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.
Learning objectives
• To understand the role of TNCs in food production,
processing and distribution.
The role of TNCs
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.
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!
Key term: Agribusiness
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.
A small number of such
companies dominate each part of
the food chain in MEDCs.
Key term: Horizontal integration
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.
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.
Key term: Vertical integration
This is when one company either owns or controls
(through joint ventures) multiple stages in a supply
chain.
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.
Corporate control of the global food chain
The role of large
agribusinesses in the
agricultural market is
increasing! This dominance
has attracted huge
criticism.
Or…
Activity: Nestle fact hunt!
There are facts about
Nestle hidden in the room.
You have four minutes to
see how many you can find!
Nestle’s role in food production
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!
We are going to
focus on the role
of Nestle in the
production,
processing and
distribution of
coffee…
Activity: Why is has Nestle received so much
criticism?
On your desk is some information
on Nestle. Use this information to
complete your table to show the
criticisms of Nestle under the
headings:
Social
Political
Economic
Environmental
Write in detail! You will be using
this information to answer an
exam question.
General problems
• 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).
Environmental issues
• 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.
Food supplies in a globalising economy
The role of transnational corporations
(TNCs) in food production, processing and
distribution
Exam technique
practice
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)
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 is
Nestle
What is Nestle's role in food supply?
Horizontally integrated
agribusiness
Largest food processing
company in the world
HQ in Switzerland
Employs over 281,000
people in 443 factories
worldwide
Largest manufacturer of
pet food, mineral water
and coffee
Get across
the theme of
a globalising
economy!
Coffee is grown in many
LEDC’s such as Indonesia,
exported to USA for
processing then
distributed worldwide
A model answer?
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?
Activity: Answer the question
• 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.
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)
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!
Introduction
Briefly introduce Nestle, with some evidence to
support that it is a TNC
Swiss company
Operates in 443
factories worldwide
Largest food processing company in the world
Largest manufacturer of pet food, mineral
water and coffee
Main body
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.
In brief…
Environmental
Environmental destruction and
degradation
Socio-economic
Use of child labour
Political
Dictates terms and conditions to
farmers
Describing = link together
WHY?
SO WHAT?
and
REASONS FOR
SOMETHING
RESULTS OR EFFECTS
OF SOMETHING
CONSEQUENCES
or EFFECTS
Something
happens…
AS A
RESULT
LEADING
TO
SO
MEANING
THAT
CONSEQUENTLY
THEREFORE
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
AS A
RESULT
Nestle has been
criticised for using
environmentally
damaging processes…
...endangered species of
tiger and rhino abandoning
their habitat in Sumatra
...of suppliers destroying
protected areas of forest to grow
coffee for Nescafe, a brand of
Nestle.
A LADDER EXPLANATION
(The answer is built up, and is firmly grounded in
the context of a detailed case study)
Level 3
CONSEQUENTLY
AS A
RESULT
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.
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.
Nestle has been criticised for using environmentally
damaging processes in countries with lenient environmental
regulations, such as Indonesia.
A model answer?
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 socioeconomic 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!