South African Wal-Mart raises food supply chain concernsAs U.S. retail giant Wal-Mart prepares to enter South Africa, many local food producers are concerned about the impact that the superstore could have on their supply chains.

Notably, Wal-Mart's aggressive pricing strategy - which generally sources food and materials from the cheapest, rather than the most ethical or sustainable, sources - could drive business away from local merchants. Ecowise, a hygiene and sanitation company servicing the food sector, speculates that Wal-Mart may use its global food importing network to bring less expensive food products into South Africa, rather than purchase goods from local farmers, according to the Business Report.

Even worse, sourcing food from such distant locals could lead to contamination, spoiled products and other health and safety hazards. "As the distance that food has to travel to reach the end-consumer lengthens and the number of stakeholders in the supply chain increases, the risk of contamination multiplies exponentially," said Gareth Lloyd-Jones, managing director of Ecowise.

He added that South Africa's food safety standards are among the most developed and hygienic in the world: "South African food producers are required to show total compliance to legislation and retailer requirements through the maintenance of an International Organization for Standardization and other rating bodies, as well as being required to pass regular inspections from the department of agriculture."

Not everyone, however, is concerned that a globalization of the supply chain would result in increased contamination of South African food sources. Chris Griffiths, a professor of microbiology at the University of Wales who published research in Food Review in September and October, warned that any producer whose product has a shelf life of longer than five days should consider the risks associated with the bacteria - no matter where the food is sourced from.

"We live in the age of having global food supplies and so global pathogens and it would be unlikely if South Africa was not affected," Griffiths said.

Food-borne pathogens include listeria, salmonella and E. coli, all of which can be fatal if left untreated, but are generally curable.

South African supply chain providers also worry that overseas sourcing from massive companies able to produce huge quantities of food for extremely low prices could put them out of a job, in a country where nearly a quarter of the population is already unemployed.

On the other hand, South African shoppers may find better pricing at stores across the nation.

Credit ratings agency Fitch Ratings said the landscape of the South African retail market is likely to change significantly with the arrival of Wal-Mart.

"This is expected to lead to increased competition and margin pressure driving greater efficiencies and price benefits to consumers through increased value and choice," the agency said.

In other words, the presence of Wal-Mart will likely force many other retailers to lower their prices - with the caveat that those who cannot adapt will indeed go out of business.

"Fitch expects that this will lead to some margin pressure among South Africa's large supermarket chains, which include Pick n Pay Stores, Shoprite Holdings, Spar Group and Woolworths Holdings and would also over time present a major strategic threat to smaller retailers," Fitch continued.

Wal-Mart announced its intention to buy South African retailer Massmart Holdings for about $4.25 billion back in September. The deal is part of Wal-Mart's bid to jumpstart growth after it was largely stalled by the sluggish American economy. South Africa is particularly vulnerable to Wal-Mart's bargain pricing strategies, because despite the country's fast-growing economy, it struggles with poverty, crime and a 24 percent unemployment rate.
Share To:

Strategic Sourceror

Post A Comment:

0 comments so far,add yours