7445: The Danish organic vegetable chain: Power assets and development prospects

Kledal, Paul Rye (2006) The Danish organic vegetable chain: Power assets and development prospects. [preprint]

Summary

Using an analytic framework grounded in New Institutional Economics and Property rights theory, concepts of power and control over access to critical assets along a supply chain has laid the foundation for the analyzes of the organic vegetable chain. With the growth and spread of organic food into mainstream market channels like supermarkets and discount chains, the market mechanisms of competition, price pressure forcing producers to explore economies of scale and scope would be expected to hit the organic segment as well. Two commodities were chosen as detailed case studies: organic carrots and iceberg salad. By combining qualitative and quantitative data bargain power in producer-retailer relations were examined revealing how retailers use various control mechanisms in relation to fees and period of credit payment that have been tightened in the last couple of years. Terms of trade as well as price premiums for organic carrots have been examined showing decline and contraction in comparison with the conventional prices. The space for future producer opportunities countervailing the bargain power of the retailers, it is argued, lies in promoting an ‘organic product basket’ valued relatively high in utility terms and scarce or unique in ownership. Examples of the ‘organic basket’ lies in the success of the National organic association’s cooperation with the discount chain ‘Netto’ and its promotion of organic products and companies under various themes during the whole year of 2005. Also the future perspective of organic producers/packagers cooperating trans-national to countervail the Pan-European supermarket chains is an example of a possible ‘organic basket’ promotion.

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