BrainTrust Query: Will global forces cause the balance of power to shift back to suppliers in food retailing?
It looks like the power dynamics are shifting back upstream in some business channels, and the question is, will it happen in food retailing?
The Tuesday Wall Street Journal front-page headline called out, ‘New
Detroit Woe: Makers of Parts Won’t Cut Costs.’ The article goes on to say that
Navistar International, a company that has been supplying diesel engines to
Ford for 30 years, stopped shipments to Ford temporarily in February of this
year, and at the time Ford was their single largest customer.
The shifting balance of power reflects the new global strength of certain
auto suppliers and shows that long-standing buyer dominance over suppliers
can come to an end.
In another industry, i.e., home entertainment consumer electronics, we’ve
seen that some large, brand manufacturers are beginning to embrace retail start-ups
that strive to complement their retail marketing strategies but don’t request
the discounts sought by some of the large, big-box competitors.
While we haven’t seen any signs of a similar power shift in the food retail
channel, it doesn’t look like “all is quiet on the Western Front.” The shift in crop production, e.g., the rush to corn for ethanol, is reducing production and raising costs in many food categories, and the rapid increase in demand for organic and natural products is having a similar effect.
What, if any, signs are others seeing that would indicate that a similar shift
might be beginning in the food sector? This is worth watching.
Discussion questions: Will global forces cause the balance of power to shift
back to suppliers in food retailing? In what food categories could you perceive