Beyond Trafficking and Slavery

Food retailers, market concentration and forced labour

Market concentration is driving forced labour in the food industry, as retailers’ unprecedented power allows them to command low prices, quick turnaround and high quality from farmers and suppliers.

Sébastien Rioux
24 February 2015
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Banksy mural in Islington. Jordi Martorell/Flickr. Creative Commons.

Selling food is big business, with retail profits rising quickly among a handful of increasingly powerful players. Market concentration in the food retail sector has been paralleled by the proliferation of cases of forced labour in the industry. The two trends are not unrelated. On the contrary, monopolisation in the industry is driving exploitative labour conditions within food supply chains.

Slavery in the Thai fishing industry, forced labour in American and British agriculture, child labour and human trafficking in the chocolate industry, and forced labour in palm oil plantations in Malaysia are just a few examples of the ever-growing number of food commodities produced—in part or in whole—for supermarkets through forced labour.

US expenditure on food and non-alcoholic beverages (2012)
US$672.6 billion

Total food retail revenue in 2013
Germany: US$204.1 billion (€180.4 billion)
United Kingdom: US$146.1 billion (£95.9 billion)
France: US$172.7 billion (€152.7 billion)

Top five global retailers by retail revenue in 2012
Wal-Mart: US$469.1 billion
Tesco: US$101.3 billion
Costco: US$S99.1 billion
Carrefour: US$98.8 billion
Kroger: US$96.8 billion

In 2011 in the European Union, the largest five retailers in every country had a combined market share of more than 60 percent in 13 member states (Austria, Belgium, Finland, France, Germany, Ireland, Luxembourg, the Netherlands, Portugal, Sweden and the United Kingdom), with market concentration exceeding 80 percent in both Denmark and Estonia.

In most countries, however, market concentration among two or three major retailers is the norm. Two supermarket chains—Coles and Woolworths—control over 70 percent of the Australia’s food retailing sector, while Wal-Mart and Kroger made 43.2 percent of grocery store sales in the United States in 2013. In Canada, 55.5 percent of the grocery and food retail sector was held by three retailers in 2011. Similar consolidation can be observed in South Korea, Brazil, and elsewhere.

The net result is an hourglass-shaped global food system. Masses of farmers and small producers compete to supply a smaller number of processors, manufacturers, and wholesalers. These supply the handful of large retailers at the choke point, who sell directly to the global population of consumers.

Food retailers’ unprecedented power as buyers within national and global markets gives them the ability to set the terms under which the food supply chain operates. Their ability to impose contracts and prices with tough deadlines is key to understanding the growing demand for sub-minimum wages in the food industry.

In order to meet their obligations, stay afloat financially and weather the efforts of retailers and processors to lower costs, producers and suppliers often subcontract labour and other low value-adding business activities. For example, farmers, who rarely have the labour capacity to harvest time-sensitive crops, may hire large numbers of workers through agencies for short periods of time.

These agencies may in turn outsource their activities to a third party, either because they are unable to meet their obligations or because they want to take advantage of a lower cost provider. As Jean Alain et al. have noted, labour supply chains operating through multiple intermediaries and stages of subcontracting are particularly vulnerable to forced labour.

Retailers’ hold over global food production and their ability to command low prices not only breeds cheap, flexible and casual labour in food production; it also creates the conditions of insecurity under which forced labour flourishes. Forced workers are not victims of greedy and morally bankrupt individuals. They are the living reality of a violent economic environment where food retailers’ rising profits and market power go hand in hand with food producers’ chronic insecurity and poverty.

Given their market power and central role in shaping the conditions underpinning global food production, food retailers bear special responsibility for the reality of forced labour in the food industry. Tinkering around with ‘ethical’ audits, labour codes and corporate social responsibility has done little to address the relationship between retail business models and forced labour.

If we have any hope of improving the situation in the short term, then retailers must offer more advantageous conditions to their suppliers, give them longer contracts and pay fair prices for their goods. Buying from the local, regional and national markets where they operate may also be a good start, though these can also depend on forced and prison labour as well, as Fortune recently revealed.

But make no mistake. Ultimately there can be no sustainable solution to forced labour in the food industry without challenging food retailers’ growing power and control over the conditions of production of the essential elements of life.

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