New Europe College Regional Program Yearbook 2001-2002

N.E.C. Yearbook 2001-2002
conversion into a market-oriented one. However, there appears to be a
danger of switching from one network failure (state domination) to another:
domination by foreign firms. Both the old and new networks show
disconnectedness within the system. In the upstream segments of the
food industry (i.e., agriculture), the state ceased to be a system integrator
with the fall of the communist system. The problems of agriculture have
become more severe, and old vertical relationships were all destroyed
(OECD, 1998; OECD, 2000).
The food-processing industry is strongly linked to agriculture, which
functions as its main raw material supplier. There were significant
differences between the structure of the food chain in the capitalist system
and that in the communist system. In the West, farmers were typically
small producers in competitive conditions, while processors were large
producers in oligopolistic or even monopolistic market conditions.
Therefore, the retailers, who were generally also small units operating
under competitive conditions, were driven by the processors. The recent
tendency is towards the dominance of large firms with a fringe of smaller
ones, but driven by oligopolistic retailers, like Carrefour, Metro, Tesco,
etc., who control not only the food manufacturers but also the agricultural
growers. This is strongly related to the high saturation and fierce
competition in the downstream of the food industry in the West and reflects
the shift from being supplier-dominated to being demand-driven (cf.
Gereffi, 1999, buyer-driven value chain literature).
In very general terms, in the communist era, the collectivization of
agriculture was not only an obstacle to competition but also determined
the organization of the food industry. Instead of agriculture being dependent
upon the processing firms, the processing factories were dependent upon
the agricultural collective farms; thus, in contrast to the West, the upstream
was favored in lieu of manufacturing. The retailing part of the industry
was oligopolistically or monopolistically state-run and driven by the state
processors (OECD, 2000). A stagnating and supply-driven industry was
left to be revitalized primarily by the inflow of foreign technology
following transition (von Tunzelmann & Charpiot-Michaud, 2000), at least
in the mid-term.
320