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Concentration Of Ownership In Food Retailing: A Review Of The Evidence About Consumer Impact


  • Kinsey, Jean D.


Increased concentration in ownership of retail and wholesale food companies in the United States naturally leads to the question "How does concentration of ownership affect consumers?" Does it lead to higher or lower food prices, better or worse service, more or less choice between stores and among products, and more or less employment and earning opportunities in the food sector? Since the early 1980's the percent of total sales captured by the top four supermarket chains have gone from 18 to 22 percent; food prices decreased, food expenditures relative to income and employment and earnings have all fallen modestly. Choice and service are harder to measure. Competition at the local level appears to be alive and well since numerous types of food retailers offer attractive substitutes for food purchased in a grocery store. The relationship between concentration, prices and profits has been studied and examined for several decades using various economic and business theories and several sources of data. These studies speak to the overall behavior and performance of the industry and provide a perspective on the consolidation and shifts in power that appear to be taking place. The results of many of these studies are summarized in this paper. Findings focus on two major questions: 1) Does the concentration of retail food firms in local markets increase food prices and firms' profits? 2) Has the retail sector become relatively more profitable and, thus, more powerful than the manufacturing sector? The results are mixed, especially with regard to price. Concentration tends to be associated with both increased and decreased prices. Recent work indicates prices tend to increase in dry grocery items, but not in fresh and chilled foods. And, concentration at the wholesale level may lower food prices. Profits of the parent company generally rise with concentration, but the reason is unclear. Most studies conclude it is due to lower costs made possible by economies of scale in procurement or vertical coordination with suppliers and better use of information technology. There was no evidence that retailers' profits are increasing faster than food manufacturers' profits.

Suggested Citation

  • Kinsey, Jean D., 1998. "Concentration Of Ownership In Food Retailing: A Review Of The Evidence About Consumer Impact," Working Papers 14329, University of Minnesota, The Food Industry Center.
  • Handle: RePEc:ags:umrfwp:14329

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    References listed on IDEAS

    1. Cotterill, Ronald W & Haller, Lawrence E, 1992. "Barrier and Queue Effects: A Study of Leading U.S. Supermarket Chain Entry Patterns," Journal of Industrial Economics, Wiley Blackwell, vol. 40(4), pages 427-440, December.
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    Cited by:

    1. Minten, Bart & Reardon, Thomas & Sutradhar, Rajib, 2010. "Food Prices and Modern Retail: The Case of Delhi," World Development, Elsevier, vol. 38(12), pages 1775-1787, December.
    2. Burroughs, Rick & Harper, Deborah, 2002. "An Analysis of Profits within the Canadian Food Processing Sector," Agriculture and Rural Working Paper Series 28018, Statistics Canada.
    3. Smith, David & Trant, Michael, 2002. "Performance in the Food Retailing Segment of the Agri-Food Chain," Agriculture and Rural Working Paper Series 28028, Statistics Canada.
    4. Davis, David E., 2009. "Price and promotion effects of supermarket mergers," SDSU Working Papers in Progress 12009, South Dakota State University, Department of Economics, revised Jun 2010.
    5. Johan F.M. Swinnen & Anneleen Vandeplas, 2010. "Market power and rents in global supply chains," Agricultural Economics, International Association of Agricultural Economists, vol. 41(s1), pages 109-120, November.
    6. Figui, Muriel & Moustier, Paule, 2009. "Market appeal in an emerging economy: Supermarkets and poor consumers in Vietnam," Food Policy, Elsevier, vol. 34(2), pages 210-217, April.
    7. McCluskey, Jill J. & O'Rourke, A. Desmond, 2000. "Relationships Between Produce Supply Firms And Retailers In The New Food Supply Chain," Journal of Food Distribution Research, Food Distribution Research Society, vol. 31(03), November.
    8. Wendt, Minh & Kinsey, Jean D. & Kaufman, Phillip R., 2008. "Food Accessibility in the Inner City: What Have We Learned, A Literature Review 1963-2006," Working Papers 37625, University of Minnesota, The Food Industry Center.
    9. Corstjens Marcel & Vanderheyden Ludo, 2010. "Competition, Risk and Return in the US Grocery Industry," Review of Marketing Science, De Gruyter, vol. 8(1), pages 1-28, June.


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