Transformation of the Agrifood Industry in Developing Countries - The Oxford Topic of Food, Politics, and Society - page 809

$700 millionofthe$2billionoftheleading15chains(basedon www.planetretail.net
data).InsteadofcombatingandregulatingheavilysupermarketsastheUnitedStates
didfortheirst30 years,eggedonbysmallretaillobbyforces(ReardonandHopkins
2006),thethird-wavecountries(exceptIndia)areactuallypromotingsupermarketsasa
modernizationstrategy.
Second, using supply-chain efficiencies, modern retailers can charge lower prices for
processed and semiprocessed foods (a dominant share of their sales as they are a domi-
nantshareofoverallfoodpurchases)thancantraditionalretailers.(Forareviewof10
countries'evidence,seeMintenandReardon2008,andMintenet al.2010forIndia,for
rice,wheatlour,andmustardoil,andGorton,Sauer,andSupatpongkul2009forveg-
etablesinhailand.)heseeiciencies,inturn,derivefrommodernizationoftheirpro-
curement systems, moving gradually from traditional spot wholesale market and stockist
networks to using direct sourcing and dedicated wholesalers, distribution centers, pri-
vatestandards,andmodernlogistics.heprocurementmodernizationtendstooccur
earliest and fastest in correlation with the “waves,” with the efficiency of local wholesale
markets,withthesizeofthechainanditscapacitytomaketheseinvestments,withpro-
cessed and semiprocessed products much earlier than for fresh produce (the latter being
about10-15 percentofthesalesofsupermarkets,asofthedietsindevelopingcountries),
and with the degree of development of modern logistics and agribusiness companies to
actaspartners.Modernizationprovidesacostadvantagetothelargebusinessesandan
acceleration of consolidation inside the modern retail segment, even at early stages.
hird,theretailliteratureondevelopingcountriesofthe1950s-1980sheldarigidand
limited view of the format and socioeconomic targeting of supermarkets: that of a “big
box”(largeformatonly),focusedonimportsandprocessedproducts,targetedatthe
high-income niche consumers with cars and refrigerators, in big cities, and interested
in “western” images. To that image was counterposed the characteristics of the mass of
consumers (many in dense cities, without cars, or in towns, many with limited incomes,
mostshoppingfrequentlyneartheirhomes).Fromthatcontradictionwasderivedthe
prediction that modern retail could not “take off.”
But modern food retail spread beyond the upper-income niche, and beyond even the
middle class, into the food markets of the poor, and into small cities and rural towns.
That spread was accomplished both by lowering prices and by adapting formats and
marketing strategies .
On the one hand, from an initial march from small to large supermarkets (usually
stand-alonebutsometimesinmalls),modernfoodretailbifurcatedintohypermarkets
ononehand,andawelterof“smallformats”ontheother—frompushcartchainsin
India,to“harddiscount”storesinArgentinaandSouthAfricaandChina,to“neighbor-
hoodstores”inIndia,Mexico,andhailand,to“freshproducestorechains”inIndia,
SouthAfrica,andIndonesia,tothefamiliarconveniencestoresinmostcountries.his
allowedpenetrationofdenseurbanspaces(allowingfrequentvisitsclosetohome),
scale to suit small towns, rapid rollout where real-estate markets are tight, a means of
targeting and adapting to a variety of consumer types, a means of franchising (and thus
co-optingsmallretailers),andameansofgettingunderregulationslimitingstoresizes.