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The Rise of Supermarkets and Vertical Relationships in the Indonesian Food Value Chain: Causes and Consequences

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  • Shyamal K. Chowdhury

    (International Food Policy Research Institute, USA)

  • Ashok Gulati

    (International Food Policy Research Institute, USA)

  • E. Gumbira-Sa'id

    (Bogor Agricultural University, Bogor, Indonesia)

Abstract

This paper reviews the causes of the emergence of modern retailing and the vertical relationships in the Indonesian food value chain, and the consequences of these changes on market organization and value distribution. The findings of this paper suggest that there are both demand- and supply-side factors that contribute to the emergence of modern retailing. The evolution of vertical relationships between farmers and modern retailers observed in Indonesia is a direct response to risks and quality uncertainty. In the vertical relation, large-scale retailers may earn a monopsonistic rent, and there are risks of exclusion of small-scale farmers from the emerging food value chain. However, there are alternative channels through which farmers may sell their products, albeit at a lower price compared to the modern channels, and measures can be instituted to protect them against monopsonistic rents. The findings have important policy implications for developing countries.

Suggested Citation

  • Shyamal K. Chowdhury & Ashok Gulati & E. Gumbira-Sa'id, 2005. "The Rise of Supermarkets and Vertical Relationships in the Indonesian Food Value Chain: Causes and Consequences," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 2(1&2), pages 39-48, December.
    • Handle: RePEc:sag:seajad:v:2:y:2005:i:1&2:p:39-48
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    References listed on IDEAS

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    Cited by:

    1. Sukhpal Singh, 2012. "Role of FDI in Multi-brand Retail Trade in India and its Implications," Review of Market Integration, India Development Foundation, vol. 4(3), pages 283-308, December.
    2. Neeliah, Shalini A. & Neeliah, Harris & Goburdhun, Daya, 2013. "Assessing the relevance of EU SPS measures to the food export sector: Evidence from a developing agro-food exporting country," Food Policy, Elsevier, vol. 41(C), pages 53-62.
    3. Sukhpal Singh & Naresh Singla, 2011. "Fresh Food Supermarkets in India: An Analysis of their Inclusiveness and Impact on Primary Producers," Millennial Asia, , vol. 2(1), pages 65-91, January.
    4. Sowjanya R. Peddi, 2014. "Multinational Corporations in Indian Food Retail: Why and How Size Matters," Millennial Asia, , vol. 5(1), pages 89-117, April.
    5. Maspaitella, Marcus & Garnevska, Elena & Siddique, Muhammad I. & Shadbolt, Nicola, 2018. "Towards high value markets: a case study of smallholder vegetable farmers in Indonesia," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 21(1).
    6. Alim Setiawan Slamet & Akira Nakayasu & Masahiro Ichikawa, 2017. "Small-Scale Vegetable Farmers’ Participation in Modern Retail Market Channels in Indonesia: The Determinants of and Effects on Their Income," Agriculture, MDPI, vol. 7(2), pages 1-16, February.
    7. Gáfaro, Margarita & Pellegrina, Heitor S., 2022. "Trade, farmers’ heterogeneity, and agricultural productivity: Evidence from Colombia," Journal of International Economics, Elsevier, vol. 137(C).

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