north american food retailers and their impact on food chains
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North American Food Retailers and Their Impact on Food Chains. Dalila Cervantes–Godoy, David Sparling, Belem Avendaño, and Linda Calvin NAAMICCancun, June 15, 2007. Outline. Consumer and food retail changes Changes in Mexican produce chains Case studies and changing requirements - PowerPoint PPT PresentationTRANSCRIPT
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North American Food Retailers and Their Impact on Food Chains
Dalila Cervantes–Godoy, David Sparling, Belem Avendaño, and Linda Calvin
NAAMIC Cancun, June 15, 2007
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Outline Consumer and food retail changes Changes in Mexican produce chains Case studies and changing requirements
Meeting scope and quality needs - Associations for Mexican cactus pears and mango
Food safety – Mexican cantaloupe and changing food safety demands
Quality and complexity – Ontario veal Conclusions
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Changes at the consumer level Demand for year round availability Interest in variety and new products Lack of time Greater affluence Concern over health and safety
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Mexico is experiencing most significant changes in consumers Greater urbanization Higher incomes, particularly in cities More women working Higher use of refrigerators
Need for one stop shopping and ability to purchase for more than one day → increased use of supermarkets
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Changes in food retail Intense competition in Canada and U.S. Growth strategies
Consolidation Internationalization – expansion into less
competitive developing markets Meeting consumer demands leading to more
international chains Larger size – larger distribution systems
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Food Retail Chains
Changing retail environment
Cut chain costs
Changing consumer needs
Consolidation
Higher quality & safety standards
Distribution centers
Internationalization
Global supply chains
Higher volumes
New technologies
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Mexican Produce ChainsOwn FarmsAll Types of Farms and
Intermediaries
10%
Distribution Centre
CEDAS
Supermarket stores
Imports
Transportation costs covered by suppliers
Transportation costs covered by supermarkets
Source: Cervantes-Godoy, 2007.
Farmers packers/processors
800%
15%
5%
25%
55%5%20%
20%45%
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Case 1 – Associations are the only way small farms reach retailers
Small farmers
CEDAs, Grower/shippers
Grower Association
Food retailProduct Flow
Information flow
Traditional markets
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Producer organized associations Study of small producers in Mexico Associations were the only way for small
producers to reach food retail chains directly Four associations examined in detail
Two cactus pear and two mango
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Four producer associationsCactus one Cactus two Mango one Mango two
# of farmers 35 82 414 51
# of active farmers
25 76 60 30
Clients Supermarkets, CEDAs, packers and export
Supermarkets,CEDAs, and export
Supermarkets andpackers
Supermarkets and CEDAs
State Zacatecas Zacatecas Nayarit Guerrero
Years selling to supermarkets
3 2 3 4
% sold to supermarkets in 2004
53% 11% 41% 40%
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Associations play several rolesSupermarket requirements
Advantages of farmer associations
Volume & consistency Consolidate farmer supply
Quality Access to technical assistance and credit
Packing & transport Credit for facilities and working capital
Administrative and financial management Use of Internet and EDI for ordering
Access to training through gov’t programs. Finance for equipment and hiring trained individuals (general managers).
Payment and discounts
Working capital to manage time from delivery to payment
Trust environment Managing relationships with farmers and retailers
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Access to credit is important
0%
40%32%
73%
100%
95%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Cactus one Cactus two Non-Participants
Cactus
Mango one Mango two Non-Participants
Mango
Per
cen
tag
e (%
)
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It pays to sell to supermarkets
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Supermarket Traditional Supermarket Traditional
Price
Costs
Profit
Cactus Pear Mangos
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Results Cactus 1 – started in 2001 – still operating Cactus 2 – started in 1983 – changed structure
in 2001 – sells mainly to CEDAs Mango 1 – in 2004 lent money to growers.
Many did not pay so no credit in 2005 Mango 2 – operated for many years
Drought in 2005 reduced quality – could not sell to supermarkets and ceased operations
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Lessons from producer associations Only way for small producers to reach retail
directly Can also reach CEDA’s and other markets
They pay – higher costs but higher profits Access to capital essential Risks
Finance – loans to members Production – one product, one region
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U.S. imports of cantaloupe, 1990-2006
0
100,000
200,000
300,000
400,000
500,000
600,000
1990 1992 1994 1996 1998 2000 2002 2004 2006
Metric tons
Mexico
All othercountries
Case 2—Food safety, small farmers, and cantaloupe
Outbreaks
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The Mexican response
NOM-EM-038-FITO-2002 March 2007
13 firms certified by SENASICA 12 field and packing 1 just field Sonora (10), Colima (2), Michoacan (1)
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Cantaloupe production by region
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Field work in Colima, Mexico Known as the Mexican cantaloupe capital Growers in Colima have never had a food safety
problem
Colima growers used to be export oriented, with great experience in growing cantaloupe for export markets
Most Colima growers are small scale and based on ejidal property
Colima is near Guerrero which has been associated with outbreaks
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The state of food safety knowledge among small cantaloupe growers
Yes No No response
Have you been affected by food safety problems?
2
(12%)
15
(88%)
0
(0%)
Do you know about Good Agricultural Practices?
2
(12%)
12
(71%)
3
(17%)
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Requirements for adopting new food safety standards
Number
Standards not very strict 3
Information and training support 6
Mandatory or buyer-requested 1
Higher price 1
Improved production 1
No answer 3
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Conditions related to food safety issues
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The contrast between large and small farmers
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Actions needed to improve marketing
Number
Adopt higher food safety standards 3
Eliminate middlemen 2
Improve quality 6
Direct marketing 1
Reach new markets 3
Other 1
No answer 1
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Support needed from government to support small cantaloupe growers
Number
Financial aid 5
Training support 2
Market information 7
Improved access to equipment and machinery
3
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Export/domestic market strategy for small Mexican growers Before 2002, 80 percent of production went to
the export market 2 small growers had their own packinghouses The rest exported via intermediaries
After 2003, 83 percent of production went to the domestic market
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The lessons
Retail industry drives the adoption of food safety standards
IFSS relegate small firms to less profitable and less regulated domestic markets
Ability to adopt depends on firm scale Associations can lead small growers to
international markets Credit is a major issue
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The lessons ….
Extension and credit improve IFSS
Packing facilities and cold chain are critical for food safety certification
Government can play a major role in promoting IFSS for small farmers
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Case 3 – Quality and complexity Ontario veal producers association Small farmers – market through processors Association took a proactive approach to meeting
retail quality needs Ont. Veal Quality Assurance Program
Requirements including audit/ certification Strict processing specifications Program included cooking instructions, in store
support and a quality guarantee
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Retail reaching out Small retail chain serving ethnic customers
was looking for innovative products OVQAP was perfect for delivering higher
quality veal products OVA selected a processor to prepare the
product to their specs Learning with the small chain allowed the
OVA to search for larger customers
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An active/market responsive role for producer associations
Veal farmers
Ontario Veal Association
Processing
Food retail
Product Flow
Information flow
Other markets/ customers
Creating quality program
Educating & organizing producers
Awareness, Contracts
Relationship management
Promotion and service
Specifications
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Scaling up - The Challenges Scale – larger retailer, 69 store launch
required more producers, larger processor and links through to retail customer
Scope – retail requirements changed Not just looking for a single product, or even a
single product line Retail chain wanted a line of products that varied
through the year
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Trouble in the middle Veal produces multiple products Retail chain only wanted selected parts and
the processor had to sell the rest Volume and continually changing demands
made it difficult for the processor The project has been much less successful
than the first or than anticipated
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Lessons from OVA Anticipating retail needs can provide
producers with marketable advantages Retail may drive food chains but they aren’t
the only powers in the chain The more complex the product and the chain
the more potential for unanticipated problems
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Looking ahead – More of the same Food retail chains will continue to grow and
dominate supply chains Producers must meet greater demands for
volume, variety and year round availability Marketing options are limited
Sell direct - alone or through associations Sell through agents/distributors Ignore retail markets – direct to consumer
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Trends to expect Smaller farms will continue to face challenges
selling directly to retail Many producers will be best suited to market
through middlemen Associations will serve more than small farms Networks of various types will help producers
meet retail needs Same product/same area Different products and different regions
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Thank you