Data from interviews with supply chain stakeholders and a survey of vegeTABLE wholesalers have been used to compare the performance of modern and traditional chains, ND the findings reveal the chains as segmented in their product focus, the modern sector focusing exclusively on quality. Modern marketing channels are generally more efficient than traditional ones but still account for only around 2% of vegeTABLE distribution. The article argues that policy-makers should not promote the ‘modernization’ of food systems at the expense of traditional channels which meet important consumer needs.
Introduction Recent research has shown the significance of the rise of supermarkets and modern distribution businesses in the food marketing systems of developing Mounties (Dolomite Touché Topmasts, 2005; Reardon et al. , 2003). The same trend has also been documented more specifically in South-East Asia: modern distribution outlets like department stores, supermarkets and hypermarkets are appearing in the region, taking food market shares from traditional retailers.
Local situations vary across the region: in Taiwan, over 60% of food sales were transacted by the modern retail sector in 2000; in Malaysia, modern retailers accounted for only 20% of food sales across the country; in the cities of Thailand, the modern sectors market share of food sales increased from 25% to 50% in just five years (Department of Foreign Affairs and Trade, 2002). However, in all countries in the region, sales of fresh food fruits, vegeTABLEs, meat and fish – are still a stronghold of the traditional retail markets and itinerant retailers (Cadillac et al. , Bibb). J. -J.
Cadillac is at the French Ministry of Agriculture and Fisheries, Paris; P. Mousier is at Circadian, Hanoi; N. D. Poole is at the Centre for Environmental Policy, Imperial College London; P. T. IAC Tam is at Among Lam university, Ho Chi Mini City; and A. P. Fearer is at the Centre for Supply Chain Research, Kent Business School, Canterbury (corresponding author: n. [email protected] AC. UK; Centre for Environmental Policy, Imperial College London, Wee Campus, Seafood, Kent, TENT AH). They wish to thank the French Ministry of Agriculture, CIRCA, ENGAGE and the British Council for funding.
The views expressed in this article are those of the authors alone. O The Authors 2006. Journal compilation 0 2006 Overseas Development Institute. Published by Blackwell Publishing, Oxford OX SQ, UK and 350 Main street, Malden, MA 02148, LISA. 2 Cadillac, Mousier, Poole, IAC Tam and Fearer In Vietnam, fresh food marketing has traditionally involved supply chains operating through a series of wholesale and retail markets scattered around cities (Vietnam Investment Review, 2000). 1 This is still the case in Ho Chi Mini City (HCI City) with over 200 markets to feed an estimated population of 8 million (Vietnam News, 2001).
Although not as developed as in other countries in the region, modern food marketing outlets are starting to appear in HCI City with strong backing from the local authorities. At first restricted o a burgeoning middle class (Tara Aria, 2004), supermarkets and modern department stores are now starting to attract local customers with different income levels (Saigon Times Weekly, 2002). This article documents the development of supermarkets in HCI City and compares the performance of modern and traditional vegeTABLE supply chains.
The next section reviews the recent literature on supermarket growth in developing countries and discusses indicators for measuring the performance of food supply chains. Section 3 details the methodology and the performance indicators chosen. Section 4 presents the structure of the fresh vegeTABLE marketing system in HCI City and the relative market share of competing vegeTABLE distribution channels. Section 5 compares the performance of traditional and modern supply chains, and the final section discusses the implications of the research findings for development policy. Literature review 2. 1 The rise of supermarkets in developing country food marketing systems Food marketing research in developing countries has shifted in recent years from a bias towards the export function in favor of research into local arrest and the increasing market share Of modern distribution outlets (Ballistic et al. , 2003). Indeed, supermarkets are becoming dominant outlets for local fresh produce compared with export markets (Uneven and Reardon, 2004; Reardon and Breeder©, 2002).
Furthermore, supermarkets in developing countries engage in relationship marketing and set up dedicated supply chains with secondary wholesalers or farmers, as opposed to relying on traditional adversarial relationships in spot markets. This emphasis on slim margins and high quality has created new opportunities as well as new halogens for farmers and other fresh produce suppliers (Coach, 2003). The supermarket focus on quality is particularly noticeTABLE to consumers in country contexts where official quality standards are low, not enforced or distrusted (Garcia Martinez and Poole, 2004; Tan Loc, 2002).
Self-service shopping, clean environments, price displays, and aggressive marketing and discounts are becoming the strategic norm (Hagen, 2003; MIM and Epinephrine, 2003). However, barriers to the advancement of the modern retail sector have been identified in the fresh food sector in Asian markets, due largely to apple held cultural 1 A supply chain is a network of organizations involved, through up- and downstream linkages, in the different processes and activities to produce value in the form of products and services for the ultimate consumer (Christopher, 1998).
The terms distribution channel, marketing channel and marketing chain will be used as a synonym for supply chain. Wholesale markets are defined as physical places where professional agents congregate to buy and sell physically present products from/to other professionals (Cadillac et al. , AAA). Retail markets cater to the demands of nonusers. Traditional Versus Modern Food Systems? 33 values (Goldman et al. , 2002). For consumers in Asian markets, ‘fresh’ food means ‘as close as possible to the live animal or plant’.
Chilled and frozen meat, fish or fresh products are associated with a period of storage that thus makes the food urn-fresh’, such that chilled food is not considered ‘fresh’ by many Asian consumers (Fig©, 2004). 2. 2 The emergence of modern distribution in Vietnam The liberation’s of the Vietnamese economy in 1 986 enTABLEd, among other things, the modernization of the distribution sector. The first supermarket in HCI City was a starters enterprise named Marinara established in 1993.
Citrate followed in 1994, owned and operated by a Vietnamese expatriate who had gained experience of supermarket operations in the Philippines. The success of Citrate inspired the owners to open another supermarket chain – Maxima – in 1995. In 1 996 the Vietnamese Federation of Trade Co- operatives established their first supermarket: Co-pop Mart (IAC Tam, forthcoming). This co-operative-owned supermarket has become the largest local supermarket chain in South Vietnam, with 13 branches within HCI City ND other provinces in the South and a 50% regional market share of modern grocery retailing (Saigon Times Weekly, AAA).
The French Bourbon Group set up its first hypermarket in Been Ho City, km east of HCI City in 1998. Fresh produce was sourced solely through the state-owned packer and exporting company Voyageur. The direct implantation of the French hypermarket model was a failure and merchandising methods have been modified at Big C to become more appropriate to the local context of frequent patronage by customers coming from the neighborhood on foot or motorcycle (Cadillac et al. , AAA). Another foreign investment into fresh food distribution is the German-owned company Metro Cash & Carry.
Established as a modern wholesaler with a first Vietnamese outlet in 2002, the company has been opening new stores with strong sales to customers in the hotel, restaurant and catering sector. The rapid success of the Metro business model has been attributed to its careful prior market analysis (Cadillac et al. , Bibb). Metro fresh food supply chains also involve strong collaborative practices with a few of their best and regular farmer-suppliers in order to satisfy their quality-focused customers (Cadillac ND Fearer, 2005).
However, Metro also relies on many small trader-suppliers for Occasional deliveries, traders with whom it has a more arms-length supply relationship determined by cheap prices (IAC Tam, forthcoming). Vietnamese authorities strongly encourage the development of modern distribution outlets in the cities in order to solve perceived problems of food health and safety in the production and marketing system (HCI City Department of Trade, 2002). Accordingly, traditional markets are being modernism or closed in HCI City. 2. 3 Measuring performance
The policies of the Vietnamese local authorities suggest that the Western supermarket model is the benchmark for good supply chain performance. However, criteria other than ‘modernity’ have been proposed to assess the performance of food markets in a more systemic manner. Traditional research has focused on detailed performance indicators like economic efficiency, innovation potential, successful transfers of resources between the different sectors of an economy, equity in income distribution in the marketing system, employment potential, reduction of food insecurity ND co-ordination efficiency (Goldman, 1992; Harrison et al. 1 987; Scarborough and Kiddy, 1992). More recent assessments of food marketing Systems have added the dimensions Of food traceability (Lees, 2003) and food safety (Ballistic et al. , 2003) that should be counted in to measure marketing system performance completely. Given the lessons learned from supermarket supply conditions in other developing country contexts, the development of modern distribution in Vietnam and strong government support for it, this research set out to compare the performance of both traditional and modern vegeTABLE supply Haines in HCI City. Research methodology 3. 1 Choice of performance indicators The following performance indicators reflect the traditional research focus, to which have been added particular concerns arising from the Vietnamese context: Market share not only involves the relative volumes supplied by competing channels but also the number and spatial distribution of availTABLE retail outlets. The market share indicator has been used in previous studies On the growth of supermarkets in developing countries (Reardon et al 2003).
However, there are difficulties In collecting accurate information in evildoing country contexts where the informal sector is very important in traditional food distribution networks. Satisfaction depends on the expectations of a customer and the performance of a supplier (Bat, 2003). The business literature has shown how satisfaction was a good proxy for the performance of a trading relationship (El-Angry, 1979, quoted by Duffy, 2002). Price data at different stages help assess the role of producers and distributors In building value in the marketing channel.
However, collecting accurate price data in a highly volatile market context has proved very official; the prices reported here should thus be seen as indicative only. The effect of price volatility is also difficult to interpret, as it can create uncertainty about the revenues of supply chain stakeholders, on the one hand, but can also be used to clear the market, on the other (Barbarous and Cotton, 1998). Labor index. The number of people employed by a supply chain divided by the volume of products sold is a rough indicator of the contribution made by the competing marketing channels in job creation (Harrison et al. 1987). Us ply chain efficiency was assessed by collecting information on price debility, flexibility in response to customer orders, delivery times and quality management in order to assess the distributive efficiency of the competing marketing channels (Fearer and Hughes, 1999). Traditional Versus Modern Food Systems? 35 3. 2 Data collection The tomato supply chain was selected because of the widespread use of tomatoes by consumers and because of the problems in marketing and transport identified by previous research (PRI, 2002).
Data were collected in HCI City between 2002 and 2004. The principal method of data collection was in-depth interviews with racketing system stakeholders – farmers, collectors, wholesalers and supermarket managers ? followed by four case studies: two of traditional supply chains, and the case studies of Metro and Big C modern tomato supply chains (Cadillac and Fearer, 2005; Cadillac et al. , AAA and Bibb). A survey of HCI City wholesale traders was also carried out in order to understand working conditions at the wholesale level of the traditional tomato supply chains.
A detailed questionnaire was used to interview 53 tomato wholesalers (46% of all tomato traders enumerated at the time of the river in the three principal wholesale markets of the city). An exploratory consumer survey was also carried out to gain insights into the viewpoint of the final customers of supply chains studied with a predominantly business-to-business perspective (Cadillac and IAC Tam, 2004). Finally, insights into the functioning of the food marketing system in HCI City were collected by key informant interviews with government officials, local researchers and industry experts (Cadillac et al. Bibb). 4 The structure of the HCI City vegeTABLE marketing system 4. 1 The system today Competing supply chains for consumer food spending Total demand for fresh vegeTABLEs in HCI City has been estimated by Tan Loc (2002) at 438,000 tones per year. The stakeholders in the fresh vegeTABLE trade are indicated in Figure 1. All the chains represented in Figure 1 source fresh vegeTABLEs from Lam Dong Province, a high-plateau area located over km northeast of HCI City.
Producers and collectors are located in the production area, whereas wholesale and retail stakeholders are urban-based. All transport from producers to urban distributors is carried out in unregistered trucks. The modern stakeholders in the vegeTABLE marketing system are represented y the cash-and-carry business (Metro) and supermarkets (Big C). Traditional urban distributors source through middlemen because of the small scale of vegeTABLE production in Lam Dong Province where the majority of household vegeTABLE plots are less than 0. Ha. In contrast, the modern distribution sector has built direct supply links with producer groups with larger land holdings in Lam Dong Province. Figure 1 oversimplifies the marketing system inasmuch as some stakeholders may hold several roles: for example, large producer groups rely on one of their members for collection and marketing o city outlets. Figure 1 also represents only vertical links between stakeholders. Suppliers to modern distribution outlets are also suppliers to traditional wholesalers (Cadillac, 2005). 6 Figure 1 : Competing vegeTABLE supply chains to HCI City consumers Primary Producers Collectors Cash-&-Carry Wholesale market traders Caterers Fixed market retailers Hawkers Us parakeets Consumers Source: Adapted from Cadillac et al. (Bibb). Wholesale markets The wholesale markets in HCI City are the main entry points for supplies of fresh produce to the city. There are three main vegeTABLE wholesale markets which are active mainly at night. In all wholesale markets the range of products on sale is extensive.
Figure 2 shows the location of these markets. Before October 2003, there were two major fresh produce wholesale markets in the historic city centre: Ca Mimi market in District I and Maim Guan Thong market in District VI. Because of congestion and market efficiency issues, the local city authorities moved the Ca Mimi market traders to a new facility on the outer reaches of HTH Duck District, in the Northeast of the city. Plans to move Maim Guan Thong market to a location in the Southwest Bin Chain District are meant to be implemented by the end Of 2005.
The third vegeTABLE wholesale centre, called Tan Guan market, is located in the Northwest district of Hoc Moon. This market is active both night and day and has two distinct peaks of selling activity corresponding to products from different origins: Lam Dong vegeTABLEs (onions, potatoes, tomatoes, cabbage, cauliflower and other temperate produce) arrive at night, while the trading of per-urban produce (mainly squash, cucumbers and yard-long beans) is conducted in the afternoon by other wholesale businesses specializes in produce coming from this geographical origin.
Figure 2: HCI City with main vegeTABLE wholesale markets, Big C supermarket and Metro Cash & Carry outlets Traditional Versus Modern Food Systems? 37 The traditional retail and catering sectors Despite the growing number of city households with refrigerators, consumers continue to go to market very frequently (Cadillac and IAC Tam, 2004). TABLE 1 shows that every ward within each urban district has at least one market. To supplement the official network Of 200 retail markets and independent shops, unofficial street markets have been set up by petty traders in order to bring the market closer to consumers.