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

1. 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).

2. 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

3. 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

4. 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.

5. 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

6. 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

7. 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

8. 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 ?

9. 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

10. 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

11. 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

12. 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.

13. 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 :
ftp://ftp.fao.org/docrep/fao/010/ah925e/ah925e00.pdf [accessed 8
February 2014]
IFPRI, (2008). The Supermarket Revolution in Developing Countries.
[Online] Available at : http://www.ifpri.org/publication/supermarketrevolution-developing-countries [accessed 8 February 2014]
IFID, (2007). Supermarkets, smallholders and livelihood prospects in
selected Asian countries. [Online] Available at :
http://www.ifad.org/operations/projects/regions/pi/paper/4.pdf
[accessed 8 February 2014]

14. 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.
http://www.ifad.org/gbdocs/gc/26/e/markets.pdf
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.
http://www.just-food.com/analysis/supermarket-sweep-hits-small-farmersin-developing-countries_id94085.aspx
http://www.just-food.com/analysis/supermarket-sweep-hits-small-farmersin-developing-countries_id94085.aspx
http://news.bbc.co.uk/1/hi/world/south_asia/6667199.stm