No foothold for Wal-Mart in Germany. But local food still loses.

by Patty Cantrell on October 13, 2010

Five years ago, the international discount giant Wal-Mart started setting up shop in Germany, one of the last frontiers on Wal-Mart’s road to world domination of consumer product and grocery sales.

Today, Wal-Mart’s blue and white megastores are nowhere to be seen in this land of thousands of brands of local sausages and beer. But it was no local-economy protecting protestors that sent the big retailer packing. Quite the opposite.

The force that has kept Wal-Mart at bay so far in Germany is the same price slashing for which Wal-Mart is so famous. Only it was Germany’s own big retailers that beat Wal-Mart to it, taking quick action to protect their market by discounting already low-priced groceries to levels well below those Wal-Mart could offer.

I picked up this story from Dr. Bettina Koenig and Dr. Wolfgang Bokelmann of Humboldt University in Berlin, who I visited last week while visiting friends in the German capitol city. The produce industry researchers spend their time trying to find ways for Germany’s farmers to make a marketing way for regional and organic products in more and more consolidated grocery and food service markets.

Germans buy 80 percent of their fruits and vegetables at those low, low supermarket prices. As in the United States, the consolidated purchasing and retailing of such large-volume markets makes it difficult for a smaller group of farms to get an audience with a buyer, let alone valuable space on those mass-market shelves.

We only think Germany has lots of local food because there is so much more of it than we have in the United States. The other 20 percent of fruits and vegetables sold in Germany show up at farmers markets or in smaller, independent grocery stores. Markets take place at least weekly in nearly every village or city section. Then there are the small Mom and Pop stores (“Tante Emma Laeden” in German) that continue to exist alongside the growing number of ethnic grocers, mostly Turkish, that stock a wide array of quality and low-cost fresh produce.

The fact of fresh and local produce so close at hand for everyone speaks more to Germany’s land use patterns than to any agricultural or food policy goals. Keeping open land open for everyone’s use, and town centers busy with residential and commercial life, is just part of the culture, which brings people and produce closer together.

But more and more Germans, similar to U.S. consumers, are concerned about the hidden costs of the concentrated agricultural and super-marketing channels that result in Wal Mart running scared.

Dr. Koenig and Dr. Bokelmann are, like their counterparts in the United States, trying to connect local food producers with the growing demand for more regional and organic products. Their surveys also show that people want local, regional, and organic for a broad range of economic, environmental, and social reasons.

The researchers spoke of two approaches toward which communities and organizations in the United States are also working. One is the concept of regional food hubs, by which farmers, distributors, and others bring products together for more efficient handling and marketing, both direct and wholesale.

“Some of the traditional, wholesale market halls in Germany are looking at this,” said Dr. Koenig. “They have sort of lost their importance in today’s markets and are looking for a new function.”

In the U.S., a number of regional food hub initiatives are underway, including a new statewide network of existing and emerging hubs in California and an effort by USDA’s Know Your Farmer Know Your Food team to find and communicate the best models across the country.

Another is the concept of “values-based food supply chains,” or food value chains, in which farmers, distributors, and others work together as strategic partners to meet new values that consumers are putting into their food purchases. They build transparent, trusting, mutual-benefit relationships in order to bring to market food that comes with sustainable growing methods, fair labor practices, and local economic impacts, for example.

A number of researchers and practitioners in the United States, as in Germany, are looking at how these food value chains are emerging, how they work, and how to help others try them, too.

The driving force is definitely the consumers, said Dr. Bokelmann. “Big supermarkets are very keen to bring consumers more of what they want.”  But the relationships they need to build and systems needed to differentiate those regional and organic products are the challenge, he said.

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