Urban wholesale retail food price eea

357 views

Published on

International Food Policy Research Institute (IFPRI) and Ethiopian Development Research Institute (EDRI) in collaboration with Ethiopian Economics Association (EEA). Eleventh International Conference on Ethiopian Economy. July 18-20, 2013

Published in: Business
  • Be the first to comment

  • Be the first to like this

Urban wholesale retail food price eea

  1. 1. Urban food price margins in Africa (Evidence from Addis Ababa) By Thomas Woldu, Bart Minten and Seneshaw Tamiru
  2. 2. Introduction Motivation of the paper: • The importance of urban food retail markets is rapidly increasing: – World population to grow from 6.7 billion to 9.2 billion between 2007 and 2050 – Higher urbanization rate in developing countries – Urban dwellers purchase food from the market and food expenditure takes their largest expenditure share. • Big concern of rising food prices in the world
  3. 3. Introduction contd. • Developing countries’ policy makers are concerned about this food price burden and its social and political consequences. • In addition to the supply and demand side of food markets, they want to understand the food distribution system; – Farmers ---Wholesalers--- Retailers---consumers WS’ Margin Retailers’ margin (blamed to be larger than what it should be)
  4. 4. Introduction contd. • It is important to study urban food retailers’ margin for several reasons: 1. It gives an idea on how much prices can be decreased by government intervention in these markets 2. In cases where countries already intervene in the retail market, it helps to understand the effect of the intervention in these margins. 3. Margins vary depending on the product, retailers and wholesalers. Investigating such variations provide information on available rooms for different products and different situations.
  5. 5. Introduction contd. • Ethiopia is an ideal country for research on this topic for the following very important reasons: 1. Very high inflation rate starting from 2008 with traders being blamed for this inflation 2. Intervention in the food retail market by the government (in the distribution of some food products such as wheat and oil) 3. On top of urban distribution costs, urban households incur additional processing (cleaning and milling) cost on cereals
  6. 6. Research questions • How much percent of the final price of food is explained by urban food retailers’ distribution and processing margins? • What is the variation of these margins over space? • How does the distribution margin of public distribution systems differ when compared with the private distribution systems? • What is the effect of the pubic distribution intervention on the overall retailers’ distribution margin?
  7. 7. Methodology • Data was collected both from retailers and wholesalers at the same period of time. • The information collected mainly focuses on prices and quality of food products • Information about turnovers, retail shop and owners’ characteristics was also collected. • Wholesale market survey • All wholesale markets in the city and also around the city are covered • The main focus on the wholesale market survey was to collect daily information about all types and varieties of the products on market.
  8. 8. Wholesale Market Food Category TotalCereals F& V Processed 1. Akaki 187 105 111 403 2. Shola 94 53 557 704 3. Ehil Berenda 851 0 0 851 4. Merkato 0 0 1,022 1,022 5. Atikilt Tera 0 405 0 405 6. Ashwa Meda 518 0 0 518 Total 1,650 563 1,690 3,903 Date; wholesale market survey; Table 2: Sample distribution
  9. 9. 9 Methodology • Retail market survey; Sample set-up – 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 – Survey collected detailed information on turnover, prices, and quality of products (among other information)
  10. 10. 10 Data; retail market survey Food products Retail outlet type No. Obs. Sampling Remark Cereals Teff Maize Wheat Sorghum Fruit and Veg. Potato Tomato Onion Banana Orange Processed foods Edible Oil Sugar Shiro Berbere Supermarkets 160 All in in the sub- city 5 sub-cities out of 10 in the city Consumer Coop. 109 Private commercial farms 2 Kebele shops 7 Etfruit shops 29 Flour Mills 264 All in the selected kebeles 4 kebeles out of 10 (on average) in a sub-city Regular shops 201 10 randomly sampled in each kebele Fruits and Vegetable grocery shops 187 Cereal shops 61 5 randomly sampled in each kebele Baltena shops 99 Gulit (Micro Sellers) 107 3 in each ketene 2 ketenas out of 5 (on average) per kebele Total 1226
  11. 11. Methodology
  12. 12. Results; Wholesale – Retail flow of cereals • Retailers go to Wholesale markets once per month • Transport cost • Mostly retailers pay it • Some times no transport is paid • In few cases, wholesale rs cover the cost Ehil Berenda EGTE Ashewa Meda Other sources in Addis Out Side Addis Flour Mills Cereal Shops Consumer Cooperatives 25% 21% Teff Wheat Maize Sorghum 51% 9% 10% 11% 11% 46% 73% 12% 12% 73% 13% 11% Main Wholesalers Main Retailers >90%
  13. 13. Results; Wholesale – Retail flow of vegetables • Retailers go to Wholesale markets once or twice per month depending on the type of vegetable • Transport cost • Mostly retailers pay it • Some times no transport is paid • In few cases, wholesale rs cover the cost Atikilt Tera (Vegetables street) Other Wholesale Market in Addis Out Side Addis Regular shops F and V Grocery shops F and V micro sellers (Gulit) 7% 7% Potato Tomato Onion 85% 6% 8% 83% 84% 7% 7% Main Wholesalers Main Retailers >90%
  14. 14. Results; Wholesale – Retail flow of fruits • Retailers go to Wholesale markets once or twice per month depending on the type of fruit • Transport cost • Mostly retailers pay it • Some times no transport is paid • In few cases, wholesale rs cover the cost Atikilt Tera (Vegetables street) ETFRUIT Regular shops F and V Grocery shops Minimarkets Banana Orange 98% 74% 20% Main Wholesalers Main Retailers >90%
  15. 15. Results; Wholesale – Retail flow of Edible Oil and Sugar • Retailers go to Wholesale markets once per month • Transport cost • Mostly retailers pay it • Some times no transport is paid • In few cases, wholesale rs cover the cost MEWIT (Jenead) Kebele shops Consumer Cooperatives Regular shops Etfruit Edible Oil Sugar 29% 18% 43% Main Wholesalers Main Retailers >90% Consumer Cooperatives Merkato Etfruit 40% 13% 10% 8% % 13% 12% % Other sources in Addis
  16. 16. Results; Wholesale – Retail flow of Shiro and Berbere • Retailers don’t normally go to wholesale markets in a month • Transport cost • Mostly retailers pay it • Some times no transport is paid • In few cases, wholesalers cover the cost Baltena Consumer Cooperatives Baltena Shops Regular shops Shiro Berbere 31% 31% 28% Main sources Main Retailers >90% Retailers made it by themselves Merkato Other sources in Addis 30% 12% 20% 21% % 13%
  17. 17. Results on Price Margins • Regressions were done for each product separately. Three types of margin regressions: 1. We estimate margins. 2. We test how the margins vary depending on the location of the wholesale market by including wholesale market dummies. 3. We include retailers’ location dummies to see how the margins vary depending on the location of the retail market.
  18. 18. Results on Price Margins 9.8***( birr 1.10/kg) 6.2%***( birr 4.28/kg) 17.1%***( birr 13.30/kg) 7.1%***( birr 5.23/litter) 39.8%***( birr 303.2/quintal) 12.5***( birr 68/quintal) 17.7%***( birr 152.3/quintal) 41.5%***( birr 569.8/quintal) 87.7%***( birr 458.2/quintal) 5.7%***( birr 56.2/quintal) 4.9%***( birr 58.2quintal) 10.2***(birr 77.4/quintal) 18.4%***(birr 99.6/quintal) 0 .2 .4 .6 .8 Retail margin Sugar Shiro Redpep Edible_oil Tometo Poteto Onion Orange Banana Wheat Teff Sorghum Maize
  19. 19. Results on price margins in public and private distribution systems -0.8% 23.2%*** 7.1%*** 15%* 48.4%*** 41.5%*** 9.8%*** 11.3%*** 9.8%*** -9%*** 7.5%***5.7%*** -.20.2.4.6 Edible_oil OrangeSugarWheat Public Private Overall
  20. 20. Conclusions • We study food marketing from wholesale markets to retailers in Addis; we look at price margins involved in distributing the food. • Retailers go mainly – to Ehil Berenda and Ashewa Meda for cereals. But, EGTE is also serving considerable number of wheat retailers mainly consumer cooperatives. – to Atikilt Tera for fruits and vegetables. But, Etfruit takes a considerable share in serving orange retailers. – to larger number of retail channels for processed foods
  21. 21. Conclusions contd. • Margins depend on wholesale market locations and retailer’s locations. • Fruits and vegetables have relatively higher margins than cereals and processed foods. The margins on cereals and processed foods are more or less similar. • The public distribution system shows lower margins. But, this is not the case for sugar where we don’t see variation in margins in public and private distribution systems.
  22. 22. Policy implications • The estimated price margins give an idea about the room available to lower food prices by intervening in the urban retail market. – The room is smaller on cereals and processed foods as compared to fruits and vegetables. – If the government intervenes, there might also be secondary effects on higher implicit prices (due to shortages) as well as employment effects
  23. 23. Policy implications contd. • The public distribution reduces prices and price margins but it has its own problems with respect to market efficiency. – There are issues related with leaks from the public distribution system to the private distribution system (WFP, 2011) – There are issues of rationing through long queues and sometimes shortage of these publicly distributed products (T.W Assefa and et al, 2012)

×