Transformation of the Agrifood Industry in Developing Countries - The Oxford Topic of Food, Politics, and Society - page 797

networks, supply-chain coordination via explicit and implicit contracts (Key and
Runsten1999,Drieset al.2009)and“privatestandards”(Reardonet al.1999,Farina,
Marino,&Guedes2000,ReardonandFarina,2001,HensonandReardon2005,Fulponi
2007,Swinnen2007),anduseofmodernirmstocoordinateintermediation,suchas
“dedicatedwholesalers”(FarinaandMachado1999,ReardonandBerdegue2002)and
modernlogisticsirms(ReardonandBerdegue2002,Han,Trienkens,andOmta2009),
themselves elements of a transformed wholesale/logistics sector.
The diffusion of a system of modern procurement, similar for modern processors and
retailers,isafunctionofseveralelements(Reardonet al.2003): (a) theabilityofthe
traditional wholesale system to meet procurement officer objectives without the chain
having to resort to costly investments in an alternative system; this varies considerably
overcountries,forexample,stronginChina(Wanget al.2009)andweakinIndonesia
(Natawidjajaet al.2007)orIndia(Minten,Reardon,andSutradhar2010,Fafchamps,
VargasHill,andMinten2008);(b) theneedtoreducecostsofprocurementbysaving
on inputs, in this case purchased product costs and transaction costs with suppliers;
this need was driven by competition on costs and price-sensitivity of target consum-
ers;(c) theneedforconsistentqualityeitherofinputs(toproducequalityoutputs,orto
produce commodity outputs at lower cost, by having consistent quality inputs to reduce
processingcosts,asindairyinBrazilandArgentina(Farina,2002;Farinaet al.2005);
(d) theinancialandmanagerialcapacityofthecompanytomaketheseinvestments,
favoring larger companies.
Giventheheterogeneityofdistributionoftheseconditionersoftransformation—
overproducts,overirms,overcountries,overregions,overtime—oneexpectsuneven-
ness in the diffusion of transformation. This unevenness was observed in a relatively
homogeneous environment such as in retail in the United States over decades (Kinsey
2004),hence,isevenmorelikelyovertheextremeeconomicheterogeneityofdevelop-
ing countries. Still, there is some regularity and timing of “waves” of diffusion, which
occurred geographically (over countries and within countries, over income classes, and
overproducts),forallthreeagrifoodindustrysegments.
he first wave tendedtobethecountriesthatstartedtheirpost-WWIIgrowthspurt
earlier,urbanizedandstartedindustrializingsomewhatearlier—inparticular,thelarger
South American countries, East Asia outside China, South Africa, and north-central
Europe.hestartofprocessingtransformationoccurredwithFDIliberalizationandthe
startofprivatizationinthemid-1980stoearly1990s,andretailtransformation“took
of”fromtheearly1990s.
he second wave tendedtobethecountriesthathadtheirgrowthandurbanization
spurtslaterand/orhadstronginternalpressuretolimitFDI;theselimitswereoten
moreforretailFDIthanprocessingFDI.HenceonefoundthatinMexico,Central
America, Southeast Asia, and southern Central Europe processing transformation took
ofinthe1980sbutretailtransformationdidnotstartuntilthemid-tolate1990s.
he third wave tendedtobecountriesthathadtheirgrowthandurbanizationspurts
mainlyinthe1990s/2000s,and/orhadlaggedliberalizationintothe1990s.hiswasthe
caseofRussia,China,India,andVietnam,amongothers.Processingtransformation