Lead firms exist in diverse segments of the value chain
At various stages of the food production value chain, one can find lead firms that dominate the outcomes and linkages within the chain. The power relationships these lead firms have with their competitors and suppliers determine the governance structure of the chain. For example, KFC is one of the world’s largest buyers of chicken, and it dictates what type of chickens farmers should raise and the product and process standards these chickens must meet in order for KFC to purchase them. Because these standards call for a high level of technological sophistication and efficiency, only the largest agro-businesses, such as Tyson’s and Pilgrim’s Pride, can become a supplier for KFC.
Similarly, TNC manufacturers like McCain that buy russet potatoes for McDonald’s french fries dictate product standards to the potato growers that supply them. McCain may choose to have more vertical control (i.e., direct ownership) over the processing, packaging, and distribution stages of the supply chain for their french fries because these practices may entail sophisticated production techniques that are best performed in-house. Alternatively, transnational manufacturers may peg their business practices to the demands of global retail buyers. In fact, retail giants such as Wal*Mart are likely to refuse to sell McCain’s or J.R. Simplot’s frozen french fries unless they meet specific pricing and packaging requirements.
Determinants of childhood obesity can be associated with the behavior of lead firms in global food production systems. Researchers have adopted the “energy in” and “energy out” model of childhood obesity (Glass and McAtee 2006; Cutler et al. 2003). “Energy in” refers to the reasons why children consume specific foods, and “energy out” relates to behaviors related to an active or sedentary lifestyle. Factors highlighted by the “energy in” literature, such as a corporate food culture, marketing to youth, and the availability of unhealthy snack foods, can be linked to the behavior of food TNCs. Their reach and power include the influence they have over children and parents in providing “instant food” options that cater to a modern culture, busy lives, and youth perceptions. TNCs are drivers of the global fast-food technology, processed foods, and Western cultural norms that have become so prevalent in developing countries. The global-local interactions they spark accelerate the speed with which local food producers, manufacturers, and retailers are adopting transnational businesses strategies and tailoring them to domestic needs.