Independent grocer testifies to the detrimental effects of supply chain consolidation
Michael Needler Jr., President and CEO of Findlay, Ohio New Encounter Inc., which operates 100 grocery stores in Ohio, Indiana, Kentucky and Florida, and a member of the Washington, D.C.-based company National Grocers Association (NGA), who represents the independent sector of the grocery industry, testified Jan. 19 before the Senate Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law about the devastating effect of blockchain consolidation. food supply on independent grocers. This issue has been a major concern for the NGA.
In his written testimony, Needler told the subcommittee, “The problems in the food supply chain in the United States are the result of increasing concentration and unchecked buying power by dominant retail chains that force suppliers to discriminate against independent grocery stores. The result is a system that benefits a select few at the expense of everyone else, including consumers, workers and independent retailers and producers. Consumers have an increasingly narrow range of choices to buy the goods and services they need, entrepreneurs and independent businesses struggle to start and sustain businesses, and producers such as farmers and ranchers are forced to accept unfavorable economic terms, conditions and prices imposed by the largest members of a consolidated supply chain.
Needler went on to observe that “grocery power buyers have taken advantage of the COVID-19 pandemic to further build their economic power at the expense of smaller competitors and producers. Independent grocers like me have struggled throughout the pandemic to stock up on essentials – such as essentials like paper towels and toilet paper, cleaning supplies and essential packaged foods like canned soup . Meanwhile, major national chains have exercised their buying power to demand full orders on time and, in some cases, to secure oversupply.
According to the grocer, a major reason for this state of affairs is the Federal Trade Commission’s lack of enforcement of the Robinson-Patman Act, an 80-plus-year-old law that prohibits anticompetitive economic discrimination against against independent businesses which Needler says hasn’t been enforced in over 20 years.
“The rules prescribed in Robinson-Patman are essentially intended to allow buyers to buy goods at the same prices as their competitors, as long as they buy in similar quantities,” he explained. “What we are seeing in our markets is that our competition in big box stores has become so significant that it has the ability to wield considerable buying power over consumer packaged goods companies. They can dictate prices, payment terms, product packaging, quantities and product delivery frequencies that are almost untouchable for operators like me. »
In his testimony, Needler argued that “the enormous economic power concentrated in the hands of a few grocery giants is hurting independent retailers and producers, the American consumer, and the American economy in at least two ways…. This leads to economic discrimination over independent competitors and increases concentration in the food supply chain. Economic discrimination against indies affects prices, terms and availability of products, and has only been exacerbated by the pandemic, during which panic buying has “decimated” grocers’ shelves. When suppliers could not produce the quantities of product needed to supply all retailers with the requested volumes, suppliers placed allocations and restrictions on product flow to retailers and wholesalers, but “they did not applied these allowances equally”. [and i]Independent grocery stores have not received their fair share.
On supply chain concentration, Needler observed, “When large grocery chains drive out independent competitors, it increases concentration in grocery retail markets. This increases the purchasing power of dominant food companies. But it’s also driving more consolidation upstream in the grocery supply chain. He pointed out that this concentration was “particularly acute” with regard to private label manufacturers, noting, for example, that there was now only one major manufacturer of private label canned soups. .
Needler added that in addition to “reduced product choice and increased prices for independent grocers and their consumers, greater concentration may result in low anti-competitive prices paid to independent producers, such as ranchers and farmers”, as well as lead to a less diverse food system. , and creating a food supply chain that is “less resilient and more vulnerable to disruptions and shortages”.
He continued, “We can win in grocery retail by delivering great service, quality, technology solutions, shopping experiences and many other enjoyable attributes. However, when the rules of the game are not enforced and those with the largest budgets dictate the rules of procurement, small players will not be given a fair opportunity to compete for the highest decision point in the world. consumer – the price. Unfortunately, it ends badly for the consumer when the small businesses go out. Without real price competition, consumers end up paying more at the grocery checkout. »
Attributing the dwindling number of independent grocers in the United States to “relentless economic discrimination and concentration imposed by dominant grocery chains with buying power,” Needler asserted, “when independent grocers leave, small towns are starting to crumble and our government is spending billions trying to reverse the food deserts that are forming.
He warned:It is too late after the departure of the independent grocers. Prevention is the only way to stop this erosion.
Needler then answered questions from subcommittee members.