Facilitating Smallholder Farmers’ Market Access
In the OIC Member Countries
126
Promote Appropriate, Market-based Institutional and Organizational
Arrangements
Previous chapters have described how modern retailing outlets and supermarkets are
profoundly changing the structure of production and wholesale marketing. Supermarkets
and modern retail outlets increasingly bypass spot markets and turn to modern
procurement systems to source produce. They may rely on dedicated wholesalers or move
on to buy directly from farmers—individual farmers, farmers in chain-agribusiness
relations, or groups of farmers belonging to producer organizations or cooperatives.
Producers who supply supermarkets and processors frequently must conform to these
buyers’ private standards, which tend to exceed national standards.199 Because it is
difficult for smallholders, with their very limited assets, to meet rigorous quality and
safety standards, smallholders’ exclusion from modern agri-food supply chains is a real
and growing concern. Supermarket buying agents and agents for other agribusinesses may
also prefer to purchase from medium and large farmers because the transaction costs are
lower than the costs of purchasing small amounts from a large number of dispersed
smallholders. Working with a group of farmers, rather than a large number of individuals,
also reduces the costs of disseminating information on agricultural practices, quality, and
other buyer requirements.
Modern food retail outlets (supermarkets and hypermarkets) account for an increasing
share of food retail in transforming, urbanizing, and urbanized economies . For
example, Turkey’s mini-markets, convenience stores, and supermarkets account for 54
percent of food retail; the comparable figures for Malaysia and Indonesia are 45 percent
and 44 percent, respectively. In other OIC member countries, such as Nigeria and
Bangladesh, traditional markets and grocery stores are still the main food retail formats.
As urbanization intensifies and incomes grow, however, modern retail formats are
expected to expand rapidly. In several Asian countries (China, India, Indonesia, and
Malaysia), supermarket sales expanded faster than GDP growth.200 One reason for this
development is that as incomes grow and more consumers enter the middle class, food
safety becomes a more sensitive issue. As consumers become more aware of food safety
issues, they tend to shift from wet markets to supermarkets. Another reason for
burgeoning supermarket sales is that sourcing efficiencies and scale enable supermarkets
to charge lower prices than wet markets and attract even more customers. 201
TABLE 25: PERCENTAGE SHARE OF FOOD RETAIL BY RETAIL FORMAT IN SELECTED OIC
COUNTRIES
Food retail format Indonesia Nigeria Bangladesh Turkey Malaysia
Traditional markets, grocery stores 55.8 65 – 46 56
Mini markets, convenience stores 22.4 34 –
54a
1
Supermarkets, hypermarkets 21.8 1 2 43
Source: USDA Gain Reports.
a Includes mini-markets, convenience stores, and supermarkets.
199 Reardon (2011).
200 Reardon (2011).
201 Reardon (2011).