Brussels, 2 October 2014
Competition: Commission publishes results of retail food study
The European Commission has unveiled the results of a comprehensive study about the evolution of choice and innovation in food products in Europe during the last decade. The results show that the entry of new competitors always increases choice and innovation. In many Member States, retail markets are not overly concentrated, and the retailers' bargaining power does not seem to have a negative impact on choice and innovation. Finally, while choice for European citizens has continuously increased in shops since 2004, the number of innovations reaching the consumer each year has decreased since 2008 largely due to the economic crisis. The Commission is inviting stakeholders to submit their comments on the study results.
Commission Vice-President in charge of competition policy Joaquín Almunia said: "European citizens should enjoy good food at affordable prices. In the past five years, stakeholders have raised lots of questions on the functioning of our food supply chain. We need hard facts to assess the concerns expressed, in particular regarding the impact of the bargaining power and private labels of large retail chains. This study provides important insights and paves the way for future work in these areas."
Following repeated concerns raised by various stakeholders, the Commission has carried out a comprehensive study on the food supply chain in Europe. The main results are:
Evolution of concentration, choice and innovation
At local level, consumer choice has been continuously increasing over the last decade in terms of number of shops, products, brand manufacturers and product package sizes displayed in shops. However, the number of innovations reaching the consumer each year has decreased since 2008 by 6.5%. In 2004 innovation essentially consisted of new-to-the-world products and range extensions (e.g. new flavour), whereas in 2012, roughly a third of all innovations merely concerned the packaging of a product.
Concentration of brand manufacturers at national level has increased in most product categories investigated. Concentration of retail overall (i.e. modern retail and traditional shops) has increased in virtually all Member States, essentially because of the increased penetration of modern retailers (supermarket chains, hypermarkets and discounters with a centralised distribution system involving modern logistics). Concentration of modern retailers alone increased in certain Member States and decreased in others. In local areas, modern retailer concentration seems to have slightly decreased on average because the main chains have entered each other's local markets.
Drivers of choice and innovation
The main drivers for both choice and innovation have been the size and types of shops and the economic environment (GDP/capita and unemployment in the local area). Also, the larger the turnover in a product category, the more choice (and innovation, to a lesser extent) there is in that category. The opening of a new shop leads the competing shops to offer more choice and innovation on their shelves. This supports the Commission's efforts to cease unnecessary restrictions on the creation of retail shops (see IP-13-78).
In moderately concentrated retail markets, retailers' stronger bargaining power vis-à-vis suppliers does not seem to lead to less choice and innovation in food products. The lack of data prevented the study from analysing situations of high concentration of modern retail (such as those in Nordic and Baltic countries). Moreover, the share of private labels in the assortment does not have a significant impact until it reaches a high level (depending on the category) at which it may become detrimental for choice and innovation
The Commission is looking forward to hearing the views and comments of those interested in the study, its results and possible follow-up. All submissions should be made to COMP-E-TF-FOOD@ec.europa.eu, preferably before 30 January 2015.
The Commission has received complaints from operators in the food supply chain as well as requests from the European Parliament to investigate the impact of concentration in the chain. The complaints alleged that large operators, in particular large modern retailers, impose often detrimental conditions on their suppliers and so these suppliers are not able to invest in new products. This would allegedly have reduced choice and innovation in food products for European consumers.
In December 2012, the Commission therefore launched a comprehensive study on the modern retail sector (see IP/12/1356) to measure how choice and innovation evolved over the last decade for consumers on shop shelves. The study also measures the evolution of a number of factors affecting markets and attempts to identify which of these factors has driven choice and innovation. The study was carried out by a consortium of Ernst & Young, Arcadia International and Cambridge Econometrics.
This study is one of the first of its kind in its scope and focus on empirical evidence, measuring choice and innovation available to consumers in more than 300 shops in a large sample of EU Member States (9), over a long time period (2004-2012), and for a wide variety of product categories (23). This resulted in a significantly large amount of data (11 million records in total) being compiled. The study sample is representative for a wide variety of situations at the local level in Europe in terms of type of area (rural versus urban) and wealth. It also covers a wide range of situations of concentration of brand manufacturers at national level, as well as a wide range of situations of imbalances between retailers and suppliers. The study sample includes countries where the modern retail sector is only slightly or moderately concentrated, but does not include countries with a very concentrated modern retail sector (i.e. Nordic and Baltic countries), because data was not available at the local retail level in those countries.