Retail giants are increasingly controlling the German food chain

Food processing has been undergoing drastic structural change for decades. Researchers led by Prof. Dr. Arnim Wiek, Humboldt Professor of Sustainable Food Management at the Institute of Economics at the University of Freiburg, have investigated what is shaping this change, what its causes are and what consequences it entails. To do so, they evaluated specialist literature and statistical data and spoke to representatives from research, associations, trade unions and companies. The researchers also investigated how companies are responding creatively and proactively to the challenges of structural change with innovations and how effective previous political measures have been. The study on food processing in Germany and the recommendations for action based on it were recently published.

Balance of power is shifting from artisanal companies to corporations

Between 2002 and 2022, the number of food processing companies across Germany fell by a total of 44% to around 25,000 companies, and in the milling industry and the bakery and butchery trades by as much as 60%. Many of them are closing because they are unable to meet key challenges - such as the shortage of skilled workers, increased energy, raw material and personnel costs, consumer trends, a lack of succession and barriers to investment and innovation. While more and more small and medium-sized enterprises (SMEs) and craft businesses are permanently disappearing from the sector, large industrial companies are increasingly concentrating market share, capital and power on themselves: in 2022, 83% of the sector's turnover (238.5 billion euros) was generated by 795 large companies, which themselves only account for 3% of companies. In many sectors, the market share of the largest four to six companies is over 50%. "Retail groups are increasingly getting involved in food processing, so that control along the entire value chain, from access to raw materials to shelf placement, is increasingly concentrated in the retail sector, which also determines prices and product standards," explains Wiek. The study shows, for example, that the Edeka Group is increasingly buying up bakery chains and also a dairy at the beginning of 2025. Schwarz Produktion, which belongs to the Schwarz Group and therefore produces for Lidl and Kaufland, is now the third-largest food processing company in Germany. The Rewe Group also has its own meat processing plants.

Key consequences - from supply gaps to deforestation

Structural change is making the food system as a whole more susceptible to crises. Wiek sees a threat to security of supply, for example: "The more food processing is concentrated in a few large companies, the more vulnerable the food system becomes to disruptions. If corporations fail or their global supply chains are disrupted, it will become increasingly difficult for the ever fewer remaining regional processors to compensate for these failures". In addition, increasing industrial processing means that the demand for raw materials is increasingly focused on uniform, high-performance crops and animal breeds. This in turn favors monocultures and suppresses the diversity of varieties in the fields, resulting in the loss of habitats and a decline in biodiversity. Structural change also has a negative impact on public health. While the proportion of industrially processed products with a high sugar, salt and fat content is increasing, the availability of high-quality, nutrient-rich artisanal products is decreasing. To illustrate the economic costs of diet-related diseases, the scientists refer to a study from 2023, which puts these at around 50 billion euros per year.

Study identifies four key fields of action

The study considers previous economic policy measures to be inadequate, as the instruments used are not sufficiently geared towards the causes. In addition, a coherent approach across local, state, federal and EU levels is lacking. The researchers have identified four areas of action to counter structural change: instead of promoting short-term projects, the causes of the problem should be addressed first and foremost. In addition, funding programs, subsidies and infrastructure should be tailored more closely to small and medium-sized enterprises (SMEs) and craft businesses - as should existing regulation. Finally, they recommend systematically measuring the impact of measures across the entire sector in order to better decide which ones are effective.