Supermarkets, Modern Supply Chains, and the Changing Food Policy Agenda

There is great interest among policy makers in how to influence the behavior of supermarkets in ways that serve the interests of important groups in society, especially small farmers and the owners of traditional, small-scale food wholesale and retail facilities. Two broader issues are also important: (1) finding a way for food prices to “internalize” the full environmental costs of production and marketing; and (2) finding a way for supermarkets to be part of the solution, rather than part of the problem, to the health problems generated by an “affluent” diet and lifestyle. There are concerns over the growing concentration in global food retailing and the potential market power that concentration implies. But the evidence of fierce competition at the retail level, and the high contestability for food consumers’ dollars, have kept this issue in the background. The ultimate impact of supermarkets in developing countries will be on the level and distribution of improved welfare for consumers. What happens to small farmers, traditional traders and mom-and-pop shops will be factors in both the size of welfare gains and their distribution, but many other factors will also come into play. Our judgment on the impact of the supermarket revolution must incorporate all of those factors. This paper places the supermarket debate in the broader evolution of food policy analysis, which is a framework for integrating household, market, macro and trade issues as they affect hunger and poverty. Increasingly, supermarkets provide the institutional linkages across these issues.