Supermarket power, own-labels, and manufacturer counterstrategies: International relations of cooperation and competition in the fruit canning industry

Abstract

Growing supermarket dominance and the expansion of own-label market share in Australia has put considerable pressure on agri-food manufacturers, and the recent movement of a number of manufacturing operations off-shore has attracted widespread attention. This paper examines the pursuit of an international manufacturing base by SPC Ardmona, one of Australia's major fruit and vegetable processors, with a focus on strategic alliances formed with Siam Foods in Thailand and Rhodes Food Group in South Africa/Swaziland. Strategic horizontal alliances have become increasingly important for manufacturers seeking to counter retailer dominance, yet have received little attention in the agri-food literature. The two alliances examined in this paper illustrate the profound importance of prevailing societal and institutional environments in which production networks 'touch-down', and their influence on firm-level dynamics of trust, motivation, corporate values, and strategic objectives. Horizontal alliances can offer a promising alternative to cut-throat competition and a 'race- to-the-bottom' between agri-food manufacturers. However, with own-label sourcing strategies deepening competition between geographically-disparate manufacturers, identifying compatible alliance partners is likely to become an increasingly greater challenge. © 2012 Springer Science+Business Media Dordrecht.