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Supplier Relationship Development In The Food Industry Of Transition Economies: The Case Of Interbrew

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  • Cocks, Jack
  • Gow, Hamish R.

Abstract

This paper discusses a process of supplier relationship development and evolution within the agri-food chain of Central and Eastern Europe during transition. We use the case of Belgian multinational brewing company Interbrew to suggest that independent facilitators holding sufficient private enforcement capital with local farmers can be used to facilitate the required supply base of local raw materials. Traditional business models for local product procurement have been found to be inappropriate for operating within business environments characterized by financially distressed local farmers who possess limited trust in processors, lack the necessary relationship-specific assets, and face weak external enforcement. In such environments the presence of sufficient initial private enforcement capital is necessary to facilitate exchange and assist in the development of a sustainable local supply base. When the processors lack sufficient capital, we argue that independent facilitators can be successfully employed to provide the link between farmers and processors. Further increases to the private enforcement capital through provision of inputs, technical assistance, and guaranteed payments widen the self-enforcing range of the contract and reduce the risk of contractual breach. Thus the presence of sufficient private enforcement capital was critical in facilitating the development of a sustainable supply that, once established, enabled Interbrew to continue divesting of malting facilities and to focus on the core competencies of brewing and marketing beer.

Suggested Citation

  • Cocks, Jack & Gow, Hamish R., 2003. "Supplier Relationship Development In The Food Industry Of Transition Economies: The Case Of Interbrew," Journal of Food Distribution Research, Food Distribution Research Society, vol. 34(1), pages 1-6, March.
  • Handle: RePEc:ags:jlofdr:27945
    DOI: 10.22004/ag.econ.27945
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    References listed on IDEAS

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    1. Gow, Hamish R. & Streeter, Deborah H. & Swinnen, Johan F. M., 2000. "How private contract enforcement mechanisms can succeed where public institutions fail: the case of Juhocukor a.s," Agricultural Economics, Blackwell, vol. 23(3), pages 253-265, September.
    2. Hamish R. Gow & Johan F. M. Swinnen, 2001. "Private Enforcement Capital and Contract Enforcement in Transition Economies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 686-690.
    3. Klein, Benjamin, 1996. "Why Hold-Ups Occur: The Self-Enforcing Range of Contractual Relationships," Economic Inquiry, Western Economic Association International, vol. 34(3), pages 444-463, July.
    4. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    5. Oliver, Lance D. & Gow, Hamish R., 2002. "Successful Alliance Establishment And Evolution In A Volatile Business Environment: The Case Of "Cellars Of Canterbury"," 2002 Annual meeting, July 28-31, Long Beach, CA 19808, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    1. repec:lic:licosd:26810 is not listed on IDEAS
    2. Van Herck, Kristine & Swinnen, Johan F.M. & Deconinck, Koen, 2012. "How the East Was Won: Supply Chain Restructuring in the Eastern European Beer Market," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 61(04), pages 1-10, November.
    3. Cocks, Jack & Gow, Hamish R. & Westgren, Randall E., 2005. "Public Facilitation of Small Farmer Access to International Food Marketing Channels: An Empirical Analysis of the USDA Market Assistance Program in Armenia," 2005 Annual meeting, July 24-27, Providence, RI 19295, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Van Herck, Kristine & Swinnen, Johan F.M. & Deconinck, Koen, 2012. "How the East Was Won: Supply Chain Restructuring in the Eastern European Beer Market," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 61(4).
    5. Cocks, Jack & Gow, Hamish R. & Dunn, Daniel J., 2003. "Meeting Private Grades And Standards In Transition Agriculture: Experiences From The Armenian Dairy Industry," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 6(1), pages 1-13.
    6. Gow, Hamish & Shanoyan, Aleksan & Cocks, Jack, 2009. "Farmers’ Choices Among Alternative Dairy Marketing Channels in Armenia: Can Appropriately Designed ODA Substitute for FDI?," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 37(1), pages 1-24.

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