Food supplies in a globalising economy

The role of transnational corporations (TNCs) in food production, processing

and distribution

Starter

A TNC is a company or corporation with branches

all over the world. The Headquarters can be

based anywhere in the world but production tends

to be based in newly industrialising countries due to the strong work

ethic.

A TNC is a company or corporation which employs over 5000 people. The headquarters

and production are concentrated in MEDCs where there are more skilled workers

and better communications available. However their

products are transported to markets all over the world.

A TNC is a global company or corporation with branches all over the world. The Headquarters and research and development

tend to be based in MEDCs such as the USA or Japan where there is a skilled workforce. Production is often, but not always, based

in LEDCs where labour is cheaper and there are fewer regulations.

• To understand the role of TNCs in food production, processing and distribution.

Learning objectives

A TNC is a company or an enterprise that manages production or delivers services in more than one

country. Headquarters tend to be located in the home country with operations in several other countries,

known as host countries.

The role of TNCs

What has this got to do with food supply?

TNCs are involved in every stage of the

food industry!

Recognise these?

Behind the many different brands names for foods that

are consumed worldwide, there are a small number of

invisible giants!

This is a generic term that refers to the various businesses involved in food production.

E.g. farming, seed supply, agrichemicals, farm machinery, wholesale and distribution, processing,

marketing and sales.

Key term: Agribusiness

A small number of such companies dominate each part of the food chain in

MEDCs.

This is when a small number of firms operate at one stage in the supply chain (e.g. coffee growing),

leading to market power and large profits.

Key term: Horizontal integration

Look at the case study box on page 233. What does it show? Fact! 60% of the

McDonald’s meals eaten worldwide contain wheat

supplied by Cargill.

This is when one company either owns or controls (through joint ventures) multiple stages in a

supply chain.

Key term: Vertical integration

For example, Dole owns plantations and canning

facilities, and has the marketing power to ship

pineapples from plantations in the Philippines to

consumers all over the world.

The role of large agribusinesses in the agricultural market is

increasing! This dominance has attracted

huge criticism.

Corporate control of the global food chain

Or…

There are facts about Nestle hidden in the

room.

You have four minutes to see how many you can

find!

Activity: Nestle fact hunt!

Nestle is a vertically integrated agribusiness, employing approximately 281,000 people in some 443

factories worldwide. Nestle is not only Switzerland's largest industrial company, but also the world's

largest food company in terms of revenue.

It is the world’s largest manufacturer of pet food, mineral water and coffee, and is fast increasing its

share of the ice cream market!

Nestle’s role in food production

We are going to focus on the role of Nestle in the

production, processing and distribution of

coffee…

On your desk is some information on Nestle. Use this information to complete your table to show the criticisms of

Nestle under the headings:

SocialPolitical

EconomicEnvironmental

Activity: Why is has Nestle received so much criticism?

Write in detail! You will be using this information to answer an

exam question.

• Use of GM ingredients.

• Purchasing cocoa and coffee from ivory coast, renown for using child slavery on its plantations to reduce labour costs (109,000 children employed).

• Children work punishing hours with dangerous tools, and are robbed of an education.

• Demanding US$6 million in compensation from hunger stricken Ethiopia.

• Unethical marketing of baby milk powder.

General problems

Dominance of food supply chain means that they are able to dictate terms and conditions to small farmers and suppliers who are forced to produce more at ever decreasing margins (e.g. Ethiopian coffee farmers).

General problems

• Selling coffee with illegal origins (supply chain).

• Nestle buy coffee which is grown illegally in The Bukit Barisan Selatan (BBS) National Park, a world heritage site in Sumatra.

• The park is renown for critically endangered tigers, elephants and rhinos. Many animals have abandoned the area.

• Environmental destruction in Brazil.

Environmental issues

Food supplies in a globalising economy

The role of transnational corporations (TNCs) in food production, processing

and distribution

Exam technique practice

Name a major TNC involved in food production, processing or supplying food and outline its role in food supply in a globalising economy (4)

Exam question 1

Name a major TNC involved in food production, processing or supplying food

and outline its role in food supply in a globalising economy (4)

Pick apart the question – decide what the

focus of the question isNestle

Exam question 1

Horizontally integrated agribusiness

Largest food processing company in the world

HQ in Switzerland Employs over 281,000 people in 443 factories

worldwideLargest manufacturer of pet food, mineral water

and coffeeCoffee is grown in many

LEDC’s such as Indonesia, exported to USA for processing then distributed worldwide

Get across the theme of a globalising

economy!

What is Nestle's role in food supply?

Nestle is a horizontally integrated agribusiness, and the largest transnational food processing company in the world. The headquarters are in Switzerland, but Nestle employs approximately 281,000 people in some 443 factories worldwide. Initially Nestle was founded on

powdered milk, but today it is the world biggest manufacturer of pet food, mineral water, coffee and ice

cream. In terms of coffee and cocoa, its role in food supply is one of production and processing, although it’s products are exported and marketed all over the world. Coffee is grown in LEDC’s such as Brazil and Indonesia

and then exported to countries such as the USA where it is processed in factories. Coffee is then shipped all over

the world under the name of Nescafe.Use the mark scheme to mark the answer above. How could you improve the answer?

A model answer?

• Remember, the devil is in the detail!

• If your answer is wishy washy and vague you will not get out of level 1.

• To get into level 2/3 you need to include specific characteristics of Nestle in the context of the question.

Activity: Answer the question

In recent years TNC’s have had an increasing role in the production,

processing and distribution of food. What reservations have been expressed about

the increasing importance of such companies? (15)

Pick apart the question – decide what the

focus of the question is

Exam question 2

In recent years TNC’s have had an increasing role in the production,

processing and distribution of food. What reservations have been expressed about

the increasing importance of such companies? (15)

Name TNC and relate

back to question

Describe the problems with such companies? Can you categorise

them/ back up each negative point with an example.

Approach like a mini

essay!

Exam question 2

Briefly introduce Nestle, with some evidence to support that it is a TNC

Swiss companyOperates in 443

factories worldwide

Largest food processing company in the world

Largest manufacturer of pet food, mineral water and coffee

Introduction

Describe the reservations (negative aspects) about Nestle.

Try to categorise the reservations you have identified. Stick to around 3 or 4 max!

Each reservation must be firmly grounded in / supported by a detailed example or case study.

Main body

EnvironmentalEnvironmental destruction and

degradation

Socio-economic

Use of child labour

Political Dictates terms and conditions to farmers

In brief…

REASONS FOR SOMETHING

and

RESULTS OR EFFECTS OF SOMETHING

WHY? SO WHAT?

Describing = link together

CONSEQUENCES or EFFECTS

Something happens…

SO

THEREFORE

AS A RESULT

CONSEQUENTLY

LEADING TO

MEANING THAT

Something else happens

A BASIC (or GATE) DESCRIPTION

(Level 1)

(The way in to the answer)

Nestle has been criticised for using environmentally damaging processes…

AS A RESULT

…of suppliers destroying protected areas of forest to grow coffee for Nescafe, a brand of Nestle.

A CLEAR or STEP-UP EXPLANATION

(Add some more detail to relate the point you have made back to the original

question)

Level 2

LEADING TO

...endangered species of tiger and rhino abandoning their habitat in Sumatra

Nestle has been criticised for using environmentally damaging processes…

...of suppliers destroying protected areas of forest to grow coffee for Nescafe, a brand of Nestle.

AS A RESULT

A LADDER EXPLANATION

(The answer is built up, and is firmly grounded in the context of a detailed case study)

Level 3

AS A RESULT

CONSEQUENTLY

Many critically endangered species are under threat, including elephants, rhino and the Sumatran tiger, as they are forced to leave their habitat. Some 45,000 hectares of land have been cleared and it is estimated that there are just 400 Sumatran tigers remaining, and they will become extinct in the next decade.

Nestle has been criticised for using environmentally damaging processes in countries with lenient environmental regulations, such as Indonesia.

20% of protected forest in the Bukit Barisan Selatan (BBS) national park in Sumatra has been destroyed. This is because coffee is being grown illegally by suppliers, then mixed with legally grown coffee beans to boost profits. The beans are then bought by companies such as Nestle and Kraft.

Firstly, companies such as Nestle have been criticised for their environmentally damaging

processes in countries with lenient environmental regulations. In Sumatra, Indonesia coffee is grown illegally in a protected area of forest which is home

to many endangered species such as Sumatran tigers, elephants and Rhino. As a result of illegal

agriculture it is estimated that 20% of the forest has been degraded, covering some 45,000 hectares

resulting in wildlife abandoning the area. It is thought that the tigers will be extinct in less than a decade, yet Nestle continues to source coffee from

the area.

A model answer?

Now do the same for the social, economic (or socio-economic if you prefer) and political issues

associated with Nestle.

A model answer?

Referring back to the original question, summarise the main reservations people have about TNCs

like Nestle.

You could balance the argument by briefly outlining some of the more positive aspects of

TNCs!

A model answer?