Mar 2007
The logical conclusion of vertical
integration?
Mike Knowles
The year is 2020 and Wal-Mart has announced plans to open its first store in Indonesia. Following decades of stunning sales growth in India (home to the world’s second-largest Muslim community), any question marks over the US giant’s ability to win over a predominantly Muslim consumer base have now faded. Wal-Mart now dominates not only the Americas, but also a large percentage of the Indian sub-continent and south-east Asia.
Bailian, meanwhile, has overtaken Carrefour as the world’s second-largest food retailer thanks to the huge strides it has made in Africa, where consumers have extended a generally warm welcome to the Shanghai-based operator. Ethiopia, in particular, its population having doubled in size since the turn of the millennium, has embraced the Chinese group’s new Galla banner, which offers a unique brand of low-priced merchandising in street market-style outlets.
Carrefour continues to do well in Latin America and Asia, where its recent acquisition of Germany’s Metro Group has boosted profits. However, its growth has stalled in Europe and the Middle East due to growing competition from the world’s largest food retail group, Tesco-Ahold.
The Anglo-Dutch company has certainly been pushing the boundaries of fresh produce retailing since last year’s acquisitions of Total Produce – the company divested from Fyffes back in 2006 – and seed company Syngenta. By taking such a bold financial step, the company has been able to harness fully the power of vertical integration, turning the ‘field to fork’ theory into reality. When it comes to sourcing fresh fruits and vegetables, the whole supply chain has been brought in-house and made far more manageable.
The company’s employees harvest, store and pack the fruit, before handing consignments over to their colleagues at LinkCool (the logistics and shipping joint venture formed with Maersk Line at the end of 2015). From the distribution centre it heads to the port, while at the other end another state-of-the-art portside handling centre is on standby to receive the fruit before forwarding it to Tesco-Ahold’s main distribution centre.
For the growers, Tesco-Ahold’s front doorstep lies at the end of their plantations. All they have to do is cultivate their client’s licensed varieties before harvesting them. Then, with no further value left to add, they simply turn around and head home.
The year is 2020 and Wal-Mart has announced plans to open its first store in Indonesia. Following decades of stunning sales growth in India (home to the world’s second-largest Muslim community), any question marks over the US giant’s ability to win over a predominantly Muslim consumer base have now faded. Wal-Mart now dominates not only the Americas, but also a large percentage of the Indian sub-continent and south-east Asia.
Bailian, meanwhile, has overtaken Carrefour as the world’s second-largest food retailer thanks to the huge strides it has made in Africa, where consumers have extended a generally warm welcome to the Shanghai-based operator. Ethiopia, in particular, its population having doubled in size since the turn of the millennium, has embraced the Chinese group’s new Galla banner, which offers a unique brand of low-priced merchandising in street market-style outlets.
Carrefour continues to do well in Latin America and Asia, where its recent acquisition of Germany’s Metro Group has boosted profits. However, its growth has stalled in Europe and the Middle East due to growing competition from the world’s largest food retail group, Tesco-Ahold.
The Anglo-Dutch company has certainly been pushing the boundaries of fresh produce retailing since last year’s acquisitions of Total Produce – the company divested from Fyffes back in 2006 – and seed company Syngenta. By taking such a bold financial step, the company has been able to harness fully the power of vertical integration, turning the ‘field to fork’ theory into reality. When it comes to sourcing fresh fruits and vegetables, the whole supply chain has been brought in-house and made far more manageable.
The company’s employees harvest, store and pack the fruit, before handing consignments over to their colleagues at LinkCool (the logistics and shipping joint venture formed with Maersk Line at the end of 2015). From the distribution centre it heads to the port, while at the other end another state-of-the-art portside handling centre is on standby to receive the fruit before forwarding it to Tesco-Ahold’s main distribution centre.
For the growers, Tesco-Ahold’s front doorstep lies at the end of their plantations. All they have to do is cultivate their client’s licensed varieties before harvesting them. Then, with no further value left to add, they simply turn around and head home.
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