Abstract

This article examines the organization of European food industry during a time of significant changes in their operating environment. The creation of common European markets, changes in agricultural policy, changing customer preferences together with technological development have an impact on the organization of the food industry. A significant phenomenon in the development of the structure of the food industry has been vertical integration. Three categories of factors influencing the organizational structure are considered; institutional factors, production costs, and transaction costs. Due to the fact that a major part of the European food processing industry is run by agricultural cooperatives, special emphasis is given to these organizations. It seems that the prevailing ways of organizing the food industry, especially cooperatives, face increasing challenges caused by enlarging markets. In many areas of production large, multinational enterprises are able to use economies of scale, complex manufacturing processes, and advanced management techniques. For the cooperative form of member control connected with the interests in a single raw material and the division of results according to deliveries it is not easy to compete with multinational enterprises. However, the cooperative mode may be predicted to be superior in coordinating the supply and demand between the producers and the first stage of processing also in the future. This may mean that the first level processing, i.e., getting the products into a non-perishable form, will be maintained inside the cooperatives, while part of the further processing being separated from this into investor owned companies. The largest cooperatives will extend their size in order to gain strength in the competition with the multinationals. Other cooperative firms try to appeal to their local and regional markets, mainly selling standard products and local specialties. Still other agricultural cooperatives get a role as suppliers of unprocessed products to various processing industries or as suppliers of processed products to retail chains.

Published in

Title: Seminar on From Farmer to Consumer : the input-output link in the agrobusiness sector, Valencia (Spain), 16th-18th February 1994
ISBN: 92-831-0207-X
Publisher: European Society for Opinion and Marketing Research

Conference

Seminar on From Farmer to Consumer: The Input-output Link in the Agrobusiness Sector

SLU Authors

• Nilsson, Jerker

  • Department of Economics, Swedish University of Agricultural Sciences
    

UKÄ Subject classification

Business Administration


Permanent link to this page (URI)

https://res.slu.se/id/publ/64252