Multinational Retailers and Home Country Food Exports

This article questions whether food exports to a given national market are impacted by a domestic retailer opening in that market. To answer this question, we considered an empirical gravity-type trade model. We tested our model with data on bilateral exports of food products sold in supermarkets (groceries) on a large panel of countries, as well as the foreign grocery sales of the world's 100 largest retail companies from 2001-2010. We found a strong positive effect of the overseas presence of retailers from a given country on its exports to those markets. This outcome is far from trivial since most products sold in retailers' foreign outlets are produced locally, and it also testifies to the fact that the presence of a country's retail companies overseas helps reduce export costs to these markets for other firms from the retailers' country of origin. On average, a 10% increase in retailers' sales in a foreign country leads to a 2.1%-2.5% increase in food exports to this destination. Our result is robust to different specifications, the use of different sets of instrumental variables, and econometric approaches. The effects on exported values and quantities are similar, implying that our finding is not induced by price or quality upgrading.