1) The document discusses a study on high-value commodity markets in Indonesia and their competitiveness and inclusiveness. 2) It finds that traditional wet markets remain important for most consumers but modern retailers are used more by higher-income consumers concerned with food quality, safety and convenience. 3) There is growing demand among urban consumers for certified organic and pesticide-free foods, though adoption of modern supply chains benefits educated smallholder farmers who receive technical assistance.

1. Markets for High-Value Commodities in
Indonesia: Promoting Competitiveness
and Inclusiveness
ICASEPS
Knowledge, Tools and Lessons for Informing Design and
Implementation of Food Security Strategies in Asia
A technical workshop and conference
Kathmandu, Nepal
November 14-16, 2011

2. What is important
about the topic?

3. Importance: We Address the
“New Food Policy Paradigm”
Previous Food Policy Focus:
Access to foods, income and price
Food policy should focus on
1.Lifestyle-induced dietary transformation
2.The impact of the expansion of modern food
retailing, distribution and wholesale firms, and
“demand for product-specific characteristics”
(Timmer, 2008)

4. Hypermarket Penetration in Asia
% Urban Shoppers using Hypermarkets Regularly,
2002-2009
86 88
81
75
58
26
16
98
90 90
59
71
45
22
0
20
40
60
80
100
120
Korea Thailand China Taiwan MalaysiaIndonesiaSingapura
2002
2009
Source: Nielsen, 2010

5. Project Objectives
1. Develop an improved understanding of consumer
preferences for high-value food products, quality and
different types of retail outlets.
2. Describe and quantify the patterns in restructuring of
food supply chains for selected high-value commodities,
including the differentiation into traditional and modern
channels.

6. Project Objectives
3. Examine the patterns, determinants, and effects of
participation of farmers in restructured value chains for
high-value commodities compared to traditional market
channels.
4. Identify the policy and program implications at the
national and local level to maximize the competitiveness
and inclusiveness of the high-value agricultural sector.

7. INDONESIA

8. Survey Location (Producer and
Consumer)

9. Lessons learnt from the
consumer survey

10. The hierarchy of lndonesian Government
Administrative Living Area in Urban
No Government Hierarchy Level Number of Population
1. Municipal (city) More than 500,000
2. Kecamatan 26,000 – 200,000
3. Kelurahan 2,000 – 48,000
4. RW 200 - 2400
5. RT 80 - 600

11. Sample Selection – Urban Consumer Survey
o Stage 1 :
Select cities within Java (based on population and size).
a. Surabaya – largest (2.8M) ; 326.38 km2
b. Bogor – medium (949K); 118.5 km2
c. Surakarta – smallest (506K); 44 km2
o Stage 2 :
- Select kelurahan within each selected city by proximity to modern
food retail stores by using map (in Surabaya and Bogor)
- Select kelurahan by using grid line in the map (Surakarta)
o Stage 3 : Randomly selected the Kelurahan

12. Sample Selection – Urban Consumer Survey
o Stage 4 :
At each selected Kelurahan, ranked RWs and RTs based on “rough
income estimation”
o Stage 5 :
Randomly selected 2 RT at each selected kelurahan (over sample
the high-income RT)
o Stage 6 :
Listed all the HH at each selected RT
o Stage 7 :
Randomly selected the household

13. Sampling Result
Surabaya Bogor Surakarta
Pop Sample Pop Sample Pop Sample
Municipal 1 1 1 1 1 1
Kecamatan 31 20 6 6 5 5
Kelurahan 163 20 57 20 51 14
RW 174* 40 244* 40 20* 15
RT 1241* 40 1209* 40 108* 25
Household 2317* 600 1726* 280 915* 300
Note : * total population from randomly selected Kelurahan

14. Consumer Survey Questionnaire
(16 Pages)
A. HH Characteristics
B. Housing and Assets
C. Cooking and Shopping
Attitudes and Behaviour
D. Shopping Behaviour
E. Food Consumption
F. Non – Food Expenditure
G. Retail Outlet Use,
Preferences Quality,
Safety and Convenience
H. Factors in Food Choices
I. Nutrition Attitudes and
Food Concerns
J. Certification Awareness,
Purchases and Perception
K. Certification
L. Diet Related and Health
Management.

15. Modern Food Retail Format
Hypermarket
Supermarket
Minimarket
Minimarket

16. Traditional Food Retail Format
Wet Market
Wet Market
Small shop
Peddler
Semi-permanent
stalls

17. Consumers’ Perceptions of
Modern Vs. Traditional Retail Formats
Commodity Price Quality Safety
Trust the
Product
Information
Meat and Poultry WM (76%) WM (55%)
MM (33%)
WM (51%)
MM (34%)
MM (45%)
WM 44%)
Fish and Seafood WM (81%) WM (55%)
MM (33%)
WM (56%)
MM (31%)
SS (47%)
MM (44%)
Fruits WM (68%) MM (54%)
WM (36%)
MM (54%)
WM (37%)
MM (59%)
WM (33%)
Vegetables SS (82%) WM (58%)
MM (32%)
WM (55%)
MM (34%)
WM (47%)
MM (44%)
Milk and Yogurt
(Dairy Products)
MM (37%) MM (54%) MM (58%) MM (65%)
Processed Food MM (45%) MM (67%) MM (73%) MM (77%)
WM (37%)
Rice WM (47%)
SS (23%)
WM (36%)
MM (25%)
WM (34%)
MM (27%)
MM (36%)
WM (31%)
Source : Toiba, Hery (2011)
Note : WM = Wet Market; MM= Modern Market (Hypermarket and Supermarket); SS = Small Shops

18. Average Share of Expenditures on Food in
Various Retail Formats
Commo
dities
Hyper
market
Super
market
Mini
market
Semi
Perm.
Stands
Small
Shop
Wet
Market
Peddler Other
Fresh Meat
and Poultry 3.1 2.9 0.5 0.9 27.6 47.3 15.5 2.4
Fresh Fish
and
Seafood
2.6 1.6 0.2 2.0 5.9 63.2 21.4 3.1
Fresh Fruit 9.8 10.0 1.7 15.0 6.7 41.6 14.5 0.8
Fresh
Vegetables
1.9 1.1 0.1 2.2 16.2 54.7 24.8 0.2
Fresh Milk
and Yogurt 16.4 18.1 18.3 4.4 28.3 4.5 4.6 5.5
Processed
Food
11.7 12.4 10.2 0.9 38.6 16.7 6.1 3.3
Rice 2.4 2.0 0.9 0.1 46.5 26.3 1.2 20.5
Source : Toiba, Hery (2011)

19. Share of Food Expenditures by Product:
Modern vs. Traditional Retail Outlets
0
10
20
30
40
50
60
70
%ofaveragehouseholdexpenditureshare
Fresh meat, poultry meat and offal Fresh fish and seafood
Fresh fruits Fresh vegetables
Fresh milk and yogurt Processed food items
Rice
Traditional
> 40% expenditure on
fresh meat, fish &FFV
spent at wet market and
>14% at peddler
Modern
• < 10% expenditure on
fresh produce &
vegetables spent at
modern food retailers
(MFR)
• 20% expenditure on
fresh fruits spent at MFR
• 52% expenditure on
fresh milk and 35%
processed foods at MFR
Source: Toiba, Hery (2011)

20. Food Shopping Frequency:
Modern vs. Traditional Food Retail Formats
0
5
10
15
20
25
30
35
40
45
%ofurbanhouseholds
Daily 2-3 times per week Once a week
2-3 times per month Once a month < once a month
never
Heterogeneity in use of
outlets
• Traditional
• Small shops, wet
markets &
peddlers are used
on ≥ weekly basis
by most (>65%)
• Modern
• 10% shop ≥
weekly at
hypermarkets &
supermarkets
• 25% shop ≥
weekly at
minimarkets
Source: Toiba, Hery (2011)

21. 0
10
20
30
40
50
60
70
Heard Purchased Prefer to
purchase
%ofurbanconsumers
Consumers' Awareness, Purchases
and Perceptions Towards Credence
Attributes on Fresh Food Products
Certified
Organic
Pesticide Free
62% “aware” of organic
& pesticide-free
32% previously
purchased organic &
pesticide-free
58-65% would prefer to
purchase food products
labelled as ‘certified
organic’ or ‘pesticide
free’

22. Urban Consumers’ Perceptions of Certified “Organic” and
“Pesticide Free”
% of respondents who agreed that Certified Organic or Pesticide Free…

23. Stated Willingness-to-Pay for “Certified Organic”
Food Products
• 65% - 69% willing to buy certified organic if price was “right”
• On Average, Indonesian urban consumers were willing to pay a
price premium of 20% for certified organic products
• Not significant differences in premiums across product categories
Products
% Regularly
Purchase
[product]
Normal
Price
(Rp/kg)
% willing to buy
“certified organic”
if the price was
right
Average
Willingness to Pay
(% extra from
normal price)
Chilli 98.5% 24,900 66.1% 19.5%
Mango 94.4% 7,500 65.6% 21.8%
Shrimp 75.9% 35,500 68.7% 19.5%
Chicken 96.3% 24,300 65.9% 18.4%

24. Lessons learnt from the
Producer survey

25. Sample Selection – Producer Survey
(Supervised by Dr. Nicholas Minot (IFPRI)
Stages West Java
Producer Survey (Chilli)
North Coast Java
Producer Survey
(Shallot)
Selected purposively major
producing areas
Garut, Tasikmalaya and
Ciamis
Brebes
Collected information and
purposively selected for specific
farmers (snow balling technique)
Farmers who supplied
modern retail market
(N= 113 farmers)
Farmers who adopted
non-conventional
farming method
(N=160 farmers)
Systematic Random Sampling at
subdistricts and villages for
“traditional farmers”
Garut (24); Tasikmalaya
(9) and Ciamis (9)
Low land: 45 villages
Upland: 12 villages
Listed 150 – 300 HH farmers from
total growers population in each
selected village
Randomly selected 12
HH per villages
Randomly selected
10 - 12 HH per village
Randomly selected the household
farmers
504 HH Low land: 540 HH
Upland: 120 HH

26. Table 1. Household, farm characteristics, and income of traditional and
modern chili farmers (mean values)
Variables Traditional
Channel
Modern
Channel
Total
Household Characteristics
Household member 4.56 4.34 4.51
Age of respondent ** 46.24 43.86 45.79
Education of respondent *** 6.46 7.96 6.74
Experience in producing chili *** 9.44 6.74 8.93
Proportion of adult between 15 and 65 years 69.08 66.55 68.60
Proportion of adult over 65 years 2.39 3.92 2.67
Own of mobile phone 74.00 79.00 75.00
Distance to sub district market 6.06 5.46 5.95
Source: Sahara (2011)
Note : *** significant at the level 1%
** significant at the level 5%

27. Table 1. Household, farm characteristics, and income of traditional and
modern chili farmers (mean values)
Variables Traditional
Channel
Modern
Channel
Total
Farm Characteristics
Land size 0.70 0.8 0.72
Irrigated land 0.26 0.3 0.28
Area planted with chilli *** 0.34 0.48 0.36
Production of the largest plot 1.80 1.82 1.81
Productivity of the largest plot 9.04 8.50 8.94
Average chilli price over the last season*** (IDR/Kg) 6,233 8,323 6,628
Own of cattle/buffalo over the last 5 years 5.95 6.25 6.01
Own of tractor over the last 5 years 1.44 1.79 1.50
Own of water pump over the last 5 years 18.89 24.11 19.87
Own of storage house over the last 5 years ** 14.99 24.11 16.69
Buy/rent chilli land over the last 5 years 13.76 15.18 14.02
Water pump investment over the last 5 years 5.54 8.04 6.01
Spraying equipment investment over the last 5 years*** 43.33 63.39 47.08

28. Table 1. Household, farm characteristics, and income of traditional and
modern chili farmers (mean values)
Variables Traditional
Channel
Modern
Channel
Total
Income Characteristics
Gross household income** 60.57 98.31 67.63
Net household income*** 22.8 32.66 24.65
Net chili income *** 6.13 13.67 7.54
Net income from other activities 16.71 19.03 17.14
Source: Sahara (2011)
Note : *** significant at the level 1%
** significant at the level 5%

29. Table 2. Post harvest activities and number of buyers of chili farmer in
traditional and supermarket channels (mean values)
Variables Traditional
Channel
Modern
Channel
Total
Activities prior to sale
Remove small or bad chili ** 80.08 92.86 82.47
Sort into different groups by size*** 8.00 40.18 14.02
Sort into different groups by color *** 14.58 54.46 22.04
Sort into different groups by quality *** 16.22 55.36 23.54
Put into bags or boxes*** 77.41 93.75 80.47
Keeping records
Keep record on the amount of pesticides *** 11.70 45.54 18.03
Keep record on the dates of pesticide application*** 5.95 14.29 7.51
Keep record on the chili prices*** 21.97 81.25 33.06
Keep record on the chili quantities*** 21.15 80.36 32.22
Source: Sahara (2011)
Note : *** significant at the level 1%
** significant at the level 5%

30. Table 2. Post harvest activities and number of buyers of chili farmer in
traditional and supermarket channels (mean values)
Variables Traditional
Channel
Modern
Channel
Total
Buyer
Have more than one buyer over the last 5 years** 66.32 56.25 64.44
Have more than one buyer over the last year 33.26 30.36 32.72
Buyer provide technical assistance*** 6.98 58.93 16.69
Source: Sahara (2011)
Note : *** significant at the level 1%
** significant at the level 5%

31. Indonesian Food Policy
Ministry of Agriculture Medium Term Plan (2010-2014)
 Establish a communication, information, education and
promotion program of “food safety for fresh produce”
 Implementation of food quality and safety standards for
“processed food” at small to medium-sized enterprises or
home industry
 Mandatory certification for organic products (fresh and
processed), fermented cocoa and Rib Rubber Sheet at
the end of 2014

32. Contribution to Indonesian Food Policy
Practical Lessons
 Traditional food retail market still play a significant role as the first
place for food shopping for most urban consumers
 Consumers with higher concerns about nutrition, food safety and
convenience also shop for food more frequently at modern food
retailers
 Demand for food products with credence attributes is growing in
urban areas
 Supermarket participation for smallholder is influenced by education,
distance to market, technical assistance, years of experience
producing chilies, land size, and the number of buyers
 Supermarket participation is associated with higher household
incomes for farmers
 Provide technical assistance for farmers: to facilitate farmers
performance in order to meet the supermarkets’ standards

33. Contribution to Indonesian Food Policy
Investment Strategies
 Provide assistance for traditional food retailers to be
more innovative to meet the “new food demand”
 Create an incentive for smallholder farmers who have
implemented organic, pesticide free, IPM and GAP in
their farming systems (e.g. certification)
 Technical assistance in farming systems and
supermarket standards will increase farmer’s
participation in modern food retail market channel

34. Limitations and GAP
Limitations and GAP
 It is necessary to conduct trader survey to examine
relationship with farmers, suppliers and modern
food retailers
 It is important to distinguish and address different
chain actors in the value chain into different types of
survey
 This research only focused on domestic market,
there is no information regarding international trade
(export – import activities)

35. Limitations and Gaps
Scaling out, the issues that should be considered:
 Different level of priorities on food policy between
countries in Asia
 The scope of research
 E.g. determine which sector of the value chain will be
focused on?
 scope of work = research budget
 Pilot Project?
 Multi stakeholder involvement (e.g. across
government agencies, private sectors and NGOs)?

36. Acknowledgement
• Research Colleagues : Hery Toiba and
Sahara
• Dr. Wendy J. Umberger
• Dr. Nicholas Minot
• Prof. Randy Stringer
• ICASEPS Colleagues (Research Team and
Data Management Team)
• Enumerators
THANKS
wahida@adelaide.edu.au