Figure 2a illustrates the food supply chain in the United States showing the

Figure 2a illustrates the food supply chain in the

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Figure 2a illustrates the food supply chain in the United States, showing the classic line of contracting from production (agriculture and fisheries) to food processing, warehouse and distri- bution, and all the way through to firms that sell food to consumers (retailers, restaurants, and food service contractors that provide institutional food services to schools, hospitals, cafeterias; Bernhardt et al. 2016). Although the food supply chain is not new, its nature has changed. The consolidation of customer-facing segments of the supply chain—in retail, restaurants, and food service contractor firms—has placed new pressures on companies and workers in upstream seg- ments of the chain to reduce costs. In the retail segment of the food supply chain, increasing concentration is notable as supermarket chains consolidate to compete with Walmart, now the largest grocery chain in the United States; its requirement that suppliers keep costs low has rever- berated along the food supply chain, depressing wages and unionization rates, and worsening working conditions in upstream companies (Food Chain Workers Alliance and Solidarity Research Cooperative 2016). The food service contractor segment that serves institutional clients is a highly concentrated part of the food supply chain. The top four companies—Compass, Aramark, Sodexo, and Delaware North—represent nearly 76 percent of the total industry revenue (Brennan 2014). This segment of the food chain has experienced rapid growth: the clients it serves are under pressure from financial markets to focus on their core competencies and outsource nonessential functions. Interfirm contracting includes a wide array of business-to-business transactions that are not well captured by the supply chain paradigm. Figure 2b illustrates what Barenberg (2015) calls the “hub and spoke” model of contracting, where the lead firm contracts with a number of other firms for on-site services. The diagram highlights the case of a building owner that contracts for on-site and off-site services. We can draw on our previous example to provide another illustration by putting any of the food service contractors at the hub and describing the spokes. Capitalizing on their relationships with government, education, business, and other institutions, these firms have expanded the services they offer to include uniform rental, laundry and linen services, environ- mental services, technical support, security, patient transportation, clinical equipment mainte- nance and repair services, and facilities management services. The major food contractor service firms also enjoy substantial monopsony power that allows them to dictate wages when hiring workers. Workers employed directly by these firms earn an average of just $22,568 a year; the large and growing number of contingent workers earns even less. Overall the wage bill in food contractor services fell as a percentage of revenue over 2009 to 2013, raising the average industry profit margin over this period (Brennan 2014).
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