Transcript Slide 1

Transformation of High-Value Food Markets in Asia:
Implications for small producers and policies
Ashok Gulati, IFPRI Director in Asia,
Thomas Reardon, Prof. at the Michigan State University
Co-directors of IFPRI/MSU joint program on “Markets in Asia”
August 9, 2007
IFPRI-ADB “Policy Forum”,
Manila, Philippines.
Thursday, July 16, 2015
Three key messages…
• Changing Asian platter towards high value
agriculture (HVA such as fruits and vegetables, dairy, meat and
fish);
• Rapid transformation and scaling up of
wholesale markets, processors, and organized
retailers (Consolidating top) while farms are still
fragmenting
• opportunity for small holders if they can connect
to new markets, else a major challenge to
remain afloat.
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
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Changing Asian Platter: Diversification and “westernization” of diets
Average Annual Growth in per capita consumption (1991-2005) in Selected
8 Countries in South and South East Asia
-1.9
-0.2 Grains
-0.4
Eggs
Fish
3.1
Meat
All but China
3.1
Milk
All 8 Nations
6.2
3.9
8.1
2.5
2.7
Fruits
9.5
1.2
1.9
Vegetables
-2.0
6.5
1.8
2.4
China
-4.0
8.1
1.0
1.4
0.0
2.0
8.0
3.7
4.0
6.0
8.0
10.0
12.0
average annual growth (%)
Notes: Grains include cereals and pulses, Consumption measured as grams/capita/day, the 8 countries include
Bangladesh, China, India, Indonesia, Pakistan, Philippines, Thailand and Viet Nam.
Source: FAOSTAT, © FAO Statistics Division 2007, 30 July 2007
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
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counterpart: High-value PRODUCTION growing
fast, already important;
…. Share of HVA in total agriculture production
growing, surpassing the staples group
(e.g., in India, share of HVA during 1981-83 was
32%, which increased to 48% in 2002-05;
Similar changes in Indonesia, China, etc...)
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
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Trade is still a tiny part of the story…
• Trade of HVA is only at the margin (less than 3%
of consumption or output).
• Change is driven largely by domestic demand.
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Next 10 years….
• Although staples are important from food
security point of view, future sources of growth
and prosperity in agriculture will come
increasingly from high value products, driven by
domestic demand, production & markets;
• But being perishable in nature, it needs a fast
moving infrastructure and institutions that can
compress the value chains and reduce risk
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That domestic market is transforming: wholesale
segment
• From truck-market to public wholesale markets (WM) in big cities:
1970s-80s
• Expansion of WMs in big cities and spread to smaller cities: 1990s2000s
• Crisis of interface of growing hort/meat demand – and capacity and
performance of WMs: 2000s
• Restructuring of WMs: 2000s
… major debate and programs: india, china, indonesia
… rise of “new-generation” wholesalers – specialized and dedicated to
modern segments (Indonesia case)
… rise of large-scale capitalized wholesalers displacing traditional small
brokers (Indonesia and China cases)
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That domestic market is transforming: processing
segment
• Rapid increase in processed product consumption
…Rapid increase in average scale of processing firms in
high-value products (hence consolidation)
… India example
• Rapid technological change in packaging and thus radius
of shipment and shelf life
… example of massive growth of Tetrapak in China
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That domestic market is transforming: retail
segment
• Rapid spread of supermarkets in Asia in three waves
… First wave: East Asia outside Japan and China; early
1990s take-off,
… Second wave: Much of Southeast Asia such as
Indonesia,
… Third wave: China and recently India and Vietnam,
shares change..
… incipient fourth wave… Bangladesh, Pakistan, etc.
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Supermarket Revolution: Average Annual Growth Rate in Grocery
Sales of Top 10 Retailers in Selected 6 Countries in South and South East Asia
(2000-06)
65.5
Vietnam
India
50.2
35.9
China
34.0
Philippines
Thailand
29.5
28.0
Indonesia
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
average annual percent grow th rate
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… change is spectacular
• Already moving beyond middle class to food markets of
the poor especially in the first and second wave countries
but starting in third
• First penetrates in processed products (today,
supermarkets have 80% of urban china processed food
retail), then in semi-processed (dairy, meats, now 50% in
china cities), then fresh (only 20% of veg retail, 39% of
fruit retail)
• China case spectacular
• India case incredible
• … these two: fastest supermarket growth in history
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Modern food industry has mixed sourcing strategy
• Large processors and supers still rely a lot on
WMs to bulk from millions small farmers
… thus efficiency of WMs affects how benefits of
processing/retail modernization will affect food
economies in Asia
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Dynamics of an emerging value chain: expanding
top and fragmenting bottom challenge to small
holders
A Vision of dynamic complete Agri-System,
where farms are fragmenting while all other
segments are scaling up fast
Retailers
Agro
Processors
Input
Suppliers
Logistic
Suppliers
Farmers
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Indian farm reality: fragmenting farms and swelling bottom Challenge
of linking small holders to supermarkets
Less than 2 hectares
2-4 hectares
4 and above hectares
Area of Holdings-India
100%
80%
60%
40%
20%
0%
1970-71
1980-81
Avg Size 2.3
1990-91
1.82
1.55
1995-96
1.41
2000-01
1.37
Number of holdings-India
100%
80%
60%
40%
20%
0%
1970-71
1980-81
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
1990-91
Source: Agricultural Census Division, India
1995-96
2000-01
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What ensures production & price risk coverage for the
small farmers?
Retailers &
Agro
processors
Market
Information incl.
Food safety
Credit &
Insurance
Input delivery &
Extension services
Farmers
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How do we judge: which way to go??
Solving the “Rubik cube” puzzle
•Innovative Institutions and
Organizations Linking smallholders
to Modern Value Chains
•Mapping and Designing
Institutions for ICSS
I-Inclusiveness
C-Competitiveness
S-Sustainability
S-Scalability
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