Vertical Coordination and Grower Organization in the Supermarket Fruit and Vegetables Supply Chain in Croatia

The means by which fruit and vegetables growers are linked with the upstream partners in the supermarket supply chain are investigated in 15 semi-structured interviews with inter alia the managers of Croatia’s five major supermarket chains. Contrasting to existing literature we find that supermarkets vertically coordinate with larger growers directly through loose 1-year marketing contracts specifying the terms of payment, without giving financial or technical assistance to the farmers. An exception is the largest Croatian supermarket which has a dominant position in the market and sometimes provides comprehensive farm assistance or even fully vertically integrates farm production. Wholesalers more often provide farm assistance to FFV growers. Though, in the future it can be expected that the wholesalers drop out of the FFV supermarket supply chain. The major bottleneck for farmers to directly supply to the supermarket chains is the access to a distribution facility for grading, sorting and packaging of FFV. Also, farmers need to organize to meet the supermarkets’ minimum quantity requirements. Since bad experience with cooperatives in the communist era is widespread, farmers distaste cooperatives and the degree of organization of FFV growers in Croatia is very low. We present an innovative model for a producer organization which could overcome the main challenges growers face in the FFV supermarket supply chain and secure that even small farmers participate. Also, we outline policy measures for the Croatian government and the European Commission to foster this development.