Retail globalisation- what happens to the local suppliers in Central and Eastern Europe?

By Jon H. Hanf, Zsombor Pall, Kirsti Dautzenberg

Paper submitted to the International Food & Agribusiness Management Association 19th Annual World Symposium, Budapest, Hungary, June 20-21, 2009

Executive summary

The retail industry has been undergoing an immense structural change for about two decades. The former nationally orientated players have suddenly become global players. There are remarkable differences in Central and Eastern European Countries in the market share of modern retail formats. In Hungary, most of the general implications can be found; however, in the other two Bulgaria and Russia, modern retail has not yet made such inroads, particularly in rural areas.

This process will have important impact on the agri food business of CEEC. The major consequences are the increased quality requirements, vertical integration and growing international competition. But this process offers outstanding opportunities for firms to supply globally. These changes will have different effects on food processing firms. The large international companies and worldwide premium food processors will be just marginally touched. The national cost leaders will face a serious competition as they will compete on an international level. However this offers the opportunity of an increased market share. Firms who are able increase their efficiency, through organisational and technological innovation will survive. Medium sized firms, who produce retail brand in contract with retailers can be the winners of retail globalisation. Finally, small producers that deliver to local or niche markets are not directly affected by the internationalization of retail. There is a given demand for local and niche products that have to be offered regardless of whether retail is nationally or internationally positioned.

Full paper at http://www.ifama.org/library.asp?collection=2009_budapest&volume=symposium/symposium_presentations.html