Analysis of Retailers role in the marketing of Fresh milk and Dairy products in Khartoum

DR/ NAHID MOHAMMED TAWFIK FAWI (AUTHOR) DEPARTMENT OF DAIRY PRODUCTION FACULTY OF ANIMAL PRODUCTION UNIVERSITY OF KHARTOUM KHARTOUM - SUDAN ABSRTACT The study was performed in the state of Khartoum the capital of the Sudan where retailers were the target of the study, the study aimed at analyzing retailers role in the supply chain of fresh milk and other dairy products. Objectives of the study included: analyzing the participation of retailers in the dairy product supply chain, reflecting the role of retailers efforts towards sustainable consumption and production and classifying and describing manufacturers marketing efforts. The study came to several findings and was concluded with a number of recommendations some of which are: widening the spectrum of the retailers role in marketing dairy products, adaptation of more empirical support for the synergy between manufacturers advertising and retail promotional activities, Retailers and manufacturers need better models of relative allocation of marketing budget towards traditional and modern media. Keywords: RETALIERS, DAIRY PRODUCTS, SUPPLY CHAIN, KHARTOUM, SUDAN.

I. INTRODUCTION In todays modernized market, retailers play the role of a gatekeeper within many product chains connecting suppliers with consumers and vice versa and being in direct contact with consumers they exert significant influence on what products consumers want to buy, and how they use and dispose them. On the other hand, they reach out to suppliers worldwide bearing the opportunity to encourage profitable production practices. Retailers can directly influence consumer choice at the sales point.. (Kotler 2006) defined retailing as all the activities involved in selling goods or services directly to final consumers for personal, nonbusiness use; they can be understood in terms of store retailing, nonstore retailing and retail organizations. Dairy product markets typically differ in several key ways, by the types of products handled, the number of intermediaries involved, and the role each plays, these two aspects are often linked in that more processed and thus higher value products often involve more intermediaries, each of whom adds some delivery or transformation service to the product (Omore 2004). An increasing market concentration in food retailing has generated concerns about the market power of retailers towards consumers and input suppliers (Salhofer et al. 2012). Retail dairy purchases are growing at widely different rates around the world in response to rising incomes and expanding urban populations, mass media promotions and new forms of retail channels are also driving growth in countries where dairy products are only beginning to reach consumers (Fuller et al. 2005). In China, dairy product consumption is growing at 15 percent per year, supermarkets in China are helping to affect this increase by providing consumers access to expanded product selections and brands (Hu et al., 2004). Communication and promotion decisions are a critical element of retailer customer experience management strategy (Ailawadi 2009). The retailers decisions include those on price, price promotions, traditional non-price support like feature advertising and displays, and other in-store communications such as TVs, shelf talkers, and shopping cart advertising that are now commonly bundled under the phrase shopper marketing (Grocery Management Association 2007). In India the emergence of modern milk marketing chains is posing stiff competition for the existence of traditional milk market agents, however, the basic structure of milk production and marketing is not likely to change significantly in the near future and therefore, the dominance of traditional milk market chains will continue to persist in spite of the rapid growth of the organized and formal milk marketing chains. (Kumar 2010). In many other emerging markets of developing countries, retail growth in dairy markets is averaging more than 10 percent per year, and in high income countries where growth in per capita consumption and population have leveled off, demand for dairy products is still

rising about 2 percent per year driven primarily by consumption of higher value-added products rather than volume increases, rapid growth in demand in middle-income developing countries will help boost dairy trade (Blayney et al 2006). The food marketing has been undergoing a paradigm shift in India and the emergence of integrated food supply chains is one of the fast growing and most visible market phenomena. Yet, about 80 per cent of marketed milk still passes through the traditional channels of handling raw milk and traditionally produced milk products (Kumar and Staal 2010). Despite the lack of research manufacturers have tended to consider retailers as an important source of information about consumers and have sought their help to gain a greater understanding of the marketplace.( McClure & Ryans 1968). In the Northeastern part of the United States, it is perceived that market power of retailers not processors drives farm gate milk prices below efficient levels. This harms consumers, farmers and processors alike (Cotterill 2006). Increasing concentration in the U.S. supermarket industry raises concerns, especially among farmers and consumers groups, about the effects of market power in dealing with suppliers (buying power) and consumers (selling power). According to the United States Census Bureau and Trade Dimensions Marketing Guidebook, the top four supermarket retailers in the United States controlled approximately 18% of total sales in 1982 and 43% in 1999. Though the supermarket industry could be characterized as a monopolistic competition at the national level, the structure of this industry at the local or regional level is mainly oligopolistic ( Ellickson 2007). Understanding the pricing conduct of supermarket chains is a key issue toward explaining retail prices, as well as the relationship between retail prices and the farm price. The level of market power that supermarket chains have to set retail prices beyond the competitive level is of particular interest. More specifically, do supermarket chains exercise market power when they set retail prices? This is relevant not only from a research standpoint, but also to policy makers, producers and processors, and consumers. From the viewpoint of policy makers, accurate estimation of market power helps shape better antitrust and merger laws to protect the welfare of society (Perloff et al. 2007). At the production and processing levels, understanding retail pricing conduct is a helpful decision-making tool in determining strategic variables, such as advertising, product differentiation, and industry consolidation (dairy cooperatives, for example) to counteract the increasing retail market power, if any ( Chidmi & Murova 2011). In 2010, the U.S. Department of Justice and U.S. Department of Agriculture held the first-ever joint public workshops on competition issues including buyer power and vertical integration in the agricultural sector. However, one important issue how retail markets (i.e. consumer demand and retailers seller power) influence the magnitudes of buyer powers price effects in agricultural procurements, has not been examined in the existing literature and public discussions.( Xia & Sancewich 2012). II. OBJECTIVES OF THE STUDY 1- To study and analyze the participation of the retailer system in the dairy product supply chain. 2- To reflect the role of retailers efforts towards sustainable consumption and production. 3- To classify and describe dairy product manufactures marketing efforts through studying the retail system. III. MATERIALS AND METHODS The study was performed during the period 2009 - 2010 in Khartoum State, the capital of the Sudan. Khartoum state is considered a major consumption centre of fresh milk and dairy products being one of the largest residential areas in the country, with a total population exceeding five million residents. Retailers in Khartoum state were the target of the study. Retailers are those who sell fresh milk and dairy products to the final consumer. As the basics of distribution and selling of the products depend necessarily on consumers characteristics who acquire several variations in socioeconomic characteristics which affect the consumption patterns; a stratified quota sampling procedure was adopted to select 180 retailer shops as a sample of this study. Khartoum state was divided into three major consumption areas; Khartoum, Khartoum- North and Om-durman, and further, each was divided into three subareas according to their socioeconomic standards, implementing an intentionally chosen random sample which were: high standard subareas, medium standard subareas and below medium subareas, reaching a total of 9 subareas in the three main consumption areas, to ensure the inclusion of a wide spectrum of consumer characteristics. Further, a population frame of retailers in Khartoum State (a quota sample of 60 shops in each area) was selected to obtain a total sample size of 180 retailer shop. The study was mainly based on primary data collected from the selected sample through a scientifically structured questionnaire. A pre-survey questionnaire was designed and distributed to a limited number of sellers to get some useful data that assisted in restructuring the final intended questionnaire. Then the final questionnaire was distributed to the selected respondents, and after their feedback, the distributed questionnaires were collected. The response rate was 100 % as shown in Table 1. The collected data was analyzed using the computerized Statistical Package for Social Sciences (SPSS) to obtain the frequency distributions and the weighted measures central tendency of the variables of the study.

IV. RESULTS AND DISCUSSION Table 1: Retailers shop location Item Number of questionnaires distributed 60 60 60 180 Number of questionnaires collected 60 60 60 %

High standard subareas Medium standard subareas Below- medium subareas Total

33.3 33.3 33.3

180 100.0 (Source: Researcher questionnaire)

Table 2: Retailers source of fresh milk ITEM Directly from the farm Directly from the whole seller Directly from the roaming sellers Total No answer Total

No. 53 46 31 130 50 180

% 29.4 25.6 17.2 72.2 27.8 100.0

(Source: Researcher questionnaire) Table 2 show that 130 shops (72.2%) out of the 180 shops under study, sell fresh milk, while 50 shops (27.8%) dont sell fresh milk. Out of the 130 shops a percentage of (29.4%) get their milk directly from farms while (25.6%) get milk from whole sellers with (17.2%) get their milk from roaming sellers. These results indicate that farms have higher credibility as a source of fresh milk. Table 3: Availability of fresh milk to cover consumers demand/ day ITEM No. Yes No Total No answer Total 105 22 127 53 180 % 58.3 12.2 70.6 29.4 100.0 (Source: Researcher questionnaire)

Table 3 shows that out of 127 (70.6%) respondents who answered the question, 105 (58.3%) assured that fresh milk was enough to meet consumers demand while only 22 (12.2%) disagreed. This result indicates that there is no shortage of daily fresh milk in the market. Table 4: the percentage that retailers fresh milk sale covers of the total market demand Fresh milk ITEM No. 29 60 60 31 180 % 16.1 33.3 33.3 17.2 100.0 No. 43 68 57 12 180 % 23.9 37.8 31.7 6.7 100.0 Dairy products

10- 25% 25- 50 % 50- 75% Cannot predict Total

(Source: Researcher questionnaire) Table 4 shows that 60 (33.3%) of the respondents think that their sale of fresh milk cover 25-50% of the market demand, in addition to the other 60 (33.3%) respondents who think that their sale covers 50- 75% of market demand. These results confirm results concluded in table 3 that there is no shortage of daily fresh milk in the market. In addition table 4 shows that 68(37.8%) of the respondents think that their sale of dairy products cover 25-50% of the market demand, in addition to the other 57 (31.7%) respondents who think that their sale covers 50- 75% of market demand. Table 5: Retailers source of dairy products ITEM Directly from the Dairy Plant Directly from the distribution centers Directly from the whole sellers Directly from the processors distribution cars Total

No. 3 3 7 167 180

% 1.7 1.7 3.9 92.8 100.0 (Source: Researcher questionnaire)

Table 5 shows that dairy products source for 167 (92.8%) respondents was directly from the producers distribution cars, with 7 (3.9%) from whole sellers, 3 (1.7%) from distribution centers, and 3 (1.7%) directly from dairy plants. This result clearly indicates that dairy plants implement distribution system strategy through their cars as an organized promotional effort that depends on the sales man as a representative of the factory as well as building strong relationships with the customer. On the other hand such distribution methods are clearly preferable to retailers in minimizing transportation costs.

Table 6: Retailers selling routes of fresh milk and dairy products ITEM No. Your own place House delivery Total 179 1 180

% 99.4 0.6 100.0 (Source: Researcher questionnaire)

Table 6 shows that 179(99.4%) of the respondents sell products to consumers directly in their shops with only 1(0.6%) respondent delivers products to houses, this result clearly indicates retailers marketing distribution strategies.

Table 7: effect of various occasions (Ramadan, Eid.. etc) on price of fresh milk and dairy products Item Effective Extremely effective No opinion Not effective Extremely not effective Total No answer Total No. 67 80 13 10 9 179 1 180 % 37.2 44.4 7.2 5.6 5.0 99.4 0.6 100.0 (Source: Researcher questionnaire) Table 7 shows that out of 179 respondent who gave an answer, the price of fresh milk and dairy products of 147 (81.6%) respondent are affected by occasions like Ramadan and Eid thus consequently their selling rates in comparison to 19(10.6%) who are not affected. This result indicates the crucial effect of consumers food culture in these occasions that surely affect consumption patterns.

Table 8: does the retailer perform promotional efforts ITEM Yes No Total

No. 50 130 180

% 27.8 72.2 100.0 (Source: Researcher questionnaire)

Table 8 shows that 130 (72.2%) respondents indicated that they do not perform any promotional efforts in comparison to only 50(27.8%) who performed such efforts, this indicates that retailers depend on producers promotional efforts for their own products in order not to bear additional expenses. Table 9: why the retailer does not perform promotional efforts ITEM No. Depends on his shop reputation 59

% 32.8

Product producers already perform enough promotional efforts Other reasons Total No answer Total

69 2 130 50 180

38.3 1.1 72.2 27.8 100.0 (Source: Researcher questionnaire)

Table 9 shows that out of 130 respondent not performing promotional efforts, 69 (38.3%) think that producers already perform enough promotion, 59 (32.8%) indicated they depended on their shops reputation for customer attraction. These results clearly indicate the poor role retailers play in promotion preferring otherwise to concentrate on selling process only.

Table 10: Do dairy product producers motivate retailers upon increase of product selling rate? ITEM No. % Yes 15 8.3

No Total No answer Total

164 179 1 180

91.1 99.4 0.6 100.0 (Source: Researcher questionnaire)

Table 10 shows that out of 179 respondents 164(91.1%) indicated that producing companies do not motivate them on rise of selling rate of their relevant products in comparison to 15(8.3%) who stated they were motivated by the companies. This result shows that companies ignore the motivation policy as being one of the important elements in the promotional efforts that can help boost selling rates and gain customer (retailer) loyalty.

Table 11: Dairy product producers motivation methods ITEM Price discount No. 3 % 1.7

Price discount and increase in product quantity Non- materialistic motivation Total No answer Total

5 1 9 171 180

2.8 0.6 5.0 95.0 100.0 (Source: Researcher questionnaire)

Table 11 shows that motivation methods ranged between, price discount and increase in product quantity (2.8%); price discount (1.7%); non- materialistic motivation (0.6%).

Table 12: Do dairy product producers perform consumer market research in retailers shops ITEM No. % Yes 96 53.3

No Total No answer Total

80 176 4 180

44.4 97.8 2.2 100.0 (Source: Researcher questionnaire)

Table 12 shows that 96(53.3%) respondents out of 176(97.8%) stated that producers perform consumer market research in comparison to 80 (44.4%) who do not perform any market research. This result indicates the awareness of producers of the importance of getting the feedback from consumers as a strategy for good marketing.

Table 13: retailers classification of manufacturers promotional efforts Item Effective Extremely effective No opinion Not effective Extremely not effective Total No. 102 51 18 7 2 180 % 56.7 28.3 10.0 3.9 1.1 100.0 (Source: Researcher questionnaire) Table 13 shows the classification of retailers of the producers promotional efforts where 153(85.0%) stated that such efforts affect consumption and hence selling rates in comparison to only 9 (5.0%) who see that such efforts are noneffective. This result reflects the importance of promotion in marketing.

V. CONCLUSION The study was concluded with several recommendations: 1- The spectrum of the retailers role in marketing dairy products should be more widened to allow upgrading from being only an outlet for selling purposes, to a more vital role in the marketing procedure via implementing extensive communication and promotional activities. 2- Manufactures could make more effort in utilizing the retailer system for their benefit through adopting joint promotional efforts with the retailer system.

3- More attention should be addressed to market research specifically consumers, in the retailer system as being considered the gateway between processors and consumers, thus assisting in crafting profitable marketing strategies. 4- Encouraging retailers to adopt their own dairy products brands thus providing more consumer choices in addition to healthy reliable products. 5- Retailers and manufacturers need better models of relative allocation of marketing budget towards traditional and modern media. 6- More research is needed for classifying and analyzing the role of the retailer system as a vital part of the dairy marketing supply chain. 7- Adaptation of more empirical support for the synergy between manufacturers advertising and retail promotional activities.

References 1) A. Omore, J. Cheng'ole Mulindo, S.M. Fakhrul Islam, G. Nurah, M. I. Khan, S.J. Staal, Employment generation through small-scale dairy marketing and processing experiences from Kenya, Bangladesh and Ghana, FAO Animal Production and Health Division, 2004. pp 7-8 2) Anjani Kumar, Milk Marketing Chains in Bihar: Implications for Dairy Farmers and Traders, Agricultural Economics Research Review Vol. 23, 2010. pp 469-477 . 3) Benaissa Chidmi and Olga Murova, Measuring market power in the supermarket industry: the case of the SeattleTacoma fluid milk market, Agribusiness Vol. 27( 4) Autumn 2011. pp 435449. 4) Cotterill, R.W, Outline of a Fair Share Milk Pricing Policy. In: Food Marketing Policy Center, Issue Papers No. 1. 2006 5) Don Blayney, Mark Gehlhar, Chris Hilda Bolling, Keithly Jones, Suchada Langley, Mary Anne Normile, and Agapi Somwaru , U.S. Dairy at a Global Crossroads, United States Department of Agriculture, Economic Research Report No(28) 2006. p3. 6) Ellickson, P.B,. Does Sutton apply to supermarkets? The Rand Journal of Economics, Vol. 38, 2007. pp 4359. 7) Fuller Frank, Jikun Huang, Hengyun Ma, and Scott Rozzelle, The Rapid Rise of Chinas Dairy Sector: Factors Behind the Growth in Demand and Supply, Working Paper No. 05-WP 394, Iowa State University, Center for Agricultural and Rural Development, 2005. www.card.iastate.edu/publications/DBS/PDFFiles/05Wp394.pdf 8) Grocery Management Association, Shopper Marketing: Capturing a Shoppers Heart, Mind, and Wallet, 2007. Report accessed on July 1, 2008, at www.gmabrands.com/publications/docs/2007/shoppermarketing.pdf. 9) Hu, D., Frank Fuller, and Tom Reardon. The Impact of Rapid Development of Supermarkets on the Dairy Industry in China, Chinese Rural Economy Vol. 7(Serial Number 235) 2004. pp 12-18. 10) Klaus Salhofer, Christoph Tribl and Franz Sinabell , Market power in Austrian food retailing: the case of milk products , Empirica Vol. 39( 1) 2012. pp 109-122. 11) Kumar, Anjani and Staal Steven J , Is traditional milk marketing and processing viable and efficient? An Empirical Evidence from Assam, India. Quarterly Journal of International Agriculture, Vol. 49 (3) 2010. pp 213-225. 12) Kusum L. Ailawadi, J.P. Beauchamp, Naveen Donthu Dinesh K. Gauri , Venkatesh Shankar, Communication and Promotion Decisions in Retailing , Journal of Retailing Vol. 85 (1) 2009. pp 4255. 13) Perloff, J.M., Karp, L.S., & Golan. A, Estimating market power and strategies. Cambridge: Cambridge University Press, 2007. 14) Peter J. McClure and John . K. Ryans. JR, Difference between retailers and consumer perception, Journal of marketing research Vol. V , Feb. 1968. p 35. 15) Philip Kotler & Kevin Keller, Marketing Management 12th ed. New Jersey: Pearson Prentice Hall, 2006. p 530. 16) Tian Xia and Brian Sancewich, Retail Markets and Buyer Power in Agricultural Procurements, Journal of Agricultural Economics Vol. 54, 2012. pp 127-143.

AUTHORS PROFILE

Dr/ NAHID MOHAMMED TAWFIK FAWI is an Assistant Professor at the University of Khartoum with 15 years of teaching experience in the line of Dairy production. She is currently interested in the line of Dairy marketing and management aspects. She has several scientific papers in Dairy marketing.

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