Transformation of the Agrifood Industry in Developing Countries - The Oxford Topic of Food, Politics, and Society - page 800

hisliberalizationopenedthedoortoprogressive“dis-intermediation”—suchascon-
tractfarmingbyprocessorsandcollectioncentersbysupermarkets.Itisarguedbyvari-
ousresearchers(e.g.,FarinaandMachadoinBrazil,EchánoveandReardoninMexico,
Louwet al.inSouthAfrica)thatdis-intermediationcombinedwiththedeclineoftra-
ditionalclientshasledtoadeclineinvolumesofwholesalemarkets,suchas25 percent
overthe1990sinSaoPaolo,30 percentovertheirsthalfofthe2000sinMexicoCity.
Second,thecounterpartofdis-intermediationhasbeentheriseinthe1990sand
2000sofvarious“of-market”actorsspecializedinmeetingthesourcingrequirements
of modern processors and supermarkets. These include the following.
The first of the modern actors are the “dedicated wholesalers” (such as Hortifruti
in Central America, first associated with the Costa Rican multinational retailer CSU,
then global retailer Ahold, then Walmart; or Bimandiri working with Carrefour in
Indonesia).hesewholesalersarededicatedtoeitheronecompanyorasegment(such
asmodernretail,processing,orHORECA(hotels,restaurants,catering)orexports),
tendtobespecializedinacategory,andhandleprocurementrelationssuppliers.hey
addvalue(relativetothesimplespotmarketofthetraditionalwholesalesegment)by
managing the relation, collecting, sorting, grading, packing or processing, and deliver-
ing of commodities.
The second of these are modern logistics companies. Commonly they undertake a
varietyoflogisticstasks—wholesaling(intermediation),warehousemanagement,infor-
mationandcommunicationtechnology(ICT)systemintegrationintoretailanddistri-
bution systems of companies, cold chain development, and packaging. They may also
forward integrate into retail management of specific divisions (such as Radhakrishna
FoodlandinIndiabecominganexternal“channelcaptain”managingfreshproducefor
second-tierIndiasupermarketchains,Reardonet al.2010).
FDIhasbeenanimportantdriveroftheriseoftheseirms,spurredbyliberalization
ofFDIaspartofgeneralliberalizationinthe1990sand2000s.InChinaandIndia,this
occurredinthe2000s,andwasimmediatelyfollowedbyarushofforeigncompanies
investing.Forexample,SnowmanisaJapanesecompanyinIndiathathasbecome,in
a few years, one of the leading logistics companies in South Asia. Some (such as Penske
andTNT)“followed”globalretailersandprocessorsintheirspreadintodeveloping
countries(Reardon,Henson,andBerdegué2007)—knownas“followsourcing.”For
a food company, this creates a shortcut to the time waiting for local logistics capacity
to build and adapt to their needs, and quickly puts in place state-of-the-art techniques
that also give them an advantage over local firms using only traditional wholesalers and
truckers.Insomecases,alargeretailerseeksamultinationallogisticscompanythatcan
integrate its operations over a whole region, as in Central Europe (see Dries, Reardon,
andSwinnen2004),andalsosetupanexportplatformfromthatcountrybacktothe
host region, such as Western Europe.
There has also been important domestic investment in this sector, sometimes from
transportcompanyroots(suchasCONCORinIndiafortherailsegment),maritime
companyroots(suchasAdaniinIndia),andhotelroots—inshort,companiesthathad
some transport functions that then were extended into logistics for modern agrifood