Producer Companies and Modern Retail in India—Current State and Future Potentials of Interaction

Abstract

A policy environment that builds on the emerging business models of Farmer Producer Organizations (FPOs) that give producers control over value addition and improve their bargaining power could be married to the benefits to consumers of well-organized value chains operated by big retailers. Considering the most recent steps taken by the Indian government to open India’s retail sector to further foreign direct investment (FDI), more direct cooperation between Indian farmers and big international retail chains is imminent. This chapter gives a quick overview over recent transformations in the global agro-food system in general and the impacts on small farmers. It then looks at the current state of Producer Companies in India as well as of modern food retailing in the fresh foods segment in India. After that, current links between this specific form of Farmer Producer Company (FPO) and supermarkets in India are being examined. Finally, conclusions are drawn.

Despite the potential benefits, only relatively few Producer Companies have succeeded in entering into purchase agreements with modern retail or food processors till date. In addition to the low quantity requirements by supermarket chains, this can be, in part, contributed to the fact that PCs are very nascent in India. Therefore, the overall experience of modern retailers with Producer Companies are oftentimes negative and the expectations of what Producer Companies can deliver with regard to product quality and timely aspects of supply are low. With regard to marketing of their farmers’ produce, these companies would not automatically have to target the modern retail or food processing sector, but could establish direct marketing channels to high-end consumers, export markets, or open their own retail outlets. Here, however, it needs to be stressed that producer companies are not the only possible option of collective action in India and that other well-functioning forms of FPOs should be treated equally.