Supermarket in the south : Hazards or Opportunities for small farms and firms

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Information about Supermarket in the south : Hazards or Opportunities for small farms and...

Published on February 21, 2014

Author: Ramkishan85tomar



The presentation talks about the impacts that the diffusion of supermarkets from North to South has on small farms and firms in developing countries

Supermarkets in the South: Chances and Challenges - A Debate on the Roles of Different Stakeholders in the Emergence of Modern Market (Ramkishan Singh, Jisoo Yun) “Supermarkets are traditionally viewed by development economists, policymakers, and practitioners as the rich world’s place to shop…”. (Reardon T. et al., 2003).

Overview 1. General trends of Supermarket diffusion 2. Supermarket as an opportunity for stakeholders 3. A case study in Zimbabwe 4. Supermarket as a challenge for small farms

General trend(1/2) Three waves of supermarket diffusion Period First Wave (early 90s) Second Wave (mid-late 90s) Third Wave (late 90s-early 00s) Countries /regions S.America, East Asia (outside China), & Average share in retail sales From 10% in 90s to 5060% by the mid 00s South Africa Mexico, C.America, Southeast Asia From 5-10% in 90s to 30-50% by the mid 00s China, India, Zimbabwe, and Reached 2-20% by mid 00s; sales growing at 30-50%/yr Vietnam, Sources: IFPRI policy brief, 2008

General trend(2/2) Determinants of Supermarket Diffusion in Developing Countries Demand-side Incentives:  Urbanization and women’s participation in outside household workforce.  Drop in processed food prices. Demand-side Capacity:  Per capita income growth, along with the rapid rise of the middle class  Growth in ownership of refrigerators (ability to store food)  Growing access to cars and public transport reinforced this trend.  Availability of personal credit. Supply-side:  Foreign direct investment (FDI) in the 1990s and after.  Internet and technology based logistics and inventory management led to a huge cost reduction. For example, China Resources Enterprise is able to save 40% in distribution costs by combining modern logistics with centralized distribution.

S.Market as an opportunity(1/3) Supermarket Revolution = involvement in the change of value chains Producers Hawkers Vendors Suppliers Processors Modern retailers Consumers Input by gov’t/suppliers Retailers in traditional markets

S.Market as an opportunity(2/3) Mutual Advantages Lipton(2006) Boselie, Henson and Weatherspoon (2003), and Swinnen (2006), have argued that smallholders enjoy several advantages over large commercial farmers (Doole and Lowe, 2001). Supermarket 1. Labour requirements 2. Increased flexibility to the requirements 3. Geographically dispersed units Smallholders 1. Security in ordering and payment 2. Market share 3. Better prices & higher margin 4. Economies of scale 4. Marketing messages 5. Learning opportunity

S.Market as an opportunity(3/3) Impacts on the Stakeholders in Value Chain Lower price, diverse products, higher quality, food security Consumers Decrease in market share vs. new employment Traditional retailers Largescale commercial farmers Smallholder farmers Processors Supermarket suppliers-LSCF-smallholder linkage New requirement, increased cost for investment in facilities Biggest and earliest impact from supermarkets and its spillover to farmers

Case study(1/3) Case Study (Zimbabwe) Remember Zimbabwe was in the third wave where the average share of supermarket in retail sales are growing at 30~50 % per year ?

Case study(2/3) Case Study (Hortico and Hortico Agrisystem in Zimbabwe) Benign Dictator - Private horticultural (FFV) company which sells the products to domestic supermarket as well as international supermarkets primarily in the UK. - The entire supply chain has been designed to the integration of small producers - Operates a smallholder outgrower scheme (OGS) which includes 4,000 smallholders - Averse to group-based contracts : prefer individual smallholder farmers rather than farmers’ groups - Strict requirement : plot size, type of crops, monopsony - Supports : supply input on credit, technical advice, training

Case study(3/3) Lipton(2006) Boselie, Henson and Weatherspoon (2003), and Swinnen (2006), have argued that smallholders enjoy several advantages over large commercial farmers through intermediation and internalization Smallholders Activate farmer organization in FFV Mindset change and capacity building Private agencies Government Establish regulations and laws Build associated infrastructures Help small farmers implement requirement ; finance the provision of inputs, provide extension

S.Market as a Challenge(1/1)  Access to markets is key for small farmers to diversify their liveli-hood strategies and earn more (Senyolo et al., 2009 and IFAD, 2003).  Supermarket sweep hits small farmers in developing countries – A sur vey conducted by the International Food Policy Research Institute (IF PRI)  Supermarkets devour Indian traders – BBC News, Delhi  New procurement system parallel to and outside of the traditional who lesale system led by: a. Centralised Procurement b. Logistics Improvements (outsourcing logistics and wholesale dist ribution function) c. New intermediaries in form of specialised wholesalers

A possible way out…  To prepare small farmers and SME sector to take advantage of opportunities and meet challenges requires special and immediate attention and a redesign of development strategy.  State and other development agencies must understand that “Market-oriented programs and policies” will in fact be “supermarket-oriented.”  Because in any given country in the region, three or four chains can command up to 50% or more of the supermarket sector.  This is an enormous challenge, and demands an urgent review and revision of current ideas, strategies, and practices.

References Boselie, D., Henson. S. and Weatherspoon, D., (2003). Supermarket Procurement Practices in Developing Countries: Redefining the Roles of the Public and Private Sectors. American Journal of Agricultural Economics, 85(5), pp1155-1161. FAO, (2003). Potential of Contracting Farming as a Mechanism for the Commerisation of Smallholder Agriculture. [Online] Available at : [accessed 8 February 2014] IFPRI, (2008). The Supermarket Revolution in Developing Countries. [Online] Available at : [accessed 8 February 2014] IFID, (2007). Supermarkets, smallholders and livelihood prospects in selected Asian countries. [Online] Available at : [accessed 8 February 2014]

Reference IFAD (2003). Promoting Market Access for the Rural Poor in Order to Achieve the Millennium Development Goals Rome. Discussion Paper, International Fund for Agricultural Development, Rome. Joyce, C., (2003). The Supermarket “Market” Phenomenon in Developing Countries: Implications for Smallholder Farmers and Investment. American Journal of Agricultural Economics, 85(5), pp1162-1163 Ruzivo Trust, (2012). Governance over Fruits and Fresh Vegetables in Zimbabwe: Market Linkages and Value Chain Study, Hanare: Ruzivo Trust Reardon T., et al (2003). The rise of supermarkets in Africa, Asia, and Latin America. Principal paper session at the American Agriculture Economics Association, Montreal.

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