverning Markets, as well as
the websites of the companies concerned.
Supermarkets are also growing steadily in Malaysia, Thailand
and the Philippines and are mostly owned by multinational
companies. Carrefour has 21 supermarkets in Thailand while
Tesco is running some 50 supermarkets and hypermarkets in
a joint venture with CP Group of Thailand. Tesco Lotus is the
name used by Tesco in Asia.
However, in Vietnam, Laos and Cambodia, the major retail
chains are still in their starting blocks. Progress is also slow
in southern Asia. India has one of the most fragmented food
markets in the world. Only about a fifth of the food in India
is bought and sold in stores: the remainder is to be found on
the open market. Supermarkets are still mainly a big-city phenomenon in both Bangladesh and Pakistan.
Africa
Africa is the only continent where the North-based international retail chains have not yet established a presence to any
appreciable extent. Instead, regional chains, which often have
their origins in South Africa, are expanding.
South Africa is also the only country in Africa that is dominated by supermarkets. They account for more than 60 per cent
of all food sales. Four South African retail chains: Pick’n Pay,
Shoprite, Woolworth and Spar (which, however, has Dutch
owners) dominate the market in South Africa. Together they
have a market share of almost 90 per cent.
Of these chains it is Shoprite which is most rapidly establishing a presence in other African countries. Today, Shoprite
can be found in 16 African countries: in addition to South
Africa it is also in Angola, Botswana, Egypt, Ghana, Lesotho,
Madagascar, Malawi, Mauritius, Mozambique, Namibia, Tanzania, Swaziland, Zambia and Zimbabwe. Shoprite has also
established a presence in India. However, establishments outside South Africa are still modest. Of Shoprite’s total of 294
supermarkets, most, 245, were in South Africa in 2004. In
Zambia there were 18, in Namibia 8, and in other countries
just one or two stores.
Pick’n Pay is in five countries apart from South Africa and
the situation is about the same for the other chains.
Another South Africa chain that is establishing a presence internationally is Metro South Africa. Metro does not just
have supermarkets, it also has cash and carry shops and neighbourhood stores. Today, Metro South Africa is in nine African
countries apart from South Africa.
In Kenya, there are two national supermarket chains: Uchumi and Nakumatt. However, the supermarkets’ share of the
total market in Kenya is very small.
In the rest of Africa, supermarkets are still a marginal phenomenon. Of the world’s five largest supermarket chains (WalMart, Carrefour, Tesco, Metro Group and Ahold), only Metro
Group and Carrefour have established a presence in Africa, both
in North Africa - in Morocco and Egypt respectively.
Eastern Europe
In Central and Eastern Europe, the multinational retail chains
are also rapidly gaining ground. Ahold and a German chain,
Lidl, are two companies that are investing in this region. In most
countries in Eastern Europe people mainly buy their food in
supermarkets, but there are exceptions. Poland is the country
where supermarkets are most prominent, while they are still
hardly visible in a country like Romania.
7
The largest players
2005, which has been compiled by Retail Planet. The
five largest food chain stores on the top 30 list are WalMart, Carrefour, Metrogroup, Tesco and Ahold. Of these
five, three: Wal-Mart, Carrefour and Tesco, are highly expansive in developing countries.
The information contained in the diagram below has
been taken from the websites and annual reports of these
companies.
The 30 largest retail chains all have their origins in the rich part
of the world, but many of them are now expanding, mainly
to developing countries. Of the 30 largest chains, nine come
from the USA, six from Germany, five from France and three
from Great Britain. Supermarkets from Japan, the Netherlands,
Belgium, Australia and Canada are also on the top list for
8
WAL-MART
CARREFOUR
TESCO
Country of origin
USA
France
Great Britain
Presence in Africa
–
Egypt
–
Presence in Asia
Japan
China
South Korea
United Arab Emirates
Indonesia
Japan
China
Malaysia
Singapore
South Korea
Taiwan
Thailand
Japan
China
Malaysia
South Korea
Taiwan
Thailand
Presence in Europe
Great Britain
Austria
Belgium
Cyprus
Czech Republic
Greece
Italy
Malta
Norway
Poland
Portugal
Romania
Slovakia
Spain
Switzerland
Turkiet
Czech Republic
Hungary
Ireland
Poland
Slovakia
Turkey
Presence in
Latin America
Argentina
Brazil
Costa Rica
El Salvador
Guatemala
Honduras
Mexico
Nicaragua
Puerto Rico
Argentina
Brazil
Colombia
Dominican Republic
–
Presence in
North Amerika
Canada
–
–
Number of employees
1 800 000
436 000
350 000
Sales in 2005
MUSD 301 000
MUSD 91 000
MUSD 74 000
Wal-Mart
Wal-Mart opened its first store in the USA in 1962 and started
its international expansion in 1991. Today, the company has
6 000 stores of which more than half, 3 700, are in the USA.
Wal-Mart’s growth during the first years of the 2000s has been
impressive. Net sales have increased by 50 per cent, from MUSD
194 000 in 2002 to MUSD 301 000 in 2005.
Between 2000 and 2003, the return on invested capital
was never less than 20 per cent, according to a report “World
Market in Imbalance”. In 2005, the return on capital was 22.6
per cent. The profit margin for that year was 4.2 per cent.
In 2003, Wal-Mart was the largest company in the world, all
categories. In 2003, its sales were MUSD 233 000, more
than both Exxon Mobil and General Motors.
Behind this somewhat incredible success story there is a
sales philosophy which, put simply, is to force prices down.
Wal-Mart’s strategy is: reduce prices relentlessly; pump up
productivity; pay low wages; prohibit trade unions; give suppliers as narrow profit margins as possible; and sell everything
under the sun cheaper than the shop next door. A store manager in Wal-Mart has the right to cut the price of a product if
he sees that it is being sold at a lower price in a shop across the
street – if you have to cut the price, cut it.
Today, Wal-Mart is rapidly establishing a presence in many
countries, mainly in Latin America and Asia. In December
2005, 545 new stores were incorporated into the Wal-Mart
empire in Brazil and Japan. A further 230 new stores are to
be opened in countries outside the USA in 2006. However,
Wal-Mart still does most of its business in the USA. Slightly
less than a third of its employees, or 500 000 people, are outside the USA.
Wal-Mart has been accused of being hostile towards trade
unions, and several legal processes are underway in the USA. In
December 2005, a court in Oakland, California, ordered WalMart to pay almost MUSD 160 to more than 115 000 employees and former employees who had been refused lunch breaks
and obliged to work overtime without compensation. A similar case is underway in Pennsylvania and Wal-Mart previously
reached a settlement in Colorado amounting to MUSD 48.
Wal-Mart has also been criticised for not paying for health
insurances, or for paying much too little for health insurances,
for its employees in the USA. In Maryland, a law was passed
in January this year which obliges Wal-Mart to increase its
employees’ health insurances, according to articles in the New
York Times and Associated Press.
An employee in the wholesale and retail trade in the USA
who is a member of a trade union earned, on average, USD
18 per hour in 2003. In Wal-Mart, where there are no trade
unions, the average wage for workers was USD 9 per hour,
according to the New York Times. Wal-Mart has also been
criticised by the International Confederation of Free Trade
Unions (ICFTU) since its suppliers try to stop trade union
organisation. In China there are 8 000 factories that produce
goods for Wal-Mart. In April 2005, 10 000 workers at one of
these factories, Uniden Electronics Factory in Shenzhen, went
on strike for the right to form an independent trade union. The
strike ended with the dismissal of the organisers of the strike.
The same thing occurred at another of Wal-Mart’s suppliers,
Jem Sportswear, in Nicaragua in 2000. Wal-Mart is now also
the subject of attention in Chinese media for trying to stop
trade union organisation in its stores in China.
In June 2006 the Norwegian oil fund – one of the largest
pension funds in the world – decided to sell its shareholding
in Wal-Mart due to the company’s anti-trade union stance and
its poor personnel policy.
Carrefour
In terms of turnover, Carrefour is about a third of the size of
Wal-Mart but it is nonetheless firmly in second place among
the global retail chain giants. In the first three years of this
decade, Carrefour increased its return on invested capital from
13 per cent in 2000 to 23 per cent in 2002, according to a
report “World Market in Imbalance”. In 2004, the company
increased the floor space in its stores by more than 1.5 million
square metres, equivalent to 50 per cent.
Carrefour still does most of its business in Europe. The
company has some 7 000 stores of which 1 664 are in France
and 4 098 in other parts of Europe. Where its turnover is concerned, 85 per cent refers to Europe, and just under half refers
to its country of origin, France. In 2005, Carrefour’s return
on invested capital was 23.6 per cent and its profit margin was
2.5 per cent.
Carrefour is expanding rapidly in Latin American and
Asia. In 2005, the company recruited 80 000 new employees
around the world.
Tesco
Tesco is the largest retail chain in Great Britain and the fourth
largest globally. Tesco is also the largest private sector employer
in Great Britain. In 2005, the company recruited 20 000 new
employees, of whom 11 000 in Great Britain.
In Great Britain today, Tesco is not merely growing through
its supermarkets, it is also buying up hundreds of convenience
stores such as Nite and Day and One Stop. In 2005, its return
on invested capital was 17.6 per cent and its profit margin 4
per cent. In 2005, Tesco made a profit of MUSD 4 000, which
is a considerable increase on 2003 when it was MUSD 3 000.
Tesco is expanding rapidly internationally, principally in
Asia. In 2003, the company had 2 300 stores in 11 countries.
In Great Britain it is planning to open 130 new convenience
stores.
9
Tesco has been accused of not giving enough consideration to
the conditions under which people work with the production
of Tesco’s agricultural products. A new shareholder, Gertruida
Baartman, a fruit picker from South Africa, participated in
Tesco’s annual general meeting in London in 2006. An international development NGO, Action Aid, gave her financial
assistance to enable her, through her presence at the AGM,
to draw attention to the wretched conditions that thousands
of African farm workers live under. “I am taking a risk when
I speak here today. I can lose my job and my home. I know
that Tesco has heard about our problems earlier and they say
that things are not so bad,” she said. “But I stand before you
today since I do not earn enough money to give food to my
children and since I must work with my bare hands in fields
full of poisons.”
Metrogroup
Metro Group, a German company and the third largest retail
chain in the world, is behind names such as Metro Cash &
Carry, Real, Extra, MediaMarkt and Saturn, and is mainly to
be found in European countries. However, according to Metro,
it wants to enhance its international profile and plans to enter
Bosnia & Herzegovina and Pakistan in 2007.
Ahold
Ahold is the only company among the top five food giants that
does not currently have a presence in any developing country.
Ahold, which is a Dutch company, pulled out of both Asia and
Latin America two years ago. In 2003, extensive accounting
improprieties were revealed in Ahold’s subsidiary, US Food Service, in the USA. Top management resigned from the company
and the company’s share price tumbled by 80 per cent.
As part of the reconstruction of Ahold (which was led by
a Swede, Anders Moberg, who had just been appointed head
of the group), sales were made of assets amounting to some
MUSD 3 000, including the company’s operations in Asia and
Latin America. A new share issue provided the same amount
and helped to put the company back on its feet.
Today, Ahold’s operations are limited to Europe and the
USA. Ahold is behind food chains such as Giant, Stop & Shop,
Etos, US Food Service and Hypernova. In Sweden, Ahold owns
60 per cent of the ICA food chain, which, in turn, is behind a
low price chain, Netto.
What is a supermarket?
There are several general definitions that state that food
stores with a floor space of between 400 and 4 000
square metres are supermarkets. This definition is also
used in this report.
The Organisation for Economic Cooperation and
Development, OECD, defines a conventional supermarket
as a food store with a floor space of between 500 and
2 000 square metres, while a superstore has between
2 000 and 5 000 square metres, and a hypermarket has
10
more than 5 000. “Supermercado”, which is the term
used in Latin America, often corresponds to what we call
convenience stores.
The Swedish Research Institute of Trade provides a more
extensive definition for Swedish conditions. A supermarket
is a store with at least 2 500 square metres of floor space,
a broad range of food and special products, an external
location (i.e. outside the centre of a town), and at least
300 parking places.
Social change is
beneficial to supermarkets
Stig-Håkan Lindhé
Retail chains that are already large are growing globally. This is
a strong trend. There are a number of factors that facilitate this
trend. It is partly a question of demand for products, which
has changed on account of new life styles in the South. And it
is partly a question of the opportunities that have been opened
up for supermarkets to establish a presence in these countries. It
should also to be pointed out that these factors also have a mutual
influence on each other and are partly effects of each other.
has an estimated 37 million inhabitants. Another is growing
along the coast of West Africa from Benin City via Lagos to
Accra. Southern Africa is also being rapidly urbanised. More
than half of the population of Botswana, Lesotho, Namibia,
South Africa and Swaziland already live in urban areas. In 2003,
two-thirds of the people living in these countries will live in
urban areas, according to a UN study “World Urbanisation
Prospectus”.
Urbanisation
Changes in living conditions
People all over the world are moving into the towns and cities.
Also, more and more children are being born in urban areas.
This year, for the very first time, the majority of the people
living in the world can be urban dwellers, according to Mike
Davis, an author and city-planning specialist, in a new book.
The FAO’s estimate is more cautious: half of the population
in the world will live in urban areas in 2017, and 60 per cent
will be urban dwellers by 2030.
Big cities are being transformed into mega cities. Today,
Buenos Aires and Rio de Janeiro each have some 12 million
inhabitants. Cairo has 15 million, Delhi 18 million, Seoul 22
million. Above all, it is the slum areas that are growing. In a
number of places there are gigantic, continuous settlements,
consisting of hovels made of cardboard and sheet metal, with
millions of inhabitants. One area of this type is along the 500kilometre highway between Rio de Janeiro and Sao Paulo, which
The world is being industrialised. The number of industrial workers on earth has never been so large as it is today. It
has doubled in twenty years. The increase is strongest in Asia,
especially in China. And the new industrial workers are often
women. As many as 80 per cent of the textile workers in the
world are women. Women are also in the majority in the toy,
shoe and electronics industries. When an increasing number of
women become wage-earners, there is a growing need to buy
food quickly and efficiently, and preferably food that requires
little preparation. They want to have everything they need to
buy under one roof. “One-stop-shopping” is the need, supermarkets are the answer. They also earn more money today. More
and more can afford to buy cars and refrigerators. The families
are becoming increasingly similar to those in the rich world, i.e.
“cash rich, time poor”. Food habits around the world are also
beginning to resemble each other. Urbanised and industrialised
11
people increasingly prefer a western diet. They consume more
calories and protein than before. They eat more meat, milk
products, wheat, cooking oil, salt and sugar, at the expense
of the traditional fibre-rich diet of root vegetables and greens.
They are abandoning a varied intake of many different cereals in favour of becoming increasingly dependent on a narrow
supply of staple commodities such as wheat and rice. Today, in
countries such as Kenya and Ethiopia, imports of wheat from
the EU account for more than half of the total imports of food.
One major reason for this is the changing consumption patterns in the towns and cities. Another change that affects the
food trade is the growing use of credit cards. These are rarely
accepted in the corner shop or at the vegetable market, but
readily at the multinational supermarket.
Infrastructure and computers
Transporting food on a large scale is not possible without good
roads. In many countries today, food is the main cargo carried
by lorries. The emergence of the supermarkets has been facilitated by investments in road construction, above all in Asia
and Central America. Their emergence has also been facilitated
by the fact that transport costs are relatively low.
Computerisation has led to a revolution in logistics in the
retail trade. The universal product numbering system (European
Article Numbering – EAN – in Europe; Universal Product Code
– UPC – in the USA) has created entirely new possibilities for
stock control, sales forecasts, and automation of orders. Today,
the major retail chains are investing in their own distribution
centres and are increasingly taking over control of the entire
distribution process.
Global rules
Since the 1980s, two international institutions, the World
Bank and International Monetary Fund, IMF, have acquired
an ever-increasing degree of influence over the economic policies of many indebted and poor countries. In the 1980s and
1990s, some 60 countries, principally in Latin America and
Africa, implemented so-called structural adjustment programmes. This was a condition for renegotiating their loans, and
also for obtaining new loans, at the World Bank and IMF.
One basic feature of the structural adjustment programmes has
been deregulation. Following the directives of the World Bank
and IMF, indebted countries have increasingly opened up their
capital markets to international capital. This is usually referred to as foreign direct investment. It has had the effect that it
has become much easier for foreign companies to establish a
presence in these countries. Requirements that were formerly
made of foreign companies in the countries they wished to enter
have been reduced or abolished entirely. The requirement for
deregulation also had the effect that many poor countries took
12
away direct or indirect support to their own agricultural sector,
for example in the form of subsidised seeds and cheap credits.
The demands made by the World Bank and IMF for privatisation have also had the effect that a number of countries have
privatised former state-owned seed companies and companies
that supplied other capital goods to agriculture.
Two agreements concluded in the World Trade Organisation, WTO, have reinforced this trend. One is the agreement
in respect of Trade Related Investment Measures, TRIMs, and
the other is the General Agreement on Trade in Services, GATS.
Both these agreements make it easy for foreign companies to
set up business in WTO countries under the principles of nondiscrimination and equal treatment of foreign and local companies. These countries are now negotiating on the service sectors
they want to open up to private and international competition. Among the sectors that can be included in GATS are,
for example, business services and distribution, which include
trade in food. Hitherto, GATS has only started to function in
practice in exceptional cases.
The dual health challenge
For society as a whole, the global expansion of the
food giants has radically increased the possibility of
choosing from a wide range of food that is often
inexpensive. People around the world are increasing
their consumption of meat, milk products, wheat,
cooking oil, salt and sugar. The intake of calories is
increasing. They are eating less fibrous food and more
fast food.
For many developing countries this represents a
dual challenge. On the one hand, they still have the
problem of malnutrition among large sections of their
populations. Now they are also getting the problems
associated with the so-called “welfare diseases” among
an increasing number of people. Extreme obesity,
diabetes, high blood pressure, and cardiovascular
diseases are spreading rapidly. The FAO estimates
that 84 million people in the developing countries
have diabetes today and that this figure will increase
to 228 million by 2025.
But the paradox is even worse: several studies
indicate that it is not, in the first place, the rich who
suffer from “welfare diseases” but the poor. In Latin
America, the proportion of overweight people is
larger, and is increasing more rapidly, in the poorest
sections of the population. It would seem that it is
easier for children of malnourished mothers with a low
birth weight to develop diabetes and heart diseases.
This is known as Barker’s hypothesis, named after
the researcher who discovered this relationship. His
explanation is that the body adapts to malnutrition in
a way that helps a child to survive in the short term,
but threatens his or her health in the long term.
Increasing demands on farmers
Magnus Lundell
The growing control of the food trade by the major retail chains
has serious consequences for the farmers of the world. In very
simple terms, an ever-increasing number of farmers in developing countries are now faced with greater investment requirements than ever before - while they must be able to sell their
products more cheaply than before.
However, this trend also offers considerable opportunities.
First and foremost it is the consumers in the cities who benefit
since they gain access to a large supply of cheap food products.
The producers who succeed in becoming suppliers to the chain
stores can, at best, look forward to a bright financial future.
Fewer deliver more
The dominating pattern in the countries where the supermarkets
are gaining ground is that there are fewer, and larger, producers and suppliers. For example, the French retail chain, Carrefour, has a gigantic distribution centre in Sao Paulo in Brazil
which serves a market of more than 50 million consumers.
Carrefour buys its melons from just three large-scale farms in
north-east Brazil. These three farms not only supply melons to
all Carrefour’s customers in Brazil; their melons are also shipped further to Carrefour stores in 21 more countries, according
to the FAO. Among the milk farmers in Brazil, the number
of suppliers of the largest dairy companies fell by 75 000 between 1997 and 2001. In the leading retail chain in Thailand,
the number of vegetable suppliers decreased from 250 to ten in
less than five years. In Malaysia, a retail chain, Giant, had 200
vegetable suppliers in 2001; two years later it just had 30.
Farmers are being faced with new and often stricter requirements when they sell their products to supermarkets, as opposed to the situation before, when they sold directly on the local
market or via small shops and wholesalers. Among other things,
supermarkets demand punctual deliveries (usually no later than
nine o’clock in the morning) every day, 365 days a year, in fixed
quantities, regardless of the weather. Moreover, the products
must be in perfect condition. In the contracts, all the financial
risks usually rest with the suppliers who must be able to invest
in, for example, cold storage and refrigerated transports.
Supermarkets are favoured by the requirements stipulated
by the authorities in respect of hygienic handling of food compared, for example, to open vegetable markets. In fact, in many
countries the retail chains have tougher requirements than the
authorities. The European standard, Eurepgap, is used by several
multinational retail chains. And other product standards can be
even more specific. One example refers to a variety of apple in
13
South Africa, Fuji. According to an international development
NGO, Oxfam, Fuji apples must be 65 millimetres in diameter,
as opposed to 63 millimetres earlier.
Retail chains often build up their own supply systems instead
of buying from traditional wholesalers. Many chains have lists
of suppliers who are given priority. According to the research
group working on Regoverning Markets, these lists contain a
small number of suppliers who are subjected to strict requirements. In order to get their name on the list, suppliers must
often pay a special fee. A supplier that does not fulfil requirements in respect of deliveries risks being struck off the list. One
single failure to meet requirements can suffice.
The supermarkets reserve the right to cancel an agreement
unilaterally, for example if a supplier delivers products too late
in the day, does not meet requirements in respect of quantities,
or if part of a delivery does not meet stipulated requirements in
respect of quality. They can also stipulate that a supplier may
not supply products to competitors. If a supplier does so, the
supermarkets cancel the agreement.
Growing pressure on prices
The mere size of the major chains makes it possible for them
to put pressure on prices by playing off suppliers against each
other. For the suppliers it is no longer a question of selling to
individual shops but to an entire chain. Individual store managers have very little freedom, or no freedom at all, to make decisions on purchases themselves – that would not be efficient.
A centralised purchasing system, in most cases with their own
distribution centre, offers a method for the retail chains to make
their operations efficient.
Large quantities are at stake and a supplier that does not succeed in obtaining an agreement with a major retail chain is in
danger of being eliminated, according to Regoverning Markets.
Faced with such prospects, suppliers have no choice but offer a
lower price than their competitors, even if it is difficult to get the
books to balance. A study of farmers in Thailand showed that
the prices they were offered by the supermarkets did not cover
their costs, and even less their investment requirements.
The powerful position and negotiating strength of the retail
chains also have the effect that they can increasingly shift costs
on to the next stage in the supply chain, i.e. the supplier/producer. One common clause in agreements is that the retail chains
can unilaterally reduce prices, which are often fixed on a weekly
basis, if the market price of the products in question should fall
during the period. There is no corresponding clause in respect
of increasing the prices they pay if the opposite should occur.
“They change backwards and forwards all the time,” says
a fruit supplier in South Africa in a study made by Oxfam. “It
takes a month for us to get the fruit to them, it takes a minute
for them to change their minds… all we can do is dump the
fruit somewhere else.”
The suppliers can pay extra if their products are to be
launched in a store together with special activities and advertisements, if they want to have a good position for their products,
or simply to get some space on the shelves in the store. They
are debited if a product is to be sold at a reduced price, if they
want to be included on the list of priority suppliers, and so on.
Lisa Hanson
14
Petter Bolme
The UK Competition Commission found 52 different ways
in which the retail chains can exploit their dominant position
vis-à-vis the suppliers, according to an article in Corporate
Breakdown in 2003.
Retail chains often prefer to sign agreements with individual producers rather than with farmers’ associations, such as
cooperatives, according to the FAO.
The chain stores can demand long terms of credit, up to 90
days, which means that the supplier must wait 90 days before
he is paid for his goods. This is often an impossible situation
for small producers. However, in several countries governments
have intervened with the aid of recommendations, and in some
cases with legislation, to oblige chain stores to make payments
faster. There are also examples of supermarkets, in Vietnam and
the Philippines, which pay in cash.
The gaps are widening
For agriculture as a whole, the consequence is an ever-widening
gap between the farmers who are excluded from the market and
those who can manage to maintain a position on the market.
Existing inequalities are polarised. Small farmers, without financial assets and the capacity to adapt, will not be able to remain
in the market. And the reverse – farmers with assets, or who
are at least creditworthy and have the ability to adapt, will be
able to develop their farming activities and possibly even gain
from this restructuring process.
The question is whether credits function as a vicious circle
which reinforces this restructuring. The farmers whose agreements with the retail chains are cancelled are judged by the
banks to be less creditworthy and thus have even greater difficulties in obtaining loans, while conversely, those who can
manage to retain their position on the market find it easier to
obtain bank loans.
However, there are also examples where being a small farmer
can be an advantage. Regoverning Markets points out factors
that can favour small-scale production, such as labour-intensive
harvests, pest control and the handling of perishable vegetables or
fruit. There are also agricultural products which do not interest
large growers and which can offer small farmers a niche.
Supermarkets mean higher incomes for some
In Zambia, as in almost all countries in Africa, supermarkets
are a new but rapidly growing phenomenon. They represent
the modern, sanitary alternative. The supermarkets have also
opened up new markets for farmers.
When Shoprite’s store on Cairo Road in Lusaka was opened,
it was the retail chain’s first store outside South Africa. During
the first ten years, Shoprite imported most of the products that
were sold in the store. The retail chain also had a favourable
agreement with the Zambian state, which gave it considera-
ble tax relief. The wages paid by the store were so low that the
staff went on strike. Many people wondered whether Shoprite
was, in fact, helping to drain Zambia rather than supporting it.
However, in recent years, Shoprite has started to sell Zambian
products in its stores and is thereby contributing to development in the country.
“A fundamental change has taken place in just a few years.
Before 2003, Shoprite imported more or less all its products
from South Africa. Only four per cent of the goods were produced in Zambia. Today, three years later, most of the goods
sold in Shoprite are produced in Zambia,” says Hyde Haantuba,
coordinator of the Agricultural Consultative Forum (ACF).
ACF is an NGO whose mission is to strengthen the dialogue on agriculture and to increase knowledge of agricultural
matters. The organisation is owned by various interest groups
in the agricultural sector in Zambia. The reasons why Shoprite started to buy Zambian goods were entirely logistical and
financial. It had become too expensive to transport goods from
South Africa to Zambia. Moreover, there was a considerable
risk that the fresh fruit and vegetables would rot on the way. At
the same time, there were many people who were pressurising
Shoprite to open up its stores to Zambian products.
However, many smallholder farmers consider that the
demands made by Shoprite are far too strict and this makes it
impossible for them to sell to Shoprite.
15
Petter Bolme
“The simple fact of the matter is that small, individual farmers cannot supply the supermarkets as a consequence of their
quality controls and requirements for large deliveries,” says
Komani Ngambi, member of the Organic Producers and Processors Association of Zambia, which receives support from the
Swedish Cooperative Centre.
“Perhaps it is a deliberate strategy to keep the small scale
farmers out?” he speculates further.
When Shoprite came to Zambia, the agricultural sector had
all but collapsed. The reason for the collapse was that the regime
that came to power in 1991 deregulated the agricultural sector
and privatised the state-owned agricultural companies. Many
people assert that this process was implemented far too rapidly.
There was no structure left in place when the state disappeared.
The farmers were left without support and without a functioning market where they could sell their goods.
After the state left the agricultural sector, the expansion
of the supermarkets has benefited certain farmers in Zambia.
Hyde Haantuba relates that one Shoprite store he visited trained
farmers in growing produce for the store. They were also given
access to crops that met the needs of the store for a suitable
16
range of products. Hyde Haantuba says that Shoprite’s distribution network also opened up new channels for Zambian
goods. In Solwezi, a town in northern Zambia, a lot of pineapples are grown. Since it is cheaper to buy these at the market
and directly from the growers, the Shoprite store in Solwezi
cannot compete with the growers. However, with the aid of
Shoprite’s distribution network in Zambia, the growers can
sell their pineapples to other Shoprite stores.
But, of course, firstly one has to become a supplier to the
supermarkets. Moses Mulenga, a small scale farmer from the
Chongwe district, says that this is almost impossible for smallholder farmers.
“I tried to sell to a retail chain, but they said that I wouldn’t
be able to supply the large quantities they needed. They asked
instead if I could join forces with more farmers.”
Text: Petter Bolme, Global Reporting, and Buhle Makamanzi, Swedish
Cooperative Centre
Ways forward in the South
Cooperatives strengthen farmers
Uganda Cooperative Alliance organises cooperatives throughout
Uganda and has received support from the Swedish Cooperative Centre for a long period of time. Growers work together in
local cooperatives to sell their vegetables to buyers. This method
reduces the risk that they can be cheated over prices.
“We have learnt to negotiate and are well informed about the
price situation,” says Ignatius Mulumba, a member of Ruhinda,
a local cooperative.
With the aid of mobile telephones, the cooperative keeps
in contact with the market in town and writes up the prices for
the day on a blackboard outside the cooperative’s premises in
Ruhinda. In this way they avoid being cheated by the buyers.
Together with other cooperatives, the Ruhinda cooperative
also runs a shop so it can sell its own produce directly. They
also jointly own a plant for peeling and drying coffee beans.
The cooperative is a customer of the local savings and credit
bank, Mitooma People’s Development Bank.
Text: Björn Lindh, Swedish Cooperative Centre
Gustaf Thunqvist
The problems can appear to be insurmountable for small farmers who have difficulties in being competitive. Have they
any future at all?
Today, many international organisations and national authorities are looking for ways of providing smallholder farmers with
support to enable them to survive in the increasingly tougher
economic climate. One strategy is to support farmers in poor
countries to organise.
Even if farmers’ organisations already exist in most countries,
they often have few members and are relatively weak where
defending the interests of smallholder farmers is concerned.
However, there are examples of organisations with many members and with a considerable influence on national policies.
Farmers’ organisations at the national level normally have
broad political and economic goals. There are often specialist
producer societies, affiliated to national organisations. These are
normally built up around one product (so-called commodity
associations) and collaboration with the national organisations
is based on obtaining production and sales conditions that are
as good as possible for the product. The farmers also organise
in cooperative societies, which are democratically run business
organisations. It is societies of this type that can be the direct
negotiating partners of the retail chains.
Foreign aid can be used for organisation development and
capacity building projects, for example they can contribute to
creating stable structures, and providing training in leadership
and democracy, in bookkeeping and business development, and
in gender issues. Member training in the form of study circles
and advisory services with the aim of enhancing productivity
and quality in farming are examples of other projects.
With the aid of effective farmers’ organisations, smallholder
farmers can join forces to buy agricultural inputs more cheaply
and to sell their products at better prices. Collective bargaining and joint business activities can make them stronger. They
can also be stronger by jointly owning machines and other
equipment, coordinating their activities, and running joint
credit institutes.
In recent years, the International Federation of Agricultural
Producers (IFAP) has drawn attention to the need of providing
more support to farmers’ organisations in the South. They have
therefore taken the initiative to form a network of aid organisations, AgriCord, which focuses on providing development
assistance to farmers’ organisations. Where Sweden is concerned, the Federation of Swedish Farmers and the Swedish Cooperative Centre are participating in Agricord.
17
Lisa Hanson
“Green gold” for the supermarkets
Organic growers usually offer small deliveries, have a range of
products that varies according to the time of year, and their harvests are easily damaged. Meanwhile, the modern supermarkets
have strict requirements for regular deliveries, uniform quality
and large quantities. This is an equation that is difficult to solve
but a company, Oro Verde, believes it has the solution.
The basic idea behind Oro Verde (Green Gold) is to collect the production of a large number of mainly small organic
producers in different parts of Costa Rica, offer them help with
transport and packaging, and then sell the products to supermarkets and restaurants. This makes it possible to offer a relative
stable range of basic products to buyers and provides strength
for negotiations on financial terms with the buyers.
“We also offer our suppliers support for production planning and issues related to growing, and we help to keep them
informed about quality standards,” says Mayra López, a business executive at Oro Verde.
Oro Verde sells its products to two of the largest retail chains
in Costa Rica: Automercado and Perimercado. They have no
written agreements with their buyers, just oral promises and
never-ending negotiations.
“It’s not just the price we must agree on. We must negotiate continuously on levels of acceptance for deviations in
the size, colour and form of the vegetables. It is a continuous
dialogue.”
In order to have the retail chains as customers, Oro Verde
has produced a system with a basic range of products. They
promise that they will always deliver eight different varieties of
vegetables and fruit to the buyers. In return, the retail chains
agree to variations in the other products on offer and usually
buy products of this type on such occasions when Oro Verde
has them to offer. Oro Verde calls itself a social company. It does
not have financial growth as a special goal and has no requirements in respect of return on capital. Today, the company buys
from twelve different groups of suppliers, representing a total
of some 300 growers. The company started operations in 2004
and is still making a loss but has the goal of breaking even by
the end of 2007.
“I am not completely sure that we will achieve that goal,
particularly now that Wal-Mart has entered the Costa Rican
market. We noticed at once that competition became tougher,”
says Marya López. “We get only half as much for our carrots now compared to last year and the price of tomatoes has
never fluctuated so much. I believe that our buyers are afraid
that they will not able to maintain sufficiently low prices,” she
continues.
The idea of starting Oro Verde came from a project on
local organic markets run by an organisation called CEDECO
(La Corporación Educativa para el Desarrollo Costarricense),
which receives support from the Swedish Cooperative Centre.
18
Mayra López
CEDECO saw that there was a considerable demand for organic products and that the local markets did not offer sufficient
opportunities for selling them.
“The small producers must find their specialities, their
niches. Otherwise it will be impossible for them to survive.
Organic production can be a strategy of this type: the way onto
the supermarkets’ vegetable displays,” says Mayra López.
Text: Lisa Hanson, Swallows Latin America
Influence national conditions
In many countries, agriculture, and particularly small-scale agriculture, faces difficult conditions for its very existence. Strong
farmers’ organisations are necessary to exert an influence on
national politicians to improve these conditions. The difficulties
can relate to land ownership, taxation, interest policies, access
to water, security and health, as well as investments in roads
and protection against foreign competition. For example, in
most African countries national agriculture has been exposed
to competition without the introduction of any corresponding
form of support, not even for a transition period.
Foreign aid can contribute by training and supporting organisations to work with lobbying activities vis-à-vis the national
government and other decision-makers. Support of this type
can consist, for example, of training in communication and
research skills to enable organisations to undertake advanced
lobbying activities.
Lisa Hanson
Access to markets
With stronger farmers’ organisations and better national rules,
greater prospects will be available to small farmers to establish
themselves on the market. However, this requires knowledge
of the market and the ability to adapt to the market’s requirements. Sales and marketing are an entire chain that starts with
production and ends with sales.
Today, there are often intermediaries, buyers, who extract
high profit margins and are justifiably mistrusted by the farmers.
Farmers’ organisations would start their own companies with
this very mission, and thereby take over control of the entire
chain from production to sales.
For this purpose, foreign aid can contribute education
programmes and technical training.
Growing organic products for local markets
In Brazil several farmers’ cooperatives have chosen to go over
to growing organic products and supplying these products to
selected local markets where the consumers care about where
and how the products they buy are grown. The farmers’ cooperatives are supported by a network, Ecovida, which works
with “participatory labelling”, labelling that is based on close
trust between the producer and consumer. Ecovida cooperates
with the Swedish environmental and solidarity organisation,
Framtidsjorden, which is the Swedish member organisation
of an international network, Future Earth. Even if growing
organic products demands a greater effort than industrial cultivation, the farmers are satisfied. According to Joce Forling, a
farmer and member of Ecovida, no organic producer will ever
become rich but she feels that she has greater financial security.
Through the cooperatives the farmers have learnt to manage
their incomes better. The organic and diversified cultivation of
coffee, bananas, vegetables and maize also provides her with
a more regular income over the year than she had when she
cultivated just one crop. She also appreciates the close contacts
with customers. But, above all, she is of the opinion that the
farmers have started to rethink.
“What is important in life? I would rather have a bookshelf
full of important knowledge than a new car. It is more important
to have a healthy and meaningful life than to get rich quick.”
The sales figures are pointing slowly but steadily upwards.
In Brazil, there are already an unusually large number of consumers who buy organically cultivated products. However,
success is far from a matter of course.
“Making it possible for farmers to retain their markets is a
continuous struggle. The supermarkets, already big, are growing.
Sometimes we are asked to sell to them but we don’t want to
be invisible suppliers to supermarkets that are only interested
in making a profit at our expense and at the expense of consumers,” says Joce Forling.
Text: Nina Björstrand, Swedish Cooperative Centre
19
Consumer power in the North
Nina Björstrand
Fundamentally the recipe is the same in the North as in the
South – i.e. that people join forces in political parties and interest
organisations and make demands on companies and political
decision-makers. The Swedish Cooperative Centre does not
believe that a model based on the choices made by individual
consumers is the most important component in a strategy for
change.
Nevertheless, consumer power provides a possibility to exert
an influence, which must naturally be used. The possibility of
choosing products that give the producer a reasonable price
and acceptable working conditions, as well as goods that are
produced organically, is important. Consumers in the North
exert an influence on the conditions of producers in the South,
consciously or unconsciously.
Today, there are several labelling systems that make it easier
for consumers to make a specific choice. In Sweden, in addition to well-known labels such as Rättvisemärkt (Fair Trade)
and KRAV, there are, for example Rainforest Alliance, Svanen (the Swan), Bra Miljöval (Good Environmental Choice),
the EU eco-label “Flower”, Utz Kapeh and Demeter, as well
the retail chains’ own labels such as Änglamark (Co-op) and
Skona (ICA).
Below a presentation is made of two organisations that are
behind Sweden’s best-known labels, KRAV and Rättvisemärkt.
Rainforest Alliance is also presented since the label is growing
rapidly on the Swedish market.
20
IFOAM/KRAV
The International Federation of Organic Agriculture Movements, IFOAM, has its head office in Bonn, the former capital of West Germany. Like a large number of other non-profit
organisations, it took advantage of the fact that a large number
of premises became available in Bonn after the German government moved to Berlin. IFOAM is an international umbrella
organisation for ecological agriculture. The organisation was
founded in 1972 on the initiative of a French agricultural organisation. IFOAM represents producer organisations, non-profit
organisations, importers, retailers and control bodies in more
than one hundred countries around the world. Of these organisations, 44 per cent are in Europe, while 40 per cent are in
developing countries.
The organisation accredits national control bodies which
themselves draw up locally adapted criteria based on IFOAM’s
compulsory minimum criteria. In Sweden, KRAV is the bestknown accredited control body.
In order to use IFOAM’s labels, producers must fulfil
IFOAM’s requirements in respect of the preservation of biological diversity. Chemical pesticides and genetically modified
organisms are not permitted. In addition to this, producers
must have a policy for social justice. If a producer clearly violates
human rights, production may not be labelled as being ecological. IFOAM does not offer higher financial compensation to
producers, but studies show that ecological cultivation is more
financially sustainable in the long run due to lower production
costs and the higher prices received for the products.
FLOI/Fair Trade
The head office of Fairtrade Labelling Organisations International (FLOI) is within walking distance of IFOAM’s office by
the River Rhine in Bonn. FLOI is an international network
consisting of 19 national organisations that work for fair trade,
with a focus on fair financial payment. FLOI was started in the
Benelux countries under the designation Max Havelaar. This
took place in 1986 when the global coffee market collapsed
and the farmers did not have their production costs covered.
Today, Fair Trade products are mainly sold in the North while
the producers of the goods are to be found in Latin America,
Africa and Asia.
The Swedish Fair Trade Association, which was founded
on the criteria developed by FLOI, started in Sweden in 1996.
Today, the association works together with a company, Fair
Trade in Sweden, which issues licences to Swedish companies.
The company is owned by the Church of Sweden and the
Swedish Trade Union Confederation. The association’s board
contains ten representatives of different organisations, including
the Swedish Cooperative Centre.
Fair Trade’s criteria include a number of compulsory requirements that comply with the International Labour Organisation’s
(ILO) conventions on fundamental principles and rights at
work. There are requirements in respect of decent wages and
other benefits and conditions. Fair Trade’s criteria contain a few
environmental requirements, for example some pesticides may
not be used, but the difference compared to organic production
is considerable. The buyer pays a minimum price defined by
FLOI which is often far above the market price. The minimum
price is based on the principle that the grower is entitled to a
decent payment. Fair Trade supports marginalised producers,
usually small farmers. Where coffee production is concerned, a
discussion is taking place on whether this is really the best way
to proceed. There is a fear that the support actually cements
a structure with smallholder farmers whose future is thus put
in jeopardy.
Rainforest Alliance
The head office of Rainforest Alliance is in the central part of
New York. Rainforest Alliance is a USA-based organisation. It
is a relatively new and rapidly growing concept on the Swedish
market. The organisation’s first initiative, which was to certify
rainforest in Latin America, came in 1989. For the last fifteen
years, the Rainforest Alliance has also certified coffee, banana
and cocoa cultivation in the South, both for small farmers and
large plantations. A group of non-profit environmental organisations are behind Rainforest Alliance.
The goal of Rainforest Alliance is to work in parallel with
social, environmental and economic criteria, but it is criticised
for not focusing sufficiently on any one of the criteria.
Rainforest Alliance requires respect for the ILO’s labour
conventions and the UN’s Universal Declaration of Human
Rights. The organisation also has requirements in respect of
preservation of biological diversity, but has minimal demands
where the use of pesticides is concerned. Pesticides in the highest
toxic classes are permitted. Growers who have been certified by
Rainforest Alliance often receive additional payments for their
coffee. However, these are not set in advance but determined
on the normal coffee market. The organisation’s requirements
in respect of fair treatment of wage earners are therefore difficult for the producers to fulfil since they are not guaranteed
higher financial compensation.
In 2005, the Swedish Society for Nature Conservation
(SNF) submitted a report to the Consumer Ombudsman in
Sweden in respect of Chiquita’s marketing campaign relating
to the company’s certification by Rainforest Alliance. Mikael
Karlsson of SNF claimed that Chiquita misled consumers in
their advertisements since, among other things, they tried to
get consumers to believe that they had minimised the use of
toxic substances on their banana plantations. In actual fact,
they still used enormous amounts of extremely toxic chemical
pesticides, according to SNF.
SNF also claimed that Chiquita’s marketing campaign was
a severe blow to the organisations and companies that worked
specifically and radically for improvements in the social and
environmental situation where bananas are cultivated.
The Swedish Cooperative Centre also feels that the introduction of Rainforest Alliance certification is problematical. It
would appear that large corporations such as Chiquita, Kraft
Foods and Lavazza regard the organisation as easier to cooperate
with than a more “difficult” labelling organisation. The fact that
Rainforest Alliance does not have any requirements in respect
of decent payments to the growers makes it an even more interesting partner in cooperation for the corporations.
The situation that Rainforest Alliance is now on shop shelves beside existing labels has increased confusion among consumers, and the possibility of increasing the consumption of
products that are produced under more acceptable conditions
has thus been made more difficult.
At the same time, Rainforest Alliance also addresses, to a
greater extent than Fair Trade, non-marginalised producers. This
also encourages better working conditions and greater consideration of the environment on the part of the large coffee, cocoa
and banana plantations, where the needs of improvements are
usually just as great as those of the small farmers.
21
Time for a super label?
Several actors have drawn attention to the fact that many people
would gain from a super label: a form of certification that
would stipulate strict requirements in respect of both the environment and fair payment and treatment. With just one super
label, consumers would avoid having to make a choice between
consideration of the environment and the producers’ right to
acceptable working conditions. For the producers it could also
reduce competition for consumers on small markets, and lead
to a reduction in costs and less administration.
If certification was coordinated, the money that now goes
to certification bodies and inspectors could be used instead to
pay higher salaries to employees or for investments, according
to Swedwatch in its latest coffee report.
Similar lines of argument can be found in the labelling
organisations. In 2001, a joint project was started by, among
others, IFOAM, ILO and Rainforest Alliance entitled “Social
Accountability in Sustainable Agriculture” (SASA). The purpose
of the project was to review possible areas of cooperation.
The most significant result of the project was that none of
the organisations was particularly interested in a super label.
“We do not think that a new, so-called super label should
be introduced on the market. There are already concepts that
work well and the problem of too many labels will be solved
through market mechanisms. The more credible labels will win
at the expense of the less reliable,” believes Thomas Cierpka
of IFOAM.
FLOI has other reservations.
“It would be very difficult for many poor farmers, FLOI’s
main target group, to fulfil all the criteria that a super label
would require. Often they don’t have enough resources to adapt
their production to both ethical and organic requirements at
the same time,” says Rüdiger Meyer of FLOI Cert.
The financial and administrative savings advocated by Swedwatch are also exaggerated, according to Rüdiger Meyer.
“The procedures and skills that are needed for ethical controls
are very different from those for ecological controls. Therefore,
the expected synergy effects and savings would be small.”
Neither is it self-evident that a super label would be a given
success on all markets. Merling Preza, head of an organisation
that works for some 40 coffee cooperatives in northern Nicaragua, has the USA as its closest export country. There, Fair Trade
has expanded considerably in recent years - without consumers
making demands that the crop should also be grown ecologically. A super label would thus be costly for the organisation
without enabling it to reach many new buyers in the USA.
Thus, even if a super label does not appear to be desirable
today, IFOAM and FLOI are both of the opinion that cooperation can have its advantages. The form of cooperation mentioned is training for inspectors where the criteria used by FLOI
and IFOAM overlap, as well as joint discussions in connection
with the development of criteria. Moreover, FLOI and IFOAM
agree that it would be expedient with fewer labels and preferably just one environmental label and one ethical label on the
market. This would at least reduce the costs of the producers
and reduce the confusion experienced by the consumers. However, it would require a “cleaning-up” operation among all the
labels on the market. At the same time, the options available
to consumers would be reduced.
Ethical labels on the Swedish market
As opposed to other countries, consumers in Sweden have taken
an interest in the environment for a long time when they do
their shopping. On the other hand, their interest in ethical
labels such as Fair Trade is much smaller. It is true that sales
have increased in recent years but, according to the Swedish
Consumer Agency, many consumers feel that ethical labels have
a tendency to be confusing, taxing and tiresome.
It is also difficult for consumers to find ethically labelled products in the largest Swedish retail chains. Despite the
fact that all the chains have a business ethics policy, it can be
noted that the sales of ethically labelled products of the major
retail chains in Sweden, ICA, Coop and Axfood, does not even
reach 0.05% of their total sales. On the other hand, ecologically labelled products are more common. The figures below,
which are from 2005, are based on information taken from
the companies’ annual reports or from direct contacts with
each company.
Market share
Majority owner
Total sales
MUSD
Proportion
ethical
Proportion
ecological
ICA
35,9 %
Ahold
(Netherlands)
9 500
0,02%
0,87%
Coop Sweden
16,4 %
Coop Norden
3 500
0,03 %
2,09 %
Axfood
13,5 %
Johnson Group
3 000
0,01 %
2,25 %
The figures are very approximate since the companies sell different ranges of products and they measure sales in different ways. Total sales include all
products, not just food. This has the effect that the proportion of ecological products, for example at the Coop, is less than half of what it would have
been if only the proportion of food sales had been measured.
22
British Co-op invests in Fair Trade
Great Britain is Europe’s largest market for Fair Trade products
with sales of almost MUSD 267 per year. Half the population
are aware of what Fair Trade stands for and the market continues to grow rapidly. The cooperative movement has played a
decisive role in developing the market for Fair Trade products
in Great Britain. The Co-op has taken the lead in putting Fair
Trade products on the shelves in its regular supermarkets and
in increasing con-sumer awareness of what Fair Trade stands
for. The Co-op’s share of total sales in supermarkets in Great
Britain is merely five per cent, but its share of sales of Fair Trade
products through supermarkets is 33 per cent.
A study made by Elaine Jones for the Cooperative College in
Manchester, identifies a number of factors that account for Co-op
UK’s successful collaboration with the Fair Trade movement.
Basic values. In 1994, the cooperative movement in Great
Britain started a campaign to re-launch and strengthen its trademark. The campaign included, among other things, an ethical
strategy under the slogan “Right to Know”, and a high profile
in its collaboration with Fair Trade Labelling. According to
the study, this has contributed to the situation today where
the Co-op has re-established its identity as an organisation
based on values. Fair Trade stands for the social values that the
Co-op defends in its commercial reality, so an alliance between
the two is natural.
Membership. The cooperative movement is a member-based
organisation and has the capacity to use this to its advantage. Its
members have been encouraged to participate in local activities
on Fair Trade such as public meetings, campaigns and tasting
and sampling activities.
Cooperation and partnership. The cooperative movement
does not only sell Fair Trade products but also conducts campaigns together with Fair Trade organisations. Among other
things, they have produced joint reports on the production of
coffee and chocolate.
The power of setting an example. The cooperative movement
has played the role of a trendsetter through a combination of
product development and marketing of Fair Trade products.
The cooperative movement has invested in consumer support
and training; no one else has done this and succeeded in achieving such leverage, according to Andy Good of Equal Exchange,
a workers’ cooperative.
Commercial practices and ethics. The cooperative movement has also followed normal commercial practices where
Fair Trade is concerned but, on some occasions, has made
deliberate exceptions. When a storm in Ghana destroyed 80
per cent of the harvest and a supplier of Fair Trade bananas
encountered problems, the Co-op chose to continue to support the supplier, despite the fact that it was entitled to break
off cooperation.
However, the Co-op’s share of the food trade in Great Britain
is decreasing. The challenge faced by the Co-op is to maintain
its commitment to Fair Trade in an increasingly tougher commercial reality with continuous pressure on prices. It is also a
question of finding and developing more and larger chains of
suppliers without forgoing the criteria that apply to Fair Trade
products.
23
References
Interviews
Literature
Thomas Cierpka, head of IFOAM’s membership and
personnel department
Rüdiger Meyer, head of FLOI Cert
Merling Preza, managing director, Prodecoop, Nicaragua
Joce Forling, member, Ecovida, Brazil
Hyde Haantuba, coordinator, Agricultural Consultative Forum
Komani Ngambi, member, Organic Producers and
Processors Association of Zambia
Moses Molenga, farmer, Zambia
Mayra López, business executive, Oro Verde
Andersson, Eva. Wal-Mart ohotad etta. Market, 12 May 2006
Barbaro, Michael. Maryland sets a health cost for Wal-Mart.
New York Times, 13 Jan 2006
Bartholdson, Örjan and Nordbrand, Sara. Kaffe från Brasilien
– en bitter smak av orättvisa. Swedwatch, 2005
Bloomberg News. Suit Alleging Wal-Mart Pressured Workers Into
Working Through Breaks Granted Class-Action Status. 13 Jan 2006.
Corporate Watch. What’s wrong with supermarkets?
http://www.corporatewatch.org/?lid=2596 Downloaded in
April 2006.
Davis, Mike. The Planet of Slums. Verso, 2006
De Vylder, Stefan. ”Mot en ljusare framtid för bönder?” in the anthology
Jordbruk, handel och utveckling. Kungl. Skogs- och lantbruksakademien, 2006
Dugger, Celia W. Supermarket giants crush farmers. New York Times,
28 Dec 2004
FAO. The State of Food Insecurity in the World. 2004
Haantuba, Hyde. Linkages between Smallholder Farm Producers and
Supermarkets in Zambia. FAO, 2003
Hellblom, Ola. Anders Moberg lanserar nya Ahold. Dagens Industri,
11 Nov 2003
Henderson, Mary and Hefferman, William. Concentration of
agricultural markets. University of Missouri, Columbia, 2005
ICFTU. Annual Survey of Violations of Trade Union Rights. 2001
ICFTU. Annual Survey of Violations of Trade Union Rights. 2006
Johansson, Maud and Söderberg, Mattias. Investera för utveckling?
Forum Syd, Diakonia, SNF, 2003
Kjell, Petra. The retail giants: Global expansion and local concern.
Corporate Breakdown, Feb 2003
Konsumentverket. Konsumtion och Etik – om företagens sociala ansvar
och etisk märkning. 2005
Liu, Pascal, Andersen Mikkel and Pazderka, Catherine. Voluntary
Standards and Certification for Environmentally and Socially
Responsible Agricultural Production and Trade. FAO, 2004
Macalister, Terry. Biggest pension fund boycotts Wal-Mart. The Guardian,
7 June 2006.
Myrsten, Johan. Wal-Mart i kamp med Kinas fack. Svenska Dagbladet,
10 Aug 2006.
Raworth, Kate. Trading away our rights. Oxfam International, 2004
Regoverning Markets. Regoverning Markets Overview. Nov 2004
Rönnbäck, Klas. Världsmarknad i obalans. Kooperation utan gränser,
Lutherhjälpen, Svenska Kyrkan, Forum Syd, 2006
Shepherd, Andrew W. The changing food retail sector in Asia. FAO, 2004
Shepherd, Andrew W. The implications of supermarket development
for horticultural farmers and traditional marketing systems in Asia.
FAO, 2004
SNF. SNF anmäler Chiquita in www.snf.se/verksamhet/internationallet/
nyhet/cfm?CFID=5225126&id=1194. Oct 2005
Stamoulis, Kostas, Pingali, Prabhu and Shetty, Prakash. Emerging
Challenges for Food and Nutrition Policy in Developing Countries.
Electronic Journal of Agricultural and Development Economics,
no. 2:2004
Weatherspoon, Dave D. and Reardon, Thomas. The rise of supermarkets
in Africa: Implications for agrifood systems and the rural poor.
Development Policy Review, 2003.
Wingborg, Mats (ed). Den globala fabriken. Rena Kläder, Fair Trade
Center, Swedwatch and Forum Syd, 2006
Weiner, Tim. Wal-Mart invades. New York Times, 6 Dec 2003
Websites
Action Aid: www.actionaid.org
Ahold: www.ahold.com
Carrefour: www.carrefour.com
Cooperative Group: www.co-op.co.uk
FAO: www.fao.org
FLOI: www.fairtrade.org
IFOAM: www.ifoam.org
Metro Group: www.metrogroup.de
Rainforest Alliance: www.rainforest-alliance.org
Regoverning Markets: www.regoverningmarkets.org
Rättvisemärkt: www.rattvisemarkt.se
Swedish KRAV: www.krav.se
Tesco: www.tesco.com
Wal-Mart: www.walmartstores.com
24
”cheap gets cheaper”
”every little hel ps”
cheap gets cheaper”
”value
”drive costs out of the sys tem”
”drive costs out of the system”
to shout about”
”cheap gets cheaper
The supermarkets are expanding in developing countries,
with enormous consequences for small farmers.
The Swedish Cooperative Centre has previously published
reports on the situation of farmers and growers in the South.
In this report we take a closer look at an increasingly distinctive
phenomenon: the expansion of global supermarkets.
”every little helps”
With the report “Small farmers – big markets” the Swedish
Cooperative Centre shows the speed of this process, the largest
players, reasons that contribute to the process, and eﬀects on consumers. The report also shows with the aid of concrete examples
how the situation of small farmers can be improved, through
organisation in the South and consumer power in the North.
ts
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a
m
g
– bi
s
r
e
m
r
a
f
Small
m SCC
Facts fro
r 2006
e
b
m
e
c
e
No 4, D
t a l . o rg
r
o
p
c
c
s
.
www
ISBN: 91-975940-3-2.

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Transcription

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