It seems that when Walmart buys Massmart and gets going in this country, farmers can expect higher prices for their fruit and vegetables while consumers will enjoy lower prices.
According to the Farmer’s Weekly of 21 Oct, that’s what Massmart CEO, Grant Pattison recently told the Consumer Goods Council of South Africa. Walmart comes to South Africa with a proven track record for logistical and retailing efficiencies.
And I have no doubt these will be applied locally as the company sets out to establish itself in this country and probably turn the local retailing scene on its proverbial head. From a fresh produce perspective this offers some interesting challenges.
With the utmost respect to Mr Pattison, I’ve heard similar promises over the years from enthusiastic entrants into the local fresh produce sector. I can’t think of one that has survived. This doesn’t mean that Walmart won’t make it – you can be sure it will. I’m saying it should be prepared to pay for a potentially expensive ride along the way.
Retailers like to control as much of the supply chain as they possibly can – including prices – to maximise the efficiency they’ve introduced while still remaining competitive. This is fine, but South Africa’s fresh produce business offers a few challenges of its own.
Our farmers are an independent lot and that can be a stumbling block to concluding supply deals. Our country is also highly diverse agriculturally. This affects supplies and quality standards. Walmart won’t have any problems moving fresh produce over long distances but it might come up against critical mass, poor infrastructure and shocking roads.
Every farmer wants higher prices, but just what does Pattison mean by this? Higher compared to which pricing benchmark: the daily average fresh produce market prices or the average prices achieved by a particular farmer on the market? As far as I know, there is no other way of benchmarking prices in this country.
The daily average price on a market reflects the sale of the different grades for a product. What many people do not realise is that Class 1 in this country has many variations, despite its standardised parameters. These come with the brand and it is the buyers who draw that distinction. They know that Class 1 from farmer X is better than Class 1 from farmer Y, and pay accordingly.
Good farmers will insist on using their own prices as the benchmark but then you can be sure they’ll be higher than the market average.
Email Mike Cordes at [email protected].
