Research background Study on Adding Value to Fresh and Processed Produce through Product Certification: The

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3. Study on Adding Value to Fresh and Processed Produce through Product Certification: The

Indonesia Case Ronnie S. Natawidjaja, Zumi Saidah, Nur Syamsiyah ∗

3.1 Research background

Rapid economic growth and urbanization are transforming the retail food sector in the developing countries throughout the world in the last two decades. Restructuring trends in the food retail and the change in consumers’ demand have led to a fast growth of multi- national chains of modern retail stores in major cities and growth in domestic retail stores chains that penetrate not only big cities and capitals but also even district level towns. Their presence opens a new market for high quality agro-food product. While many products come from overseas, many can also be supplied locally by farmers or farmers’ co- operatives or associations provided that they meet the quality and supply standards required by the store. These changes present great challenges, even exclusion, for small farms, processing and distribution firms, but also potentially great opportunities. The growth of modern market certainly offers opportunities for farmer and producer associations and other market participants to take advantage of a more consistent demand on high quality fresh and processed produce. However, several studies show that the bulk of local production of fresh produce mostly enters local traditional wholesale markets, and receives small quality rewards. Only a small portion 10-15 per cent conforms to higher product standards and enters the modern chain Natawidjaja et al., 2007a. There has been rapidly increasing competition in the quality of the product domestically. From a health aspect, properly cleaned and handled produce is becoming the most important issue in the fresh supply chain to supermarkets. Competing on cost and quality also requires reorganization of the supply chain. In this case, product certification is important for consumers as a guarantee for safety and standardized products. Responding to the situation and, at the same time, to push forward the export of high value tropical ∗ Center for Agricultural Policy and Agribusiness Studies, Padjadjaran University, Indonesia. Chapter 3 14 agricultural products and its competitive advantages, the Indonesian government, specifically the Ministry of Agriculture, is working to build ’country brand images‘ by instituting broad agricultural product certification standards and codes similar to what is being developed by the neighbouring countries such as ThaiGap, MalayGap, etc. However, the effort seems to have a long way to go to achieve its ultimate goals. The aim of the project is to study and identify specific benefits from this global economic trend that can be tapped by secondary crops farmers, specifically those living in medium altitude areas. More specifically, the study objectives are a to identify and analyse linkages between smallholder producers and specific market segments, local urban markets and cold store chains; b compile primary data and information on post-harvest practices, cleaning, handling and packing; and c collect information on pricing, implicit and explicit quality requirements and current certification activities at all stages of the marketing process.

3.2 Food market restructuring in Indonesia