European Bank Subsidised Lidl Expansion with A$1200 million.
This article owes its origins to an intriguing report originally published by GRAIN. You will see why I found it intriguing when you get to it. I have spent some time on the Global Farmer discussing agricultural subsidies, little did I know and I’m sure you didn’t, that the Guardian Newspaper recently revealed German discount supermarket giant Lidl and its sister chain Kaufland have benefited from almost US$900 million (A$1200 million) in public development money over the last ten years. Is this just another form of subsidy to encourage the global expansion of European supermarkets and European food?
The companies, owned by the large retail company Schwarz Group and controlled by one of Germany’s wealthiest families, received loan funding from a little-known wing of the World Bank and from the European Bank for Reconstruction and Development (EBRD). There is no suggestion there was anything ‘wrong’ with the funding, as you will see it is part of the specific mandate of these organisations funded by taxpayers and owned by governments to encourage local development, in this case in Europe.
The German Federal government, on their website has been heavily promoting both Lidl and Aldi in America to help it to become established in that country and, no doubt, sell food that has been made or produced in Germany. Lidl like Aldi, also sell a range of German made hardware, electrical goods and many other things.
Aldi already have stores in Australia and it is understood they plan many more. Lidl are also planning a chain of stores throughout Australia. In what seem like a few years in the UK they have secured over 10% market share and are causing both Tesco and Waitrose, the two biggest food retailers in the UK, to review their business plans.
They have made no secret about being ‘aggressive’ with their entry into America. Maybe interesting times for the Australian consumer, but what about the producers and what few processors are left, what of the future for them?
In the future is the market, the demand food in China, going to be a ‘Golden Fleece’ for Australian food producers? Are we capable of increasing our production to meet what we are told will be the ever-increasing markets for food in Asia?
More importantly those who should know, the ever-increasing number of ‘China experts’, claim that the growing middle class in China and other countries, like Indonesia, will be able to afford, pretty much at any price, what we produce and there are already several precedents that indicate that could be true. Milk as we shall see, Wagyu beef, premium wine and so on.
I don’t think Australia stands a chance when it comes to developing a bigger business in China or anywhere else. I think we will fiddle around the edges, make big of little things. The reasons for my pessimism are:
Productivity in Australia is going down. Costs are going up. We continue to fight among ourselves we refuse to become organised and speak with one voice.
Farmers are suspicious of everyone looking at agriculture with new eyes, especially if they are foreign and have money.
Farmers (generally) are heavily in debt so they believe, and they haven’t been told any different, that their potential to change and repay those debts in the short term so that change can happen, is limited. How to reduce crop and increase sheep for instance. Where will the money come from? Are the banks in favour of change? Will change affect the value of the land?
As the graphs below show we have a lot to do in the export arena just to catch up with where we were, once upon a time, and not just with China. We have also lost market share with Japan and Indonesia. Farmers need to know the reasons why. Those who process the food they produce for export are losing market share, market share in one of the fastest growing markets on earth. Why is that. Are we too expensive?
Given that progressive loss in other markets, what chance China?