Introduction Product Certification: Creating Added Value for the Rural Poor

5

2. Product Certification: Creating Added Value for the Rural Poor

Togar Alam Napitupulu ∗

2.1 Introduction

Global trade has significantly changed domestic agricultural products’ markets during the last decade. Consumers are increasingly demanding high quality and safe products. Product differentiation, the first P of the 4P’s of the marketing strategy traditionally practiced in non-agro products has now become a major marketing tool for agricultural products as well. Product differentiation based on what consumers want, as opposed to a homogenous commodity, is now increasingly emerging, of course as one would expect, with price premiums. In line with the new wave in world trade and the change in consumer demand patterns for food and agricultural products, we now witness rapid growth of multi-national and national retail store chains in major cities in developing countries. Their presence expands the market for high quality fresh and processed food, of which some are supplied from other countries, but many of which are also supplied locally by farmers or farmers’ co- operatives or associations provided they meet the quality standards and supply stability required by the store. Following the growth of the multi-national retail stores we also observe the growth of domestic retail store chains that invade not only big cities and capitals but also are established even in district-level towns. Similar to the multi-national retail stores, these local stores also usually require a particular level of quality of agro-products, different than those sold in traditional ‘wet’ markets. This phenomenon is continuously growing with more foreign direct investment and will continue to grow in the future giving opportunity for local producers and processors that would otherwise be captured by imports. The questions are how local farmers can capture the opportunity? Is there any recipe that can be adopted to be able to supply this growing demand? In the end, would the rural poor benefit from this? If not, how can they be part of this new market development and benefit? ∗ Senior Economist at CAPSA-ESCAP 2006-2009, Bogor, Indonesia. Chapter 2 6

2.2 Evolution in marketing and logistics