Agriculture, Food and Competition Law: Moving the Borders
The food supply chain accounts for 5 per cent of EU value added and 7 per cent of employment, bringing together the agricultural sector, the food processing and manufacturing industry, wholesale trade, and the distribution sector. Food spending represents about 15 per cent of the average EU household budget. There is no single, homogeneous, and common food supply chain at European level. The length and the degree of complexity of the food supply chains depends on the product and market characteristics. Figure 1 provides a simplified description of food supply chains. On the supply side, for certain raw products, production and processing are closely integrated (for milk or sugar) at local level and the product can be processed and sold through a rather short supply chain to retailers in national markets. For other raw products, for instance for fruit and vegetables, a large number of atomised producers sell locally to many wholesalers who in turn supply many local retailers, especially in south eastern Europe. For manufactured food (such as biscuits and cereal based products) large food manufacturers operate in many national markets but often organise their distribution networks, their marketing and promotion activities along national borders and operate a more or less centralised production system depending inter alia on how expensive it is to transport the product and how necessary it is to adapt it to local markets. On the demand side, wide differences exist between consumers of different Member States in terms of spending, price sensitivity and attachment to brands as is shown by the varied degree of development of the private labels of retailers. Further consumers tend to shop essentially at local stores (distance selling remains limited) Due to these supply and demand characteristics, food markets are first defined by the level in the chain and remain predominantly national or regional in scope. In other words in terms of competition analysis, product markets are usually defined at each level in the chain and geographic markets are often national (eg wholesale supply of many raw and manufactured products) or local (eg retail sales to the end consumer) In order to understand the competition issues arising in the food supply chains, it is worth presenting the market structure at each of the following levels: agricultural, wholesale, processing, manufacturing, and retail levels. Primary/agricultural producers form the least concentrated level in the food supply chain. The most common situation across sectors and Member States is that agricultural producers remain atomised or grouped in small cooperatives. This is particularly true for eastern Member States, where history has created a negative image for farmer organisations which led to a very low degree of penetration of cooperatives (below 25 per cent compared to 40 per cent or above in other Member States) In