The structure of the global food industry is continually changing and evolving as food suppliers, manufacturers, and retailers adjust to meet the needs of consumers, who are increasingly demanding a wider variety of higher quality products. Having first-hand knowledge of consumer preferences and purchase habits, food retailers are positioned to transmit this information upstream to other segments of the supply chain. In the quest to meet consumer demands for variety, affordability, safety, and quality, the food retail sector is constantly evolving and generating innovative sale formats. In addition to the popular supermarket format, hypermarkets, discounters, convenience stores, and combined gasoline and grocery outlets have emerged in numerous countries in recent years.
Global food retail sales are about $4 trillion annually, with supermarkets/hypermarkets accounting for the largest share of sales. Most of the leading global retailers are U.S. and European firms, as large multinational retailers expand their presence in developing countries and small retail firms increasingly account for a smaller share of total food sales. The top 15 global supermarket companies account for more than 30 percent of world supermarket sales. With improved technologies and economies of size, these retailers enjoy operating cost advantages over smaller local retailers.
Similar to retailers, food manufacturers are reorienting their business strategies in response to consumer signals transmitted via retailers. Two common strategies are geographic expansion in developing countries and a greater emphasis on product category management. Although multinational manufacturers are rapidly expanding their operations, firm concentration in food manufacturing is not visible at the global level. Together, the top 50 food manufacturers' share of global packaged food retail sales account for less than 20 percent.
Driven by innovation and competition from private retail brands, food manufacturers are focusing on specific product lines where they have inherent advantages. There is greater emphasis on "category management" and "focused growth" compared with the product portfolio diversification strategies of the past. This strategy allows food firms to become leaders in certain core product lines and to better cater to consumer demand for these products in different markets. Therefore, while manufacturer concentration is not evident at the global level for total packaged food sales, firm concentration may exist in specific product lines and regional markets. Firm concentration is particularly evident for those products where the manufacturer's brands are popular, such as in soup, breakfast cereal, and baby food.