Motives, Consequences and Determinants of Vertical Contractual Relations in Agriculture: Some Results of an Empirical Investigation in Germany

Abstract

With the completion of the Single European Market, which has been accompanied by fundamental changes in agricultural price policy, as well as the steady growth in concentration of the food processing and food retailing sectors new forms of marketing arrangements are often discussed by managers, farmers, academics and government representatives. At the same time, product characteristics like food quality, food safety and the fact that processes are transparent throughout the system are becoming more and more the determining factors in food purchasing decisions of an increasingly affluent society. Quality of products, reliability in delivering promised features and services are becoming the key success factors throughout the food chain. The rapidly expanding number of guarantees and certificates in food processing and retailing, often based on ISO-9000 standard documentation, as well as the introduction of processor/retailer driven integrated quality programs clearly reflect this development (Maurer and Drescher, 1996: 229; Drescher and Kühl, 1996: 69). These factors, as well as recently amended regulations on product safety and product liability are favouring and supporting the establishment of close vertical relationships between agricultural producers and firms operating in up- and downstream sectors of the agri-food system.