Transformation of the Agrifood Industry in Developing Countries - The Oxford Topic of Food, Politics, and Society - page 811

intensivelyshouldtargetqualityproductionandextraservices.Itotenformslong-
standing social networks and sometimes credit relations with clients and suppliers.
Itssmallsizeallowsittoitintonooksandcranniesandshititslocations.Butfrom
the steady march of the modern segments, of course at very different paces in different
countries and products and segments, one can infer that these advantages are not deci-
sive or permanent.
Second, there is evidence emerging that the three modern agrifood industry segments
are in a mutually reinforcing “symbiosis.” The following explains this critical point.
Large processors reduce transaction costs for modern retailers by facilitating
dis-intermediation, delivering to the DCs or stores of the retailers (for Argentina and
Brazilexamples,seeFarinaet al.2005,forPoland,Milczarek-Andrzejewskaet al.2008).
They adapt packaging and variety to the needs of the retailers. Their inventory systems
reduce chances of retail stock-out. Their national headquarters can negotiate deals with
the retail headquarters, and if both are multinational, they can do so globally.
Inturn,modernretailersfacilitatemarketsizeandscopedevelopmentforlargepro-
cessors. Supermarkets tend to carry a limited set of brands per product category, and
these tend to be mainly from medium and large processors, and a smattering of small
company brands for noncommodity products. Retail chains provide large shelf space
(comparedtotraditionalretailers)inwhichtomultiplythediversityoftheprocessors
products(DriesandReardon2005),coldchainandshelves,advertising,andpromo-
tions. Modern retailers develop markets for processed products because they tend to
sellthemcheaperthantraditionalstoresonceprocurementsystemsaremodernized
(MintenandReardon,2008).heseadvantagesofmodernretailtothelargeprocessor
areofsetpartiallybycompetitionfromretailers'privatelabelproducts,slottingfeesand
othercharges,and—ifthechainislarge—strongbargainingpowerfromlarge-volume
purchases.
Finally, large processors and supermarket chains provide the initial key markets for
modern wholesalers (the “dedicated wholesalers” noted earlier) and modern logis-
tics firms.4 These firms are competing with traditional wholesalers to serve the mod-
ernretailersandprocessors—anddosobyoferingotensuperiorservicesoftransport
(with modern cross-docking and refrigerated vehicles), warehousing management,
and services not usually found in traditional distribution segments such as operating
packinghouses,packaging,ICTsystems,andcoldchains,andmanagingcontractfarm-
ing, merchandise inventory, and international networks. Multinational processors and
retailers sometimes ask global or regional logistics firms serving them in developed
markets to “follow source” into the new developing markets. For example, Carrefour
brought Penske into Brazil, and major Taiwanese and Japanese retailers bring their
home logistics firms into China.
Itappearsthatthesedevelopingsymbiosesamongmodernsegmentsleadtograd-
ual displacement of traditional retailers, wholesalers, and processors as suppliers to
themodernsegments.Forexample,selectingtheperspectiveofretail'ssourcing,one
indsamplecase-studyevidenceofsupermarketsshitingfromsourcingfromstock-
ists and wholesalers and SMEs to preferred supplier direct relationships with large