The financial crisis and insecurity among customers has increased the demand for discount grocery stores. Discounters are making huge profits -- often with products made in China under inhuman conditions. Last week the German NGO Südwind-Institut released a survey about the issue.
Discount grocery stores are making profits during the financial crisis.
There are several major discount grocery chains in Germany. They serve customers who want to buy cheap goods fast. Competition among the biggest three discounters is tough. They are competing for an estimated overall annual revenue of 36 billion Euros. And each of them wants to have a bigger slice of this cake.
The pricing pressure in this business sector is extremely high. Each year, Germany's leading discounter Aldi offers about 2,500 “special” items, such as computers, other electronic devices and textiles to lure more customers into their chain stores. Many of these “specials” are being produced at low cost in China. But not always under legal conditions, as Ingeborg Wick from Südwind-Institute shows in her survey.
Labour law infringements
“Inhuman overtime work of 91 hours for example at factories in Southern China which provide Aldi with cosmetics; underpayment; the breach of right for unions; no maternal protection: Those are some of the labour law infringements we have documented at several factories,” says Wick.
In 1995 China’s labour law came into effect. Since 2006 a labour contract law also helps to protect the rights of workers and makes it easier for them to go to court. But practically speaking, both laws exist more on paper. Cai Congguo is an expert on Chinese labour law based in Paris.
Cai says that Chinese labour law is well elaborated, with articles about working hours, overtime, salary, health care and so on. “But these provisions are not being implemented in many cases. Labour law stipulates a certain limit on overtime hours. But in reality the overtime hours of an employee can exceed that by two or three times. Another thing is that overtime hours are not or less paid. Factory owners often regard the legal minimum wage as the common wage,” says Cai.
Aldi wants to investigate issue
Deutsche Welle asked Aldi about those allegations and received a written reply. It says that Aldi will have its own detailed investigation on the content of the Südwind-Institut report and that it has been a member of the Business Social Compliance Initiative since the beginning of 2008, an initiative which tries to keep certain social standards in the supply chain.
Ingeborg Wick claims that Aldi’s own efforts have not been sufficient so far. “Aldi has joined a business initiative called Business Social Compliance Initiative. They do not have an independent controlling system. In that way to join this initiative has been just a symbolic step,” she claims.
As the credit crunch hits consumer spending in Germany customers are demanding cheaper and cheaper prices. The pressure on prices is forcing producers to pressure their suppliers. The result is a downwards spiral leading to more and more cost cutting. And, it seems, someone has to pay the price.