Farm Products Get Tied with Foreign Retailers

Nowadays, it is very convenient to buy fresh fruits and vegetables in the foreign supermarkets in China. They are no more expensive than the ones sold in the markets. Farmers, supermarkets and consumers can get what they want!

Till the end of November, Chen Bo, public relation director of Carrefour China, still felt regretful that he missed the conference of introducing the agricultural products into supermarkets twenty days ago. Now, all the retail giants in China are busy contesting for the high-quality farm products. Carrefour, which was the first retailer launching this program, is benefiting from it.

Apart from Carrefour, Wal-Mart and Metro want to get more profits from the farm products. Motivated by the foreign retail giants, the program of introducing the farm products into supermarkets, which was initially put forward by the Chinese government to help the farmers, now has become an important part of the foreign retailers’ development strategies in China.

Changes to Purchasing Pattern

If you find that the apples in Carrefour are cheaper than the ones in the markets, don’t worry about whether the fruits are fresh or not because they were all picked from the trees a couple of hours ago.

“Our headquarters in China has already built cooperation with 60 farmer cooperatives in 14 provinces in China, buying apples, tomatoes, parrots, pears, oranges and so on from these places. Our city commission units (CCU) have started cooperation with 106 farmer cooperatives in 15 provinces of China,” said Chen Bo.

The way Carrefour adopted to buy farm products is a new purchasing pattern. Traditionally, the farmers sold their farm products to the dealers of the wholesale markets; then these dealers sold these farm products to the second-tier dealers in the local markets. Then the suppliers of the supermarkets got these products from the local markets and sold them to the supermarkets. Therefore, three or four extra links existed between the farmers and supermarkets, which increased the cost of purchasing and affected the quality of these agricultural products. The new pattern has successfully built a bridge between the farmers and supermarkets, through which the supermarkets can directly import fresh agricultural products from the farmer cooperatives. This can help to promote the integration of the supply chain of the agricultural products.

This new cooperation pattern was previously tinted with the government’s will. In 2008, in order to help the agricultural products directly get into the supermarkets, the Chinese Ministry of Commerce and Ministry of Agriculture chose nine domestic and foreign retailers including Carrefour and Wal-Mart as the pilot companies.

“We answered to the call of the Chinese government. Besides, we believed that this could bring us the profits we wanted,” said Chen Bo. According to him, this program has enabled Carrefour to lower the prices of agricultural products by 10% to 15%. Furthermore, more fresh products, like fruits and vegetables, have a faster and more convenient access to the shelves of the supermarkets. These fresh products with lower prices attract a lot of customers, bringing the revenues of the supermarkets upward.

Lower prices and more customers are just what the retailers want. A contest was held among different retail companies in cooperating with the farmer cooperatives to get more agricultural products. The other international retail giants, who previously felt antipathy towards the “obligation from the government”, have changed their minds and begun to follow suit.

At the end of November, Wal-Mart declared that it had signed the agreements with the Ministry of Commerce and Ministry of Agriculture, according to which more than 1 million Chinese farmers can directly sell their products to Wal-Mart at the end of 2011. Auchan also expressed its plan to buy more agricultural products from the farmers. The domestic retailing companies, who are not willing to let the foreigners monopolize the benefits from this sector, will launch a series of measures to change their current purchasing patterns.

Changes to the Strategy

With so many links dismissed, who will be responsible for the quality of the agricultural products?

Carrefour’s solution is to set up an orientation monitoring system upon each kind of agricultural products. Through the barcode, the customers can know where the products come from and the information about its quality.

Metro’s method is quite similar. It sets up a company named Star Farm, which is responsible for the quality of the agricultural products directly bought from the farmers. This company is featured with its traceability system which gives each product an identical barcode. When the barcode is scanned, the customers can know the product’s place of origin, production process, features, processing and a lot of other detailed information.

This traceability system provides the solutions to the quality management problem. But this new pattern makes the retailers face different suppliers. That required the purchasers of the supermarkets to go out of their offices and make on-site investigations in the countries. And the shortened payment period forces the retailers to change their operation patterns.

According to Chen Bo, Carrefour has reduced its payment term for the farmers from 60 days to 15 days. Some farmers can even get the advanced payment. Besides, Carrefour also provides training courses for the farmer supplying agricultural products for them. The topics include the food safety, product classification and cooperation with modern supermarkets.

For Carrefour, the cooperation with farmers and farmer cooperatives has been listed in the long-term development strategy.