Food value chain transformations in developing countries: Selected hypotheses on nutritional implications

TL;DR: The primary finding is that the transformation of FVCs creates challenges and opportunities for nutrition in developing countries, and a FVC typology is proposed that takes into account the participants, the target market, and the products offered.

About: This article is published in Food Policy.The article was published on 2013-10-01 and is currently open access. It has received 228 citations till now. The article focuses on the topics: Malnutrition.

Summary

1. Introduction

• Malnutrition affects millions of individuals worldwide and presents a continuing challenge to government, donors, and individual decision-makers.
• FVCs are changing rapidly in developing countries due to several factors.
• These categories differentiate based on participants and their interactions, markets targeted, and types of products offered to end consumers.

2. Conceptual Framework

• Food value chains (FVCs) comprise all activities necessary to bring farm products to consumers, including agricultural production, processing, storage, marketing, distribution, and consumption (Gómez et al. 2011).
• Developing country FVCs have experienced a rapid transformation in recent years.
• Only a few decades ago, most people in developing countries lived in rural areas and worked in agriculture.
• Increasingly, an expanding urban population and middle class are utilizing modern supermarkets and are diversifying their diets.
• At the same time, many rural residents depend on FVCs for their food intake because most of them, including the poor, are net-food buyers and are employed in the food sector (Barrett and Dorosh 1996; Byerlee et al.

2.1 Typology of FVCs and hypotheses

• The authors conceptual framework to examine the effects of these FVC transformations on nutrition is shown in Table 1.
• First, the authors classify developing country FVCs into four categories.
• The authors explore two hypotheses on the relationship between traditional FVCs and nutrition (see Table 1).
• First, the authors posit that traditional FVCs contribute to reduced micronutrient deficiencies by enhancing access to fruits, vegetables, and livestock products in rural areas and in lower income neighborhoods in urban areas; similarly, they reduce undernourishment, primarily in rural, remote markets, by facilitating access to staple foods.
• These two characteristics allow modern-to-traditional FVCs to implement intensive year round distribution strategies for processed/packaged foods, targeting lower income consumers in urban areas as well as consumers in smaller, remote markets in rural areas.

2.2 Food categories and nutrition

• Prior to examining the hypotheses stated in Table 1, it is important to discuss briefly the nutritional properties of different foods, given that each FVC category has advantages for delivering specific products.
• Foods may be classified into groups based on their nutrient composition.
• Staple foods are good sources of calories and may contain significant amounts of protein and some micronutrients but tend to be low in vitamin A and bioavailable forms of calcium, iron and zinc.
• These highly processed foods are convenient, highly palatable, and often high in calories.
• Food fortification has been demonstrated repeatedly to be effective in reducing prevalence of micronutrient malnutrition in many countries (Miller and Welsh, 2013).

3. Traditional Food Value Chains

• There is strong evidence that food categories that are important sources of micronutrients continue to be accessed primarily through traditional FVCs in developing countries (FAO 2005; Guarin 2011).
• Figure 1 shows that over 90 percent of all fruits and vegetables are purchased in traditional FVC retail outlets in Kenya, Zambia and Nicaragua.
• 9 Similar to fruits and vegetables, animal source foods are disproportionately accessed by developing country households through traditional FVC retail outlets (Jabbar et al. 2010; FAO 2005).
• 90 percent of households in Ethiopia (across all income groups) buy their beef through a local butcher in a wet market (Table 2).
• 10 Traditional FVCs are also important for consumer access by consumers of the staples necessary to meet minimum caloric requirements.

3.1 Factors facilitating food access in traditional FVCs

• These large market shares are largely the result of three advantages accruing to traditional FVCs, particularly with respect to perishable products: 1) ability to offer products at low prices, 2) considerable flexibility in product standards, and 3) convenience for consumers due to flexible retail market locations (Guarin 2011; Schipmann and Qaim 2010; Wanyoike et al.
• Traditional FVC retailers typically operate under structures that give them pricing advantages relative to modern supermarkets.
• Product standards in traditional FVCs tend to be less strict, permitting the marketing of foods that would otherwise be rejected by modern supermarkets.
• Minten (2008), for example, examined differences in consumers perception of quality and retail prices of meat products in Madagascar and found that meat type and odor are important attributes influencing choices among modern and traditional FVC retail patrons.
• Several studies have found that distance to retail outlet is a critical determinant to food shopping outlet choice in developing country urban areas (e.g., Tschirley et al.

3.2 Post-harvest and distribution infrastructure and production seasonality

• In general, the postharvest and distribution infrastructure requirements of perishable foods, including fruits, vegetables and livestock products, are more expensive and technologically advanced than for other food types (e.g. staples, shelf-stable packaged foods).
• This infrastructure is therefore typically lacking in developing countries and may imply higher price variability and limited year round availability in traditional FVCs (Gómez et al. 2011).
• Renkow et al. (2004), for example, estimated that lack of distribution infrastructure results in additional marketing costs to smallholder farmers, equivalent to about a 15 percent tax on sales to consumers.
• Post-harvest losses may also affect food access in traditional FVCs.
• Seasonality of camel milk production in Kenya, an important source of micronutrients and proteins, implies extremely high prices during the dry season, when supply is limited (Wanyoike et al. 2010).

3.3 Synthesis: Traditional FVCs and nutrition

• The authors review suggests that food products rich in micronutrients, and staple foods rich in calories (which contribute to ameliorating micronutrient deficiency and undernourishment malnutrition, respectively), tend to be more affordable in traditional FVCs.
• The authors were unable to find studies that directly measured the nutritional status of consumers dependent primarily on food from traditional FVCs.
• Additionally, important nutritional benefits accrue to low income people in urban areas, where traditional FVC retailers enjoy cost and location advantages.
• This is reflected in significant retail price differences between modern and traditional FVCs.
• Their review also suggests that lack of access to adequate post-harvest processing and distribution infrastructure may 1) limit the ability of traditional FVCs to contribute to year round availability of micronutrient-rich foods; and 2) result in high intermediation costs that may offset to some extent the cost advantages in retailing.

4. Modern Food Value Chains

• Fueled by population growth, accelerating urbanization, a growing middle class, and rising income, the rapid expansion of modern supermarkets and wholesalers in developing countries has been well documented in the literature (Neven and Reardon 2009; Reardon and Berdegué 2002; Reardon et al.
• For modern supermarkets, year round procurement of a diverse array of food product categories (e.g., produce, meats, dairy, and packaged/processed) is critical to meet the demands of their increasing consumer base in developing countries (Reardon et al.
• The benefits from increased micronutrient intakes associated with the dietary diversity offered by modern FVCs, however, are unlikely to reach all consumers.
• The available evidence suggests that lower income households buy processed and packaged foods in supermarkets, but not fresh produce, dairy and meats (Cadilhon et al. 2006; Goldman et al. 2002; Guarin 2011).

4.1 Modern FVCs and over-nutrition

• Modern FVCs have been most successful at increasing their market share of the processed/packaged foods category (Hawkes et al. 2010; Gorton 2011).
• 15 A ten-country analysis by Minten and Reardon (2008) examined evidence from ten developing countries and showed that supermarkets initially gain market share in packaged/processed foods and later try to expand market share in perishable high value fruit, vegetable, dairy and meat product categories.
• The authors review also suggests that the expansion of modern FVCs is associated with increases for the market for processed/packaged foods, with at least two implications for nutrition.
• There is evidence that dietary changes in developing countries, along with other factors (e.g., change in lifestyles, reduced manual labor), are associated with the emergent global epidemic of obesity, particularly among younger people (Harris and Graff 2012; Garde 2008; Caballero 2007).
• The existence of these substitution effects has not been addressed in the literature.

5. Modern-to-Traditional Food Value Chains

• The market for processed/packaged foods is growing substantially faster in developing countries than in developed countries.
• Hawkes et al. (2010) point to a 28.0 and 11.9 percent growth in per capita consumption of processed/packaged foods between 1996 and 2002 in low-middle and low income countries, respectively.
• This market expansion has been accompanied by substantial increases in foreign direct investment into developing countries.
• In India, small independent grocers called ‘kirana’ stores are ubiquitous in urban and rural areas and represent over 53 percent of processed/packaged food retail sales in that country in 2010 (Euromonitor 16 2011a).
• As a result, food manufacturers are establishing distribution channels that include traditional FVC retailers (street vendors, wet markets and ‘mom and pop’ stores) oriented to low income consumers in urban areas (who are increasingly demanding convenience) as well as smaller markets in remote, rural areas (Pitta et al.

5.1 Modern-to-traditional FVCs and caloric intake

• Intensive distribution of processed/packaged foods through traditional FVC retailers in developing countries is likely to influence diets and nutrition in several ways, depending on the location (urban or rural) and income level (high or low) of consumers.
• The authors posit that processed/packaged foods sold through modern-to-traditional FVCs may help alleviate (and prevent) undernourishment in remote rural areas.
• Moreover, these products can require energy-intensive distribution infrastructure (e.g., controlled atmosphere and/or cold storage) which is typically lacking in most developing countries.
• Carbonated drinks manufacturers provide substantial marketing support (e.g. signage, free equipment, in-store promotions) to traditional retailers (e.g. ‘duka’ stores in Kenya).
• Wojcicki et al. (2010), for example, found that carbonated drink consumption among children in Africa is on the rise, ranking third in beverage consumption among South Africans aged 12-24 and much higher than micronutrient-rich products such as fluid milk.

5.2 Fortification of packaged/processed foods

• While expanded sales of processed/packaged foods may lead to over-nutrition in urban areas, fortification of these foods may provide an avenue for alleviating micronutrient deficiencies with modern-to-traditional FVCs.
• These private-public partnerships necessarily include the network of traditional FVC retailers and traders because these entities offer the primary point of sales employed by the poor to access food.
• The first partnership type focuses on the development of new fortified foods to improve nutrition among the poor.
• They are receiving substantial attention from donors and policymakers as a means to reduce micronutrient deficiencies worldwide.
• Unfortunately the empirical literature does not offer impact estimates, perhaps because most of these initiatives are relatively new.

5.3 Synthesis, modern-to-traditional FVCs and nutrition

• Increasing business partnerships between large food manufacturers and traditional retailers is (and will continue) expanding the affordability and availability of processed/packaged foods in developing countries.
• These products are often rich in calories but poor in important micronutrients.
• The authors review of the literature suggests that modern-to-traditional FVCs may have 20 mixed influence on nutrition, depending on the population segment targeted.
• They can assist in efforts to prevent or at least reduce undernourishment in some rural, remote areas; but, they can also create problems associated with over-nutrition in urban areas for patrons of traditional FVC retail outlets.
• The authors review also reveals substantial enthusiasm for public-private partnerships that link food manufacturers to the network of traditional retailers to alleviate micronutrient deficiencies through fortification.

6. Traditional-to-Modern Food Value Chains

• Traditional-to-modern FVCs are characterized by developing country smallholder farmers and traders selling food to the expanding modern supermarket and food manufacturer sectors.
• In this review, the authors focus solely on participation in domestic markets because developing country FVCs are primarily domestically oriented, with in-country sales representing about 95 percent of the volume of developing country food production (Gómez et al. 2011).
• There is ample empirical evidence that farmers who participate in supermarket supply chains enjoy higher income opportunities (Bellemare 2012; Miyata et al. 2009), even when facing stricter product safety and product standards established by supermarkets (Minten et al. 2009; Berdegué et al. 2005).
• This evidence suggests that traditional-to-modern FVCs may work for relatively better-off farmers, whereas the poorest smallholder farmers and traders may not be able to benefit from participation.
• The literature shows that increased income opportunities reduce the risk of insufficient caloric intakes in developing country rural areas (e.g., Ndhleve et al.

6.1 Synthesis, traditional-modern FVCs and nutrition

• The authors review suggests a positive correlation between smallholder farmer and trader participation in traditional-to-modern FVCs and reduction in undernourishment.
• Most of these benefits appear to occur indirectly, particularly for the poorest farmers, in the form of off-farm employment opportunities in commercial farms and post-harvest businesses.
• Nevertheless, the authors found no support to the hypothesis that these income-generating opportunities influence diet diversification and micronutrient deficiencies in rural areas.

7. Conclusions

• The authors examine the relationship between emerging developing country FVCs and malnutrition.
• Subsequently, the authors developed a set of hypotheses to explore the relationship between each FVC category and the triple malnutrition burden in developing countries (undernourishment, micronutrient deficiencies, and over-nutrition).
• Developing country FVCs are changing rapidly, fueled by the expansion of modern food retailers, wholesalers and manufacturers, which coexist and interact with firms in traditional FVCs.
• Intensive processed/packaged food distribution strategies by modern manufacturers through traditional retailers (modern-to-traditional FVCs) may contribute to over-nutrition in urban areas, but may prevent or reduce undernourishment in remote rural areas.
• Additionally, there is little empirical evidence illustrating how food purchasing patterns and dietary outcomes change when smallholder farmers and rural participants are linked to higher-value market opportunities.

Figures

Figure 1: Fresh fruit and vegetable market share of modern and traditional FVC retail sales

Table 1. Food value chain typologies and their hypothesized influences on nutrition

Table 2. Retail outlet choice for meat purchases in Ethiopia

Table 3: Types of public-private FVC partnerships that have nutritional goals

Figure 2: Modern Food Value Chains retail market share in processed/packaged foods and in fresh foods (fruits, vegetables, meats) in selected countries

Frequently asked questions

Q1. What are the contributions mentioned in the paper "Food value chain transformations in developing countries - selected hypotheses on nutritional implications" ?

The authors examine how the transformation of food value chains ( FVCs ) influence the triple malnutrition burden ( undernourishment, micronutrient deficiencies and over-nutrition ) in developing countries. The authors propose a FVC typology ( modern, traditional, modern-to-traditional, and traditional-to-modern ) that takes into account the participants, the target market, and the products offered. Next, the authors propose selected hypotheses on the relationship between each FVC category and elements of the triple malnutrition burden. Further research should focus on the influence of FVC transformation on reduction of micronutrient deficiencies, on modeling demand substitution effects across food categories and the attendant policy implications for malnutrition. 

Q2. What have the authors stated for future works in "Food value chain transformations in developing countries - selected hypotheses on nutritional implications" ?

Future research examining individual- or household-level consumption patterns over time can shed light on how the changes in product assortments offered to end consumers affect malnutrition. 

Q3. What is the impact of the recent research on the demand for food in developing countries?

Recent research indicates that income growth, rapid urbanization, increased participation of women in the labor force, and trends toward more ‘westernized’ work schedules in developing countries are increasing the demand for food purchasing options offered by modern supermarkets (Hawkes 2008; Pingali 2007; Ma et al. 

Q4. What is the impact of modern FVCs on obesity?

modern FVCs may be contributing to obesity/overweight malnutrition by expanding the reach of inexpensive, calorie-dense processed/packaged foods, primarily in urban areas. 

Q5. What is the main factor affecting food choices among urban consumers in developing countries?

Recent food marketing research indicates that shopping convenience, which is one of the advantages of traditional FVC retailers, is the principal factor affecting food choices among urban consumers in developing countries (Deloitte 2012). 

Q6. What is the need for rigorous research on how they influence diets?

As developing country FVCs continue evolving in a globalized food system, the need for rigorous research on how they influence diets will grow.23 

Q7. What does the literature show about the benefits of FVCs in developing country?

The literature shows that increased income opportunities reduce the risk of insufficient caloric intakes in developing country rural areas (e.g., Ndhleve et al. 

Q8. What are the food groups useful for assessing the nutritional quality of diets?

The following food groups are useful for assessing the nutritional quality of diets: fruits and vegetables, livestock products (meats, poultry, fish), dairy products (milk, cheese, yogurt), and staple foods (cereals and root crops). 

Q9. What is the main factor influencing the large share of high value, perishable products sold?

Flexibility in physical location is the third factor explaining the large share of high value, perishable products sold through traditional FVCs. 

Q10. How do they show that the majority of farmers supplying supermarkets are the better educated?

Neven and Reardon (2009) show that the majority of farmers supplying supermarkets directly are the better educated, who run medium-size commercial operations; they generate employment that benefits poor smallholder farmers via the labor market. 

Q11. What is the advantage of traditional FVCs?

In this regard, traditional FVCs often have a critical advantage as they benefit from a network of retail outlets (e.g., wet markets, street venders, corner stores) in urban areas. 

Q12. What is the important factor influencing choice of market outlet for camel milk products?

Wanyoike et al. (2010) found that the most frequently cited factor influencing choice of market outlet for camel milk products (a critical source for protein and nutrition in parts of Somali-ethnic Kenya) was proximity to the household. 

Q13. What is the main reason why people continue to access food in traditional FVC outlets?

Despite the expansion of modern supermarkets, there is strong evidence that food categories that are important sources of micronutrients continue to be accessed primarily through traditional FVCs in developing countries (FAO 2005; Guarin 2011). 

Q14. What is the main reason why people in developing countries buy their meat in traditional FVC outlets?

Further evidence in Kenya (camel milk, meat), Bangladesh (meat, dairy), Vietnam (pork), Ethiopia (beef, raw milk) indicate that traditional FVCs remain the primary access point for fresh meat, especially for low income households (Jabbar et al. 2010).