The Importance of Forming and Funding Collaborative Marketing Groups for the Survival of Smallholder Farmers in Asia

In developed countries such as the USA and Western Europe, the market share of fresh fruit and vegetable sales by the major supermarket chains can be as high as 80%. In China, with growth rates averaging between 30% and 40%, it is anticipated that supermarket chains will gain a greater market share in Asia. Because of their size, supermarket chains source their product globally and focus on maximizing returns for shareholders, keeping costs low for consumers, and providing a safe product. To be competitive, smallholder farmers need to supply a large volume of safe and high-quality fruit. However, unless they increase their bargaining power, they will become price-takers. Regrettably, most smallholder farmers in Asia lack the income to introduce new technologies such as fertilizing and irrigation to improve fruit quality. Sometimes these management inputs are funded by the trader and supermarket chains though outgrower schemes. However, this leaves the farmer vulnerable to exploitation. We suggest that the best means for smallholder farmers to remain viable in global supply chains is to establish economically sustainable collaborative marketing groups. We propose a new way to fund the establishment of these groups, whereby international aid agencies or national governments fund a core nucleus of farmers (10 to 50) and contract them to implement new technologies. This will deliver a greatly improved product and significantly increase grower returns, often in the order of 5 to 10 times their current net farm profit. We suggest that a portion of the improved profits from this core group be retained to provide short-term startup funds for additional groups of farmers to implement new technologies. Consequently, the process of farmer improvement will become self-generating and self-sustainable without the need for additional support. Furthermore, we propose that the more successful farmers levy themselves to establish and maintain marketing infrastructure and activities such as training and cool chain management. Governments and aid agencies will need to support these marketing groups by providing long-term technical assistance as well as social facilitators to develop trust and maintain unity within the groups.