Given levels of corporate concentration and the size and power of a small number of firms, there is a tendency to view their influence as beyond contestation. However, these businesses are actually highly vulnerable and contesting corporate concentration means putting in place measures to take advantage of those vulnerabilities.
- The increased interest in chemical use reduction, e.g., IPM and organic production, is slowly reducing demand for farm chemicals.
- According to a consortium of pesticide manufacturers, the cost of developing a new pesticide is now almost US$300 million and because of the demand for lower toxicity across a narrower spectrum or organisms, the product application is far less universal than earlier periods. This is having a profound effect on pesticide development, with firms less willing to develop or taking chances on marginal crops and products. Many farmers are forced to adopt IPM for lack of product choices which in turn reduces sales. Unfortunately, the high R&D costs also drive mergers and acquisitions in the chemical manufacturing sector.
- Consolidation is also happening in the fertilizer sector as farmers reduce fertilizer purchases in the face of concerns about cost and pollution. Many speculate that we have achieved peak phosphorus (P), causing firms and customers to rethink their P application strategies. In some ways this is timely, since most agricultural soils are over-fertilized with P and P pollution is now a serious problem in many waterways in Canada.
- Farmers are revolting against high input prices and organizing themselves to purchase generic versions of pesticides that are off-patent, e.g., no-name glyphosate. A large number of small generic manufacturers occupy niches in the chemicals market place.
- The drive to reduce GHG emissions and move to energy efficiency continues to apply downward sales pressure on oil and natural gas (the primary feedstock for N fertilizer).
- Low farm income typically reduces machinery purchases and increases repair. Given the generally poor state of farm income in this country, manufacturers are chronically under financial pressure. Also important is that ecological production requires different equipment,and consequently farmers are looking internationally for equipment that suits their strategy, e.g., imported tillage equipment from Europe. As more farmers shift to ecological production, conventional equipment manufacturers will likely reduce sales unless they adapt.
Processors / manufacturers
- Loss of economic power to retailers. Manufacturers used to have the most market power in the Canadian food system, with the ability to dictate terms of trade to the retailers. But the power dynamics shifted in the 70s and 80s, associated with retail consolidation and private label retail branding. The result is that the retailers now dictate the terms of trade. Pressure on retailers (see below) puts pressure on manufacturers.
- Global sourcing and distribution. Although in theory global sourcing and distribution mitigates risks for manufacturers, it also creates greater complexity and as the international trade environment deteriorates, higher costs and vulnerabilities.
- Food safety scares. The costs and loss of reputation associated with food safety scares is so significant that firms devote inordinate attention to these matters. But, equally important, long-distance supply chains and scale increases augment the possibilities of food safety problems (see Goal 4, Food Safety Regimes).
- Loss of brand loyalty. Consumer attachment to manufacturing brands has been in decline for years, related to the shift in market power from manufacturers to retailers. The rise of retail private labels is also part of this phenomenon.
- Co-packing for retailer private labels. Many manufacturers are not packing their products under retail private labels. These co-packed products often sit on the shelf beside their products, frequently at a lower price.
- Drive to value chain coordination. There's increasing pressure to coordinate with other actors in supply chains who have traditionally been competitors. This reduces independent decision making for firms and makes them somewhat more subject to the pressures within a commodity chain.
- Generally lower profitability than global players. Canadian owned and based firms typically have lower profitability than global firms and are thus subject to global competition.
- Narrow profit margins, around 3%, which means .....
- Dependence on customer volume. Given low margins / item, stores need lots of customers and small declines in volume can have big financial impacts.
- Store loyalty declining in areas with options. Stores are having to work harder to retail customer loyalty.
- More people trying to reclaim a real shopping experience (e.g., farmers’ markets). As farmers' markets return to popularity, retailers lose some sales and some compensate by trying to create a farmers' market atmosphere in parts of the store. Associated with this is the interest in local food and rebellion against global supply chains.
- Pressures for more product lines, making central warehousing and distribution more complex. This is particularly acute with sustainable and ethical products since they have parallel supply chains to their conventional analogs, making logistics trickier to manage.
- Competition from low-cost outlets. The big three retailers (Loblaw, Metro, Sobey's) are feeling cost pressures from Walmart and Costco.
- Thin profit margins, around 3.5%. As with retailers, this creates pressures to maintain high volumes
- Student markets applying values-based pressures (e.g., local, animal-welfare). Many university food service firms have been forced to change their supply chains in response to student pressures.
- Demands for higher nutritional quality. Many food service operations traditionally served low quality food and consumer pressures have forced them to improve the quality of their menus.
- Ethnic population diversification. Given the diversity of many urban centres, food service operators are forced to diversity their menus to maintain or bring in new customers. There's been a significant expansion of certain product lines and supply chains as a result (e.g. halal chicken).
- Cafeterias as interesting eating experiences. Fewer eaters are prepared to tolerate bare eating areas with plastic chairs and florescent lights. Many restaurants and cafeterias have upgraded their facilities
- Some companies linking cafeteria to overall workforce health. Companies are now understanding the workplace cafeteria to be part of their employee health strategy, improving the nutritional quality of their offerings and reducing access to low quality foods.
Strategies for addressing these vulnerabilities appear under many goals. In this section, the focus is on reducing anti-competitive behaviours and increasing co-operative ones.