Economic and Transitional Impact of Food Retail Investments.ppt

1、Economic and Transitional Impact of Food Retail Investments: Evidence from the Czech Republic Liesbeth DRIES & Vlaho Kojakovic,WB-CEI-FAO Workshop on Agriculture, Agri-business and the Retail Sector in South-East Europe, Sarajevo, 24-26 May 2004,Introduction,Are CEEC experiencing a similar rapid ret

2、ail transformation as observed in other developing regions since the start of transition?,Recent developments in other regions (L-Am; Asia; Africa),Dramatic rise in market share of supermarkets and modern retail sector Multinationalization Inter-country as well as intra-country supermarket diffusion

3、 Concentration Important changes in procurement systems,Rise of modern retail sector,Three phases: Communist period: state owned retail and procurement system Transition period: initial privatization and breakdown of highly concentrated system into separate units that soon start to merge and form sm

4、all private chains. Very limited FDI inflows. Globalization period: Extensive investments of foreign retail chains and rapid rise of modern retail sector Transition and globalization period difference between countries depends on reforms,Rise of modern retail sector,Rise of modern retail sector,Mult

5、inationalization,Multinationalization,Multinationalization,Multinationalization,Dynamic diffusion of FDI over CEE countries,Before global chains: retailers from neighbouring countries First wave: Central Europe (CZ, PL, HU), Globalization period started second half 1990s; then Croatia: globalization

6、 period started 2000; then Russia: globalization period started 2001/2,Spread to secondary cities (and small towns),Russian Federation: Pyaterochka: Sint-Petersburg (1999) Moscow (2001) Regions (2002) Perekrestok: Moscow (1995) Moscow region (1999) Sedmoi: Moscow (1994) Moscow region (2003) Spar: Mo

7、scow (2000) Regions (2002/3) Ramenka-Ramstore: Moscow (1997) Moscow suburbs (2003) regions (2003),Consolidation - emerging,Expect acquisitions and mergers that will concentrate supermarket sectors. Weapons of competition: Organizational change in procurement Format diversification,Format diversifica

8、tion,Format diversification,Format Diversification,Russian Federation: Perekrestok: SM(1995) Discount (1998) HM (2002) Sedmoi: SM (1994) HM (2003) Spar: SM (2000) HM (2002) Metro: Cash & Carry (2001) HM (2004),What drove the “supermarket revolution”,Demand-side incentives: Urbanization Reduction of

9、effective food prices (mass procurement & efficient merchandising) Demand-side capacity: Per capita income growth Growing access to refrigerators, cars, . Supply-side: Driven by mainly European retail investments following FDI liberalization & demand-side changes,What drove the “supermarket revoluti

10、on”?,What drove the “supermarket revolution”?,The future: convergence?,CEE: Catching-up of lagging first wave and second wave countries,The future: convergence?,Change of procurement system under Communism,Change of procurement system during transition,Dismantlement of the state-run and collectivize

11、d components of the retail procurement system Private general-line wholesalers Imports,Change of procurement system globalization period,Initially: retailers buy from local wholesalers and importers Shift to centralised procurement systems: Build distribution centra: Czech Republic: Delvita (1995);

12、Ahold (2001); Tesco (2003) Russian Federation: Pyaterochka SPB (2002) Ramenka (DC Moscow & regions),Change of procurement system globalization period,Shift toward cross-border systems: Coordinate procurement over DCs in different countries of operation: Ahold Central Europe Ahold CEE Fresh Wholesale

13、rs follow retail chains over the borders E.g. Ceroz (CZ) enters Slovakia in 1998,Change of procurement system globalization period,Shift toward specialized/dedicated wholesalers (specialized in product category, dedicated to supermarkets): First, offer services (packaging, quality control) Second, f

14、rom spot market to list of preferred suppliers to outgrower schemes Third, JV retail chain-wholesale firm,Change of procurement system globalization period,Shift toward preferred supplier systems to select producers meeting quality and safety standards and lower transaction costs Shift toward privat

15、e safety and quality standards Differences between countries,Impact on farmers - evidence from the Czech Republic,Data: Focus on FFV sector Interviews with different actors in the food retail chain: food retailers, wholesalers, agricultural producers and producer marketing organisations. Survey of 2

16、50 FFV growers, March-April 2004,The development of producer marketing organisations: PMO,Developments in Food Retail sector are main driving force behind organisation of farmers: 4 out of 5 interviewed Producer Marketing Organisations for FFV indicate as main reason for their establishment: to gath

17、er sufficient quantity and product varieties to satisfy the requirements of big supermarket chains,Importance of PMO in FFV,Marketing of vegetables: 5 PMO 15% of total sales of vegetables 85-90% sold to supermarkets Marketing of fruits: 3 PMO 50% of total fruit sales 60% sold to supermarkets,Potenti

18、al benefits of PMO to growers,Bargaining power Services Extension service (55%) Storage, sorting, packaging facilities (60%) Access to information (73%) Facilitated access to inputs through payment guarantee program with input suppliers Preferred position to apply for bank loans (repayment certainty

19、) .,BUT,Not all farmers may be able to become members of PMO: ZN Fruit: new members are screened: quality is most important, SISPO label is required CZ Fruit; Litozel: varieties/assortment of new members needs to fit requirements Members with storage/sorting/packaging equipment preferred,Marketing o

20、f FFV,Supermarkets buy FFV from(Czech Republic): 60% wholesalers 5% direct from growers 15% PMO 20% Imports,Marketing of FFV,Grower survey: Local market: 67% - relatively more FF Industry: 50% - relatively more Ltd. Wholesalers: 45% - relatively more Ltd. Supermarkets direct: 8% - relatively more Lt

21、d. PMO 19% - relatively more coop/JSC Other 6%,Contracts with WS / SM,40% Ltd. have contract with SM/WS - other legal structures less than 30% Types of contracts: Preferred supplier SM: quality; payment method; penalties; safety WS: quantity payment,Public versus private standards,Impact on Investme

22、nts,A lot of investments mainly with own resources No supplier credit Bank loan guarantees limited mainly PMO not WS/SM Growers supplying to PMO/WS invest more Growers supplying local market invest less,Impact on Quality,Impact on Quality,Significant higher quality delivered to SM Growth in high qua

23、lity production 2000-2003 for growers supplying SM since 2000 Decline in high quality production 2000-2003 for growers delivering to local market in 2000,Impact on Growth,No significant impact on growth in production for growers that supply to WS/SM/PMO,Concluding comments,Implications for policy-makers and international organizations are important, and the issues are complex How to create a “win-win” situation ? What role can governments play in this process ? Which actions can international organizations take ?,