Modern grocery retailing is expanding quickly in many developing countries,
which has implications for food demand and trade. This report hypothesizes
that two mechanisms are potentially important in explaining the growth in
modern food retailing. First, modern retailers may be meeting rising demands
for dietary diversity, shopping and preparation convenience, and food safety
that are commonly associated with rising incomes among some groups of
consumers. Second, modern grocery retailers may be investing in the supply
chain and improving efficiency, which can lead to a stream of efficiency
gains to be shared between producers and consumers. The potential impact
of improved marketing efficiency on food demand and trade is possibly more
significant in a developing-country context than in more developed countries
because lower income consumers tend to be more responsive to income and
price changes, and because agriculture and food account for relatively large
shares of both income and expenditures in developing-country households.
This report finds that the growth of modern grocery retailing in developing
countries is correlated with the share of the working-age population, which
suggests that demand factors such as increased convenience might be important
to that expansion. This finding is supported by sales of convenient packaged
foods, which are growing fastest in countries where modern grocery
retailing is expanding the most. On the other hand, this report finds no correlation
between the growth of modern grocery retailing and factors that would
support efficiency gains in a country, such as better business environments
and infrastructure. This lack of a correlation is not conclusive but, combined
with the lack of primary data sources on how much modern grocery retailers
are investing in the supply chain, these findings warrant further empirical
study of how modern retailers might be affecting the supply chain.