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A New Balance of Power Between Suppliers and Retailers in Finland

Author

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  • Liu, Xing
  • Niemi, Jyrki
Abstract
The last twenty years has witnessed substantial changes in retailing across most European countries. Private labels (PL) has become increasingly important strategic tool for European retailers to gain market share, loyalty of customers and reinforce the bargaining power toward suppliers and countervailing power against manufacturing brands. (Bonfrer and Chintagunta, 2004; Hansen et al., 2006; Groznik et. al. 2010 EU commission, 2011). The combination of recession and a retail food price spike during the last 5 years provides even more opportunity for PL growth as increasingly price-sensitive customers shift to PL alternatives.1(Volpe, 2011) According to statistics from Private Label Manufacturer Association (PLMA), the market share of PLs accounts for 17 to 48% of the groceries market in the EU in 2012. In Finland, the sales of private labels have been growing significantly during the last five years. However, the total share of the sales is still lower than in the EU countries on average. PL share is positively correlated to concentration levels in food retail. (Lincoln and Thomason, 2009). Table 1 presents the concentration of national grocery markets in a number of EU countries versus the market shares of PLs based on the volumes obtained from PLMA. Figure 1 displays the total market share of PLs including food and non-food in Finland calculated in value. Clearly, Finnish grocery trade is the most concentrated amongst EU members of states. Even though the market share of PLs in Finland has not reached as high level as the other European countries such as Germany and UK, the market share of PLs in food sector based on sales value, has been steadily grown from 7.6% in 2003 to 12% in 20122(See Figure 1). Given the close link between concentration levels and PL share, the expectation that PL market share in Finland is projected to increase by between 3- 5% points yearly in the coming five years. Compared to the current level of 12 percent, this entails that PL market share is set to over 20% in value in the coming 5 years.

Suggested Citation

  • Liu, Xing & Niemi, Jyrki, 2014. "A New Balance of Power Between Suppliers and Retailers in Finland," 2014 International European Forum, February 17-21, 2014, Innsbruck-Igls, Austria 199060, International European Forum on System Dynamics and Innovation in Food Networks.
    • Handle: RePEc:ags:iefi14:199060
    DOI: 10.22004/ag.econ.199060
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    References listed on IDEAS

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    1. Groznik, Ana & Heese, H. Sebastian, 2010. "Supply chain interactions due to store-brand introductions: The impact of retail competition," European Journal of Operational Research, Elsevier, vol. 203(3), pages 575-582, June.
    2. Gabrielsen, Tommy Staahl & Sorgard, Lars, 2007. "Private labels, price rivalry, and public policy," European Economic Review, Elsevier, vol. 51(2), pages 403-424, February.
    3. Karsten Hansen & Vishal Singh & Pradeep Chintagunta, 2006. "Understanding Store-Brand Purchase Behavior Across Categories," Marketing Science, INFORMS, vol. 25(1), pages 75-90, 01-02.
    4. Richards, Timothy J. & Hamilton, Stephen F. & Patterson, Paul M., 2010. "Spatial Competition and Private Labels," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(2), pages 1-26, August.
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    Cited by:

    1. Cucagna, Maria Emilia & Goldsmith, Peter D., 2018. "Value Adding in the Agri-Food Value Chain," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 21(3), February.

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    Keywords

    Agribusiness; Consumer/Household Economics; Production Economics;
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