Integrating Local Food Suppliers in Modern Food Retail in Africa: The Case of Tanzania

Abstract

This study addresses three distinct but interrelated issues in the integration of local food suppliers in modern food distribution in Tanzania. These issues are: What are key factors driving the development of modern food retailing in Tanzania? What factors influence the participation of local modern food suppliers in the industry? And, finally: What policies and strategies can be adopted to increase local suppliers‘ participation in the industry? The study used a critical realism case study approach, in which nine local food suppliers and seven modern food retailers participated. Participants from two food regulators and two private sector support organisations were also interviewed. Data were collected in four regions of Tanzania: Dar es Salaam, Arusha, Kilimanjaro and Morogoro. Interviews were conducted in English and Swahili, and voice recorder and field notebooks were used in data collection. Secondary data were also used for the study and were collected from government reports, newspapers and magazines. Data were stored in Nvivo but were primarily analysed manually. A thematic analytical technique was used for qualitative data analysis. Furthermore, both within-case and cross-case study data analyses were employed for data analysis in the study. This study produced three findings: First, the study shows that the evolution of modern food retail distribution in Tanzania was accelerated by both internal and external factors. External factors are the availability of suppliers, the acceptance of trade credit and return policies by local food suppliers, administrative reason, change in lifestyle, the rise of the middle class, and institutional supports. Internal factors are innovation, quality, the availability of products, safety and return policies. Second, the study shows that the participation of local food suppliers is very low, but is increasing. Findings show that the selection of local food suppliers is influenced by satisfying government requirements, food quality, consumer feedback, packaging, reliability, acceptance of return policies and trade credit, price and adherence to Islamic practices. The study shows that a number of factors influence the establishment of the supplier-retailer relationship. These are: the acceptance of trade credit, return policies and premises visitations. Furthermore, the study shows that territory relationship and social embeddedness influence the formation of relationships between retailers and suppliers. In spite of this, the supplier-retailer relationship study shows that there is a lack of trust and commitment among actors. The study shows that payment delays limit supplierretailer relationships. Finally, the study shows that, in order to increase the participation of local food suppliers in modern food distribution in Tanzania, local food suppliers use different strategies. These strategies are the formation of networks, innovation, outsourcing and the recruitment of ix experienced staff. To increase their chances of participation, local food suppliers embarked on innovation, and the study shows that major sources of innovation are distributors, retailers and government agencies. However, the flow of information to stimulate innovation from downstream actors is limited by trade credit, consumer preferences and government requirements. The study contributes to theoretical and empirical knowledge. The study presents a new look at the formation of the supplier-retailer relationship from the perspective of developing economies in four stages. These stages include: (1) retailer evaluation of suppliers‘ reputation, (2) supplying of samples (3) supply commencing after terms are negotiated and agree upon, (4) consumer/institution recommendation and finally (5) a sustained relationship. The study also proposes a framework for understanding the evolution of modern food distribution in developing economies, with a focus on internal and external factors. In general, previous proposed theories marginalised the influence of external factors on the evolution of retail formats, which seem to be very important in Tanzania. One policy implication study suggested the formation of special financial supports for local food suppliers to help them meet their working capital when engaged in trade credit with retailers by commercial banks in Tanzania. These loan could be granted against invoice based on supply to the retailers who buying on credit. In spite of these contributions, the study has some limitations. For example, it does not employ distributors/wholesalers that are main actors in food distribution in developing economies like Tanzania. Furthermore, distributors of imported food were not included in the study, although they play a major role in the development of modern food retail in Tanzania. I would therefore like to suggest that future research include distributors/wholesalers of local and imported food products.