Abstract
There is an ongoing debate as to who in the South African food sector holds the most power - the manufacturer or the retailer. This debate becomes particularly heated at times when the price of food is seen to be rising disproportionately to the overall inflation rate, as evidenced in 1991. This research contributes to the debate surrounding the balance of power. The overall balance of power is seen to be made up of three components: power - the ability of member A to alter the decisions of member B; non-coercive sources of power - the ability to give assistances/rewards; and coercive sources of power - the ability to apply punishments. It was found that manufacturers are strongest on the power dimension, retailers have the greatest strength in the coercive sources of power dimension, and neither retailers nor manufacturers have the upper hand in respect of non-coercive sources of power. The overall balance of power is, however, perceived to be dynamic in nature and likely to change in future due to issues such as changing consumer profiles and the installation and commissioning of sophisticated information systems by retailers.
Highlights
In 1991, when food prices started rising well ahead of the overall inflation rate, the attention of the media, government institutions, consumer bodies and the manufacturing and retailing sectors was focused on finding the culprit(s)
The purpose of this study was to contribute to the debate around food distribution in South Africa by conducting research into power in the food distribution channel
The aim was to test the hypothesis that the power balance in food retailing in South Africa is currently in the hands of the manufacturer, and to characterize channel conflict and power in food distribution in South Africa
Summary
In 1991, when food prices started rising well ahead of the overall inflation rate, the attention of the media, government institutions, consumer bodies and the manufacturing and retailing sectors was focused on finding the culprit(s). According to the Financial Mail (1 November 1991: 94) the producer price index for food escalated from 100 in August 1985 to 222.8 in August 1991, an overall rise of 122.8%. During the same period the overall consumer price index for food rose from 100 in August 1985 to 241.9 in August 1991. According to the BIT (1992: 6), it would be fair to say that the extraordinary rise in food prices has the distribution channel from manufacturer to retailer, and not the farmer, as origin. The power relationships in the food distribution channel, and the bearing it has on competition and food prices, are of more than just academic importance
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