Transcript Slide 1

Keys to inclusion of small producers in
dynamic markets
Regoverning Markets
A global programme of collaborative research and policy
support to:
• To understand the keys to inclusion into restructured
market in order to address implications and
opportunities for small scale producers and enterprises
• To understand what is best practice in connecting
small scale producers to dynamic markets
• To bring these findings into the wider policy arena with
facts and recommendations, practical action for public
sector policy and private sector strategies.
Program Components
1. Empirical
research to inform
policy
2. Building on
Innovation and
Guiding Practice
Keys to inclusion
Points of innovation
3. Learning Platforms and Policy
Dialogue
New alliances
Component 1: Studies of market restructuring
1. Horticulture Markets in China
2. Dairy Markets in India
3. Horticulture Markets in Indonesia
4. Strawberry Markets in Mexico
5. Dairy Markets in Poland
6. Horticulture Markets in South Africa
7. Tomato Markets in Turkey
8. Beef and Chicken Markets in Zambia
Component 2: Best Practice Case Studies
• Round 1: 15 cases selected from 39 proposals
from 23 countries – 6 business models (eg
Carrefour, China FFV, Haleeb Food, Pakistan,
Dairy) and 7 collective action (Morakert,
Hungary, FFV; NorminVeggies Phil, Vegetables)
• Round 2 (on going): 15 case studies selected
from 81 proposals
Component 3: Policy Dialogues and
Learning Platforms
• 8 Reference Group (RG)- 1 for each country with
component 1 research
• RG is a multi-stakeholder group who provides
advice, feedback and helps champion policy and
c3 initiatives
• 4 Policy and Institutional Mapping workshops
(Turkey, Indonesia, South Africa and Morocco)
• Policy and Institutional Mapping
Toolkit/Manual/Learning Workshop
Modern Markets
Traditional
Low operating costs
Low margins
Proximity to customers
Long opening hours
Home delivery
Credit provision to consumers
Sale in small units
Provision to transport, packaging, inputs
market information
Building of trust with both supply and
demand side – social networks
Haven for manipulation and exploitation
Modern
Product differentiation
Quality and food safety as key driver of
vertical integration
Private standards
Reliability of supply
Wholesale /cash and carry consolidation
Contracts
Group marketing
Brand name and value
Centralised procurement
Specialised wholesalers and logistics
companies
Dedicated wholesalers
Preferred suppliers
Dragon heads – supply and trade
functions
Produce concession in store
Physical infrastructure – cold chain etc
Service provision to preferred suppliers –
TA, credit, transport, training, IT services
and advice, loan guarantor
Interest in CSR and Fairtade
Re-governance and market inclusion: Conceptual framework
Factors driving
dynamic
market change
Creates
changes in
supply
chains….
Consumer ‘pull’
Technology
Policy ‘push’
Management
Leading to
small-scale
producer and
SME..
INCLUSION
Urbanisation
Organization
Commercial
opportunity
Industry
structure,
concentration
Skills and
assets of
producers
and SMEs
Food standards
Procurement
Foreign
Investment
EXCLUSION
Standards
Local
investment
..in dynamic
markets
Finance
Entry Points
Policies
Institutions
Business
Models
Collective
Action
Support
Systems
Research and
Development
The rapid rise of both supermarkets and
wholesale markets in China (sales, $ bn)
Sales (Billion US$)
Wholesale
Supermarkets
45
60
40
50
35
30
40
25
30
20
15
20
10
10
5
0
1990
1992
1994
Source: CCAP
1996
1998
2000
2002
0
1986
1988
1990
1992
1994
1996
1998
2000
Retail strategy as practice..
Cash and Carry investor in Pakistan
• Cash and Carry investor - 2 stores in 2006, 5 more in
2007 which each store costing $30-40m
• Suppliers must have tax number, fax machine etc..
• Success of C&C depends on inefficiency of wholesale.
Eg tomatoes. Rp 20 at farm, and Rp 140 in city 5 days
later, with up to 5 people involved along chain. Broker
(arthi) provide very little service other than prefinancing. 40-45% losses -- packing, logistics, grading.
• C&C can buy for Rp40, sell for Rp60 and still get
enough margin.
Types of strawberry producers in Michoacán, Mexico
1996
2006
1. Traditional system
1. Traditional system
2. Traditional system
with higher input
use
– Cost = $7,500/ha
– 80% of farmers / 25%
production
2. Medium tech system
– Cost = $20,000/ha
– 15% of farmers / 40% of
production
3. High tech system
– Cost = $45,000/ha
– 5% of farmers / 35% of
production
The Market Divide
Fastfood chains
Processors
Hotels & Restaurants
Supermarkets
Consolidators
Traditional Market - Traders
Modern, dynamic market chains
Fragmenting farms (Roy 2006)
Average Farm size: expanding block
(source: Roy, 2006)
Regulating buyer power?
• Regulation of below-cost selling?
– Eg Germany: Restraints on Competition Act (1999)
• Regulation of supplier relations?
– Eg Germany: Reform of competition legislation, July 2005.
Large companies now prohibited from using market power
to demand “unjustified and repeated” special terms and
conditions from suppliers
• Codes of Conduct on supplier relations?
– Voluntary?. Eg UK, March 2002
– Mandatory? Eg Argentina, Australia
– Europe-wide?
Any impact? Transferable from NS?
(service)
•Independent growers
(Marketing)
CLUSTERS
Sweet pea
Lettuce
Tomato
Carrots
Squash
Cabbage Bell pepper
•NGOs & POs(Small farmers)
• Corporate farms
• Input/service
providers
•Honorary members
Regoverning Markets programme in short..
• Can the new agrifood business drivers be
partners in development?
• Can smaller scale producers and their
organisations be partners in new business?
• Can anticipatory public policy make any
difference?
Strong link between research and
policy and learning platforms
1. Empirical
research to inform
policy
2. Building on
Innovation and
Guiding Practice
Ke ys to inclusion
Points of innovation
3. Learning Platforms and Policy
Dialogue
New alliances