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THE NEW GREEN: Playing the game: Foodopolies

By Kelsey Sullivan
On April 24, 2014

In recent years, the American consumer has grown increasingly interested in where their food comes from. Whether the concern is for personal nutrition, environmental impact, humane labor practices or the presence of GMOs, shoppers are pushing for the "behind-the-scenes" processes of food distribution to become more transparent and calling for more control over their grocery options. It certainly seems like the options are plentiful - a simple walk through a Stop & Shop or a Walmart yields a diversity of products that can be downright overwhelming. The organization Food & Water Watch, however, argues that this appearance of consumer power and choice is an illusion. In their report "Grocery Goliaths: How Food Monopolies Impact Consumers" (December 2013), F&WW outlines the troubling trends in the American grocery industry.
The report explains that the rise of "mega-retailers" (chain grocery stores) has led to only a handful of companies controlling the grocery market. Did you know, for example, that Trader Joe's is owned by Aldi? Or that Whole Foods has acquired no less than 13 other grocery chains since 1996? This affects the consumer in the form of reduced choices and arbitrarily high prices: from 2010 - 2012, prices rose twice as fast as inflation and wages. In 2012, over half of the money that Americans spent on groceries went to the four largest retailers (Walmart, Kroger, Target, and Safeway); Walmart alone constituted nearly one-third of U.S. grocery sales. In contrast, only 20.8 percent of sales went to the four largest chains in 1997. The report cites a number of studies that directly correlate the rise in prices to the centralization of the grocery industry. From a practical standpoint, this outcome seems inevitable. With less competition, big chains can set their prices where they want them. The mega-retailers employ a variety of strategies in order to intentionally mislead the consumer into buying their products. They will often sell products under a number of brandnames - it is popular, for example, for large companies to buy out smaller organic brands that the consumer believes to be independent. In the cracker aisle: "the well-known brands like Ritz, Keebler, Wheat Thins and Triscuits are owned by Mondelēz International (formerly Kraft) and Kellogg, but even seemingly independent and healthful options, such as Kashi, are also owned by Kellogg."
The report examines 100 categories of grocery foods and documents the ownership represented in each category, with startling results. Over 98 percent of the sports drink market, for example, is controlled by just two companies. Overall, the report found that "in most cases, there were four companies that dominated the majority of the sales of each grocery item, but in 23 categories only three companies sold most of the units, and there were only one or two major rivals in 15 categories."
The consolidation of grocery stores also impacts the other end of the market: the farmers and food companies that supply the products. The report states that, "Smaller, innovative food companies have difficulty getting onto supermarket shelves because they cannot meet the contract terms of afford to accept the low, often unfair prices from retailers." The consolidation of retailers has incentivized food manufacturers to seek their own mergers, so that companies are now being bought up at a dizzying rate. Ownership in both the retail and manufacturing of food in America is now the domain of only a few large, powerful businesses.
Ultimately, the report recommends a number of federal actions, including a call for the Federal Trade Commission to enact a moratorium on grocery chain mergers. More information on foodopolies, and how to fight for diversity in consumer food choices, is available at foodandwaterwatch.org.
 


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