Advancing Economics, Transforming Lives

July 2009

AFRE Researcher’s Insights into Emerging Markets Gain Global Recognition

Professor Tom Reardon is widely recognized as the leading global expert in links between the “supermarket revolution” and links between agrifood value chains and farmers in emerging markets. This work has had a wide impact on governments, donors, non-governmental organizations, international development practitioners, and businesses in developing countries and the US. Tom is usually out in the field with his “ear to the ground”: his work is based on primary field surveys of thousands of farmers and wholesalers and interviews of hundreds of agribusiness and food industry companies. In all, Tom has spent 25 years working on Asia, Latin America, and Africa, of which 14.5 years “on the ground” doing fieldwork with country collaborators, MSU colleagues, and graduate students. Today Tom spends time in Asia on MSU joint work with the International Food Policy Research Institute on horticultural and aquaculture markets.

His fieldwork in the past decade on market transformation in Asia and Latin America has surprised the world with insights on the fast rise of supermarkets in emerging market countries, starting at the “take-off” in the early 1990s. The share of supermarkets in overall food retail climbed from a mere tiny niche of 5-10% in South America, Mexico, East and Southeast Asia outside China, and Central Europe in the early 1990s to 50-60% today. To give an idea of the speed of this retail revolution, Brazil did in one decade what took five decades in the US! And the rise of supermarkets in these areas is even slow compared to the speed of supermarket sector development in the two fastest-growing economies in the world – China and India, where supermarkets are spreading faster than anywhere in history.
The rise of supermarkets in emerging market countries is important to agricultural markets. Concentration and modernization of retail “downstream” affects actors (processors, wholesalers, farmers) “upstream”. The spread of supermarkets “knits together” fragmented markets by creating national, regional, and eventually global sourcing networks. Supermarkets impose “private standards” of quality and safety on their suppliers. These changes “grow” the modern market, and start to integrate and modernize a formerly fragmented and traditional market, and harness quality and product diversification. This means big opportunities for local development as well as for exporters in the US to tap the nearly 1 billion middle class consumers in emerging markets, where food markets are growing 5-7 times faster than in the US and Western Europe. There is also a challenge for suppliers from greater competition and requirements of the modern market. These findings have important implications for international agricultural development programs seeking to help small farmers access new modern markets, and for American exporters to understand and thus help access emerging market opportunities.