The Supermarket Revolution in Developing Countries. Implications for Food Security and Development Assistance Strategies

Transcription

1 The Supermarket Revolution in Developing Countries Implications for Food Security and Development Assistance Strategies

2 Thomas Reardon, Michigan State University & Renmin University of China

3 Overview of Talk Talk uses illustrative focus on Asia: majority of world s poor and hungry Asian food economy transformation has strong similarities to transformation in E/S Africa, Latin America, C/E Europe

4 Sets the supermarket revolution in broad context of food value chain transformation: 1) Food economy context 2) Supermarket revolution 3) Linked to transformation midstream in the value chain (processing, wholesale) 4) Procurement system modernization 5) Impacts of the above on food value chain 6) And on food security 7) Implications for development assistance

5 1. Asian Food Economy Context a) While trade is important and growing: 95% of Asian Food Economy is domestic market 5% are imports or exports b) While grain is important to food security: grain is about 25% of Asia s food; the majority (75%) is milk, meat/fish, oil, pulses, produce

6 d) While the rural areas are important: 50-75% of Asia s food market is urban e) While the productivity of the farm sector ( upstream in supply chain) is crucial for food security: but 50-70% of the food price is formed after the farmgate in the supply chain downstream (retail) midstream (wholesale/logistics and processing) These off-farm segments have been relatively neglected in the food security debate

7 e) A common view of the food markets and supply chains of developing countries of Asia is that they are traditional, stagnant, sleepy. But we find the downstream and midstream segments are transforming in a DOUBLE REVOLUTION: A Modern Food Market Revolution: A Supermarket Revolution (fastest in the world in history) + rapid rise of modern large processors + rapid rise of modern wholesale/logistics firms Accompanied by Quiet revolution in traditional supply chains not just in high value agriculture (non-staples) but also in rice & other staple foods

8 2. Asian Supermarket Revolution: 3-5x Waves of modern retail diffusion: noting when main take-off started 1 st Wave (early 1990s) faster than GDP Growth : annual modern retail sales growth rate South Korea 10.3% 4.5% Taiwan 12.0% na 2 nd Wave (mid-90s) Indonesia 19.1% 5.2% Malaysia 17.2% 5.5% Philippines 17.3% 5.1% Thailand 16.0% 5.2% 3 rd Wave (late 90s/early 2000s) : annual GDP growth rate China 27.5% 10.4% India 49.9% 7.5% Vietnam 45.4% 7.7%

9 b) Supermarket section in Asia concentrating + multinationalizing global multinational firms (like Metro, Carrefour, Tesco, Walmart) plus rapid emergence of regional multinationals like Dairy Farm International (HK based) FDI will probably accelerate (retail FDI was last week liberalized in India )

10 c) Spreading in waves from the rich.. to the middle class into the food markets of the poor d) Spreading in waves from big cities.. to secondary cities to rural towns/villages there are even now rural supermarket chains emerging in China and India

11 e) Spreading in waves over product categories: processed foods and rice, to semi-processed foods: meat, dairy. to (already, recently) fresh fruits and vegetables but faster/earlier than in Latin America, Europe, and the US in the US it took 40 years before supermarkets sold any fresh fruits and vegetables

12 3. Midstream in the supply chain: Processing & Wholesale/Logistics Processing + wholesale/logistics co-evolving in symbiosis with supermarkets: mutual reenforcement 3.1. Modernizing Processing Sector: a) Rapid growth, b) concentration c) multinationalization (global multinationals but also by Asian multinationals like the giant CP (Thailand) d) technology change (capital/labor ratio increase) e) Branding & packaging

13 3.2. Rapid modernization of wholesale & logistics in Asia: a) rapid overall expansion of wholesale markets: example from China & India and modernization of Wholesale markets: Inner Mongolia Wholesale Market b) Technology change in wholesale/logistics: huge investment in truck fleets, warehouses, cold storages

14 c) rise of specialized modern wholesalers (such as Bimandiri on Java) that act as dedicated procurement agents for supermarket chains d) Rapid disappearance of traditional marketing system: reducing role of traditional village brokers

15 e) Multinationalization/regional integration of wholesale/logistics follow sourcing regional multinational wholesalers regional and global sourcing hubs of retail chains (with inter-asian trade within procurement networks) Prediction: Intra-Asia-Pacific Trade will grow to far dominate Asia-Europe & Asia-US food trade in next 20 years

16 4. Procurement System Modernization a) re-organizing: distribution centers + national/regional sourcing networks b) standardizing: private standards c) dis-intermediating and re-intermediating: direct procurement/contracts use modern wholesalers

17 5. Impacts on Supply Chain in Asia/Pacific a) Most of the impact is of supermarkets on food processors and wholesalers and via the latter on farmers b) Included: Small farmers with needed assets (irrigation, roads, credit, education) & medium farmers c) Included: dynamic/commercializing zones d) Excluded: resource-poor small farmers

18 6. Impacts of Supermarket Revolution on consumers food security a) Reduced Cost of Food b) Increased Food Safety c) Reduced Volatility of Food Prices d) Increased availability of food

19 7. Development Assistance implications a) Invest midstream: Public-Private Partnerships b) Invest upstream in farm and agricultural support services c) Differentiate aid strategy for two zones/groups: Two rural Indias there are poor farmers in both zones d) Use jujitsu on the food market transformation! examples of Corfo/Chile, China s 2x100 Program, and donor innovations in supply chains