1. 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

2. 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 Objective and Approach

3. Source: Gómez et al. (2013) Key differences between developing country food systems in 1980 and 2010

4.  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 Developing Country FVC Transformation

5. 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-to- traditional Domestic and multinational food manufacturers sell through the network of traditional traders and retailers (e.g., ‘mom and pop’ stores). Traditional-to- modern Supermarkets and food manufacturers source food from smallholder farmers and traders. Food Value Chain Typologies

6. Traditional FVCs

7. 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. Fresh fruit and vegetable market share of modern and traditional FVC retail sales

8. Retail outlet choice for meat purchases in Ethiopia Percent of households within the income group Retail Outlet Total sample Low income Medium income High income Producers residence or local market1011 Butcher in a local wet market90609474 Supermarket1401154 Special butcher shop60735718 Source: Authors’ creation based on Jabbar and Admassu (2010). c c

9. 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)

10. 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)

11. 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

12. Modern FVCs

13. 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 Growth and Food Products

14. Source: Euromonitor (2012a), Gorton et al. (2012), Goldman and Vanhonaker (2006). Supermarket share in processed/packaged foods and in perishable foods

15. 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

16. Modern-to-Traditional FVCs

17. 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). Drivers and Links to Diets

18. Partnership Goal Value Chain Focus Nutrition Impacts Examples Development of new products and processes Design modify existing food products to address specific micronutrient deficiencies  Vitamin-fortified yogurt from Grameen Danone Foods for the Asian market. Expansion of distribution networks Make existing micronutrient- fortified products available in remote areas  Scale UP Nutrition Network partners with food 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 Public-private Partnerships with Nutritional Goals

19. 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

20. Traditional-to-modern FVCs

21. 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.) Relevance to Nutrition

22. 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 Drivers and Links to Nutrition

23. 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 Concluding Comments

24. 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