Prices and quality in urban food retail
Published on: Mar 4, 2016
Transcripts - Prices and quality in urban food retail
Prices and Quality in Urban Food Retail: Evidence from Addis Ababa Thomas Woldu, Girum Abebe, Indra Lamoot, and Bart Minten ESSP-II (IFPRI and EDRI) Improved evidence towards better food and agricultural policies in Ethiopia November 02, 2012 Hilton Hotel, Addis Ababa 1
Introduction• Urban food retail markets receiving increased attention for three reasons:1. Growing in importance because of urbanization2. Food prices are sources of tension and draws policy makers’ attention3. The emergency of modern retail outlets with possible important implications on the structure of food value chains
Introduction• Few empirical studies on the functioning of these retail markets in developing countries• Our study on urban food retail markets using new and unique data for Ethiopia: – The case of Addis Ababa • No Foreign Direct Investment (FDI) in retail • Price controls and interventions • VAT on some items – Explore quality on offer, prices charged, and turnover of food products
Research questions• Three main research questions:1. Importance of different retail food outlets in urban food distribution?2. What is the quality and price at which different outlets sell and what are determinants that drive food price formation?3. What are the potential implications of the emergence of modern - public and private - retail outlets on prices and quality of food in the market?
Sampling strategy• 10 sub-cities in Addis: half of them randomly selected (after geographical stratification)• Choose 4 main cereals, 5 main fruits and vegetables, and 4 processed foods• Collected census data on the importance of different outlets in each sub-city• Randomly selected outlets to be interviewed• Survey was done in April – May 2012• 1,226 retail outlets interviewed in total
Descriptive results Modern retail outlet penetration 100 80Number of shops opened 60 40 20 0 1992/93-1997/98 1997/98-2002/03 2002/03-2007/08 2007/08-2011/12 Years in GC
Descriptive results188.8.131.52.20 Market share of retail outlets in cereals Maize Sorghum Teff wheat Supermarkets Consumer Cooperatives Kebele Shops Flour Mills Cereal Shops Modern Outlets Others 8
184.108.40.206.20 Market share of retail outlets in fruits and vegetables Onion Orange Potato Tomato Supermarkets Regular Shops F&V Grocery Shops Micro sellers of F&V (Gulit) Private Commercial Farms Etfruit Modern Outlets Others
220.127.116.11.20 Market share of retail outlets in processed foods Berbere Edible Oil Shiro Sugar Supermarkets Consumer Cooperatives Kebele Shops Cereal Shops Regular Shops Private Commercial Farms Etfruit Baltena Shops Modern Outlets Others
Quality comparisons • Probit regressions Cereals Fruits and Vegetables Processed Food Cereal No Size is Quality is Packed Branded sold is Impurities large high white (1) (2) (3) (4) (5) (6)Modern retail outlet 0.91* 0.12 0.65* 0.89** 1.61*** 2.65***Mini markets and regular 1.07*** 1.22** -0.22 0.28 1.02*** 2.15***shopsConsumer cooperatives -0.16 0.19 -0.15 2.98***Kebele shops -0.42 -0.52Flour Mills -0.23 -0.68**Cereal Shops -0.16 -0.72**F&V grocery shop -0.55* 0.30F&V micro- sellers -0.76 -0.86
Price comparisons Price difference Price difference Cooperatives versus Modern versus traditional traditional non-cooperatives Price (Birr/kg) ATT Price (Birr/kg) ATTTeff na 11.5 vs 12.0 -0.44Wheat 16.0 vs 9.10 6.62*** 9.25 vs 9.37 -0.13Maize 35.1 vs 6.04 29.0*** 6.24 vs 6.02 0.21Potato 8,46 vs 7.50 0.95* - -Tomato 12.0 vs 10.6 1.40** - -Banana 8.62 vs 8.36 0.23 8.00 vs 8.52 -0.53***Onion 9.94 vs 9.43 -0.50 - -Orange 17.4 vs 18.0 -0.62 - -Edible oil 77.7 vs 62.7 14.9*** 24.4 vs 28.9 -4.57***Shiro 56.5 vs 39.1 17.4*** 20.3 vs 25.1 -4.90Berbere 98.9 vs 75.2 23.7*** 74.1 vs 75.3 -1.17Sugar 15.0 vs 14.5 0.45 14.2 vs 14.7 -0.47***
Effect of price controls• In case of controls, products are delivered at cheaper prices. However, there are some typical rationing issues, especially with sugar and palm oil (as prices are not playing their allocation roles). Sugar Palm oil Wheat% of outlets that run out of stock 58% 53% 23%in the last 12 months% of time that outlets were 36% 39% 25%unable to sell this productbecause of lack of supplies% of shops that had large 30% 30% 12%queues (more than 10 people)waiting to get this product
Summary of the findings• A large amalgam of food retail outlets. The importance differs significantly by food type: – Cereals Mills/cereal shops – Fruits and vegetables Micro-sellers- grocery shops – Processed foods Traditional shops- Public retail• A domestic private modern retail sector is quickly emerging. Share is still small. Is yet to enter the cereal sector• The share of public modern retail rapidly growing. Important for those products where supply chains are controlled by the government.
Summary of the findings• Domestic private modern retail outlets deliver high quality products at significantly higher prices (ceteris paribus)• Cooperative modern retail outlets delivers low-quality food at significantly lower prices (ceteris paribus)• Shops that pay Value Added Tax (VAT) charge significantly higher prices (ceteris paribus). However, only 7% of the retail outlets pay VAT.
Policy implications• Consumer cooperatives deliver food at cheaper prices. However, rationing problem and hence efficiency concerns. Explore other ways to get food cheaply to poorer consumers (e.g. targeted food subsidies).• The impact of the expansion of VAT on food prices should be better understood.• Potential benefits (e.g. increased consumer choice, more efficient supply chains) and costs (e.g. employment effects traditional retailers) of stimulating an up-scaling of the modern retail sector (e.g. through FDI) should be seriously examined.