Distribution channels of vegetable industry in Indonesia: impact on business performance

Abstract

Purpose The purpose of this paper is to analyse the distribution channels of vegetable sectors in Indonesia, its economic impact on the performance of vegetable sales and the factors affecting marketing channels selected by producers. Design/methodology/approach The study employed qualitative and quantitative methods. A market survey was qualitatively conducted at producer, intermediary, wholesaler, hotel and food processing company as well as retailer levels. Producer survey was quantitatively conducted at the farm level, by interviewing 556 randomly selected farm households. Structural equation modelling was employed to accomplish the objectives of the study. Findings Marketing channels for vegetables in Indonesia was complex and relatively long. Farmers decided to select particular channels because of business circumstance and their knowledge. Distance and gentleman’s agreement with traders limited farmers to choose the desirable marketing channel. Marketing channels affect business performance in terms of high sales and profit. Research limitations/implications This study only pays attention to the supply side of vegetables. The effect of marketing channels also encumbers the consumers, which are beyond this study. Other studies are expected to highlight the consumer side. Originality/value This study focused on smallholder agribusiness players. This study uses two surveys as data sources: market survey and producer survey. The market survey serves as vital information to design producer surveys.