Multi-National Food Chains: The Poor Aren’t Buying It

Multi-national food chains are cropping up in poor countries, but no one is buying.

It sounds like a good idea in theory. Poor people require cheap food, and giant food chains can provide them. So why aren’t the poor lined up outside the doors to buy the goods?

In developed countries, consumers flock to these chains to buy their groceries at cheaper prices than they might get at the neighborhood store. One would think that the same would be true in poorer countries. It seems this is not the case.

In a study by Bart Minten, a Senior Research Fellow at the New Delhi office of the International Food Policy Research Institute, Minten concludes that even at very low prices, “food prices in the global retail chains are 40-90% higher than those in traditional retail markets.” His study found that shoppers were still not willing to pay the prices of the large global retail chains, instead preferring to do their shopping at the local markets “who operate at very low margins and carry local foods of widely varying quality largely untouched by modern agriculture, both of which would be unacceptable to a multinational company.”

If Minten’s conclusions are correct, multinational food chains will have a hard time enjoying the huge profit margins that they can enjoy in more developed countries. The surge in percentages of food retail that supermarkets have enjoyed in recent years may become a flop in some developing countries. As Minten remarks, “If the chains do survive in poorer countries, they will likely remain exclusively the domain of the middle classes, especially so in the poorest African nations.”

Apart from grocery chains, fast-food chains are also opening across poorer countries. These chains, however, are more cognizant that the average consumer in these countries cannot afford fast food, and deliberately target the middle class.

Although the idea of supplying food cheaply to consumers in poorer countries would seem to be a wonderful idea at first glance, those considering such a move might reconsider.

Source: Rudy Faust, University of Chicago Press Journals

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