Rural Industries Research & Development Corporation

Research Compendium 1993 - 1994

Research Project

A PRELIMINARY EVALUATION OF VEGETABLE MARKETING CHANNELS IN AUSTRALIA

Objectives

• To develop a financial model which could be used by growers to evaluate which of the three domestic selling options - agency, merchant or direct - offered them the best financial returns.
• To test the validity of this model through a series of grower case studies.

Background

The fresh fruit and vegetable industry is fragmented and atomistic and experiences wide fluctuations in market prices and net returns to growers. Traditionally, the major selling channel for fresh horticultural produce has been through the central markets which operate in each capital city. The majority of these transactions between farmers and central market operators have been conducted on a merchant basis, although in many cases farmers think these transactions occur on an agency basis.

Over the past five years, there has been significant growth in direct sales to supermarket chains.

Research

A series of personal interviews were conducted with vegetable growers in the three major horticultural areas of Queensland to identify all possible transactional costs associated with each of the three selling channels. The resultant financial model was then validated against 306 consignments offered for sale by the cooperating growers.

Outcome

The financial model captured the identifiable costs associated with selling fresh vegetables through the alternative channels available to growers.

The analysis of the consignments failed to demonstrate the financial superiority of one selling system over another. However, this analysis was hampered by the small number of directly comparable consignments, the large number of different commercial relationships between grower and 'agent' and the lack of a uniform specification system between consignments.

Implications

None of the selling systems have an obvious advantage over the others which indicates that each has its place in the selling strategies of horticultural producers as they attempt to spread price risk.

The study did show a growing dissatisfaction by growers and retailers with the central markets. The need for better consumer information flows between central market operators and growers was urgently required.

RIRDC Project No: UQ-22A

RESEARCHER: A J Dunne

ORGANISATION: Department of Management Studies

PHONE: 074 60 1332

Last updated: 10 October 1996
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