COMPETING MANUFACTURERS AND RETAILERS IN FOOD RETAILING: THE EFFECT CONTRACTUAL DESIGN ON SUPPLY CHAIN PERFORMANCE

Abstract

The distribution of fast moving consumer goods (FMCG) via manufacturer-retailer supply chains is analysed. Packaged goods in grocery channels are supplied by manufacturers to retailers selling them on to consumers. The products are standardized and branded so that each manufacturer is in competition with other manufacturers as the products within a category are to some extent perceived exchangeable by consumers. Similarly, the retailers’ offerings are composed widely of the same items and brands. This competitive scenario is shaping the contractual relation between each supplier and retailer. In many instances, fierce bargaining is often the reality in the manufacturer-retailer relationship. This paper reviews the setting of the distribution of groceries in European markets. We provide empirical evidence on bargaining processes and the contractual conditions. Furthermore, the effect on supply chain performance is shown by various examples.

Key words: manufacturer-retailer competition, bargaining, contracting, supply chain performance