Wholesale whispers

Discussion around the way forward for wholesale markets in an increasingly competitive global food market made for a well-rounded exchange of ideas in Beijing last week, with market authorities from Europe, the US, South America, Africa and the Far East sharing aims and objectives at their respective stages of development.

The congress had an overarching theme - the emerging strategic role of modern food markets in the global food supply chain - and featured the latest best practice strategies. International co-operation was at the top of the agenda, and the event was intended to accelerate the development of the wholesale trade in the global food chain.

WUWM chairman Donald Darnall urged the sector to step up its game to global proportions, and he encouraged market authorities from across the world to build on communication strategies. “All the markets in WUWM have learned by working together and solving problems together, and the whole community has grown,” he says. “We all have to come together to form regional and global market economies.”

WUWM has undertaken a five-year action plan to support the development of the wholesale trade across all member countries, and has promised to increase the publication of information about WUWM activities, publish a WUWM directory featuring contact details of all member markets, and extend its Good Practice Guide.

The meeting of world market authorities in Beijing was billed as the first step to building lasting links with the wholesale trade in China and the Far East. “But this is just the beginning,” Darnall stresses. “The opportunities for international trade are going to become apparent.”

The Chinese vice-minister of commerce, Huang Hai, and chairman of the Chinese National Association of Wholesale Markets (CAWA), Zengjun Ma, opened the event alongside Darnall.

WUWM members first visited wholesale markets in China back in 2004 when, according to Darnall, traders had started to adopt similar attitudes to the rest of the union, and this trend has continued, with markets contributing to regional and urban development. The number of wholesalers in China has rocketed since the 1990s, and there are now more than 4,300 wholesale markets across the country, ranging from large composite sites to more specialist ventures, as well as flower markets.

“There are some proactive changes taking place in Chinese wholesale markets, with traders looking to improve logistics, technology and refrigeration to better their fresh produce offer,” says Darnall. “I am very impressed with Chinese wholesale markets - they are doing a good job, and are going to form a very strong part of the world economy.”

The development of markets in China has gone through three stages, according to Ma, from the initial start up, to a period of rapid growth, followed by restructure and redevelopment. “We can learn from our competitors overseas, and they can learn from us,” he says. “We have to construct a third-generation market in China and establish a wholesale brand, as well as work on the co-operation between the wholesalers and the promoters of international trade. When we achieve this, we will step into a new phase in the development of wholesale markets.

“Chinese market authorities are doing a lot of work to improve food safety and quality, and CAWA has been visiting the markets,” he adds. “We need to work on improving their management approach. In the past, a lot of markets developed quickly, but now the infrastructure and the function of the sites will be different, and the way the markets are managed will change, but rapid growth will continue.”

But Chinese wholesale market operators will have to overcome a number of obstacles before they can claim to be on a par with international market standards. “International markets tend to be larger-scale operations, better planned and well managed, and they tend to have closer relationships with farmers and producers, so they can set up accurate traceability systems,” says Hai. “But in China, markets lack communication, and they are far behind more advanced countries.”

Ma stresses that China will have to formulate market formats to suit its traders and customers, rather than look to emulate existing models overseas. “Markets in every country have their own advantages and their own obligations,” he says. “We have to set up a market structure for China, which will be different from existing formats, because of the differences between Chinese consumers and those elsewhere - the people here are different, so we need to find a new way of managing the market,” he tells FPJ. “We have a saying in China - Chinese people want to taste their food before they buy, so they shop with their mouths, Japanese people want their food to look good, so they shop with their eyes, and in Europe and the US, people have started to think about added value, such as nutrition, so they shop with their heads.”

Hai predicts that it will take Chinese wholesale markets in major cities, such as Beijing and Shanghai, some three to five years to catch up with their international counterparts, but the process is expected to take longer in rural areas. “Previously, markets had no financial support,” Hai tells FPJ. “But the government is now supporting the trade with preferential policies, including better rates for loans, to help establish better technical facilities.”

The Chinese government has recognised that wholesale markets are a public service and play an increasingly important role in the food distribution chain, and has pledged to support and improve the food markets in China with preferential policies and subsidies. The Double 100 programme, a joint initiative between the ministry of commerce and CAWA, was introduced to strengthen the sector. The scheme singles out 100 wholesale markets that are deserving of government financial support, and the largest 100 commercial enterprises connected to food markets, such as transportation, logistics, retail markets, or support companies, with “high standards, a sound distribution network, and a company playing a role of importance in local wholesaling” are offered additional funding.

CAWA provides the Double 100-nominated markets with information and technical assistance related to security, monitoring, waste treatment, processing and distribution systems.

Edward Seidler, senior officer at the Food and Agriculture Organisation (FAO) of the United Nations, urged the wholesale sector to seize opportunities for development and expansion, especially in countries where the multiples are yet to make their mark. The wholesale trade is central to the grocery market in countries in which the major multiples are yet to take hold, he says, but attempts to crack the remaining untapped markets are underway all the time. The multiples have a powerful grip on the market in Europe and the US, with a grocery market share of 80 per cent, but in the likes of Thailand, Mexico and Guatemala, supermarkets control around half of the market, while in China it is only 15 per cent. This means there are still ample growth opportunities for traditional wholesale markets in these areas.

“Food safety and quality are more important than ever, but this is not free and does not come without its costs,” says Seidler. “There has been a growth in international and national trade standards. But providing quality certifications is very demanding, with few price incentives, and poses a real challenge to the management of agrifood supply chains that involve smallholder companies.

“Markets need a food safety system that operates efficiently, but if it does not have enough staff or funding, it is next to useless,” he adds. “The wholesale trade in China needs better information mechanisms, clearer food legislation and investment on a national level.”

Seidler warns that if action is not taken to improve the offer from wholesale markets in China, they will lose market share to retailers, as they have in other countries.

But Chinese market authorities will have to push hard to make progress, with so many challenges related to the perception of food safety and quality, as well as the existing structures for management and logistics.

“The infrastructure for wholesale markets in China is not complete and there is a lack of control, so it cannot meet the demands of the population,” says Liu Zhiren, a councillor at the State Council of China. “But it is fair to say that there is a lot of study and research going on into the development of wholesale markets, but we do not yet have sufficient understanding of markets in other countries.”

Zhen Zhang, vice-director of the Beijing University Economics Department, gave Chinese market operators tips for the best way forward. “We have to accelerate the reform of the wholesale markets in China, we have to promote and maintain the modern logistics mode of carrying wholesale markets forward, and encourage sales and marketing by forging a brand,” he says.

The creation of a recognisable wholesale brand for China will push development forward, Ma says, and he is keen to point out that work to this end is already underway, albeit in the early stages. “We have started to develop a brand for wholesale market products from China but, so far, this is only on the surface and the concept has not been far reaching,” he tells FPJ.

Some markets in China have started to design logos for products, he adds, but he recognises that the country still has a long way to go.

The perception of fresh produce sold in the wholesale environment, the image of the markets themselves, and the relationship between the traders and the market authorities are key to making progress in the face of strong competition, according to Michel Escoffier, secretary general of the Paris-based French Federation of Wholesale Markets (FFMIN). The diversification of products and services, the improvement of quality, and an emphasis on hygiene and food safety, will allow the wholesale trade to hold its own in an increasingly competitive global market, he says.

He told the floor that it is the role of market authorities to provide suitable premises, keep it clean and well ventilated, with key utilities and a waste disposal system, and also provide the relevant training for tenants, adding that he was “encouraged” by the projects he had seen underway in China.

The wholesale trade should aspire to find a new role for itself in the international grocery market, according to Marc Spielrein, president of Semmaris, the authority at Rungis market in Paris, and he says that food safety and traceability are key to moving forward in this area. The enforcement of national and international legislation, and the WUWM Good Practice Guide, should be viewed as essential tools for the sector, he adds.

The co-operation of markets on a national and international level needs to reach past the domestic market, according to Spielrein, and he says Rungis has already started to build bridges to overseas markets.

The French market has linked up with the municipal government in Shanghai to plan and develop the Shanghai Western Suburban Agro Trade Centre. “We want to make a contribution to the building of the market and, if the Shanghai municipal government approves, we would like to be a shareholder and participate in the operation of the market,” says Spielrein. “Both markets see this is a positive step towards the promotion of international trade and co-operation, and will open the European market to products from China.”

The positioning of wholesale and retail markets on the same site could help trade to thrive, according to Manuel Estrada Nora, international director at Madrid-based Mercasa, and he says joint communication campaigns highlighting the link between wholesale and retail could prove mutually beneficial. “We need to create an emotional link between the consumer and the market,” he says. The introduction of clear labels to inform customers about where product is sourced - in line with “Yo compro en Mercamadrid” or “Je me forcené a Rungis” - will reinforce the image of the markets and make the distribution chain more transparent, he adds.

WUWM urged the congress to take note of opportunities that will arise from the increasingly global market. Some 80 per cent of the fresh produce sold on Chinese wholesale markets is earmarked for the domestic market but, according to Ma, there is potential to grow international trade, and this was echoed by responses from the floor. “We need to create a better environment to promote international trade, with standardised production, inspection centres and guaranteed food safety, as well as complete traceability from production through to the distribution channels,” says Ma. “Wholesale markets in China have to give priority to brand establishment, because image is an important part of going global.”

The necessary moves to gear up for business on an international scale were outlined by Darnall, who insisted that markets should link up to make progress in this area. He told the congress that trade across the world will be opened up by the increasing consumer demand for produce that differs from what they are used to, and that this will give Asian markets opportunities to join the global supply chain. “Ethnic foods give retailers the chance to differentiate themselves from the multiples, and this could develop an incredible bond between wholesalers and retailers,” he says.

WUWM membership is already sub-divided into four main regional working groups - Europe, the Americas, Africa and Asia-Pacific - to encourage market communities to work together.

Darnall offered a methodology for how small- and medium-sized companies can take practical steps to introduce strategies for the promotion of international trade, tied up with the concept of robust regional networks. The international wholesale market needs to construct so-called “hard” networks, with a professionally trained industry facilitator and at least five members who are willing to make a financial commitment, to put an emphasis on business analysis and progress. “We want regional working groups to form into networks supported by WUWM, which means that there will not be a need for WUWM offices in every country,” says Darnall. “But they need a comprehensive plan.”

The European working group has so far been the only one to set up anything approaching a hard network, according to Darnall, but that is because it already had members that could act as facilitators, investment, and a foundation on which to build. “What we need to do within WUWM is to continue to address regional issues,” he says.

“You have to constantly look at changes in the food industry and the wholesale trade, and continue to adapt and remain relevant to the market,” he adds. “We failed to adopt aggressive strategies when we should have done, and now we are behind - the only way we can become relevant again is to develop regional network strategies.”