Building Partnerships and Alliances in the European Food Industry

Summary

The European food industry is experiencing rapid structural change, notably, with the emergence of huge retail firms with massive buying power and, concomitantly, concentration in the manufacturing sector. Key consumer trends are driving change in the food industry, including: very slow population growth; strong demand for convenience products; and better educated consumers concerned about health, nutrition, food safety, and the environment

The balance of power in the food industry has shifted in the favour of the grocery retailer. Major retail firms, particularly in the UK, but, increasingly in other EU countries, are establishing premium own label products as a mechanism for differentiating themselves from their competitors, and increasing their gross margins. Supermarket own label products in the UK are leading the explosion of new food products that are entering the market. The emergence of retailer-driven vertical partnerships in the food industry is a UK phenomenon reflecting, inter alia, retail firms seeking to maintain and increase margins in a static market, and the desire to minimise their exposure to food safety risks. The implications of these developments are critically important for all in the food industry; not least, for farmers and manufacturers who must position themselves to supply the major retail and food service firms. Irrespective of whether a manufacturer or farmer is a supplier of own label products or nationally branded products, there will be an increasingly important requirement to show excellence in innovation — innovation in new product development, marketing and supply chain management.