implications for high-value agriculture Nicholas Minot , Randy - - PowerPoint PPT Presentation

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

Urban shopping patterns and implications for high-value agriculture

Nicholas Minot , Randy Stringer, Wendy Umberger, and Wahida

28 March 2013 ARD / East Asia & the Pacific region The World Bank, Washington, DC

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Overview of project

• Project title:

Markets for high-value commodities in Indonesia: Promoting competitiveness and inclusiveness

• Funding:

ACIAR

• Institutions

IFPRI, University of Adelaide, ICASEPS,

Michigan State University, and CAPAS

• Objectives

1. What are the patterns of urban consumer demand for modern retail outlets and implications for food retail transformation and effect on farmers? 2. What are the determinants and outcomes of participation of farmers in modern market channels for high-value commodities compared to traditional market channels? 3. What are the policies and programs that would promote the competitiveness and inclusiveness of the transformation of high-value supply chains? 4. A fourth objective is to build research capacity in Indonesian institutions

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Project activities

Urban consumer survey covering 1180 households in three cities

• What are the patterns of demand for modern retail outlets?
• What are the implications for food retail transformation and

effect on farmers?

• Attitudes toward organic food and certification?

Surveys of growers of chilies, shallots, shrimp, mango, and mangosteen

• What are the determinants and outcomes of participation of

farmers in modern market channels for high-value commodities compared to traditional market channels?

• What are the policies and programs that would facilitate

diversification into high-value agriculture?

Value chain assessments and trader surveys

• What are the trends in transformation of supply chains?
• What policies and programs would make supply chains more

competitive and more inclusive?

Capacity building

• Five Indonesian graduate students using survey data
• Training in survey methods, sampling, CSPro, etc

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Objectives of urban consumer survey

• Describe shopping patterns in urban Indonesia
• Focus on importance of modern retail outlets
• Evidence that supermarkets source produce differently
• Risk that small farmers will be squeezed out by quality and

quantity requirements of supermarkets as they expand

• Use current shopping patterns to project into future
• As incomes rise, use of supermarkets rise
• We measure this relationship statistically with survey data
• Then simulate effect of income growth on supermarket use
• Implications for high-value agriculture
• Impact on high-value agriculture depends on rate of growth
• f supermarket demand for high-value commodities

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Design of urban consumer survey

• Sample
• 1180 urban households in three cities
• Stratified three-stage random sample
• Over-sampling of higher-income households
• Over-sampling of RTs near supermarkets

Bogor 280 households Surakarta 300 households Surabaya 600 households

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Design of urban consumer survey

• Questionnaire
• 16-page questionnaire
• Household member characteristics
• Assets and housing
• Shopping attitudes and behavior
• Food & non-food expenditure
• Perceptions
• Attitude toward certification
• Nutrition status
• Data collection
• 33 enumerators in three teams
• Nov 2010 to Feb 2011

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Types of food outlets

Type Definition

Hypermarket Very large, modern stores with 10 or more cash

• registers. Examples:

Carrefour, Giant, Macro, and Hypermart. Supermarket Medium or large modern stores with 3-9 cash

• registers. Examples: Hero,

Matahari, Asia, and Yogya. Minimarket Small, modern stores with 1-2 cash registers. Examples: Alfa and Indomart.

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Type Definition

Semi- permanent stand Vendor who sells from a table, stand, cart, or stall that can be moved, but generally stays in one place during the day. Does not include vendors in a wet market . Small shop (warung) Small store selling food products in a building or part of a house, often located in a residential area.

Types of food outlets

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Type Definition

Traditional (wet) market Collection of numerous food vendors under one roof or in one location, usually renting space in the building Peddler Small-scale vendors operating on foot, on bicycle, with a cart, or from a car/truck, who moving around during the day.

Types of food outlets

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Food shopping patterns

Hyper- market Super- market Mini- market Semi- perm. stand Small shop Tradi- tional market Peddler Total Low price / value 19 29 21 26 11 45 10 23 Variety of foods 29 23 12 10 1 22 2 13 Easy to get to 11 16 47 49 77 19 70 45 Other 41 33 19 16 10 14 18 Total 100 100 100 100 100 100 100 100

Main reason for using this type of food outlet

(percent of urban households that use this type) “Other” reasons for going to hypermarket or supermarket include close to entertainment, provides discounts, high quality food, and cleanliness

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Food expenditure data

• Food expenditure module
• 67 food categories
• 7 rice and other grain products
• 3 beans, soy, and tofu
• 12 animal products
• 23 fruits and vegetables
• 22 other (spices, beverages, etc)
• Questions on
• Change in consumption over

past five years

• Frequency of purchase
• Normal amount of purchase
• Main type of store where

bought

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Food shopping patterns

Share of food spending by type of food outlet

(percent of urban food expenditure)

Modern

• utlets

account for 19% of food spending

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Food shopping patterns

Share of food spending by type of food outlet and food group

(percent of urban food expenditure)

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Food shopping patterns

Food products for which more than 50%

• f spending at modern retail outlets

Food product % from modern

• utlets

Infant formula & nutr 92 Spreads 91 Other dairy products 84 Other cooking oils 68 Other fresh and froze 68 Apple 67 Other milk 67 Fats, butter, and mar 65 Chocolate, meisus, an 63 Alcoholic beverages 59 Chili sauce and other 57 Breakfast cereals 57 Processed meat 51 Other processed food 51 Food product % from modern

• utlets

Other seafood 5 Onion 5 Meals eaten outside home 4 Poultry 4 Maize products 4 Other meats 4 Fish 4 Pineapple 4 Rice 3 Potato 3 Other spices and seas 3 Processed fish & seaf 2 Ready-to-eat meals 2 Tofu and tempe 2 Green bean (buncis) 1 Tomato 1 Carrots 1 Garlic 1 Tubers 1 Chilies 1 Leafy green vegetable 1 Long bean Shallots Cucumber

Food products for which less than 4%

• f spending at modern retail outlets

Other food products of interest

Food product % from modern

• utlets

Mango 7 Mangosteen 10 Shrimp 11

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Food shopping patterns

Share of food spending by type of food outlet and income

(percent of urban food expenditure)

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Food shopping patterns

Share of food spending by type of food outlet and education

(percent of urban food expenditure)

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Determinants of share of food spending at modern retail outlets sector

Determinants of whether or not a household uses modern food

• utlets

Determinants of the share of food spending at modern outlets, given that a household shops there

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Determinants of share of food spending at modern retail outlets sector

Determinant Effect on whether households uses modern outlet Effect on share of food spending at modern outlet

Per capita expenditure (log)

+++ +++

Household size

+++ +++

Female-headed household Education of head of household

+++ +++

Working wife Own refrigerator

+++ +++

Own motorbike

++

Own car Time to get to supermarket (min) Interaction of motorbike and time Surabaya

+ ++

Bogor

++

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Projecting evolution of food retail sector

Income growth Population growth Increased number of modern

• utlets

Increased demand for food quality, safety,

• etc. of modern outlets

Increased

• wnership of

motorbikes & cars Increased access to modern outlets Rising share of households using modern outlets Rising spending at modern outlets among customers Rising urban population Urbanization Rising total spending at modern food outlets

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Projecting evolution of food retail sector

• Key assumptions in making projections
• Urban population growth: 2.5%
• World Bank & UN, http://data.worldbank.org/indicator/SP.URB.GROW
• Per capita income growth: 5.5%
• Projection 2010-14, http://devdata.worldbank.org/AAG/idn_aag.pdf
• As incomes rise, households will follow patterns of higher

income households today

Per capita income Modern outlet share

2011

Per capita income Modern outlet share

2020

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Projecting evolution of food retail sector

• What is the effect of income growth on other

determinants of modern retail spending?

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Projecting evolution of food retail sector

Share of food expenditure at modern

• utlets rises from 19%

to 25% over 10 years

• What is the projected share of food expenditure

allocated to modern outlets?

• Taking into account income growth, increased ownership of motorbikes and

refrigerators, and rising education on use of modern food outlets?

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Projecting evolution of food retail sector

Total food expenditure at modern outlets grows from 100 to 235 trillion Rp per year, 135% growth

• r about 9% per

year, ….

• What is the projected total urban expenditure at

modern food outlets?

• Taking into account income growth (5.5%), urban population growth (2.5%),

and declining share of food in total expenditure

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Projecting evolution of food retail sector

…but food expenditure at modern outlets remains no more than one-quarter of total food expenditure over next ten years.

• What is the projected total urban expenditure on food

(modern and traditional)?

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Summary

• Households do not choose one type of food outlet, but rely on several types

for different needs

• Traditional market are appreciated for low prices; warungs, minimarts, and

peddlers are appreciated for their convenient locations; and supermarkets and hypermarkets are appreciated for proximity to entertainment, food quality, and cleanliness.

• Modern food retailers account for 19% of urban food spending, divided

equally among hypermarkets, supermarkets, and convenience stores

• Warung (31%) and traditional wet markets (24%) are the most important food
• utlets in terms of consumer spending
• Higher income households allocate a larger share to moderns outlets
• But even the richest 10% of urban households spends twice as much at

traditional food outlets than they do at modern outlets

• Econometric analysis: spending at modern retail outlets is higher among

households with high income, more education, larger size, a motorbike, and a refrigerator.

• Spending at modern retail outlets is NOT associated with distance or travel

time to modern outlets, sex of head of household, or a working wife

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Implications for horticulture

• Projections can be made assuming that as household income rises, they

adopt patterns of currently richer households

• Based on this approach, we project that the share of urban food spending at

modern retailers will grow from 19% to 25% over 10 years

• Combined with urban population growth (2.5%) and income growth (5.5%),

this implies strong growth in modern outlet sales, which would increase 135%

• ver 10 years or 9% per year
• Although the modern sector share is expected to rise, this does not imply that

the traditional sector will shrink. Indeed the traditional sector is expected to grow 67% over 10 years (5% per year).

• Currently, 80% of urban vegetable purchases are at traditional markets and

from peddlers. Vegetable purchases at modern outlets is very small. Thus, supermarket quality and food safety requirements currently have little effect

• n vegetable growers.
• On the other hand, almost half of urban fruit spending is at traditional
• markets. Apples and oranges tend to be purchased at modern outlets, while

mangoes, papayas, and other fruit are purchased at traditional outlets.