the food retailing revolution experience from poland by rapeepun jaisaard world bank
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The Food Retailing Revolution: Experience from Poland by Rapeepun Jaisaard World Bank. Transportation Communications Information Technology Advertising Trade Regime. Management Innovations Cross-Border Investment Processing Technology Storage Technology. Global Retailing Revolution.

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the food retailing revolution experience from poland by rapeepun jaisaard world bank

The Food Retailing Revolution:Experience from PolandbyRapeepun JaisaardWorld Bank

global retailing revolution
Transportation

Communications

Information Technology

Advertising

Trade Regime

Management Innovations

Cross-Border Investment

Processing Technology

Storage Technology

Global Retailing Revolution
  • Expression in food retailing of revolutions in
so far few supermarkets in balkan countries
So Far Few Supermarkets in Balkan Countries
  • The food retailing revolution is just starting in the Balkans – delayed because of
    • Transition from socialism
    • Security situation
  • Croatia
    • Local and international supermarket companies from Austria, Italy and Slovenia
  • Serbia
    • First foreign supermarket (Est. Dec 2002) and at least 3 hypermarkets of 15k sq meters in 2003
  • Bosnia, Macedonia have a few
experience of poland
Experience of Poland
  • Poland
    • First supermarket in 1995. Now more than 500 hypermarkets and supermarkets.
    • Most major international chains represented: Tesco, Carrefour, IGA, Royal Ahold, Metro
    • Ten top food retailers in Poland are foreign companies
experience of latin america
Experience of Latin America
  • Latin America
    • Supermarkets now dominant.
    • In only about 10 years, supermarkets moved from about 10-20% of retail food sales to 58% (weighted) average for 10 countries.
    • Spread from capital cities to medium-sized cities and towns
    • 42% in fresh fruit and vegetables. Less than in processed food but still very large
experience of china
Experience of China
  • China
    • the first supermarket in Beijing was opened about 1995.
    • Now they are in all cities in the country.
    • There are 3,000 supermarkets and modern metro stores in Shanghai alone.
general characteristics of the food retailing revolution
General Characteristics of the Food Retailing Revolution
  • Early supermarkets are few
    • In the capital and serving the middle class, capital cities, upper income customer base, largest and richest countries
  • Later
    • Spread to medium sized cities, middle and working class customers, poorer countries
    • Hypermarkets on the outskirts of cities appeal to working class because of low prices
characteristics of the revolution in food retailing cont
Characteristics of the Revolution in Food Retailing (cont.)
  • Demand drives the system rather than supply
    • Increased competition
    • More variety
    • Low prices
    • Responsive national, regional and international supply chains
    • One-stop shopping
  • Improved quality
    • Food safety practices
    • Improved product quality and presentation
    • Convenience & amenity in shopping environment
prerequisites for entry of global supermarket companies
Prerequisites for Entry of Global Supermarket Companies
  • When prerequisites exist, entry of large international supermarket chains can be very rapid.
  • This was shown by previous examples of Poland, Latin America and Asia.
prerequisites for entry of global supermarket companies cont
Prerequisites for Entry of Global Supermarket Companies (Cont.)
  • Population critical mass in trading region (not necessarily a single country)
  • Political stability & cross-border logistical ability
  • Growing per capita purchasing power
  • Viable banking sector to finance transactions of the company and domestic and international suppliers
  • Communication systems to support EDI (Electronic Data Interchange) & CRS (Continuous Replenishment System) technology
  • VAT system compatible with company accounting
  • Presence of local supermarket acquisition targets
supermarket procurement
Supermarket Procurement
  • Use of long-term supermarket supply contracts
  • Numerous and costly criteria for supplier accreditation
  • Tough contract negotiations and enforcement
  • Regional and international procurement
supermarket supply contracts
Supermarket Supply Contracts
  • Earlier, supermarkets bought supplies, especially perishables, on spot wholesale markets
  • Now typically long-term supplier contracts
    • e.g., 3-year contract, annual renegotiation of prices
  • Supplier contracts allow supermarkets to
    • control quality
    • ensure desired supply volumes
    • reduce price uncertainty
supplier accreditation
Supplier Accreditation
  • Technical certification - HACCP (Hazard Analysis Critical Control) - ISO 9000
  • Volume trading capacity
  • Access to adequate facilities for sorting, grading, packing, storage, transport
  • Traceability of products back to producers w/bar codes
  • Insurance cover on all aspects of supplier’s operations
  • Electronic systems in place or planned (EDI and CRS)
  • Adequate working capital / general financial strength
  • Adequate management and personnel resources
tough contract negotiations and enforcement
Tough Contract Negotiations and Enforcement
  • Examples from Tesco in Poland
    • Tesco negotiated a 25% better price on carp from local suppliers
      • imported from Ukraine
      • suppliers matched lower Ukraine price
    • Contract volume and delivery terms enforced. Suppliers who failed to meet exactly terms were terminated.
regional and global procurement
Regional and Global Procurement
  • Bargaining power of super buyers comes from
    • their access to regional and global networks of suppliers and
    • their huge volumes
  • Supermarket companies prefer to deal with large traders with regional and global supply networks
    • rely on them to produce large volumes at required times
impact on national traders
Impact on National Traders
  • In Poland, 50% of local wholesale trading companies amalgamated or went out of business as supermarket share of retail sales increased
  • Small traders who pick up variable truck loads at farm gate particularly hurt
    • do not have branded products
    • quality control insufficient
  • Despite the turmoil, amalgamated companies have succeeding in getting supermarket accreditation
    • some are going regional themselves.
impact on processors
Impact on Processors
  • Supermarkets initially sourced large % through international (mostly EU) suppliers
  • Shakeout of local processors continuing
    • stronger ones, including some amalgamated ones, have now adapted and are taking a growing supermarket share
  • The meat industry shakeout in Poland especially severe
    • half the still remaining firms expected to merge or go bankrupt
  • FDI in food processing, grew rapidly during the period.
  • The industry is now more competitive and can expect to survive and perhaps prosper after EU accession
impact on commercial farmers
Impact on Commercial Farmers
  • Impact of supermarket entry on commercial farmers similar
    • they struggled to meet the new requirements passed through by traders and processors.
  • As commercial farmers adapted to supermarket requirements
    • there was a decline in sales to domestic retail channels
  • Luckily this decline in retail sales was more than offset by strong export sales
    • resulting in a (small) 8% growth in volume 1995-2001.
  • One adaptation: the emergence of farmer/traders with own packing facilities, supermarket contracts.
impact on small farmers
Impact on Small Farmers
  • Little chance for individual small farmers to sell direct to supermarkets
  • Some farmer associations and cooperatives that have invested in advanced grading and sorting equipment have been accredited
  • Tesco, for example, supports this channel to enhance social responsibility image
  • “Lower tail”of small dairy producers forced out as dairies became more competitive
  • Poverty impact not favorable in the short run and policies needed
implications for policies and programs in balkan countries
Implications for Policies and Programs in Balkan Countries
  • Must accept that supermarkets are here to stay and product markets increasingly will be supermarkets.
  • In food retailing, global, regional and local markets are converging under the influence of global supermarket companies.
  • Market-oriented policies and projects for the agrifood sector should logically be supply-chain-oriented policies and projects.
  • Local markets with low quality standards are contracting (but not disappearing).
implications for policies and programs in balkan countries cont
Implications for Policies and Programs in Balkan Countries (Cont.)
  • Development programs must learn to deal with “super buyers” and understand that in a liberalized economy, super buyers have alternative regional and international suppliers.
  • Attempts to continue local monopoly positions or saddle producers with costly social mandates may end badly - and rather quickly given the speed of supermarket entry.
implications for policies and programs in balkan countries cont22
Implications for Policies and Programs in Balkan Countries (Cont.)
  • Small farmers who can potentially adapt
    • should be helped to organize together quickly
    • otherwise they may be locked into a rapidly declining traditional market segment.
  • Small farmers who can’t attach to the supermarket supply chain may be helped by
    • policies and lending to modernize traditional food retail channels, e.g., promote safety and cleanliness.
  • Rural families with tenuous attachments to commercial agriculture will need a range of other policies and programs.
implications for policies and programs in balkan countries cont23
Implications for Policies and Programs in Balkan Countries (Cont.)
  • Agrifood exports typically mean fitting into regional and international supermarket supply chains
  • The best way for producers to learn how to do this is to fit into domestic supermarket supply chains
  • Regional logistic questions are important
  • Local suppliers at all points in the value chain need adequate financial resources and entrepreneurial skills.
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