Modern retail food sector in the Philippines: dominance of large domestic retailers and their effects on the supply chain

Abstract

The number of modern food retailers such as supermarkets and hypermarkets has increased considerably in the Philippines. However, participation of foreign retailers has been limited since opening the retail sector to foreign investment in March 2000 through Republic Act 8762. The rapid expansion of the sector came mostly from a few large domestic food retail chains. This paper aims to examine the market structure of the modern retail food sector particularly the dominance of the large domestic retailers and their implications on supply chains notably, on small-scale food retailers and producers. Results show that dominance of a few large domestic retailers has continued despite liberalization as indicated by high concentration ratios (CRs). While CRs initially reduced within 5 years after liberalization, they eventually increased through joint ventures and buy out of foreign retailers. These are expected to increase further with the proliferation of stand-alone stores and convenience stores under joint ventures with foreign retailers and strategic partnerships with other large retail and property development firms. There is some evidence of displacement of small traditional retailers and only a few small suppliers to supermarkets succeeded, despite efforts of the government and non-government organizations to help them access modern food retailers. It is suggested that the review and subsequent amendment of RA 8762 should be expedited and studies conducted to examine further the effects of the dominance of large food retailers in the chain including the possibility of market power in the output and input markets.