|Royal Ahold Adds to Its Grocery List|
|Subject||Economies of Scale|
|Topic||Production and Costs|
|Key Words||World market, dominant firms, take over, supplier, subsidiaries, leverage, manufacturers, supply chain, consumers, investors|
A struggle for dominance of the world grocery retail market is going on. Wal-Mart, the French company Carrefour, and Kroger, are the dominant firms. However, a Dutch company, Royal Ahold, currently sixth, is on the prowl for companies to take over. For example, in the U.S. it has purchased Giant Food Co., U.S. Foodservice (which is the second-largest restaurant supplier), and the on-line grocery Peapod, although it continues to allow its subsidiaries to operate under their original names and have local control. The established market leaders are not sitting back, however. Wal-Mart has set up stores overseas and has acquired others. Carrefour has bought Promodes, making it the largest retailer in Europe.
One rationale for growth is that the retailers are looking for leverage in their dealings with grocery manufacturers. For example, Royal Ahold companies in 23 countries each buy coffee from Columbia. It makes sense for there to be a global supply chain to create savings that can be passed on to the consumer. That in turn will please investors.
(Updated January 1, 2001)
|Source||Martha McNeil Hamilton, "Global Food Fight," The Washington Post, November 19, 2000.|
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