1. Issues for a Better Functioning Food Chain Learning from the EU marketplace Dr. Rodolphe de Borchgrave Arcadia International® TGDF Annual Meeting Antalya, 13 November 2013

2. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave Contents  WHAT IS AT STAKE ?  CLAIMS & CONCERNS  POLICY OPTIONS  A CASE IN THE FRUIT & VEGS. SECTOR  A CHECK LIST

3. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave Arcadia International ®  Profile:  Agro-food chain consultants  An international network of experts  Info: www.arcadia-international.net  Relevant experience  EU certification of ASÜD dairy companies  TURKEY fitness test on EU accession food safety chapter  EC DG Enterprise on innovation and competitiveness  EC DG Sanco on food safety policies  EC DG Comp on retail concentration

4. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave An ideally functioning food chain  “THE SUPPLY CHAIN INITIATIVE” (16 Sept 2013)  “..with the aim of ensuring fairness in commercial relations along the food supply chain”  “.. to nurture strong, collaborative supply chains. Our initiative reflects our commitment to working together in a positive and fair way” (Philip Clarke, Tesco PLC)  “…leading to greater accountability and transparency for all “ (Mella Frewen, FoodDrink Europe) “…better meeting the needs of shoppers” (Roger Scarlett- Smith, AIM) “We now call on the EU policy makers to endorse this initiative” (Christian Verschueren, Eurocommerce)

5. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave Some industry claims re. retail’s practices Commercial payments Category management and information exchange Supplier image in private label support Non written contracts and retroactive modification Most favoured customer clause Loss leading Blind auctions Supply exclusivity clauses Imposition to purchase selected goods or services Source: Comision Nacional de la Competencia

6. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave Retail response: defensive and offensive  INDUSTRY CLAIMS ARE UNWARRANTED  Retail is not more concentrated than industry  Retailers margins are not highest in the food supply chain  Industry negotiates purchasing prices with farmers  Bargaining power is not about size  Industry have their own unfair practices  COMPETITION FROM OWN BRANDS CREATE VALUE  Lower prices for consumers (in the long term)  Promote consumer choice and innovation  Promote sustainable and responsible food chain Source : ERRT

7. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave Consumer claims  FOOD PRICE EVOLUTION VS. INFLATION –Consumer prices increase faster than inflation  ASYMMETRIC PRICE TRANSMISSION –Fluctuations in agriculture commodity prices reflect, after a delay, in industry and consumer prices –However there seem to be a pawl effect in consumer prices who do not come down after agriculture prices decline

8. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave Food chain: 180 anti-trust cases (2004-2011)  HORIZONTAL (cartel) :  NATURE : Price fixing, exchange of consumer info, customer sharing  SECTORS: Cereal products, meat, poultry & eggs  VERTICAL (anti-competitive)  NATURE: Price related, exclusive purchase agreement  SECTORS : Coffee, sugar, multi-products (retail)  ABUSE OF DOMINANT POSITION  NATURE : Foreclose competition, min purchasing obligations, tying & refusal to supply, unjustified contractual obligations  SECTORS: Multi-products (retail), dairy, soft drinks Source: ECN Activities in the Food Sector, May 2012

9. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave EU policy issues  Objectives  Competitiveness: global market share and employment  Consumer welfare: health, quality, transparency  Internal market: fair competition  Agriculture: stable and decent farmers’ income  Options & programmes  Monitoring, eg. price observatory  Self regulation: codes of good conduct  Regulation  Catalysing a re-engineering of the supply chain Source: EC

10. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave A case in effective re-engineering  ISSUE Retail concentration versus agriculture fragmentation Unbalanced bargaining power Unequal farmers’ access to market  FRAMEWORK The CAP The Fruit & Vegetables regime  PROGRAMME Producers associations

11. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave Implementation : Belgium and the Netherlands  BELGIUM  All fruit & veg producers are members of cooperatives…  Who collectively own BVT : a centralised market organisation  BVT system in charge of : quality control, sorting, storing, contract negociating, auction selling  Collective marketing via Flandria brand name  The NETHERLANDS  Farmers are industry like and larger scale than in Belgium  Farmers went away from centralized market system  Producers’ organisations are sales and marketing vehicles  Compete with each other !

12. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave Impact on market  BALANCED SUPPLY AND DEMAND Fair income distribution to all cooperative members Volume and quality ensured to retail Stable supply: large throughput and efficient logistics  SECTOR CONSOLIDATION Push towards larger production units  INNOVATION Uniform quality rather than innovation: trend follower Coordinate contacts with seed houses  CONSUMER CHOICE Quality upgraded through VBT control Significant increase in choice

13. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave A check list for the Turkish food chain  ARE THERE ANY INDUSTRY-RETAIL ISSUES ?  WHAT ARE THE CONVERGENCE AREAS ?  WHAT ARE THE CONTENTIOUS ISSUES ?  IS THERE TRANSPARENCY ?  IS THERE A DISCUSSION FORUM ?  WHAT ARE GOVERNMENT CONCERNS ?  CAN COMPETENT AUTHORITY ACT AS EITHER : FACILITATOR REGULATOR MONITOR RE-ENGINEERING CATALYST

14. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave Conclusions  IDEAL FOOD CHAIN FUNCTIONING IS NOT A GIFT OF NATURE  UNBALANCE IS ONLY TOO NATURAL AND MUST BE ACTED UPON  THE CONSUMER IS TOO EASILY TAKEN AS HOSTAGE  AUTHORITY CAN AND SHOULD PLAY A USEFUL ARBITRAGE ROLE

15. A RCADIA I NTERNATIONAL - Dr Rodolphe de Borchgrave Thank you for your attention ! rodolphe.deborchgrave@arcadia-international.net