Food supply chain: which road towards fairness, integration and competition?

Speakers: Buhr Carl-Christian, Groen Else, Gouveia Paulo
Moderator: Crofts Lewis

On Wednesday, 25th of February, at the premises of Science14 Atrium in Brussels, PubAffairs Bruxelles hosted a debate on the theme of the food supply chain in Europe and the road towards fairness, integration and competition. The debate was moderated by Lewis Crofts, Chief Correspondent at Mlex while the discussants were Mr Carl-Christian Buhr, Member of Cabinet of the Commissioner for Agriculture, Mrs Else Groen, Representative of the “Food Supply Chain Initiative” and Mr Paulo Gouveia, Director of the General Affairs Department, Copa-Cogeca.

In the first part of the debate, Lewis Crofts introduced the speakers, the format and the main topics which the debate would touch upon. He then gave the floor to the discussants in order for them to give their preliminary speeches.

Mrs Groen started her intervention by pointing out her double role as a retailer association Director General and as a co-Chair of the Supply Chain Initiative, launched by seven EU-level associations in September 2013 with the aim of increasing fairness in commercial relations along the food supply chain. She explained the work and the composition of this polity and pointed out that a substantial number of large, as well as small and medium manufacturing and retail enterprises are part of this initiative, the agricultural sector is participating at national level, as well, but still unfortunately under-represented. Mrs Groen continued by stating that the optimal way to improve business to business practices in the food supply chain is to reach out and engage with every group of stakeholders in order to establish a constructive dialogue and find common solutions.

Mr Gouveia started his speech by stating that the main issue emerging from a comprehensive analysis of the food market in Europe is the fact that agricultural enterprises have been suffering from an imbalance of power in the supply chain. In his opinion, the past and current food supply chain setting has favoured unbalanced business to business dynamics over time. He continued by recalling that in the past a EU level dialogue between the stakeholders involved had already been attempted, however, with few results with regard to agreeable solutions. Mr Gouveia concluded by stating that on past occasions several key issues which the agricultural sector considered most relevant were not heard by some negotiating parties and, for these reasons, the dialogue was in the end unfruitful.

Mr Buhr began his contribution by recalling the role of the European Commission with regard to both the waves of reform of the EU common agricultural policy and the fact that on a global scale food production needs to be increased. He explained that one of the main principles of the recent relevant policy changes has been to accompany the European agricultural sector towards a fully market-oriented setting as the quota phasing-out of the most recent EU agricultural policy reform demonstrates. He continued by adding that European institutions have also been confronted with the issue of how best to support the European agricultural sector towards this process. As a result, the question of how to tackle unfair trading practices has also been taken in consideration as witnessed by the work of High Level Forum for a Better Functioning Food Supply Chain. Mr Buhr added that a recently launched Commission’s public consultation on competition guidelines linked to the single Common Market Organisation, whose aim is to facilitate farmers gathering together and organising themselves, both in order to improve their bargaining power and to exploit the economic advantages of greater sectorial integration, is also a sign of this attention. Last but not least, the EU executive body is also looking at the bigger picture on a global level. In the context of a recent crisis caused by import bans, European producers have proven to be more resourceful than expected by some in that they managed to find other markets for significant amounts of produce. This new setting and the renewed endeavours of the Commission should give impetus towards a more empowered and more competitive agricultural sector both within and without the EU.

A first focal issue of discussion consisted of the issue of market concentration within the food supply chain. Mr Gouveia pointed out that the agricultural sector in Europe is formed by a vast majority of small and medium undertakings, while a large portion of the retail market is held by large companies. According to his view, this simple fact should make evident that farmers are the weak link in the chain and that they are suffering from a lack of negotiating power. He added that this does not mean that producers are claiming more than fair treatment according to existing legislation. On the same issue, Mrs Groen said that a recent report of DG Comp highlighted that this segment of the European single market should be considered efficient and does not suffer from excessive concentration. She continued by stating that a greater degree of association in the agricultural sector would help overcome some of the operating hurdles which are affecting its bargaining power and contribute to the overall efficiency in the supply chain.

A second focal issue of discussion consisted of the question of enforcement of existing legislation. Mr Buhr recalled the fact that several times, often due to historical and cultural differences among EU member states, it has been difficult to find a common solution. Mr Gouveia listed the main key issues which were not addressed during a previous attempt of an inter-sectorial EU-level dialogue concerning unfair trade practices, namely the lack of anonymity for complainants, a frequent lack of sanctions for unethical behaviour as well as the uncertainty both in performance indicators and in the overall uptake of the system. He added that the inadequacy of the solutions proposed in the past induced the farming sector not to actively participate in any concerted scheme which would have not boldly tackled these fundamental matters. Mrs Groen replied to this question by explaining that the issue of anonymity of complaints had been seriously explored by the Supply Chain Initiative’s stakeholder group, with the assistance of independent legal experts. It appeared that this possibility is in conflict with the fundamental right to defence. Legislation and sanctions oppose trading partners and lead to breaches in trading relationships. The Supply Chain Initiative’s prime objective is to seek solutions for disputes between trading partners so that trading relations can continue for the benefit of both parties and the efficiency of the chain.

The final part of the debate and the Q&A session also covered the following issues: the question of low food prices, the role of the new Commission with regard to these matters , the issue of competition in the agricultural sector, the question of producers’ and retailers’ margins, the matter of aggregated complaints, the question of the country of origin and TTIP, the question of an eu level enforcement as well as the question of rules of conduct and regulations’ effectiveness.

Do you want to go further into the issues discussed in our debate? Check our list of selected sources which we have provided for you

Food prices in Europe, European Commission Communication, December 2008

Commodity price monitoring, DG Agriculture and Rural Development website

Forum for a Better Functioning Food Supply Chain, European Commission

Food price pass-through in the euro area, ECB, March 2010

Report on competition law enforcement and market monitoring activities by European competition authorities in the food sector, European Competition Network, May 2012

The economic impact of choice and innovation in the EU food sector, DG Comp, September 2014

Supply Chain Initiative, First Annual Report, January 2015

Copa Cogeca website

Independent Retail Europe website