Food Supply Chain Formation Necessity in Zemgale Region

A. Liscova, L. Silina Food Supply Chain Formation Necessity in Zemgale Region

FOOD SUPPLY CHAIN FORMATION NECESSITY IN ZEMGALE REGION

Anna Liscova 1, Dr.oec.; Linda Silina , Dr.oec., assist. professor 1/DWYLDQ5XUDO$GYLVRU\DQG7UDLQLQJ&HQWUH 2 Latvia University of Agriculture

Abstract. &RQVXPHUVLQFUHDVLQJO\FRQVLGHUWKHRULJLQDQGKDUPOHVVQHVVRIUDZPDWHULDOVRISURGXFWVZKHQSXUFKDVLQJ food. Therefore, the issue of the possibilities for purchasing human-health-friendly food becomes topical. The present research was performed to identify the necessity for forming a food supply chain in three municipalities of Zemgale region: Dobele, Auce, and Tervete. An expert group, which engaged in designing a questionnaire, was formed to carry out the research. A survey was conducted in the territory of the municipalities of Dobele, Tervete, and Auce, engaging ERWKFRQVXPHUVDQGEXVLQHVVPHQ7KHSUHVHQWSDSHULVEDVHGRQWKHVXUYH\¿QGLQJV,WFRQFOXGHVWKDWSUHVHQWO\ consumers most often choose to buy food at supermarkets; yet, they are very interested in purchasing food produced within a food supply chain, and the main product groups are meat and dairy products, meat, milk, and eggs. From the viewpoint of businessmen, the number of food suppliers and the quantity of food offered by them are small; thus, the assortment of food products has to be enlarged. Key words: home production, food supply chain, consumer, food. JEL code: Q13

Introduction &HSDQRQH GLYHUVLI\LQJ SURGXFWV RI KRPH Food, including food products consumed to raise the production (Klavina, 2012), development possibilities for feeling of comfort of oneself and family, play an important home production (Majore – Line, 2012), home production role in every individual’s daily life. Before purchasing food, as a job (Grutups, 2012) as well as small investments consumers increasingly study the origin of food products, made by home producers (Misina, 2012) were addressed the place of origin of agricultural raw materials, and the on the level of rural municipalities in 2012. harm caused by food, which encourages consumers to buy The research hypothesis is - the formation of a food food products of local producers. Yet, a problem arises, supply chain creates a possibility for developing home as no information on purchase possibilities is available. production in municipalities. Therefore, a need has emerged for a practical research Based of the hypothesis, the research aim is to WR¿QGRXWWKHRSLQLRQVRIFRQVXPHUVDQGEXVLQHVVPHQ ascertain the need for the formation of a food supply regarding establishing a short food supply chain in the chain in the municipalities of Dobele, Tervete, and territory of the municipalities of Dobele, Tervete, and Auce. Auce which are located in Zemgale region. To achieve the aim, several research tasks were It was concluded, after making an initial situation set: 1) to identify consumers’ opinions on the need for analysis, that a researcher L.Melece (2001., 2002, WKHIRUPDWLRQRIDIRRGVXSSO\FKDLQDQG WR¿QGRXW 2003a, 2003b, 2008a, 2008b) mainly focuses her businessmen’s opinions regarding the possibilities for research on milk and meat quality standards. However, forming a food supply chain. she relates her research to large-scale producers but To achieve the research aim, the survey was not to the level of households as well as researched carried out, and the questionnaire was designed in food safety in Latvia; thus, contributing to providing cooperation with a group of experts which included the the sustainability of food (Melece, 2011). Melece L., UHSUHVHQWDWLYHV RI 'REHOH &RQVXOWDQF\ %XUHDX RI WKH Praulins A., and Popluga D. (2009) have conducted /DWYLDQ5XUDO$GYLVRU\DQG7UDLQLQJ&HQWUH //.& WKH pieces of research on environmentally friendly farming 6HFUHWDULDWRIWKH1DWLRQDO5XUDO1HWZRUN'REHOH&RXQW\ in Latvia, revealing some economic aspects and &RXQFLO WKH $VVRFLDWLRQ RI )DUPHUV WKH $VVRFLDWLRQ RI setting priorities for development. /DWYLDQ 5XUDO &RRSHUDWLYHV WKH )RRG DQG 9HWHULQDU\ A practical guidebook with guidelines for best 6HUYLFHDQGWKH6WDWH5HYHQXH6HUYLFH//.&VSHFLDOLVWV practices was produced for those being engaged in crafts, in crop and livestock farming and in rural development including food processing (Rokasgramata labas…, 2011). as well as individuals who wanted to participate However, not a single practical research regarding the in establishing a food supply chain. The survey was situation in municipalities has been carried out, and the conducted from September to November of 2012. present paper may be considered a beginning of research The survey encompassed 343 respondents, including on it, so that the research results may be adapted to 220 consumers, 39 businessmen, and 84 farmers. and exploited in developing home production in other The following research methods were employed: municipalities. 1) analysis and synthesis; 2) induction and deduction; Several topics related with home production, for 3) the graphic method; and 4) a sociological method – instance, uniting home producers in an association a survey. ______&RUUHVSRQGLQJDXWKRU [email protected]

134 Economic Science for Rural Development No. 30, 2013 ISSN 1691-3078 A. Liscova, L. Silina Food Supply Chain Formation Necessity in Zemgale Region

22 20 Less than LVL 150 LVL 150-250 LVL 250-350 5 LVL 350-500 9 more than LVL 500 25 not specified 19

Source: authors’ construction

Fig. 1. Percentage distribution of the respondents by monthly income

45 42 40 Supermarkets

35 Self-produced food 30

25 Small and specialised stores % 20 16 16 15 15 Local marketplace 10 10 Bought from local farmers 5

Source: authors’ construction

Fig. 2. Percentage distribution of the most popular shopping sites of the respondents

Research results and discussion 6XSHUPDUNHWV ZHUH VSHFL¿HG DV WKH PRVW 1. Consumer opinions on creating a short popular shopping sites by 80% of the respondents, food supply chain 69% purchased their food at small stores, while Initially, consumer opinions were found out by 31% of the respondents produced agricultural surveying 220 respondents. products themselves for their own consumption. $ VLJQL¿FDQW LQGLFDWRU ZDV WKH DJH VWUXFWXUH RI The frequency of shopping by the respondents is an consumers, which indicated the interest of local indicator showing how frequently local producers rural residents in and their need for purchasing food. have to supply their food products as well as what Potential customers of farmers and businessmen, NLQG RI WUDGH LV WKH PRVW HI¿FLHQW DQG SUR¿WDEOH which were interested in purchasing local food, were According to the survey, the greatest number of the the population aged 26-55 years that comprised respondents purchased food products for their family 71% of the respondents. once a week, and 32% of them did shopping two Of the respondents, 47% replied that their monthly or more times a week. Most often, the respondents family income was less than LVL 250, which indicated preferred to buy meat and meat products as well as dairy the low purchasing power of the respondents and products; yet, eggs, non-agricultural products, and fruit negatively affected their demand for short food supply and berries were most rarely purchased. chain products. Of the questioned individuals, 19% had While conducting the research on the need for a family income within a range of LVL 250-350, and only introducing a short food supply chain, an important 5% of them earned more than LVL 500 a month; 20% did goal was to identify the interest of potential consumers not reveal their income (Figure 1). in supporting local producers. Of the respondents, Nowadays, there are various food purchase sites, 72% said that such a possibility was necessary and thus, it was important to identify the most popular and FRQ¿UPHG WKHLU LQWHUHVW LQ LW 2QO\ ZHUH VFHSWLFDO preferable ones. The data are presented in Figure 2. about it.

Economic Science for Rural Development No. 30, 2013 135 ISSN 1691-3078 A. Liscova, L. Silina Food Supply Chain Formation Necessity in Zemgale Region

100 88 92 90 80 70 60 50 39 42 34 40 28 Number 30 22 20 12 16 10 0

Source: authors’ construction

Fig. 3. Distribution of the respondents’ most popular food products

140 125 120

100

80 70

60 number 41 43 40

20 8

0 Delivered at home Delivered by Marketplace Store for local Internetstore themselves products

Source: authors’ construction

Fig. 4. Most popular shopping sites and ways for consumers

The most popular food products and food groups VLJQL¿FDQWIDFWRUVIRURIWKHUHVSRQGHQWVIROORZHG ZHUH LGHQWL¿HG LQ WKH VXUYH\ $FFRUGLQJ WR WKH VXUYH\ by price for 69%, and the place of origin of products meat as well as milk and dairy products were most often ZDVWKHWKLUGPRVWVLJQL¿FDQWIDFWRU3URGXFWSDFNDJLQJ purchased from local producers – 92% of the respondents played a smaller role in attracting consumers, as only admitted it (Figure 3). They were also interested in 11 respondents of 220 mentioned it. locally produced bread and bakery products as compared For producers, it is very important to be located as ZLWKRWKHUIRRGJURXSV+RZHYHU¿VKSURGXFWVZHUHQRW close to consumers and their preferable shopping site as popular, which might be explained by the small number possible. RI¿VKIDUPVLQWKHUHVHDUFKHGWHUULWRU\ The survey revealed that 125 respondents (Figure 4) When purchasing daily food products, several factors preferred to buy food products of local producers at a LQÀXHQFHFRQVXPHUV)RRGTXDOLW\ZDVRQHRIWKHPRVW specialised store intended only for local producers, thus,

136 Economic Science for Rural Development No. 30, 2013 ISSN 1691-3078 A. Liscova, L. Silina Food Supply Chain Formation Necessity in Zemgale Region

28% 5%

67%

Tervete municipality Dobele municipality Auce municipality

Source: authors’ construction

Fig. 5. Percentage distribution of the surveyed businessmen by municipality

4 2 6 Public catering 2 Trade

Processing

Provision of tourism services

51 Production and sale of 31 agricultural products Market management

Source: authors’ construction

Fig. 6. Percentage distribution of the surveyed businessmen by economic activity making mass products and products from producers from the assortment of products in which consumers are other regions not available. Of the respondents, 32% interested in is limited. preferred to purchase local products at the marketplace, while 43% wanted to deliver such products from 2. Engagement of businessmen in forming a producers themselves. They were least interested in short food supply chain the sale site becoming increasingly popular now – the Thirty-nine businessmen from the municipalities of e-environment, as this way of shopping was not exploited Dobele, Tervete, and Auce who specialised in purchasing by most of the consumers. DQGSURFHVVLQJDJULFXOWXUDOFRPPRGLWLHVZHUHLGHQWL¿HG The consumer understanding of the processes during the survey. The respondents’ resources and presently taking place in the food industry was also wishes, the need to support the short food supply ascertained as well as it was established what affects the chain as well as their opinion on the development of low demand for local food products. Of the respondents, local producers in their municipalities were ascertained 58% pointed that the key obstacle for cooperation with in the survey. Businessmen from Dobele municipality local producers and for purchasing their products was participated in the survey most actively, accounting for the lack of information. One can conclude that the effect 67% of the total number of questioned businessmen and RI DGYHUWLVLQJ LV FRQ¿UPHG RQH PRUH WLPH ± WKH PRUH processors (Figure 5). products are advertised, the greater are their sales. The majority of the respondents represented public For 52% of the respondents, shopping at a store was catering organisations, which often were the purchasers more convenient, and a high price of products was not and consumers of agricultural products (Figure 6). important to become a customer for local producers. Of the respondents, 51% provided public catering One may conclude that in consumers’ opinion, the services, while 31% were engaged in the industry of direct formation of a short food supply chain is necessary, and sales – they were mainly owners of small and specialised it would provide a possibility to buy products of local stores. There were providers of tourism services, and producers; yet, before establishing the chain, a detailed producers and processors of agricultural products among analysis of the supply of products has to be made, as the respondents.

Economic Science for Rural Development No. 30, 2013 137 ISSN 1691-3078 A. Liscova, L. Silina Food Supply Chain Formation Necessity in Zemgale Region

23% 49%

23%

Purchased regularly Purchased regularly Purchased irregularly No cooperation with local farmers &RRSHUDWLRQRIDQRWKHUW\SH&RRSHUDWLRQRIDQRWKHUW\SH

Source: authors’ construction

Fig.7. Percentage distribution of the surveyed businessmen by frequency of cooperation with local farmers

8% 28% 23%

41%

High Medium Low Other

Source: authors’ construction

Fig. 8. Evaluation of the demand for agricultural products in the municipalities, %

23% 41%

31%

Seasonal products are accentuated Seasonal products are not accentuated Used but not regularly Such an activity is planned

Source: authors’ construction

Fig. 9. Popularisation and accentuation of seasonal products in offers, %

&RRSHUDWLRQ ZLWK ORFDO EXVLQHVVPHQ DQG SXUFKDVHUV positive factor of short food supply chains. Products are is necessary in order that producers of agricultural delivered fresh and in the required quantity as well as SURGXFWV FRXOG VHOO WKHLU SURGXFWV PRUH HI¿FLHQWO\ 2I they are mainly environmentally and human-health- the respondents, 49% regularly cooperate with local friendly. The businessmen believe that such cooperation producers, purchasing their products (Figure 7). Irregular has also psychological advantages – food suppliers are SXUFKDVHV DUH VSHFL¿F WR RI WKH EXVLQHVVPHQ SHUVRQDOO\NQRZQZKLFKEXLOGVDGGLWLRQDOFRQ¿GHQFHLQ and the same proportion of them has not established products offered by them. cooperation. According to the businessmen and The businessmen pointed to high bureaucracy, purchasers, a small supply and low prices on products, ¿OOLQJ LQ YDULRXV GRFXPHQWV DQG SURGXFW TXDOLW\ WHVWV which would make their services more expensive and DQG FHUWL¿FDWLRQ DV QHJDWLYH DVSHFWV IRU FRRSHUDWLRQ reduce the number of their customers, are the main with farmers. Prices also change, and not always the reasons for it. price agreed upon is in force at the time products are The majority of the businessmen pointed to the delivered; besides, there is the risk that products may quality and availability of products of farmers as a spoil earlier.

138 Economic Science for Rural Development No. 30, 2013 ISSN 1691-3078 A. Liscova, L. Silina Food Supply Chain Formation Necessity in Zemgale Region

The businessmen noted that in order that stores 3. &XVWRPHUV DUH PRVWO\ LQWHUHVWHG LQ SXUFKDVLQJ FDQ SUR¿WDEO\ EX\ SURGXFWV IURP D ORFDO IDUPHU D locally produced meat and dairy products; they are wide spectrum of products has to be supplied from one YHU\ LQWHUHVWHG LQ ¿VK SURGXFWV ORFDOO\ SURGXFHG producer, as presently the demand for every product bread, and other bakery products. JURXS LV VPDOO &RQVHTXHQWO\ LW LV QRW SUR¿WDEOH WR 4. &XVWRPHUV ZLVK WR EX\ IRRG SURGXFWV DW WKH VLWHV farmers, which produce only cabbage and carrots, to that are advantageous to them, i.e. at specialised supply these products to stores in small quantities – it stores selling products of local producers and at the is too costly to the farmers to deliver ten cabbages and local marketplace as well as they want to deliver such 10 kg of carrots once a week. This factor indicates that products from producers themselves. They most several businessmen have to cooperate for developing RIWHQ ZLVK WR EX\ D ³IRRG EDVNHW´ ± ³PHDWPLON´ complex product offers. ³PHDWPLONYHJHWDEOHVHJJV´ ,W LQGLFDWHV WKDW Based on the respondents’ replies, one can conclude consumers are interested in a wide assortment of that the customer demand for agricultural products is local agricultural products. medium in the researched municipalities. If compared 5. The respondents are interested in supporting with the interest and opinions of consumers, it is a local producers – it is necessary to establish contradiction, which may be explained by poor consumer D ³VKRUW IRRG VXSSO\ FKDLQ´ 7KLV LGHD ZDV awareness and, consequently, the low demand. supported by 72% of the respondents, and only The businessmen noted that they would want to buy 6% were sceptical. They mentioned the following and offer consumers more quality vegetables and dairy advantages: quality products (75%), acceptable products mainly themselves. They were also interested in price (69%), and local place of origin. Only 5% of cooperation with farmers who produced berries, rhubarb, the respondents paid attention to the packaging of greenstuffs, tomatoes, cucumbers, processed meat, products. and dairy products – 18 respondents of 39 expressed 6. The businessmen (49% of the respondents) who are their wish to start such cooperation in the near future if already engaged in processing agricultural products EHQH¿FLDORIIHUVZHUHDYDLODEOH regularly purchase products of local producers. One of the best ways of attracting customers is to Products are delivered fresh and in the required develop adequate offers for customers, as they have quantity as well as they are mainly environmentally various tastes, wishes, and interests. Over the recent and human-health-friendly. The businessmen would period, an increasing attention was paid to various like a wider assortment and want to purchase products that highlighted and reinforced the local identity regularly seasonal products: berries, rhubarb, as well as were in line with seasonal topicalities. greenstuffs, tomatoes, cucumbers etc. Of the surveyed businessmen, 41% said that seasonal 7. The businessmen pointed to high bureaucracy – products were also accentuated in the assortment of ¿OOLQJLQYDULRXVGRFXPHQWV±SURGXFWTXDOLW\WHVWV their offers; 31% performed such activities irregularly, DQG FHUWL¿FDWLRQ D ODFN RI RIIHUV DQ LQVXI¿FLHQW while 5% planned to popularise such products in the assortment of products, and too high prices as future. negative aspects for cooperation with farmers. The businessmen believed that seasonal offers as well as the use of local food recipes in public catering were certainly commendable and positive activities. More such Proposals, recommendations offers are available in rural areas, and the only problem is 1. 7KH//.&LQFRRSHUDWLRQZLWKLQWHUHVWHGLQVWLWXWLRQV WR¿QGIDUPHUVZKRZRXOGVXSSO\DOOQHFHVVDU\SURGXFWVDW has to elaborate a plan of measures for informing the best prices. The respondents said that such activities and consulting residents and producers on the Short required careful marketing planning as well as increasing )RRG6XSSO\&KDLQ the value added of products. The price of offers has to 2. Active businessmen have to be united, thus, be also analysed, as public catering organisations mainly establishing a cooperation network among offer what customers demand – quality products at the producers. lowest possible price. 3. In cooperation with local governments, public The businessmen pointed to the interest of farmers organisations, and producers, attractive sale sites themselves in more active sales of their products as one of have to be established as well as local cultural the most important prerequisites to promote cooperation heritage has to be exploited, for instance, the with farmers. It is also necessary to amend the legal renovated old marketplace in Dobele etc. framework and reduce the present level of bureaucracy. A broader assortment of dairy products and vegetables is Bibliography needed as well as greater attention has to be paid to the 1. Britiks, G. (2012). Ar partikas kedes no stelinga quality of products. OŝG] JDOGDP NRQWUROL LU XQ EXV MŅUHNLQDV (Control of the Food Supply Chain from the Stall to the Conclusions Table is and will be Reality) . Ludzas Zeme , 1. 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