A new merger in Chile's supermarket sector will make it the most concentrated in the world with three chains accounting for 90% of all food sales, warns a U.S. Department of Agriculture (USDA) report.

SMU corporation (Unimarc supermarkets) and Supermercados del Sur are proposing joining forces which would leave Wal-Mart and Cencosud as the sole competitors.

The Association of Professional Industrial Suppliers (AGIP) President Vasco Costa, is calling for a self-regulatory system to guard against potential market abuse.

“This new market situation forces us to be sure to avoid any practice that could threaten free competition and affect the consumer. We need to watch over consumer rights, as well as the rights of providers, and the industry as a whole," he said.

If the new SMU-Supermercados de Sur merger goes ahead it would control 24% of the market with Wal-Mart still in pole position at 34%, followed by Cencosud with 30.5%.

However, SMU described the move as good news for consumers and employees saying the merger would stabilize prices.

Conferderation of Production and Commerce president Lorenzo Constans, agreed and said the merger would benefit customers with price reductions.

But Universidad de Chile retail studies center researcher Ricardo Montoya, was sceptical about the proposal.

"Historically, they do not generate lower prices for consumers; instead, economies of scale are achieved by offering disadvantageous conditions to the suppliers."

Supermarket concentration of the top three firms is 62% in neighboring Argentina while in the U.S. it is 32% and 42% in the U.K.

In Chile, Wal-Mart owns of Lider, Ekono, Bodega and aCuenta while Cencosud controls Jumbo and Santa Isabel.

Photo: Elranco.cl

www.freshfruitportal.com