Food Value Chain Transformations in
Developing Countries: Nutritional
Implications
Miguel I. Gómez and Katie Ricketts
Dyson School of Applied Economics and Management
Cornell University
Joint FAO/WHO Second International Conference on Nutrition (ICN2)
PREPARATORY TECHNICAL MEETING
FAO Headquarters, Rome, Italy
13-15 November 2013
Objective and Approach
• How transformation of food value chains (FVCs) influences
the triple malnutrition burden in developing countries
• Identify areas that require more attention from researchers
and decision-makers
• Develop a FVC typology that takes into account the
participants, the target market, and the products offered
• Propose selected hypotheses on the relationship between
each FVC category and elements of the triple malnutrition
burden
Key differences between developing
country food systems in 1980 and 2010
Source: Gómez et al. (2013)
Developing Country FVC Transformation
 Share of food reaching consumers through longer FVCs has
increased due to changes in food consumption patterns
− rapid urbanization
− income growth
− expansion of modern retailers, processors and distributors.
 Demand for products such as meats, dairy, fruits and
vegetables is increasing
 Market for processed/packaged food categories is expanding
 Many rural residents depend on FVCs because most of them
are net-food buyers and are employed in the food sector
Food Value Chain Typologies
Type
Description
Traditional
Traditional traders buy primarily from smallholder farmers, and sell
to consumers and traditional retailers in wet, mostly local, markets.
Modern
Domestic and multinational food manufacturers procure primarily
from commercial farms and sell through modern supermarket
outlets.
Modern-totraditional
Domestic and multinational food manufacturers sell through the
network of traditional traders and retailers (e.g., ‘mom and pop’
stores).
Traditional-tomodern
Supermarkets and food manufacturers source food from
smallholder farmers and traders.
Traditional FVCs
Fresh fruit and vegetable market share of
modern and traditional FVC retail sales
Modern FVC Retail
Traditional FVC Retail
Market share (%)
90
60
30
0
Kenya
(2009)
Nicaragua
(2007)
Zambia
(2009)
Thailand
(2006)
Mexico
(2007)
Country
Note: Countries arranged in order of GDP per capita (World Bank, 2008)
Sources: Tschirley et al. (2009), Zambia and Kenya; Reardon et al. (2010), Mexico and Nicaragua;
Gorton et al. (2011), Thailand.
Retail outlet choice for meat purchases in
Ethiopia
Percent of households within the income
group
Total
sample
Low
income
Medium
income
High
income
Producers residence or local
market
1
0
1
1
Butcher in a local wet market
90
60
c
94
74
Supermarket
14
0
c
11
54
Special butcher shop
60
73
57
18
Retail Outlet
Source: Authors’ creation based on Jabbar and Admassu (2010).
Factors facilitating food access in traditional
FVCs (particularly for perishables)
• Ability to offer products at lower prices than supermarket
(Schipmann and Qaim 2010; Lippe et al. 2010)
• Considerable flexibility in product standards (Lee et al.
2010)
• Product attributes valued by consumers are different relative
to supermarkets (Minten 2008)
• Convenience for consumers due to flexible retail market
locations (Tschirley et al. 2009)
Factors affecting food access in traditional
FVCs (particularly for perishables)
• Lack of postharvest and distribution infrastructure imply higher
price variability and limited year round availability (Gómez et
al. 2011)
• Post-harvest losses (in volume and in quality) are huge (Kader
2005)
• Seasonality in crop/livestock production affects
disproportionally food retail prices in traditional FVCs (Kumar
and Sharma, 2006)
Synthesis - Traditional FVCs and Nutrition
• Food products rich in micronutrients, and staple foods rich in
calories tend to be more affordable in traditional FVCs
• Deliver nutritional benefits to rural residents who are largely
missed by modern FVCs
• Important nutritional benefits accrue to low income people in
urban areas - FVC retailers enjoy cost and location advantages
• More flexibility to target consumers willing to settle for lower
perishable food standards.
• Lack of access to adequate post-harvest/distribution
infrastructure may limit year round availability and result in high
intermediation costs
Modern FVCs
Supermarket Growth and Food Products
• Rapid expansion of modern supermarkets (Neven and Reardon
2009; Reardon and Berdegué 2002; Reardon et al. 2003)
• Benefits from increased micronutrient intakes associated with the
dietary diversity are unlikely to reach all consumers
• Low income households buy processed foods in supermarkets, but
not perishables (Cadilhon et al. 2006; Guarin 2011)
• High standards make micronutrient-rich foods available in
supermarkets less affordable the poor (Dolan and Humphrey 2000)
• Lower income households engage in ‘cherry-picking’ food shopping
behavior (Tschirley and Hichaambwa 2010; Cadilhon et al. 2006)
Supermarket share in processed/packaged
foods and in perishable foods
100
Produce and meat
Pacakaged food
Market Share (%)
80
60
40
20
0
Thailand
Mexico
Country
China
Source: Euromonitor (2012a), Gorton et al. (2012), Goldman and Vanhonaker (2006).
Synthesis - Modern FVCs and Nutrition
• Help alleviate micronutrient deficiencies by offering a wide
assortment of products year-round for a diverse diet, but only
for urban, relatively wealthy households
• Increased market for processed/packaged foods…
− Contribute to obesity/overweight malnutrition (among other
factors)
− low priced packaged/processed foods substitute for fresh
produce and livestock products
• Empirical evidence to examine causality between
supermarkets and overweight malnutrition is needed
Modern-to-Traditional FVCs
Drivers and Links to Diets
• Market for processed/packaged foods growing five times faster
in developing countries
• Much of this growth fueled sales to lower income consumers
through traditional FVC retailers in urban and rural areas
• Business models targeting the poor (bottom of the pyramid)
and presence of economies of scale in food manufacturing
• Processed/packaged foods sold through these FVCs may help
alleviate (prevent) undernourishment in remote rural areas
• Expansion through traditional retailers in urban centers may be
associated with excess weight and obesity, (Wang et al. 2002;
Mendez et al. 2005).
Public-private Partnerships with Nutritional Goals
Partnership
Goal
Value Chain Focus
Nutrition Impacts
Examples
Development of
new products
and processes
Design modify existing food  Vitamin-fortified yogurt from
products to address specific
Grameen Danone Foods for the
micronutrient deficiencies
Asian market.
Expansion of
distribution
networks
Make existing micronutrient-  Scale UP Nutrition Network
fortified products available
partners with food
in remote areas
manufacturers with strong
distribution networks
Strengthen
consumer
demand
Expand local and regional
preferences for purchasing
packaged foods rich in
micronutrients
• Future Fortified campaign by the
Global Alliance for Improved
Nutrition (GAIN) to encourage
expectant mothers to consume
nutrient packets
Synthesis: Modern-to-traditional FVCs
and Nutrition
• May have mixed influence on nutrition, depending on the
population segment targeted
− can assist help prevent or reduce undernourishment in some
rural, remote areas…
− but, they can also contribute over-nutrition in urban areas for
patrons of traditional FVC retail outlets
• Enthusiasm for public-private partnerships to address
micronutrient deficiencies
• Must evaluate the impact of partnerships to guide donor,
government and food industry actions
Traditional-to-modern FVCs
Relevance to Nutrition
• Developing country FVCs are primarily domestically oriented
(Gómez et al. 2011)
• Implications for smallholder farmers and traders in rural areas
because most of them are net food buyers (Barrett 2008)
• Farmers who participate in supermarket chains enjoy higher
income opportunities (Bellemare 2012; Miyata et al. 2009)…
• …but they are generally farmers with superior endowments
(land, education, etc.)
Drivers and Links to Nutrition
• The poorest farmers and traders may benefit indirectly by
linking with modern FVCs (Maertens and Swinnen 2009)
• Increased income opportunities reduce the risk of household
food insufficient caloric intakes in rural areas (e.g., Ndhleve et
al. 2012; Smith et al. 2005)
• Little is known on income opportunities impacts on diet
diversification and influence on micronutrient deficiencies
Concluding Comments
• Difficult to generalize the influence of food value chain
transformation on nutrition
• Interventions to increase the efficiency of traditional FVCs can
improve access to micronutrients (urban and rural poor)
• Interactions between traditional and modern participants suggest
the need for a more nuanced view of food chains
• Opportunities for public-private to partnerships to use food
fortification to reduce micronutrient deficiencies
• Future research should address…
1) links between FVC transformation and micronutrient deficiencies
2) demand substitution effects between food groups
Thank You!
Questions or Comments?
Miguel I. Gómez
Dyson School of Applied Economics and Management
Cornell University
340D Warren Hall
Ithaca, NY 14853
P: 607-255-8159
E: mig7@cornell.edu