In recent years, category management, the retail practice of managing a group of related products as a single business unit, has undergone a fundamental transformation. What was once a discipline focused on securing the lowest unit cost has become one obsessed with supply continuity, driven by consumer expectation of year-round availability and repeated supply chain disruptions.
This ‘always on’ requirement structurally favours large, vertically integrated or globally networked suppliers who can deliver year-round continuity at scale. Smaller and mid-tier upstream suppliers, including regional processors, cooperatives, and growers, are pushed into subordinate roles or excluded entirely. This article examines the mechanics of this shift, its upstream implications, and the strategic responses available to agribusiness leaders and investors.
The collapse of just-in-time and the rise of ‘just-in-case’
Increased consumer demand has meant that year-round availability of core lines has become a base expectation. Consequently, retailers are pivoting from just-in-time to ‘just-in-case’ inventory models that prize reliability and redundancy over pure price efficiency, with supply assurance becoming an explicit criterion in supplier scorecards and listing decisions.
Both food service and retail buyers increasingly treat any gap in the supply calendar as grounds for delisting, vendor substitution, or contractual penalties. Compliance thresholds are commonly set as high as 98%, with deductions of between 3-5% of the cost of goods applied to non-compliant cases. Those deductions and the associated chargebacks can absorb between 5 and 10% of a supplier’s revenue with a given retailer and have even become a profit centre for some buyers.
Smaller suppliers typically lack the resources to dispute any charges and end up effectively paying a tax on their revenue. Whereas large multinational suppliers with multiple distribution centres can simply substitute out-of-season produce from another origin. Consequently, industry buyers have concentrated purchases with fewer, larger suppliers, reducing complexity for the retailer and raising formidable barriers for smaller producers.
How category management frameworks reshape agricultural supply and bias toward scale
The consequences extend beyond commercial outcomes and can have a significant impact on competition, rural economies, and the long-term health of agricultural systems. The demand for supply continuity has driven the financialisation of farmland and agribusiness practices. Institutional asset managers have aggregated land and production assets across continents on the reasoning that geographic spread and increased integration dilute risk and produce the stable return profile retailers demand. Increasingly acquirers are pursuing M&A to stabilise supply chains, secure upstream assets, and enhance the predictability of their earnings, often prioritising targets that offer vertical integration potential.
The effect on the producer base can be severe, and the sweet onion sector provides a stark illustration of this. In Georgia sweet onions are a seasonal speciality, available locally only from April through August. Two decades ago, approximately 200 Vidalia growers supplied them to major retail buyers, but as these buyers consolidated and consumer demand grew, producers who could not guarantee year-round produce were bypassed. Large-scale suppliers responded by building overseas supply networks, importing or growing sweet onions from Peru, Mexico and Texas. The impact has been drastic. Roughly half of the original growers are gone, and those who remain have scaled up and turned to South American imports to bridge the off-season.
Similar restructuring is visible wherever consumer demand for seasonal produce is year-round. For instance, Driscoll’s, the world’s largest berry company, contracts growers from North America, Europe, Africa, South America, Australia, and New Zealand as a way of eradicating seasonal lulls from its supply calendar. Mission Produce, which sources from over 21 countries with thousands of hectares of company-owned or partnered orchards across Latin America and Africa has adopted a similar approach.
Even retailers have moved into upstream integration. Costco built a $450 million poultry processing plant in Nebraska in an effort to stabilise its rotisserie chicken supply, and Walmart opened its own dairy processing plant to supply private-label milk. These moves serve as a warning to suppliers, as they demonstrate retailers’ willingness to integrate vertically when external suppliers cannot meet continuity requirements.
What this means for small and mid-sized producers
For small and mid-sized producers, food hubs and other consortia have emerged as a potential workaround. By pooling the output of many small farms, hubs attempt to mimic the reliability and scale of larger suppliers. The economics are demanding: aggregation, grading and logistics costs are front-loaded and highest precisely when volumes are lowest, so many have depended on concessionary capital. That dependence has proved fragile in some regions. For instance, in the United States, more than $1 billion of federal-local food-purchasing programmes were terminated during 2025.
Africa, by contrast, appears to be building a more durable version of the aggregation model. Institutions across the continent are embedding aggregation into permanent, purpose-built agro-industrial parks and special economic zones. These parks are specially dedicated to the production and processing of agricultural products, typically governed by public-private entities. They give tenants shared access to processing, storage, packaging, transportation, and even finance and R&D services. In effect, the model replicates the aggregation, cold chain, and processing capabilities of a vertically integrated supplier without requiring any individual farm to own them, while collective bargaining strengthens producers’ negotiating position with buyers.
Ethiopia’s integrated agro-industrial parks (IAIPs) illustrate the potential. Its four parks span over 1,077 hectares with a capacity for more than 300 investors and a projected 400,000 direct jobs. Challenges remain, including enabling regulatory environments and access to financing, as well as the farmers’ own capabilities in handling, packaging, and marketing, but as an institutional response to the scale bias of modern procurement, the African model rests on firmer foundations than many of its counterparts.
Strategic implications and emerging risks
The year-round supply paradigm carries systemic risk. Over-concentration heightens vulnerability to climate events, trade restrictions and disease outbreaks, even where individual companies appear resilient. For investors, the key point is that aggregation only dilutes risk where exposures are genuinely independent; where a portfolio spans a common transport route, water basin or cultivar, scale concentrates risk rather than dispersing it.
Opportunities exist at the retail level for those willing to redesign category management frameworks. Incorporating supplier diversity, local sourcing, and sustainable practices into supplier scorecards can add value and provide downside protection. Similarly, structuring supplier bases intentionally, with a mix of large year-round partners alongside regional and seasonal suppliers, may enable category managers to differentiate offerings, capture value and insulate against risk better than any system which over-relies on large-scale, globally networked suppliers.
Further upstream, survival increasingly means adapting through scale, aggregation, technology adoption, strategic differentiation or increased integration. Those who can transition from a harvest model to an integrated inventory model will retain access to mainstream retail channels. The most robust defence for these businesses is often ownership of midstream bottlenecks, such as packing, processing, cold chain, and export logistics. Those who cannot make that transition must find alternative routes to market or risk obsolescence.
However, it is worth mentioning that integration stabilises margins rather than maximising them. Integrated agribusiness platforms can command enterprise value multiples of two to three times those of standalone farming operations, yet midstream packing and distribution centres typically run on thinner margins than farming. The investment case therefore rests on risk-adjusted rather than absolute returns; consequently its profile is better suited to institutional and permanent capital vehicles than to shorter-horizon funds.
Gulf sovereign vehicles appear particularly alert to this dynamic and are accelerating vertical integration. Critically, these vehicles are optimising for supply assurance rather than return on invested capital. For private capital bidding on the same assets, contesting against a lower cost of capital and a non-commercial mandate will likely be a formidable challenge.
Navigating vertical integration with expert support
Vertical integration demands competence across agronomy, processing, logistics and commercial disciplines. These are rarely consolidated within a single organisation or management team. The result is that integration programmes often falter on strategy and execution rather than on the idea itself.
At Farrelly Mitchell, our agribusiness and supply chain experts provide strategic, technical, and commercial expertise to help agribusiness owners, investors, and managers make informed decisions and achieve sustainable growth. We specialise in M&A services, operations improvement, supply chain optimisation, and due diligence assessments that stress-test assumptions and pinpoint where value can be created before capital is committed. With a proven track record across agricultural value chains, we combine local market insights with global best practices to optimise your operations, address complex challenges, and capitalise on emerging opportunities. Contact our experts today to discuss how we can support your business’ continued growth and profitability.
