The document discusses the role of foreign direct investment and transnational corporations in shifting global diets through modernizing food supply chains. It hypothesizes that modern food systems lower the price of processed foods, increase availability of these foods through year-round supply and sophisticated marketing, and enhance food safety. While diets may become more diverse and micronutrient availability increase, processed foods tend to be more energy dense with high salt, saturated and trans fat. Empirical evidence on impacts of supermarkets on consumption in developing countries shows increased purchases of processed relative to fresh foods and potential for higher calorie intake. However, determining causal effects is difficult and modern systems co-exist with traditional food chains.

1. The role of FDI in food industries,
transnational corporations and
supermarkets in shifting diets
Bruce Traill
Professor Emeritus
The University of Reading
Presentation at the FAO Expert Consultation on Trade and Nutrition
15-16 November 2016

2. Background
“Multinational retailers have followed multinational food
manufacturers, soft drink companies, and fast food chains into food
and drink sectors in virtually all countries and have introduced the
types of supply-chain controls previously seen only in the developed
world, such as tight vertical coordination, centralized purchasing and
distribution, private standards, product differentiation and
sophisticated marketing. Domestic firms, driven by competition and
and learning from new market entrants, have followed suit.”

3. Trade and Investment policies
• Uruguay Round Agreement on Agriculture (URAA) (1994) and World
Trade Organisation (1995)
• 200 plus regional agreements registered with WTO
• SPS and TBT measures of WTO/Codex
• Trade-Related Investment Measures (TRIMS)
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5. Foreign Direct Investment
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Source WIR.

6. Asian food retail market clusters
Discriminating Shopper Markets
Big and Basic Markets
Modern Growth MarketsMulti-Format
Source: Food Retail Formats in Asia
RETAILERS

7. • Supermarkets and large manufacturers are said to work symbiotically,
the latter are able to supply the large volumes (at high standards)
demanded by the supermarkets, which in turn are able to deliver a
market for the manufacturers’ products.
• The economies of scale on both sides enable the delivery of reduced
prices for processed products.

8. What is the impact on food consumption and
nutrition?

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12. Impact on food consumption and nutrition
• From an analytical perspective, it is difficult to determine whether
observed changes in supply chains caused dietary change or were a
response to growing consumer demand for soft drinks, fast food, and
packaged groceries linked to general economic development—rising
incomes, urbanisation, women in the workforce etc

13. Hypotheses of why modern food systems
have an impact on consumption
1. They lower the price of processed foods relative to traditional staples and
fresh F&V.
2. They make more foods available (e.g. chilled foods such as dairy products,
processed meats, product variety, snack foods, fast foods, soft drinks). They
also provide year-round availability, notably for fruit and vegetables.
3. They employ sophisticated marketing, often targeted at children, to encourage
a preference for western foods
4. They enhance food safety and quality (enforcement of standards) which
promotes consumer confidence in the foods supermarkets sell
5. Reduce waste in post-harvest supply chain
• Nutrition implications: more diverse diets, cheaper energy, enhanced
micronutrient availability, but processed/fast foods are often energy dense
with high levels of salt, saturated and trans fats. NB. In general consumers
derive pleasure from these developments!
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14. Recent empirical evidence
• Rische et al, Food Policy 2015, Supermarket use in small towns in
Kenya and food consumption.
• Supermarket purchases lead to substitution to processed from unprocessed
foods (a result of prices being 5-10% lower)—a 10% increase in expenditure in
supermarkets (the difference between towns with and without supermarkets)
leads to about a 3.5% increase in processed food purchases; and lead to
higher calorie intake from processed foods (50% to 53% for same change in
supermarket usage); and average calorie intake by up to 10% (250 calories)
holding expenditure fixed.
• Ease of access is the major determinant of supermarket use (including within
towns with supermarkets)

15. • Umberger et al, AJAE 2015, Supermarket use and overnutrition in
urban Indonesia
• Average supermarket expenditure share is 19% by urban households
• BMI/obesity/overweight share as dependent variable: no impact of
supermarket use on adult BMI
• Some evidence that supermarket use leads to higher likelihood of over-
nutrition in higher income urban households

16. • But Gomez and Rickets (Food Policy 2015) point out that modern food
systems co-exist with other forms of food chain organisation,
especially in poorer developing countries.

18. Conclusions
• Food chains globally have modernised at different rates and to different
extents in the past 20 years
• Foreign companies have been an important contributory factor
• There are logical reasons to hypothesise a number of impacts of food chain
modernisation on food consumption
• Empirical evidence is difficult to obtain, and not suggestive of major
impacts
• The usual ‘model’ of food chain modernisation neglects a number of other
forms of food chain development involving interaction between traditional
and modern actors. These may be hypothesised to have additionalimpacts
on food consumption