#16 food & farming
Yvonne Franke

The Good, the Bad and the Ugly? The Expansion of Big Retailers in Developing Countries – a Challenge For Food Security

The Millennium Development Goals have resulted in disappointing outcomes, particularly with regard to eradicating hunger, an objective now postponed until 2030. We cannot help but conclude that the political and scientific answers to the challenge have failed the test of time, despite manifold global efforts, including supporting small-scale farmers, the fostering of local rural and urban food systems, direct food relief, market interventions, subsidies, genetically modified seeds and so on.

Why have these failed? In part because the vast majority of scientists are focusing on the wrong area: While social scientists concentrate on new actors like the multinational supermarket chains gaining ground in the developing world, the more applied agricultural economists research community is almost obsessed with integrating small-scale farmers into the world market. In so doing, they miss the big picture. A bird’s eye perspective of local, regional, and even global food systems shows that just as multinational supermarket chains are not the biggest threat to food security, market integration is not a magic bullet for small-scale farmers and developing countries. What politics and research should really focus on are small-scale actors across the entire food chain, since they are the backbone of local food security. Supporting them would involve creating a heterogeneous food system that backs small-scale producers, industries, corner shops and independent retailers, thus benefiting the poorer strata. Unfortunately, neither the scientific community nor the global epistemic community of international cooperation practitioners seem to embrace this fact.

The 1970s saw a sudden increase in small-scale self-service stores – the autoservicios – that corresponded with the international credit expansion and was based on the redistribution politics of the 1950s and 60s.

A lesson from Argentina

Argentina, the everlasting emerging country and self-declared granero del mundo (granary of the world) can be taken as a blueprint for the heterogeneity that persists in the food sector. This is quite interesting, especially given the fact that politicians traditionally prefer not to regulate the agri-food sector. Historically, the Argentine retail sector was dominated by corner shops and small-scale retailers. The 1970s saw a sudden increase in small-scale self-service stores – the autoservicios – that corresponded with the international credit expansion and was based on the redistribution politics of the 1950s and 60s. This development was intertwined with national industrialization as the growing national food and beverage industry looked for new groups of buyers not being reached via traditional commercial channels, such as local corner shops and markets.

Corresponding with the neoliberal turn in the 1970s and 1980s, the rise of national and multinational super- and hypermarkets began and foreign investment by chains like Wal-Mart and Carrefour intensified. Their strategy targeted middle and upper class consumers in the rich areas of Buenos Aires with high-end hypermarkets that focused on the presentation of food and brands to give customers the impression of modernity and exclusivity. This strategy proved successful, and they soon conquered markets outside of Buenos Aires, all the while focused on wealthy customers.

The fact that even almacenes de barrio (corner shops) still exist at all in a globalizing world is astonishing and demands explanation.

In recent years, the multinational chains have amplified their strategy by expanding to other domains: local shop presence to win over customers with short distances and a new focus on poorer strata with discount strategies.

The survivors of globalization

The fact that even almacenes de barrio (corner shops) still exist at all in a globalizing world is astonishing and demands explanation. Most have been supplanted in large city centres, though many shops in the suburbs, poorer quarters and countryside of Argentina have managed to resist the trend. The many reasons for their survival in a globalizing food system are closely linked to aspects of food security. Corner shops provide extra service: Shop owners allow trusted customers to purchase on credit, particularly towards the end of the month. They sell smaller quantities compared to packaged goods in commercialized supermarkets, which is convenient for people short of cash. Additionally, they sell the lowest possible quality – the food is usually purchased as animal food, which people will gladly buy when faced with the alternative of no food at all. All of these are obviously relevant in the context of Argentine socio-economic development, which is highly volatile as it is the vast majority of developing countries. As Ana, a cleaning lady from the poorer quarter of Morón in Buenos Aires bluntly puts it: “Someone who has nothing eats nothing.” This is an unsurprising finding and the core of what Armatya Sen, Mike Davis and others have clearly stated: Food security is not (always) a question of food availability, but of money to buy it. The available monetary resources are scarce and volatile for some societal strata in developing countries – this is the context in which the corner shops, whose persistence defies their general decline the world over in favour of big retailers, must be evaluated. Since they provide informal ways to bridge monetary scarcity and reduce the amount and quality of food consumed, their existence is crucial for poorer segments of society. The advantage of corner shops is that they help people cope with and compensate for income fluctuations.

Family farming still plays a major role in the Argentine food system and constitutes a central pillar of food security and food sovereignty.

A second reason for the continued existence of corner shops is the agricultura familiar, which can be paraphrased as agricultural subsistence production. There are more than 200,000 pequeños productores – peasants without any family members or other workers in permanent paid employment and without a constant and stable relationship to the capitalist market. When their production exceeds their consumption, they sell their products on local ferries or to corner shops based on commercial relations from lasting personal networks. In order to assess their relevance, we must take into account that around 20% of national agricultural production is generated by small-scale family agriculture. Their products are cheaper due to lower standards from a modern retail perspective, and they do not meet major quality requirements like size or appearance, traceability of production, and packaging. This by no means affects the food quality itself – quite the opposite in fact. Despite the high volume of industrial agricultural production in Argentina, family farming still plays a major role in the Argentine food system and constitutes a central pillar of food security and food sovereignty.

Small and local is beautiful?

Small-scale farming, small and medium-sized enterprises and small-scale retail is certainly not a magic bullet for socio-economic development. We should be careful not to fall into the trap of romanticizing the small-scale food sector, especially with respect to hygiene and quality standards, environmental practices, and decent work and gender relations. Instead we need to assess its potential along with the challenges facing the small-scale food sector in developing countries without any bias. Taking a volatile socio-economic and political environment into account, it is an unquestionable fact that the small-scale food sector is the backbone of food security in times of crisis. But in order to perform this function, the smaller parts of the entire food chain need to be viable, since they can fulfil their role if and only if they act in concert. Personal networks are the central pillar of the small-scale food chain; they allow it to resist certain market pressures. Aside from horticultural products, which can be sold as is, processed products are a required part of a healthy diet. Here the dairy chain illustrates how small-scale actors are the backbone of a sustainable political and economic strategy of regional food security.

Personal networks guarantee that the small-scale food sector continues to function in times of crisis, but only if all of the small-scale actors work together.

In Argentina, small-scale dairy producers are frequently wooed by the big dairy industries, particularly when raw milk is seasonally scarce, so every litre counts. But small-scale producers resist temptation in many cases, since they know they will be ruthlessly driven out of the market in times of overproduction. They prefer to give their surplus production to the local small-scale dairy processors instead. The volume delivered along with means of transport and the end price are all part of an ongoing process of negotiation intended to secure future collaboration. If the local industry cannot pay for the milk, payment is often deferred as a way to cope with capital scarcity. The same applies to the small-scale dairy industry and corner shops and, of course, customers. Personal networks guarantee that the small-scale food sector continues to function in times of crisis, but only if all of the small-scale actors work together. This fact is frequently ignored by regional and national governments as well as the scientific community involved in agro-economic research, not to mention the practitioners in the field.

The global trend regarding the expansion of big supermarket chains is obviously a widespread laissez-faire stance.

An agenda for food security: supporting the small-scale food chain

There are many rather surprising aspects to current efforts to support small-scale actors in the agro-food chain. First and foremost, there is the local, national and international unwillingness to regulate the expansion of big retailers. Looking at the Argentine situation, the manifest disinterest in regulating such expansion has been caused, amongst other things, by the historical coalition of the middle classes and the agro-food oligarchy, both economically and ideologically connected to global networks. A multinational retailer like Carrefour is a symbol of modernity and membership in the club of the first-world countries and therefore welcomed in Argentina. Furthermore, most parts of the economically dominant agro-food sector are afraid of any kind of regulation, since they are competitive on the global market and therefore prefer an economic environment without governmental interference. The global trend regarding expansion of big supermarket chains is obviously a widespread laissez-faire stance. Exceptions like India, which opted for rather strict regulation to support their local food systems, are explained away as instances supposedly backed by cultural tradition and therefore construed as rather exotic outliers. This goes along with the WTO-backed support of FDI in all economic spheres and an international development cooperation discourse touting “inclusiveness” and “upgrading”. Policy advisers prefer concepts for the integration of small-scale producers and industries in global food chains instead of supporting small-scale local food systems. This goes along with the research trend towards empirical analysis with a focus on possible coping strategies for small-scale actors.

If food security is the objective, though, the opposite should be happening: The small-scale chain should be included in an integral local and national food security strategy. Agro-economists should focus on modelling tools adjusted to the needs of small-scale producers, such as basic cooling systems, storage and packaging. Social scientists should focus on building networks and cooperation, as well as capacity building and labour standards. Policy strategies at all levels – regional, national and global – should be reassessed. On the regional level, this would include regulating big retailers via urban and rural management, supporting cooperatives, and providing technical and financial assistance – just to mention the crucial key points. On the national level, taxation policies should be implemented that do not favour the modern parts of food chains. FDI should be regulated. At the very least, major incentives like tax reduction, liberal import-export regulations, and favourable labour legislation that neglects international standards of decent work should be abolished. In a nutshell, politicians, scientists and practitioners in the field of food security should become aware of the risks and pitfalls the brave new world of modern retail and food production involve for vulnerable strata of developing countries.

Photo: “Bananas in Salta” by Tobias Mayr
2015 - licenced under Creative Commons Attribution (2.0)

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