The existence of buyer power in the Italian fresh milk supply chain

Abstract

Purpose

Buyer power can be defined as the ability to obtain trade terms more favourable than a supplier’s normal trade terms. The purpose of this paper is to estimate existence of buyer power in the Italian market of fresh milk. The sector is characterised by high industrial and retail firms concentration and a significant gap between the downstream and upstream prices exists.

Design/methodology/approach

The authors applied the “first-pass” test proposed by Lloyd et al. (2009) on a set of monthly price indexes series from 2000 to 2013 in order to estimate if a buyer power exists in this sector. This in order to verify how prices are transmitted along the supply chain and to determine if buyer power contributes in conditioning the retail-producer price spread.

Findings

Estimated results suggest that buyer power exists in the Italian fresh milk supply chain and oligopsonistic behaviour affects the spread between downstream and upstream prices.

Originality/value

The paper gives a contribute on estimation of buyer power in the agro-food supply chains. However, more research needs to be carried out in order to precisely evaluate the nature and the causes of presence of buyer power.

Citation

Madau, F.A., Furesi, R. and Pulina, P. (2016), "The existence of buyer power in the Italian fresh milk supply chain", British Food Journal, Vol. 118 No. 1, pp. 70-82. https://doi.org/10.1108/BFJ-12-2014-0395