Wastage and Retail Pricing and Vendors
Dinesh K Kapila
This is another factor in high prices at the retail end of the supply chain, as regards fruits and vegetables. I got talking to our fruit vendor today evening. I was asking about the prices of peaches and trying to figure out the reasoning, if any, by the vendor for the vast difference from the farm gate. The fruit vendor had his own reasons. He was frank enough to let me know the actual farm gate price was not his core concern, he was more anxious about getting by on his margins and controlling costs due to wastage, the weather, poor grading or poor packing at the main market or at the farm gate. The cost ultimately was borne by the retailer. And of course the consumer. As we discussed cold chains, he said he only knew grapes supplied fresh from the field supplied through the intermediaries - contractor- grader - packer - wholesaler - transporter - sub wholesaler; stayed fresh and ready for sale for a longer time even at his outlet, which was essentially only sheltered from the sun. And no climate control. However grapes supplied from a cold store wilted faster, maybe 30 % to 40 % faster than grapes from the field. With the consumer not knowing the difference, his pricing and its increase had to be calibrated carefully and at times incrementally.
Stone fruits were the biggest challenge, peaches, plums, cherries etc. Peaches in particular he pointed out were a major concern. The skin was soft, easy to be damaged, wilting could be faster. Firstly, each 10 kg box of peaches, ,never did weigh 10 kgs, it was normally 9.5 kgs or so. That is one reason. Then as per his estimate, two (2) kgs in each kilogram at times was already not fit to consume. At times 2.75 kgs. Then the wastage due to weather and wilting and poor grading, led consumers to reject the last lot, at times a kg or more. In his words, if he purchased simply One (1) kg peaches at Rs 50/- from the wholesaler, he had to sell it at Rs 120/- per kg just to break even. And if he rented a place and installed air conditioning or fruit cooling solutions, the cost would go up by another 30/- per kg. Electricity itself was costly. Rents had sky rocketed. Perhaps a more reasoned cost driven by lower rates would be better.
Litchi he found was a sturdier fruit but it wilted faster after two days and the price he charged for desperate sales (the lot unsold at the end of the day) to certain sub vendors was essentially reflected in his pricing. That was the major concern, the vendor reflected on such wastage being charged to the consumer. As is natural. And estimating actual demand every day by consumers was not easy and most vendors overestimated this aspect and then later regretted the quantum of waste. Moreover, traders at the main market at times pushed multiple products including low demand products,
Apples were the best fruit to push to the ultimate consumer as were mangoes. Bananas were quite ok to keep and did not wilt early.
The inflation in the prices of fruits was again a point to consider with empathy, demand was slipping for some products or tended to fluctuate and products were being marketed at higher prices, these aspects could impact sales in the long run. As it is demand was tapering off for the costlier fruits and this needed a return to some degree of harmonisation across suppliers and retailers. And this was important for our own health too. The consumption of fruits and vegetables.
Ultimately, if we see, grading and packing remain a core concern. This happens at the level of the farmer too, this I wrote about in my article on the failure of FPOs. The FPOs had to incur higher costs to ensure quality at the farm gate during aggregation. A point, how long does pasteurised milk packed by milk unions last as against the envisaged time. These are key concerns and have been discussed for decades. Ultimately This lack of adherence to quality control finally leads to higher pricing too. This is at least the feedback from a vendor at the retail end.
Dinesh K Kapila
This is another factor in high prices at the retail end of the supply chain, as regards fruits and vegetables. I got talking to our fruit vendor today evening. I was asking about the prices of peaches and trying to figure out the reasoning, if any, by the vendor for the vast difference from the farm gate. The fruit vendor had his own reasons. He was frank enough to let me know the actual farm gate price was not his core concern, he was more anxious about getting by on his margins and controlling costs due to wastage, the weather, poor grading or poor packing at the main market or at the farm gate. The cost ultimately was borne by the retailer. And of course the consumer. As we discussed cold chains, he said he only knew grapes supplied fresh from the field supplied through the intermediaries - contractor- grader - packer - wholesaler - transporter - sub wholesaler; stayed fresh and ready for sale for a longer time even at his outlet, which was essentially only sheltered from the sun. And no climate control. However grapes supplied from a cold store wilted faster, maybe 30 % to 40 % faster than grapes from the field. With the consumer not knowing the difference, his pricing and its increase had to be calibrated carefully and at times incrementally.
Stone fruits were the biggest challenge, peaches, plums, cherries etc. Peaches in particular he pointed out were a major concern. The skin was soft, easy to be damaged, wilting could be faster. Firstly, each 10 kg box of peaches, ,never did weigh 10 kgs, it was normally 9.5 kgs or so. That is one reason. Then as per his estimate, two (2) kgs in each kilogram at times was already not fit to consume. At times 2.75 kgs. Then the wastage due to weather and wilting and poor grading, led consumers to reject the last lot, at times a kg or more. In his words, if he purchased simply One (1) kg peaches at Rs 50/- from the wholesaler, he had to sell it at Rs 120/- per kg just to break even. And if he rented a place and installed air conditioning or fruit cooling solutions, the cost would go up by another 30/- per kg. Electricity itself was costly. Rents had sky rocketed. Perhaps a more reasoned cost driven by lower rates would be better.
Litchi he found was a sturdier fruit but it wilted faster after two days and the price he charged for desperate sales (the lot unsold at the end of the day) to certain sub vendors was essentially reflected in his pricing. That was the major concern, the vendor reflected on such wastage being charged to the consumer. As is natural. And estimating actual demand every day by consumers was not easy and most vendors overestimated this aspect and then later regretted the quantum of waste. Moreover, traders at the main market at times pushed multiple products including low demand products,
Apples were the best fruit to push to the ultimate consumer as were mangoes. Bananas were quite ok to keep and did not wilt early.
The inflation in the prices of fruits was again a point to consider with empathy, demand was slipping for some products or tended to fluctuate and products were being marketed at higher prices, these aspects could impact sales in the long run. As it is demand was tapering off for the costlier fruits and this needed a return to some degree of harmonisation across suppliers and retailers. And this was important for our own health too. The consumption of fruits and vegetables.
Ultimately, if we see, grading and packing remain a core concern. This happens at the level of the farmer too, this I wrote about in my article on the failure of FPOs. The FPOs had to incur higher costs to ensure quality at the farm gate during aggregation. A point, how long does pasteurised milk packed by milk unions last as against the envisaged time. These are key concerns and have been discussed for decades. Ultimately This lack of adherence to quality control finally leads to higher pricing too. This is at least the feedback from a vendor at the retail end.
Meanwhile a major corporate retailer cum aggregator has a special drive for mangoes, Safeda Mango at Rs 70/- a kg - their actual price as per them is Rs 162 a kg while vendor sells at Rs 140 a kg and comes down to Rs 120 a kg too. Another vendor sells for Rs 100 a kg. As regards Kesar Mangoes, the special price is Rs 135 a kg while listed prce is Rs 236 a kg, the vendor sells for Rs 200/- a kg. The market itself sends out mixed signals and I found quality issues even with the corporate aggregator. This is the crux of it. A strict innate sensibility to adhere to quality control and specifications as laid down for inputs and pesticides and fertilisers. Plus being ethical in grading and packing. The farmer and the vendor both need to be aware and active. The issue of margins at the trader level are a separate complicated issue as it includes empathy and commercial aspects both.
Feedback
In the 1820s, the East India Company faced an analogous problem. Kapas from India was of wonderful quality initially, sold in British markets at a very high price. Then they discovered that either the farmer or the intermediary Seth had begun to contaminate it with soil and twigs. After suffering a lot. or two the markets of Europe simply reduced the price of Indian kapas by 25% at one stroke. American kapas though continued to command full. price because it was quality controlled and graded.
Quality control and grading have always been the weakest spot in the Indian market place. My suspicion is that here everyone tries to cheat everyone else. What manifests in the market is the sweet spot achieved by cheating: everyone presumes that everyone else will invariably cheat.
Even govt run companies do it. Look at Verka 'pasteurised milk'. It is so incompetently pasteurised that it lasts just for a few hours after being brought by the consumer. Normally pasteurisation should keep the milk fresh for as much as 24 hours at ambient temperatures of 24º C.
We run on a healthy dose of chai, jugaad and mistrust. On a serious note, you succinctly bring up issues that are non negotiable and yet what a shame that we continue to face them. In depth analysis 👌🏼👌🏼👌🏼
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