A large part of the food consumed worldwide is still produced by smallholders in the Global South who cultivate less than two hectares of land. Moreover, a significant range of intermediate actors who link the farm gate with food retailers consists of informal, often unregistered small-scale traders and other intermediaries typically associated with traditional markets. This is despite decades of transformations of food systems resulting from the emergence and diffusion of modern national and international food retailers. This thesis contributes to the research and debates on the structuring and restructuring of agri-food markets. It does so by exploring the co-existence of modern and traditional markets and the implications of the transformation processes for actors and flows of produce along smallholder-based horticultural value chains ending in Thai domestic markets. The latter are characterized by the presence of large domestic and international retailers alongside a variety of traditional retail and wholesale markets.
Analytically, the thesis takes its point of departure in global value chain analysis. It pays particular attention to contextual factors, local embeddedness and actors’ perspectives in dynamics of agri-food value chain configurations and their associated development outcomes. These local contextual dimensions, and how they influence governance and upgrading dynamics, have been researched less in GVC studies, which have largely focused on industries linking production in the Global South with consumption in the Global North. Empirically, the thesis draws on two cases involving the value chains of fresh produce sold in both supermarkets and traditional markets in Thailand. Thailand has been identified as one of the fastest growing markets for food retailing in Asia, with the country-wide presence of a number of large modern international and domestic food retail chains, while traditional markets at the same time still play a central role. The research in this thesis is based on data collected through a mixed-methods approach in the Bangkok Metropolitan Area and Chiang Mai province in two periods between January and October 2018, supplemented by data collected in October-December 2019.
The research revealed that modern and traditional channels are not separated into distinct filaments as often assumed in the literature. The co-existence of traditional and modern agri-food markets channels prevails along both value chains, and the same smallholders and layers of traders, spanning locations from rural areas to provincial and national wholesale markets in urban centres and metropoles, participate in producing and distributing fresh produce that ends up both in traditional wholesale and retail markets and on supermarket shelves. The different traders perform pivotal roles in product differentiation and the coordination of both types of chain, including ensuring compliance with product quality requirements based on appearance and size or weight. This functioning system provides few incentives for modern food retailers to develop a tightly coordinated value-chain filament with a parallel system of more efficient and controlled production and sourcing processes. Although the supermarkets are stricter in enforcing quality requirements, they do not closely monitor or control either production or processing at the farm level or the trader level. Moreover, the study’s exploration of the nature and scope of the trade transactions between the actors reveals that social relationships are central to transactions along the chain, as well as to both business and economic relations. Social relations and networks based on trust are established, built and/or maintained through inherited relations, background research and repeat transactions. These place-based local structures – trader networks and long-term social relations – are central in ensuring deliveries of produce in sufficient volumes and with sufficient product freshness and quality at the right times and prices, as well as in guaranteeing a reliable buyer or consumer base.
There are several implications of the co-existence of traditional and modern value chains for actors’ market connections, in particular those of smallholder farmers and traders, and for environmental dimensions. The possibility of combining sales channels provides opportunities to produce for and sell to different end-markets, both modern and traditional. Smallholders and traders who are typically associated with traditional markets remain integrated into modernizing food-retail systems, despite not delivering produce directly to supermarkets. The co-existence provides alternative sales pathways within the agri-food system, which is known for being a notoriously fluctuating and insecure or volatile sector in terms of both production (volumes and quality) and marketing (price fluctuations). However, power asymmetries are still present and the smallholders and to some extent, the different traders are subject to market structures characterized by the greater bargaining power of downstream buyers and product differentiation in the segments of the big traders and supermarkets’ preferred traders. Furthermore, stakeholders associated with modern retailers produce more waste (42 percent) than those who are less tied to ‘cosmetic standards’, such as different trader segments and small retailers in traditional markets (18-24 percent). The co-existence of traditional and modern sales channels provides market outlets for products that do not meet supermarket standards. In this way, the diversity in marketing channels provides complementarity in terms of product quality criteria, which can have positive consequences for reducing the amounts of unsold produce. The implications can be contrasted with the commonly encountered narrative that traditional food systems are static and inefficient.
Previous theoretical and empirical contributions to understanding global value chains – and global production networks – have rather abstractly argued that institutions and embeddedness are interwoven with actors and economic relations and shape governance structures. This thesis has focused attention on contextual factors, local embeddedness and actors’ perspectives. It first suggests that the analysis of agri-food value chains should pay greater attention to the perspectives of chain actors and household realities. Granting more agency to actors – in this case smallholders and traders – in the process of comprehensively analysing their participation in agri-food value chains can move forward discussions of how to link the actors more inclusively to markets. This can also produce new insights into how upgrading opportunities are conceptualized to include rewards other than price premiums and moving up the ‘value-added ladder’. Furthermore, by unpacking the nature and scope of social relations between value chain actors, this thesis suggests that such relations are vital for the functioning and coordination of both upstream and downstream economic transactions and hence for the governance of the chains. This is despite the embeddedness of the value chains in regional and global markets. Strong networks that support economic transactions can also help ensure or improve one’s position in the chain by increasing stability and securing better deals. Therefore, the actors largely focus their investments on building and maintaining both up- and downstream relationships as an essential part of their ‘upgrading strategies’, apart from the more evident need to invest in physical assets and reproduction in order to maintain and expand the business. This thesis takes earlier conceptualizations further by pointing to the wish to secure and stabilize one’s position as a central aspect of upgrading strategies and to invest in social relations and in building trust as a means or strategy to achieve this.