3. 1. Asia/Pacific Food Debate: Focus vs
Realities
a) Debate is focused on trade: but 95% of Asian
Food Economy is domestic market
… at most 5% are imports or exports
b) Debate is focused on government marketing
interventions: but 95-99% is private sector
(traditional & modern)
… only about 1-5% is direct government
involvement
c) Debate is focused on grain – but grain is about
25% of Asia’s food; the other 75% is milk, meat/fish,
oil, pulses, produce
4. d) Debate is focused on rural – but 50-75% of
Asia’s food market is urban
e) Debate is focused “upstream”, on the farm:
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
5. e) The debate is dominated by the the conventional view
of food supply chains as traditional, stagnant, sleepy…
…. But we find the downstream and midstream segments
are transforming very fast in DOUBLE REVOLUTION:
Modernization: “Supermarket Revolution” + modern
large processors + modern wholesale/logistics firms
Transformation – a Quiet revolution - in traditional
supply chains
… not just in “high value agriculture” (non-staples)
… but also in rice & other staple foods
I show that transformation by off-farm segment of the
supply chain: downstream, midstream
And its implications for farmers and for food security &
development assistance in Asia/Pacific
6. 2. “Downstream” in the supply chain:
Supermarket Revolution
a) The “Supermarket Revolution” has swept
developing countries in the past 2 decades
… take-off and rapid spread in three waves
First wave: South America, East Asia outside
China, South Africa
Second wave: Mexico/Central America, Southeast
Asia
Third wave: China, India, Vietnam, emerging in
Eastern/Southern Africa
7. Asian experience: 3-5x faster than
GDPG Growth
Waves of modern retail 2001-2009: annual 2000-2008:
diffusion: noting when main modern retail sales annual GDP
“take-off” started growth rate growth rate
1st Wave (early 1990s)
South Korea 10.3% 4.5%
Taiwan 12.0% na
2nd Wave (mid-90s)
Indonesia 19.1% 5.2%
Malaysia 17.2% 5.5%
Philippines 17.3% 5.1%
Thailand 16.0% 5.2%
3rd Wave (late 90s/early 2000s)
China 27.5% 10.4%
India 49.9% 7.5%
Vietnam 45.4% 7.7%
8. b) Supermarkets Spreading in “waves” over
countries in Asia
c) Gradual concentration
… & multinationalization
…global multinational firms (like Metro,
Carrefour, Tesco, Walmart)
… plus rapid emergence of regional
multinationals like Dairy Farm International (HK
based)
9. d) Spreading in waves from the rich to the middle
class… into the food markets of the poor
e) Spreading in waves from big cities to secondary
cities … to rural towns/villages
… even to rural supermarket chains in China and
India
… China: private and state enterprise retail chains
selling consumer durables, fertilizer/pesticides,
processed food;
India: “rural business hubs” (rural supermarkets
that are also “rural services platforms” for farm
inputs, credit, medical services, specialized
extension)
10. f) Spreading in waves over product categories:
… processed foods and rice,
… to semi-processed foods: meat, dairy.
… to (recently) fresh fruits and vegetables
… but faster/earlier than in Latin America,
Europe, and US
… in the US it took 40 years before supermarkets
sold any fresh fruits and vegetables…
11. g) Recent surveys’ evidence in China in 5 biggest cities;
modern retail sells:
… 79% of processed foods
… 50% of rice (our recent survey in Beijing)
… 60% of dairy
… 46% of meat
… 37% of fruit
…22% of vegetables
Compare with Hong Kong in 2006:
… nearly all of rice (was only in small rice shops in 1980s)
… 59% of fruit
… 52% of meat
… 55% of vegetables (leap from mid 1990s, was 10-20%)
12. 2. “Midstream” in the supply chain:
Processing & Wholesale/Logistics
Midstream segments “co-evolving” with
supermarkets: mutual re-enforcement
2.1. Rapid change in food processing sector:
… rapid overall expansion
… plant scale increase
… technology change: capital/labor ratio
increase (India example)
13. … processing (continued)
… emerging concentration (half of rice in China
via large mills)
… multinationalization (global firms plus rise of
regional multinationals like CP of Thailand, or
Singapore’s Wilmar with huge investment in
oil/rice in China)
… rapid increase in branding/packaging: rice
example: emerging in India/Bangladesh, already
dominant in China cities
14. 2. “Midstream” in the supply chain:
Processing & Wholesale/Logistics
2.2. Rapid change in wholesale/logistics:
a) rapid overall expansion: wholesale markets
in China & India grew to 4000-5000 by 2000s
from only 100’s in 1960s
b) capital/labor ratio increase in wholesale:
trucks, warehouses, cold storages
15. c) Sector still fragmented - but with emerging
concentration:
… rise of modern logistics firms
… massive new investment in private logistics
(along with public investment)
… rise of specialized modern wholesalers (such
as Bimandiri on Java) that act as dedicated
procurement agents for supermarket chains
16. … but also shortening of traditional supply
chains:
… mounting evidence of reduction of village
trader role
… and rise of direct purchase from farmers by
wholesale market traders & mills
(vegetables/Shandong,
rice/Heilongjiang,
tomato/Indonesia,
rice and potato/India)
17. d) Vertical integration:
… sprayer-traders in mango sector in Indonesia,
Philippines
… wholesale markets in China (Inner Mongolia
Wholesale Market)
18. e) Multinationalization/regional integration of
wholesale/logistics
… “follow sourcing”: multinational logistics firms
“following” retail chains and large processors to
Asia (to “fast track” supply chain development)
… regional multinational wholesalers (setting up
across countries to coordinate trade)
… sourcing hubs (of retail chains) (with inter-
Asian trade within procurement networks)
19. … Export/import network among wholesale
markets in Asia
hypothesis: trend toward “wholesale/logistics
market” integration in Asia/Pacific region
Hypothesis: Intra-region trade – and
competition – will come in 2 decades to
eclipse food trade (except for soy) with rest of
world
20. 3. 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
China examples: 10 leading supermarket chains
in Beijing source rice mainly direct from big mills
Metro example: Star Farms direct procurement
21. b) Procurement modernization:
… Uneven diffusion
… fastest in processed,
… second in semi-processed,
… just starting or not yet started in fresh produce
(especially use of specialized wholesalers acting as
selection/contracting agents)
… follows the “waves” described earlier
22. 4. Impacts on Supply Chain
a) Most of the impact is “downstream on
midstream”:
… supermarkets on traditional retailers
… supermarkets on processors
… supermarkets & processors on wholesale
85% of what supermarkets sell is processed or
semi-processed (mirrors food consumption
composition in Asia)
… most procurement system modernization has
occurred in processed/semi-processed product
procurement
23. b) Transformation of segments: coevolution,
symbiosis like “snowball rolling”
supermarkets tend to source from large
processors, less from SMEs (Beijing chain’s
suppliers: 1000 to 200)
… effect on SMEs also by new food safety
laws/China
Logistics companies investment helps large
retail and processing to develop
Processors & supermarkets source direct
from each other and farmers and reduce role of
small wholesaler
25. c) Food industry transformation affects farmers,
emerging findings:
… IMPORTANT: Despite the conventional view
that rural Asia/Pacific is homogenous, tiny
farms, traditional context: reality is sharp
inequality in farm sizes and non-land asset
distribution
… and there are 2 rural Asias:
dynamic/commercializing zones and hinterland
areas
26. Small farmers tend to excluded where there is
mix of medium and small farms (much of Asia)
Or where there are only small farms, those
poor in non-land assets are excluded… except
(RARELY) where they are in effective coops
27. But supply chain modernization (direct
purchase, contract farming) found to raise farm
incomes, decrease income variation/risk, but
require investments of farmers
28. (and broad food industry
transformation) on consumers’ food
security: Emerging Evidence &
Hypotheses
a) Reduced Cost (Delhi example)
b) Increased Safety: Ability to monitor, keep cold
chain
c) Reduced Volatility: market
integration/distribution networks/logistics by
modern food industry - can – reduce price volatility
d) Increased availability: increase profitability to
farmer to increase productivity & quality
investments
29. Donor and Government Development
assistance implications
a) Invest midstream
b) Invest upstream in farm and ag support services
c) Build Institutions and public support systems
d) Differentiate strategy for two zones/groups
e) Use jujitsu/jieli-dali on the food market
transformation!
… examples of Corfo/Chile, China’s 2x100 Program,
and ACIAR innovations in supply chains
