Food distribution retail technologies: a comparison between countries with different income levels

Tecnologías de distribución de ventas al detal: una comparación entre los países de diversos niveles de ingreso

Dario de Oliveira Lima-Filho y Leidy Diana Souza de Oliveira

7. Final Remarks

The aim of the present study was to describe and compare the food retail distribution systems in countries with different income levels, based on an extensive bibliographical review of reports, journals and scientific studies. The supply and demand dimensions were analyzed and the strategies adopted by the retailers in high, upper-middle, lower-middle and low income countries were identified.

The market in high income countries is in a mature stage, with growth in demand associated with population growth and the launch of high aggregated value products. In upper-middle income countries there is growth in the market. In lower-middle and low income countries, the supermarket system has only recently been introduced, the competition is low and retail chains are scarce, mainly in the small and medium-sized cities and in the rural zones.

The analysis allowed the FDI to be classified into two groups. In the first, formed of high and upper-middle income countries, the FDI is made by large multinational retail chains. The second, formed of lower-middle and low income countries, the FDI is made, above all, by small retailers coming from neighboring countries with similar cultures. Supermarkets are the main channel of food distribution in high and upper-middle income countries; in the others, the influence of small informal retailers is strong.

As in the high income countries, the consumers in countries upper-middle income countries demand products considered healthy and convenient, though price sensitivity remains important. Product quality and variety are important factors in the retailing strategy in high-income countries. In the upper-middle income countries, cost control is an additional aspect. In lower-middle and low income countries, price-elasticity and food quality are high and the supermarkets have little chance of competing on price in a market with high levels of informality. In this case, the strategy adopted by food retailers is to attend the high and middle classes, charging premium prices for the safety and quality of the food items.

At the microeconomic level, the findings of the present study further our understanding of the impact that income – and in the case of China, also the rate of urbanization – can cause on the forms of food distribution, providing firms with information about the peculiarities of the market. They can guide farmers, manufacturers and retailers in the process of adding value to products and taking decisions jointly with the aim of sharing information and achieving cost reductions, so as to improve current practices. The analysis is based on the formulation of strategies that are fitted to different socio-economic environments. Nevertheless, it appears that one universal strategy should be clear to the firms, as the Forum for the Future (2007) demonstrates: change the focus from "food provider” to “supplier of good health”.

At the macroeconomic level, the study supports the conception of public policies aimed at the adoption of better practices in the existing food distribution systems. There is no doubt that supermarket, as the largest distributors of food, bring economic and social benefits. Their expansion to less developed countries located in Latin America, Africa, Asia and Eastern Europe will continue making great strides. According to Hawkes (2008), the activity of supermarkets brings with it five important implications for the diet of the population: i) the location of the stores, ii) the product mix of food items that they sell, iii) the price charged, iv) the promotional mix adopted, and v) the eating practices that they implant.

As Hawkes (2008) and Asfaw (2008) point out, this tendency is accompanied by opportunities and threats for the consumers. Low prices, variety (packaged and frozen products), safer foods, FFV warehousing capacity and more convenience in terms of time and place are examples of the opportunities for the well-being of the population. But, on the other hand, a large part of the items sold contain high proportions of fat, sugar and salt, that, according to Lima-Filho and Souza (2006), seem to stimulate the appearance of chronic degenerative diseases – obesity and heart disease. This issue could guide the public authorities to look into, together with the agrifood chains, the standards of food quality and safety in order to eliminate or reduce possible threats to human health and the natural environment. A recent study (Forum for the Future, 2007) highlights the pressures that supermarkets currently face and will face in their business model, including environmental and social issues, demographic and lifestyle changes, new technologies and globalization.

Within the academic area, the present study provides a market analysis model based on set of attributes in different contexts, deemed by Priem (1992) as essential for the understanding of market heterogeneity, while, for the most part, existing studies have focused on single attributes in one specific context.

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