Interests in the Supermarket and Grocery Store Industry: Resources, Coverage, and Organizing Costs

Introduction

The Supermarket and Grocery Store Industry worldwide currently faces public policy issues relating to Labeling Regulations, Food politics and Abuses of buyer power. This paper will explore the nonmarket activity of the three leading retail giants from this industry, namely Tesco PLC ($101.3b), Walmart ($72.2b) and Kroger ($96.5b) respectively. It will also focus on drawing comparisons between their lobbying efforts and those undertaken by the industry’s prime trade associations.

Nonmarket Activity among Interests in the Supermarket and Grocery Store Industry

All of the three leading enterprises within this industry have a significant amount of non-market spending. British retail juggernaut, Tesco PLC, boasts of $101.3 billion in revenue and employs 530,000 people globally.^1&2 This emphasizes its economic and personnel prowess in the nonmarket realm. Internationally, Tesco operates in 12 markets and in all the 39 counties (states) of the United Kingdom.³ Therefore, it has a strong geographic presence domestically. Moreover, Tesco is also a household favorite in the U.K and that allows the company to leverage its strong brand as a catalyst to rally favorable political impetus. In addition, Tesco also invests significantly in campaign spending and lobbying in order to garner greater political support.⁴

North America’s largest retailer, Walmart, recorded a revenue of $72.2 billion and employs 2.2 million people worldwide. Walmart has 8,500 stores in 15 countries, under 55 different names. In 2009, it generated 51 percent of its US$258 billion sales in the U.S. from grocery business and is said to employ 1% of the American working population, making it a very robust force to reckon on the political front.^6&7 To reinforce this stance, within the U.S.A, Walmart operates in all 50 states and the district of Columbia. As of 2013, Walmart invested $3.8 million in political contributions, of which $1.47 million went to candidates, with the remainder going to political parties.⁸ (Exhibit 1)

Fellow U.S retailer Kroger totals $96.5 billion in revenue, operates 2,435 stores and employs 343,000 individuals in 31 states of its home nation. Compared to Tesco and Walmart, Kroger’s human resource penetration within its parent country may seem fractional, but it is still considered relatively strong on a general industrial scale.⁹ Surprisingly and rather uncharacteristically, Kroger has also reduced its cumulative political spending with expenditure on lobbying amounting to a measly $200,000. However, in retrospect, while looking at historic data pertaining to Kroger’s political investments over the last decade, it is evidential to infer that the company has not only been cutting down on such expenses, but was never actually big on political spending.¹⁰ (Exhibit 2)    

The National Retail Federation (NRF) is the world's largest retail trade association and represents an industry that contains over 1.6 million U.S. retail establishments with more than 24 million employees and sales of $4.4 trillion, as of 2005.¹¹ All the three major global retailers discussed above are a critical part of this umbrella group, which saw political spending of $1.1 million⁵ this year. Intriguingly, the $3.5 million spent in 2012 eclipsed this amount. (Exhibit 3) Other significant food retail trade associations include ‘The Food Institute’, ‘Foodservice Sales & Marketing Association’ and ‘National Association of Convenience Stores’ among others.¹²

Conclusion

The analysis conducted in this paper has highlighted a consistent trend - Reduced spending in political activity and lobbying in the Supermarket and Grocery Store Industry, largely characterized by the fractional cut in expenditure exercised by the industry’s largest and most vital trade association as well as its leading players. (Exhibits 1,2&3) It is also conclusive to recognize this industry’s dense and geographically well dispersed human elements, as viable forces that have the power to attract political attention and bring about requisite changes, if necessary.

End Notes

1.       Tesco Company Stats: http://www.dailymail.co.uk/news/article-1319718/Tesco-numbers-Employs-472-000-people-makes-6K-minute.html

2.       Tesco Company Stats: http://en.wikipedia.org/wiki/Tesco

3.       Tesco Company Stats - Store dispersion: http://www.store-locations.co.uk/tesco/

4.       Tesco’s Lobbying activities: http://www.corporatewatch.org.uk/?lid=254

5.       NRF’s Lobbying activities: http://www.opensecrets.org/lobby/clientsum.php?id=D000000741

6.       Walmart Company Stats -Annual Revenue & Store dispersion: http://en.wikipedia.org/wiki/Walmart

7.       Walmart Company Stats - Employee data: http://www.statisticbrain.com/wal-mart-company-statistics/

8.       Walmart’s Lobbying activities

·         http://www.opensecrets.org/lobby/clientsum.php?id=D000000367

·         http://www.huffingtonpost.com/al-norman/walmart-lobbyists_b_3632526.html

9.       Kroger Company Stats: http://en.wikipedia.org/wiki/Kroger

10.   Kroger’s Lobbying activities: http://www.opensecrets.org/lobby/clientsum.php?id=D000027084

11.   National Retail Federation Info: http://en.wikipedia.org/wiki/National_Retail_Federation

12.   Major Food Retail Trade Associations: https://www.technomic.com/Resources/Links/

EXHIBIT 1

EXHIBIT 2

EXHIBIT 3

Media Coverage and Treatment of Nonmarket Issues in the Supermarket and Grocery Store Industry

The Supermarket and Grocery Store Industry consists of retailers that are predominantly involved in the procurement and sale of a vast variety of food items. This industry currently faces public policy issues relating to Labeling Regulations, Food politics and Abuses of buyer power. This industry’s issues are vastly covered online by individual journalists, bloggers and organized free-lance writers who seek to spread awareness about farmer’s rights, consumer exploitation as well as environmental hazards. In addition to these sources, a few major media outlets also cover similar issues but by and large, the sources remain fragmented and scattered. Significant literature pertaining to this issue also exists from books and offline sources.    

            There have been ample publications relating to the issue of labeling regulations⁵. Authors such as Calver, Dean, Fiedler and Jankowski (among others) address this issue through their books and also provide appropriate suggestions to best resolve this issue. While these authors remain relatively unknown outside the realm of food retail, their work has gained many plaudits in the academic space, as these titles are extensively used in several university courses within this field. Since these pieces of study were created with the inherent goal of being utilized as scholarly material, ‘media bias’ as per Baron’s Theory of Media Coverage and Treatment is practically absent as there isn’t an inherent desire for the writers/publishers to profit out of its publicity in any way.              

             Websites such as food politic.com¹ and foodretailworld.com² serve as viable information sources pertaining to the issues of food politics. Thepacker.com⁶ is the online version of a weekly newspaper that has been covering food retail news and relative issues, since 1893. These online platforms are established and managed by considerate individuals of society who are passionate about such issues. Among the more niche sources, The New York Times³ and The Wall Street Journal⁴ remain very prominent as well. Since the problem of food politics has a very extensive meaning and encompasses many dimensions of the food retail industry, a lot of these articles target issues that relate to the larger problem. Monbiot, G. (2000) Captive State and Basingstoke: Macmillan (pages 162-208) are publications that further investigate this issue. Based on the nature of this issue, it seems unlikely that the publishers produced this material with even a partial objective to gain profit through sensationalization of this issue or otherwise.

            In terms of the third issue i.e. Abuses of buyer power, a lot of information has been generated by educational institutions and professional organizations studying the business operations of retail organizations as a part of the curriculum or for research purposes respectively. These material resources, existing in the form of research projects and class papers, are widely used in the academic space and are constantly propagated through research initiatives, thus indirectly raising awareness about the issue at hand. A majority of this data is based on the writer’s opinions, thoughts and suggested courses of action. Over time, multiple revisions by different experts from the field help refine the study⁸. The topic of large retailers exploiting consumers through superior group purchasing power, makes for interesting news and has the potential to stir a response from the public. Although instances of perceived monetary gain through academic publication on these issues are sparse, media vehicles such as news channels, newspapers and magazines tend to sometimes blow such issues out of proportion to engage readers and thereby make the most out of the issue at hand. In a sense, they sometimes tend to report the issue as being much larger than what it actually is.  

           The issues in the Supermarket and Grocery Store Industry have received moderate coverage and editorial treatment in the media. The media’s interest in issues such as food politics and labelling regulations remains low on account of their relatively technical and ‘dry’ nature. On the other hand, Abuses of buyer power is a globally advertised issue that claims much intrigue across the globe and is thereby, greatly covered by media platforms.

End Notes

1. http://www.foodpolitic.com/
2. http://www.foodretailworld.com/
3. The New York Times: http://topics.nytimes.com/top/reference/timestopics/organizations/f/food_and_drug_administration/index.html
4. The Wall Street Journal: http://blogs.wsj.com/moneybeat/2013/09/11/hot-in-the-market-the-supermarket-deal/?KEYWORDS=food+retail
5. Labeling Regulations:

·         Calver, G., What Is Packaging Design, Rotovision. 2004, ISBN 2-88046-618-0.

·         Dean, D. A., 'Pharmaceutical Packaging Technology", 2000, ISBN 0-7484-0440-6

·         Fiedler, R. M, "Distribution Packaging Technology", IoPP, 1995

·         Holkham, T., "Label Writing and Planning – A guide to good customer communication", 1995, ISBN 0-7514-0361-X

·         Jankowski, J. Shelf Space: Modern Package Design, 1945–1965, Chronicle Books. 1988 ISBN 0-8118-1784-9.

·         Leonard, E. A. (1996). Packaging, Marcel Dekker. ISBN 0-8247-9755-8.

·         Lockhart, H., and Paine, F.A., "Packaging of Pharmaceuticals and Healthcare Products", 2006, Blackie, ISBN 0-7514-0167-6

·         McKinlay, A. H., "Transport Packaging",IoPP, 2004

·         Morris, S.A. "Food and Package Engineering", 2011, ISBN 978-0-8138-1479-7

·         Opie, R., Packaging Source Book, 1991, ISBN 1-55521-511-4, ISBN 978-1-55521-511-8

·         Pilchik, R., "Validating Medical Packaging" 2002, ISBN 1-56676-807-1

·         Robertson, G. L., "Food Packaging: Principles and Practice", 3rd edition, 2013, ISBN 978-1-4398-6241-4

·         Selke, S., "Packaging and the Environment", 1994, ISBN 1-56676-104-2

·         Selke, S,. "Plastics Packaging", 2004, ISBN 1-56990-372-7

6. http://www.thepacker.com/
7. Food Politics: Monbiot, G. (2000) Captive State & Basingstoke: Macmillan, pp. 162-208

8. Abuses of buyer power:  http://www.ftc.gov/ogc/healthcarehearings/docs/030926bloch.pdf

Public Policy Issues in the Supermarket and Grocery Retail Industry

The Supermarket and Grocery Store Industry consists of retailers that are predominantly involved in the procurement and sale of a vast variety of food items, including fresh fruits and vegetables, fish, meat, milk and milk products, and other sustenance products. Chain grocery retailing was a phenomenon that took off around the beginning of the twentieth century. Natural and organic food was and continued to be a successful and growing category in the grocery industry in the early 2010s. The largest consumer of natural and organic food and beverages was the United States, which claimed more than 50 percent of the market in 2011. The European Union and Japan were also important markets.

The Supermarket and Grocery Store Industry, which falls within the NAICS code 445110, reported a combined annual revenue of $714.9 billion, largely influenced by the revenues of the leading retail industry giants vis-à-vis Tesco PLC ($101.3b), Walmart ($72.2b), Kroger ($96.5b) and the Shwarz Group ($67.8b) respectively. However, this Industry also faces significant public policy issues that are summarized in this paper.

Labeling Regulations

Issue: The FDA has proposed regulations that would regulate grocery stores under a “Nutrition Labeling of Standard Menu Items at Chain Restaurants” provision included in the Patient Protection and Affordable Care Act (PPACA). The law was initially intended to provide a uniform standard for chain restaurants with 20 or more locations to comply with various state and local menu labeling laws, none of which have regulated grocery stores. By expanding these regulations to grocery stores, FDA would impose a $1 billion initial cost on grocery stores.

Interests: End consumers and grocery store shoppers have a stake in this issue as the new labeling laws will have an impact on their purchase decisions and value perceptions with respect to nutritional facts and information. Quite obviously, organized interests will include all the major grocery retailers and supermarkets, and the FDA, on account of the economic repercussions and reputational issues they have at stake.

Institutions & Life Cycle: In the U.S, this law is currently in the formulation phase and there is a debate as to whether it would limit restaurant menu labeling regulations to establishments that primarily sell restaurant foods. And since grocery stores are not similar to restaurants in that respect, there is every possibility that they might not be regulated under restaurant menu labeling. There are a few European countries where similar laws are currently in the enforcement stage, although the specifications of the same may vary.

Food politics

 Issue: Food politics are the political aspects of the production, control, regulation, inspection, distribution and consumption of food. The politics can be affected by the ethical, cultural, medical and environmental disputes concerning proper farming, agricultural and retailing methods and regulations. Government policy now plays a significant role in the production, safety, and distribution of food. Today’s governments have the authority to regulate the storage and preparation of foods, and the enforcement of these regulations has been strongly influenced by public outcry following outbreaks of food poisoning. Due to the buying power of the large supermarket chains they can put huge demands on producers, often pushing prices artificially low, whilst still making large profits on the food themselves with some products selling at over 400% the price paid to producers. This buying power also allows supermarkets to transcend national boundaries in sourcing food. However overly stringent policies, defeat to a certain extent, the bargaining power of the retailers, eats into their profits and diminishes their ability to reap benefits of volume and price.

Interests: This problem affects all the parties involved right from the supply to the purchase of food products as well as the government’s regulatory authority. Therefore, suppliers such as local producers, farmers, transportation agencies, and the supermarkets themselves are impacted.

Institutions & Life Cycle: Food politics is an ongoing problem across the world and is at varying stages on the life-cycle in different countries. In many cases, corruption plays a big role in determining the nature of these regulations. 

Abuses of buyer power

Issue: Consumers are the final link in food supply chains which are increasingly international. The processes and dynamics operating along such chains affect consumers in both positive and negative ways. Over at least 30 years, supermarkets in developed economies round the world have acquired an increasing share of grocery markets, and in doing so, have increased their influence over suppliers – what food is grown and how it is processed and packaged – with impacts reaching deep into the lives and livelihoods of farmers and workers worldwide. At national level in many countries, a large share of the grocery market is frequently in the hands of only a handful of supermarkets. One of the consequences of this concentration is a growing imbalance of bargaining power within food supply chains. Major Supermarket chains play a key role in shaping consumer demand and because of the power they wield in the marketplace, they have a strong influence over what consumers buy. Supermarkets can be seen as gatekeepers rather than passive transmitters of consumers’ wishes, and their gate-keeping role can work to the detriment of consumers and suppliers alike.

Interests: Consumers, suppliers, the supermarkets and consumer organizations are the affected parties in this case, with interests in this issue.

Institutions & Issue Life Cycle: With a mandate to inform consumers and act in their interests, consumer organizations have a vital role to play in preventing the negative effects of buyer power. Although at present there are several seemingly potent legal hurdles established to keep this problem in control, the sheer financial and influential prowess of giant supermarket chains is fairly capable to exploit potential shortcomings in the system. Effective measures to curtail unfair B2B commercial practices and the resulting detriments to small-scale producers and consumers are urgently needed, and remain an ongoing concern with a dynamic life cycle.

Conclusion

The Supermarket and Grocery Store Industry is experiencing the following three public policy issues at present: Labeling Regulations, food politics and abuses of buyer power. End consumers & shoppers, farmers, consumer organizations, transportation agencies, suppliers, and legal regulatory & government organizations cumulatively comprise of the interest groups, with respect to these broader issues. While all these issues exist at different stages in their respective life-cycles, it is reasonable to infer that some of them can be effectively resolved faster and easier than others. However, several aspects of the larger issues such as food politics and abuses of buyer power continue to be heavily complicated and the processes needed to resolve them, increasingly labyrinthine.