Agriculture Reference
In-Depth Information
And the Green Giant story continues to turn. In 2001, Diageo sold its Pillsbury Division
to General Mills for $10.4 billion. The Pillsbury Doughboy and the Jolly Green Giant came
home to Minnesota, but only as brand names. As part of the deal, Diageo received 134 milli-
on shares of General Mills, valued at $ 5.9 billion. When the deal closed, Diageo owned a 32
percent stake in General Mills. While the stories are a bit different for each, most of the first-
generation canners and packers have been swallowed up to become part of the large multina-
tional corporations that are rapidly taking control of the food system. In some instances, such
as Green Giant, it is only the brand name that is being sold, since the productive assets of the
company such as farms and factories were sold off years ago.
Grocery Wars
Since 1990, the retail sector of the food industry has seen the emergence of five major play-
ers: Kroger, Wal-Mart, Albert-son's, Safeway, and Ahold USA. In the early 1990s, these five
retailers accounted for only about 20 percent of retail sales. Together, these five firms now
account for over 40 percent of food retail sales (see table 4.2). However, as Phil Kaufman,
an agricultural economist at USDA notes, “… the effect of consolidation on consumers is re-
lated primarily to increases in local market concentration—the combined sales of the largest
firms expressed as a share of the total local market sales.” 9 Average market concentration of
the top four retailers in individual metropolitan areas stands at about 75 percent. And there
are several metropolitan areas in which the top four firms account for 90 percent or more of
sales. 10
Almost all of the large food retailers cite lower costs and greater efficiencies as the primary
benefits of consolidation. As size increases, procurement, marketing, and distribution costs
presumably decrease. Further, to lower their operating costs, the large food retailers are cent-
ralizing management and control at their headquarters. Finally, by forming supply chains
with global processors, the large retailers are able to streamline procurement and distribution
of products.
Table 4.2 . Ten Largest Grocery Store Chains in the United States: 2001
Company
Number of stores
Sales ($ million)
Kroger
3,211
50,700
Albertson's
2,573
38,300
Safeway
1,762
34,301
Ahold USA
1,446
23,200
Wal-Mart Supercenters*
1,060
20,100
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