Increasing concentration best describes the changes in the European and North American supermarket sectors over the past decade. Competition in the home markets has intensified. The fresh produce department has become a key part of the retailer's strategy to attract and build loyalty in customers. Fresh produce consumption has increased and diversified over the past decade in the two home markets. At the same time, availability of a given item has on average "de-seasonalized" - become available year-round. These changes were driven by consumer demand, as well as great availability of produce due to increased supply from countries mainly in the southern hemisphere, in particular from Latin America, Asia, Oceania, and Africa. The above changes in demand and supply have their reflection in changes over the past decade in supermarkets' strategies in produce procurement. Those strategies included seeking new suppliers globally, for example: (1) increasing the volume and variety of produce from tropical countries; (2) buying stone fruit that is grown in the home market areas in the offseason from temperate zones in the southern hemisphere. The above has two implications: (1) the supply system from producers to a given supermarket for a given item now, on average, covers more geographical distance and more countries than a decade ago; (2) there is an increased probability (relative to a decade ago) that the producer of that item is in a country that does not necessarily have the infrastructure, institutions, and agricultural and manufacturing practices that are adequate to meet safety and quality requirements of the supermarket chain. The above two implications create strategic challenges in designing procurement. On the one hand, setting safety issues aside for a moment, the above implies that it is potentially more costly and risky to source produce, controlling for quality. That poses a competitiveness problem. On the other hand, European and North American consumers are highly sensitive to breaches of food safety, and that then adds costs related to safety evaluation of produce in sourcing. The above strategic challenges imply the need for institutional and organizational innovations at the level of a given supermarket chain, and at the inter-chain level. Those innovations are part of improving system coordination that in turn improves efficiency, as demanded by competition.
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