Volume 45 Number 176,
January-March 2014
Corporate Control of Food Distribution in Mexico
José Gasca, Felipe Torres *
Date received: May 30, 2013. Date accepted: August 15, 2013.
Abstract

This work analyzes factors relevant to the configuration of the food distribution system in Mexico, where corporate leadership is dominant. It identifies the causes and effects of the expansion of a new, more organized and more competitive business scheme for food distribution as compared to the traditional channels that operated before the advent of this hegemony. The importance of this process and its relation to commercial opening is reflected in a set of territorial expansion strategies through multiple operating modes and establishment sizes to dominate a significant amount of food consumption located mainly in Mexican cities.

Keywords: Food commerce, retail channels, supermarkets, commercial corporations, food supply, Mexico.
INTRODUCTION

There have been significant changes to food distribution and marketing in recent decades, from traditional forms of transport to business models which are more advanced from a technological and organizational perspective. One explanation for this is that the mass mobilization of food products as a business model meets the demands of contemporary society more efficiently. The other lies in the logistical capacity of companies to access national and global markets where trade barriers are broken and transportation costs and time is reduced. There is a tendency to diversify supply sources from greater distances. Furthermore, opening up to foreign investment has provided transnational corporations (tnc) in countries like Mexico with fertile ground for expansion, enabling them to secure a better position in the market in a short time, compared to traditional channels.

Modern, mass distribution of food in retail is a distinctive feature of the global economy in that it is one of the most important processes in the circulation and exchange of goods on a global scale. In countries like Mexico, modern commerce is showing an increasing tendency to dominate market shares thanks to the advantages of economies of scale, and as a result of technological and organizational innovations. These innovations lead to more efficient management from production to final consumption.

The predominance of the modern food distribution system today is defined as a multiscale structure of establishments and corporate firms. Firstly, because it has adopted a strategy of granting flexibility to units and sales areas from convenience stores to hypermarkets. Secondly, because all the establishments are controlled by large firms showing increasing signs of transnationalization and a tendency towards hyperconcentration, in response to recent bankruptcies, mergers and acquisitions in the commercial sector. These establishments are defined as hegemonic agents of food supply owing to their capacity to target a wide range of consumers, control different areas of primary and agro industrial production as well as their capacity to operate under economies of scale which reflect greater competitivity, dynamic levels of growth and wide distribution.

The objective of this work is to explain those factors which account for the arrangement of the food distribution system in Mexico, based on the leadership and dominance of the corporate business model. This involves knowing the causes and effects operating in the expansion of a more competitive food distribution model on a global scale, one which is better organized and with different impacts on traditional internal channels.

This article is organized in three sections. The first section identifies the factors involved in the transition from the traditional scheme to the modern corporate food distribution sector. The second section evaluates the position of the corporate business model in the food distribution process on a global scale, and the third the key features of the expansion of the main corporations operating within the Mexican market.

TRANSITION TOWARDS THE CORPORATE FOOD DISTRIBUTION MODEL

Food distribution in Mexico consists of a succession of interconnected phases originating in primary and agro industrial production, to collection, storage, wholesale and retail distribution. This process consists of an intermediation apparatus connecting producers with consumers. The intermediaries are key agents because they deploy technical, logistical and marketing processes at different stages of supply. Cities are the strategic locus to direct distribution flows and final demand and together with transport permit the movement of a complex network for the physical and geographical circulation of products.

During the phase prior to the current open economy in Mexico, food distribution depended on a series of institutional mechanisms and was dominated by state intermediaries, as well as direct participation or links with the primary production sphere, the lynchpin of supply processes, and food distribution on a local and regional scale to guarantee public supply. In the wholesale distribution sector the State built large commercial infrastructure works for storing and distributing basic grains and fruits and vegetables, which created and provided an impulse to different channels such as public markets, open air markets, state-owned supermarkets, syndicates and other specialized establishments.

Although the modern food distribution system has existed in Mexico since the first supermarkets appeared in the mid 1940s, its role was marginal in consumption and was almost exclusively to be found in the country’s capital. It was not until the 1980s and 1990s that this means of food distribution acquired significant weight in terms of meeting the food demands of a growing population, mainly in urban areas.

The expansion of food supply and distribution through supermarket and self service companies, together forming a new system, has several explanations. One is the deregulation of the commercial sector under neoliberal policies in the early 1980s, representing a process of dismantling and/or privatization of areas of the food distribution chain in which the State participated. The other is the deregulation of foreign direct investment (fdi) which favored market penetration of leading global transnational firms, and which through partnerships, mergers and acquisitions generated strategic adjustments for various firms and greater competition in the sector. This eventually helped to rebuild the retail market in developing countries.

Another success factor of large firms in the modern system was the introduction of logistical, organizational and technological innovations that gradually transformed the way large volumes of food products were mobilized, from production and distribution to final consumer. This was achieved through technologically more sophisticated marketing and innovation in business organization. The integration of information and communication technology (ict) and organizational innovations has permitted these companies to develop more productive operating modes meaning greater productivity by integrating the value chain and managing more efficiently the movement of goods, inventory management and supply and distribution logistics in large volumes, as well as a new concept in purchasing contracts and relationships with suppliers.

Another aspect explaining the boom of the model is the growth of mass consumer markets. These are the result of the continuous trend towards urbanization in which cities position themselves as key areas where the main segments of the food market are organized owing to their concentrated strength and consumption density. Compared with the last decades of the twentieth century, where an unstable and fragmented demand system prevailed in a limited number of cities, modern commerce now responds to a different sociodemographic context. Increased demand has prompted the design of new logistical distribution platforms for handling large volumes of products. These respond to establishment formats with sales capacities to satisfy consolidated demands and flexible markets, according to continually changing trends and consumer habits with food products.

ict AND ORGANIZATIONAL INNOVATION: KEY FACTORS IN THE MODERN FOOD DISTRIBUTION SYSTEM

One of the key elements in the expansion of modern food distribution companies is the intensive use of technology and the development of organizational innovations both in-house and externally. These have supported the development of economies of scale in that they facilitated the handling of large volumes of products, coordination with suppliers and control of mass consumer markets. This resulted in greater profit margins through the elimination of operation and transaction costs, enabling the emergence of a new logical supply system and retail distribution.

The use of specialized software, satellite communication, bar code systems, zero inventory, among others, promoted the use of credit and payment mechanisms through banking terminals and internet sales strategies and were necessary to organize, direct and integrate hundreds of suppliers, thousands of products and millions of transactions and customers in an infinite number of stores in a variety of countries and cities across the world (Berdegué, 2005). Thus ict has marked a standard in the recent revolution of food distribution because it is geared towards eliminating all those costs from the process that add no value to a specific product. Consequently ict has been a focus for corporations amidst fierce competition among firms and also the traditional sector.

ict has been integrated into modern technical logistics to incorporate strategies such as the so-called “Efficient Consumer Response” (ecr). This innovation seeks to remove all costs from the supply chain that do not add value to the final product, optimizing coordination between agents related to the supply of a product and eliminating inefficiencies in the chain (ibid.). Electronic Data Interchange (edi) facilitated ongoing communication between distributers and suppliers. This resulted in the automation of inventory control systems and vertical integration of suppliers. Thus the supply system is updated automatically according to store inventories and a system jointly managed with a suppliers’ network called Retail Link. The technological basis for this process lies in the development of the product’s universal code, which as well as speeding up the distribution process of goods at points of sale, reduces the time that existing goods are held, facilitates inventory control and rotation and therefore coordination with suppliers in terms of time management and product flow.

Another innovation in this area lies in automated messaging systems. These allow transactions to take place between suppliers and clients and electronic invoicing (e-commerce) as well as shared management with suppliers concerning real and anticipated demand. The systems also allow for diagnosis of fluctuations in consumer trends which means sales can be monitored daily or the history of product transfer can be built up by establishment, city, state, region, country or a group of countries. These processes have permitted the redesign of the spacial flow of products, logistically more efficient between the production-supply phase and the supply-retail distribution phase.

At the same time, with the use of ict , another key element in the development of modern commerce is organizational innovation applied to the logistics of the flow and movement of goods. Previously, supermarkets relied on traditional wholesalers to meet their supply needs for perishables at their commercial units. However, despite the negotiation power and capacity of large firms, this meant greater costs because of the strong presence of intermediaries. Although supermarkets today can resort to suppliers at traditional wholesale markets, the main trend has been to break this link by developing their own logistics distribution centers (ldc). This led to reconstitution in methods of supply which in turn stimulated organizational and management innovations in food distribution at the beginning and end of the supply chain (supply, collection and retail distribution).

ldcs permit supermarket firms to integrate the transport process and movement of goods forward and back along the chain, allowing for a direct relationship with agricultural producers and a link to their retail outlets. The opportunity to link directly with suppliers’ permits supermarkets to buy on a large scale, as well as significantly reduce costs, control quality, sizes and supply times, which in turn makes them more competitive.

Thus, as the number of stores increased and the geographical locations diversified, the need arose to change the fragmented procurement system per commercial unit to another with one or various regional ldcs that meet the specific needs of establishments in several cities at once. In this way, as well as eliminating the dependence on traditional wholesale markets, such as fruit and vegetable markets for example, the ldcs formed a geographical organizational network which helped to integrate supply and procurement both in terms of the physical movement of products and in terms of organizing and managing the commercial process.

The formation of a coordination network of different ldcs increased the efficiency and profitability of acquisitions by reducing coordination and transaction costs. The organizational reengineering of supplies of the large supermarket chains thus transformed the territorial reengineering of the chains participating in the production-supply-distribution system. This is because the ldcs created the link to manage a territorial network with multiple connections between regions of main specialized producers and centers of demand in the cities.

To meet the demand for the efficient physical distribution of goods to retail units of the same company, a logistical technique know as cross-docking was implemented. This involves collecting products directly from producers, usually the manufacturer, and organizing the distribution from there directly into the retail sales systems. This system reduces the handling and storage of products, in some cases eliminating the role of the supermarket chain’s own distribution centers and the “bottle necks” of specialized suppliers. These innovations in the food distribution system meant that a large company gained corporate control almost automatically, as well as a wide variety and quantity of establishments across the supply chain and retail distribution.

GLOBAL EXPANSION OF MODERN FOOD DISTRIBUTION COMPANIES

The operation of modern food channels was at first a predominantly European and American phenomenon, and almost 60% of worldwide supermarket sales take place in these areas (fao, 2009:10). However, different expansion trends have taken place with transnational chains in other parts of the world since the 1990s. The first showed expansion in South American countries at the beginning of the 1990s (Argentina, Brazil and Chile) and East Asia (Taiwan, the Philippines and Thailand), Northern Europe and the Baltic nations. In these regions, the food retail trade increased from 10-20% in 1990 and from 50 to 60% in the first decade of 2000. The second trend includes Mexico and other Latin American countries (Guatemala, Ecuador and Colombia) and several South East Asian and Central European countries. In these countries, the supermarket share fluctuated from 5-10% in 1990 and from 30 to 50% at the end of the same decade. The third trend involving countries taking up the retail supermarket model took place at the end of the 1990s and the beginning of this century and accounted for between 10 and 20% of retail trade. This included some countries in Africa, South America and Central America, South East Asia and China, India and Russia (Reardon and Berdegué, 2008:7-8).

It is currently believed that the bric1 countries will define the future expansion trends in this sector owing to the potential size of the market, their urbanization rates and the growth in large national and transnational food retail chains in these counties. For example, growth in sales in the sector rose between an estimated 10 and 14% in Russia, China and India in 2001 and 2006 (fao, 2009:12). In Latin America, opportunities in the food market were an objective for several firms from the 1990s, for it is estimated that while in the 1980s supermarkets controlled between 10 and 20% of retail trade, at the beginning of the 21st century, the average share had increased to between 50 and 60%. This means that modern trade expansion took only 10 years, whereas in Europe and the United States it took around five decades (Di Nucci and Lan, 2009:15).

The global expansion strategies of transnational companies satisfy different interests. In the food industry this is due to saturation of markets, increased internal competition, and sanctions applied to monopolistic practices in some of the companies’ home countries. It is worth noting here that in the U.S.A., for example, the five largest firms only control 32.6% of the market, whereas in France, they control up to 70% (ibid.:16). This is why some countries have adopted antitrust laws2 , which aim to contain the development of supermarkets. In others local consumers, traders and syndicates3 have resisted, for it is known that traditional trade suffers with the arrival of supermarkets. Another factor explaining the global expansion of supermarkets is, as we have seen, the liberalization of foreign investment, which took place in various countries, including Mexico. In the decades prior to trade opening up and deregulation of fdi, restrictive policies were a barrier to the expansion of transnational firms. For this reason, the 1990s was an important decade of expansion for transnational supermarket firms in different countries.

As Reardon and Berdegué suggested (2008:15) the global expansion of food distribution firms follows three different patterns. The first is one promoted by the main firms in different countries around the world or in continental regions and involves global firms operating from Europe and the United States, namely Wal-Mart (EU), Carrefour (France), Tesco (Great Britain), Metro (Germany), Schwarz (Germany). The second relates to emerging firms in regional markets on a worldwide scale or countries close to the head office. Some examples are companies of Japanese, Thai and South Korean origin entering the Chinese market; Hong Kong, South East Asia and India; Slovenian firms in South East Europe or South African firms in different countries in Africa. The third relates to independent transnational expansion through a joint-venture or acquisition by a national chain.

For the year 2011, the 20 main retail firms reported total incomes of more than 1739.2 billion dollars (including food and non-food products). The most important was Wal-Mart which turned over almost 447 billion dollars in this year, followed by the French company Carrefour with a turnover of around 113 billion dollars annually (See Table 1). Carrefour and Metro are among the most transnationalized companies, operating in 33 countries. Wal-Mart4 operates in 27 countries and the French Casino and German Schwarz in 26 countries each. By contrast, some chains only operate in their country of origin such as The Kroger and Target in the U.S. and Edeka in Germany.

It is estimated that 40% of annual food retail sales are in the modern trade sector (fao, 2009:5).This figure can vary between countries, for in a report published by the Pacific Economic Cooperation Council (pecc) in 2005, in some of its members such as Canada, the U.S.A., Japan, Chile, New Zealand and Singapore, the modern distribution sector controlled over 70% whereas in countries such as Australia, Mexico, Russia and Thailand the degree of local market penetration lay around 50 and 70% (See Figure 1).

One of the dominating trends is corporate control of companies in the food industry. This can be seen through the phenomenon of hyperconcentration and is the result of the distribution sector being controlled by a few firms. Such is the case in Sweden where three companies control more than 95% of the market, in Singapore where they control 73%, in Canada where the first five firms dominate 70%, in New Zealand where four firms control 61% of the market, in Denmark where three control more than 60%, and in Belgium and Austria where three capture around 55% of the market. In markets like Holland, Argentina and Mexico, the share is relatively less, for three large firms control 47, 45 and 43% of their markets respectively (Montagut, 2007:27; peec, 2005:9).



Figure 1. Proportion of Food Sales through Supermarkets in Countries Belonging
to the Pacific Economic Cooperation Council,
2005 (percentages)

Source: Prepared by the authors based on data from peec (2005:9).

THE FOOD INDUSTRY THROUGH LARGE CORPORATIONS IN MEXICO

In Mexico, the opening phase for supermarkets took place in the 1940s in the country’s capital. The rapid urbanization that occurred from the 1970s was the drive behind the steady expansion of supermarkets in the Metropolitan Zone of Mexico City (mzmc) and for some cities in the center and North. The first companies grew gradually in different forms and sizes until establishing themselves as large corporations, forming part of different businesses associated with the sector including department stores, restaurants, banks, manufacturers of their own labels, among others. In this time the sector had become well established with three large national corporations: Cifra, Grupo Gigante and Controladora Comercial Mexicana. At the same time, other chains emerged in regional markets such as Soriana (Coahuila), Casa Ley (Sinaloa) and Chedraui (Veracruz). From the 1990s, supermarkets entered into a process of major competition because the battle for consumer space among the main chains meant the opening of commercial units in a large number of cities in Mexico’s federal states. During this process there were changes to distribution logistics, the format and size of establishments and there were innovations to marketing systems.

The new institutional context, spurred by structural reforms which had began since the middle of the 1980s, meant the transnational supermarkets chains found themselves in a favorable institutional environment for expanding new businesses in the country thanks to changes in the National Foreign Investment Law, the signing of nafta and the withdrawal of the State in general trade and supply practices. Wal-Mart’s turnover in Mexico was replicated by the French companies Carrefour and Auchan in 1994, through a strategic alliance with Grupo Cifra in 1991. The U.S. firms Kmart and H-B-E also entered the Mexican market. This unleashed major competition with Mexican chains with national or regional presence. To address this situation, strategic adjustments took place among transnational and national firms through joint-ventures because the foreign companies’ lack of knowledge of the Mexican market indirectly helped to strengthen positioning by keeping national chains in the domestic market (See Figure 1).

Partly because of conflicts in the partnership process, obstacles to financial consolidation and strong competition, several joint-ventures were short lived, while other companies such as Kmart decided to leave the country. For this reason only some firms were strengthened in the Mexican market, or within regional niches. Eventually, the assets of several transnationals were acquired by national companies as was the case with Carrefour and Auchan, acquired by Commercial Mexicana and Chedraui, respectively. An exception was the strategic partnership between Grupo Cifra and Wal-Mart in 1991 which led to the complete acquisition of the Mexican firm by the U.S. firm in 1997. In the years prior to its acquisition, this group remained the main national chain of supermarkets. H-B-E continued operations in some regional niches in the North East and Center West, while Gigante was acquired by the Soriana Group, which jumped from being a company with regional operations to one in second place nationally. Commercial Mexicana maintained its strategic link with Costco under the “Price Club” format although it is worth mentioning that the Mexican firm was recently presented with a financial rescue package by the federal government on account of its liabilities.5


Figure 1. Evolution of Main Food Distribution Corporations and Companies in Mexico


Source: Prepared by the authors based on antad(2010); Moreno (2012) and Wal-Mart, Soriana, Comercial Mexicana, Chedraui, H-E-B, Casa Ley, Oxxo and 7-Eleven web pages.

With the main partnerships, bankruptcies and takeovers finalized, the increased competition of the main groups led to a strategy of greater diversification of format and size of establishments. The current types and dimensions of units vary from hypermarkets and retail price clubs (sales areas from 10,000 to 20,00m2), different types of supermarkets and self-service stores (from 4,000 to 6,000m2), establishments with low-price formats, warehouse stores or the sale of gourmet products aimed a high earners (between 2,000 and 3,500m2, small local supermarkets (300-500m2) and convenience stores (sales areas between 50 and 100m2).

According to the National Association of Self-Service and Department Stores (antad) the self-service and supermarket sector in Mexico consisted of 37 chains, 4,954 establishments, 13.5 million m2 of sales area and generated just over 388,000 direct jobs in 2012 (antad, 2012). The current scenario in modern food distribution in Mexico is dominated by four groups: Wal-Mart, Soriana, Chedraui and Comercial Mexicana. It is worth noting that Wal-Mart is the main chain with approximately 2000 establishments. Soriana occupies second place with just over 600 establishments, followed by Comercial Mexicana with 232 establishments and Chedraui in fourth place with just over 200 units (see Table 3).

Moreover, several firms have consolidated operations in different regions. Casa Ley stands out with around 150 establishments in 12 states in the Mid-West, North and North-East. Alsuper (Futurama Group) has 52 stores in three states in the north of the country. The U.S. firm H-B-E has 32 establishments in six states in the North East and Bajío and finally, Arteli has 31 outlets located mainly in Tamaulipas and Veracruz. Convenience stores have the largest number of units in the country, owing to their dimensions (although with the smallest sales area per unit). It is estimated that there are currently around 20,000 outlets in this category, with the Oxxo chain owning a 50% share (antad, 2010).

In terms of sales figures, Wal-Mart stands out, and according to the cnn register Expansión en 2012 occupies third place in the ranking of 500 most important firms in Mexico. Wal-Mart holds first place in the main retail trade corporations. The corporation reports sales rising to 453,133 million pesos in 2012 (including those reported for Sam’s Club), followed by Soriana with 98,263 million pesos. The convenience store chain Oxxo (Femsa Comercio) holds third place turning over 74,112 million pesos, above the Grupo Comercial Chedraui with 57, 487 million pesos and Controladora Comercial Mexicana with 43,784 million pesos (cnn-Expansión, 2012). Independent of the weight of these chains in the Mexican market, the predominance of the transnational Wal-Mart stands out with 62% of the total sales reported by the five main retail firms in Mexico. In addition, this firm owns almost 40% of sales area in the country considering the sales area of the 32 most important supermarket chains reported by antad.

From a theoretical perspective, the expansion of modern sales units occurs mainly in the contemporary city and is related to restructuration processes in the tertiary sector. While historic centers in cities have traditionally played an important role in centralizing commercial channels for goods and services, it is more profitable for companies to develop decentralized location strategies as the city expands and new urban agglomerations arise. These disperse locations generate new centers in the form of nuclei, linear developments and specialized consumption areas, creating polycenter patterns6 which spread out in large metropolitan areas. This would explain the enormous growth that modern commerce has experienced in the mzmc with a market of approximately 20 million consumers accommodating the 612 premises of the four main supermarket chains. This phenomenon also applies in most of the large metropolitan zones in the country where there is expansion towards the periphery areas of cities. These areas promote the growth of supermarkets to cover emerging markets.

The rise of commercial centers in the form of hypermarkets, commercial plazas and centers, malls, among others corresponds to changes in trade centers in a large number of cities, both from the point of view of economic structure and spacial organization (Amaya, 2009: 265). To an extent, the complex interurban expansion of the supermarket model forms part of this process although it also responds to the strategy for capturing the increased number of consumers, directed at all segments of society in multiple urban areas: the neighborhood, city, suburban areas and the metropolitan area. Thus the idea to allow for greater flexibility in premise size is key for the companies for it allows them to diversify into different locations to reach different income levels and consolidate different entry strategies in the wider urban space and stratified by income.

Although most of the supermarkets are present in the majority of Mexico’s states, one of the main expansion strategies is inter-urban, that is at sites in an extensive urban network. Operating through a network of cities has economic and logistical advantages for the company, for with storage units strategically located are possible to manage the distribution of products in hundreds of sites and demand centers efficiently. For this and the following reasons, the majority of urban sites, where there is strong demand, are the main destination for firms: there is low coverage for traditional channels in some urban locations; a culture better adapted to supermarket consumption; there is also increased competition in cities among national corporations and among these and regional ones. Interurban expansion is important because Mexico has reached a phase in which the demographic pattern is dominated by urban settlements, housing nearly 70% of the national population, equivalent to just over 80 million inhabitants located in 383 locations classified in the city category (Conapo-Sedesol-Segob, 2012:22).

Mapping showing the locations of the four main supermarket chains reveals the extent to which the supermarket model has entered and expanded within the national urban system. The mzmc stands out in particular with 612 sites representing almost 30% of the total commercial sites belonging to the four corporations. Within the group of commercial units in this great metropolis, there are around 120 hypermarkets. What stands out, when considering the 10 cities that make up the national urban system (with populations of between 1 and 5 million) is that the 491 commercial units belonging to the main supermarket groups within the hierarchy are dominated by Wal-Mart and Soriana. Furthermore, a total of 382 sites serve to support commerce in 22 intermediate cities (with populations ranging from 500,000 to one million) with the exception of Wal-Mart. Most of the corporations’ commercial units belonging to the corporations are in this group. In terms of medium cities (103 sites for between 50,000 and 500,000 inhabitants) and small cities (247 sites for between 15,000 and 50,000 inhabitants) the commercial units belonging to the national supermarket chains tend to have a very low presence (less than five commercial units and in many cases only one site per urban location). This is explained by the reduced size of the market, the strong presence of regional or local chains and the difficulty that national corporations have in consolidating strategies in small, disperse urban locations and/or outside the main urban-regional systems already consolidated (see Table 3).

While the main corporations have a presence in almost the whole national urban system, the Wal-Mart chain dominates in terms of penetration and spacial distribution. Wal-Mart had 1,141 commercial units registered mid-way through the year 2010, located in 230 urban areas of which 33 were metropolitan zones. It also has a strong presence in medium and small cities with almost 260 units. Meanwhile, the Soriana group had 547 commercial units in 2012, operating in 138 urban locations, 34 of which are in metropolitan zones. Chedraui had 186 units and is present in 84 urban locations, whereas Comercial Mexicana had just over 200 sites, operating in just 42 urban locations.

Because modern trade responds to new modernization processes that require the dynamics of consumption, metropolitan cities and zones will continue to preserve spaces for consumption where the traditional and the modern combine, although traditional channels incorporate no new technology and lag behind. The new supply and distribution pattern for food will depend to a large extent on the control wielded by the corporations on retail distribution. This distribution operates on different levels through different store formats and products are offered to adapt to established markets and stratified segments of the population, while being sensitive to social organizational changes in the cities.

CONCLUSIONS

Like many countries, Mexico has experienced a transition with a trend towards predominantly large national and transnational corporations in retail distribution, particularly food. The success of the modern commercial model follows technological, logistical and organizational changes that have permitted the corporations to move large volumes of products, link with thousands of suppliers and millions of clients, while incurring lower transaction costs and implementing economies of scale. This puts them in a better market position, to the detriment of traditional channels.

The hegemony of this model is the result of trends towards the hyperconcentration of commercial capital in few companies and their capacity to control larger market shares of food through broad expansion in metropolitan zones and cities in all the country. This hegemony reflects the growing bid to control productive capital and primary food producers through different subordination strategies.

The complex supermarket expansion model in the cities follows a growing consumer marketing strategy directed today at all segments of society at multiple locations within the urban space: the neighborhood, city, suburban areas and the metropolitan zone. Thus the idea to allow for more flexibility in the size of sites is a key factor for firms for it allows for diversification of location to reach different income levels and consolidate different penetration strategies.

While the supply model based on corporate control of firms is evidently dependent on the complexity of meeting concentrated demand, the effect in displacing small family-run establishments is also clear. They provide a safety net in times of economic crisis. There are also repercussions for internal food security with a supply system dependent on large firms.

There are also effects at the end of the agri-food chain in this sector, for control of primary production has a series of adverse effects on consumption habits. Food patterns are affected because the process has a significant impact on the type of food millions of consumers have access to.

BIBLIOGRAPHY

Amaya H., Carlos Andrés (2009), “Rol de los centros comerciales en la orga-nización espacial de las principales aglomeraciones urbanas de Venezuela”, Revista Geográfica Venezolana, vol. 50, num 2, Carácas, Venezuela, pp. 263-286.

antad (2010), El bicentenario del comercio en México, Mexico, Asociación Nacional de Tiendas de Autoservicio y Departamentales (consulted May 9, 2013), available at: http://www.antad.net/index.php?option=com_ wrapper&view=wrapper&Itemid=471.

________ (2012), Informe Anual 2012, Mexico, Asociación Nacional de Tiendas de Autoservicio y Departamentales (consulted March 15, 2013), available at: http://www.antad.net/informeanual12/vii_administracion.html.

Berdegué Julio A.; Thomas Reardon, and Fernando Balsevich (2005), Supermercados y sistemas agroalimentarios en América Latina, Santiago de Chile, Report for OXFAM UK, (n.pag).

cnn-Expansión (2012), Las 500 empresas más importantes de México (consulted May 12, 2013), available at: http://www.cnnexpansion. com/rankings/2012.

Conapo-Sedesol-Segob (2012), Catálogo sistema urbano nacional, Mexico, Consejo Nacional de Población, Secretaría de Desarrollo Social, Secretaría de Gobernación, Mexico.

Deloitte (2013), Global powers of retailing 2013. Retail beyond (consulted February 18, 2013), available at: www.deloitte.com/consumerbusiness.

Di Nucci, Josefina, and Diana Lan (2009), “Globalización, hiperconcentración y transnacionalización del comercio alimenticio en Argentina. El territorio 155 usado por las empresas supermercadistas”, Anales de Geografía, vol. 29, num.1, Madrid, pp. 9-33.

fao (2009), Agribusiness handbook. Food retail. Food and agriculture, Rome, UN.

Lichtenstein, Nelson (coord.) (2006), Wal-Mart el rostro del capitalismo del siglo XXI, Madrid, Editorial Popular.

Montagut, Xavier, and Esther Vivas (coords.) (2007), Supermercados, no gracias, Barcelona, Edit. Icaria.

Moreno Lázaro, Javier (2012), “Los españoles y la revolución comercial mexicana: las cadenas de supermercados, 1921-2011”, Investigaciones de Historia Económica, num. 8, Valladolid, Spain, pp. 69-82.

peec (2005), Pacific food system outlook 2005-2006. A revolution in food retailing, Singapore, Pacific Economic Cooperation Council.

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Web Pages

Wal-Mart Mexico and Central America: http://www.walmartmexico.com.mx/

Organización Soriana: http://www1.soriana.com

Grupo Chedraui: http://www.chedraui.com.mx/

Controladora Comercial Mexicana: http://www.comercialmexicana.com

Casa Ley: http://www.casaley.com.mx

H-E-B: http://www.hebmexico.com

Oxxo: http://www.oxxo.com/

7-Eleven: http://www.7-eleven.com.mx/

*Institute of Economic Research, UNAM, Mexico. jgasca@unam.mx and felipet@unam.mx



1 In the international arena, the acronym bric is used to refer jointly to Brazil, Russia, India, China and South Africa. Most of these countries have a large population in common and extensive territory, large amounts of resources, vast local markets, major participation in world trade, and geostrategic roles in their respective continents.

2 The Galland Law in France prohibits new stores larger than 300m2 from opening.

3In the home countries of the main transnational retail firms such as the United States and the United Kingdom, different consumer organizations and antisupermarket trade unions have been formed. Examples are the antitrust community “Sprawl Busters” and the “Uni-Commerce” organization that specifically denounce the aggressive practices of Wal-Mart regarding worker rights, low wages and control on suppliers, as well as the lack of respect for the environment. For more detail on this subject see Lichtenstein (2006) and Montagut and Vivas (2007).

4 Wal-Mart is a paradignatic case in retail trade for it is a leader in the main logistical, marketing, technological and organizational innovations in the sector which have been imitated by other firms. Wal-Mart currently occupies third place in the world in the 2012 Forbes list of 500 companies. In March 2013, this company had 10,818 retail units located in 27 countries under 69 different names. Wal-Mart generates 2.1 million jobs and receives 176 million customers a year, making the transnational company the largest in the world (www.walmartstores.com).

5To face competition and expand, this company incurred an unsustainable debt owing to the devaluation of the peso which led to a 43% fall on the stock market on October 10, 2008, a large proportion of its assets being in foreign exchange. The federal government granted a loan through Nacional Financiera so that it could renegotiate its debts with the U.S. worth 1.5 billion dollars (Moreno, 2012:80).

6 Polycenter patterns or polycentrism is connected with the idea that a

multinuclear space is generated in the urban metropolitan space with new productive concentrations and services attracting significant flows of goods and people in the periphery zones of cities. This means that as well as the traditional urban center, there are other sub-centers establishing complementary relationships or competition. The development of policentric structures is the result of distances increasing as the original urban space expands and also the need to reduce transport costs through the development of complexes which favor new concentrations of employment, equipment and services.

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 193, April-June 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
CP 04510, México, D.F. Tel (52 55) 56 23 01 05 and (52 55) 56 24 23 39, fax (52 55) 56 23 00 97, www.probdes.iiec.unam.mx, revprode@unam.mx. Journal Editor: Moritz Cruz. Reservation of rights to exclusive use of the title: 04-2012-070613560300-203, ISSN: pending. Person responsible for the latest update of this issue: Minerva García, Circuito Maestro Mario de la Cueva s/n, Ciudad Universitaria, Coyoacán, CP 04510, México D.F., latest update: June 27th, 2018.
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