Abstract
Modern marketing arrangements are increasingly being implemented to assure improved food quality and safety. However, it is not well known how these modern marketing arrangements perform in early stages of roll-out. We study this issue in the case of rural-urban milk value chains in Ethiopia, where modern processing companies – selling branded pasteurized milk – and modern retail have expanded rapidly in recent years. We find overall that the adoption levels of hygienic practices and practices leading to safer milk by dairy producers in Ethiopia are low and that there are no significant differences between traditional and modern milk value chains. While suppliers to modern processing companies are associated with more formal milk testing, they do not obtain price premiums for the adoption of improved practices nor do they obtain higher prices overall. Rewards to suppliers by modern processing companies are mostly done through non-price mechanisms. At the urban retail level, we surprisingly find that there are no price differences between branded pasteurized and raw milk and that modern retailers sell pasteurized milk at lower prices, ceteris paribus. Modern value chains to better reward hygiene and food safety in these settings are therefore called for.
Highlights
We find that pasteurized milk is not sold at significantly higher prices than raw milk ceteris paribus and that there are rewards to some measures of quality, but not for others
Assuring food safety is an important challenge that is receiving increased attention in a number of developing countries. This is an important consideration for liquid milk value chains given its perishability as well as incentives for adulteration
There is lack of evidence on how these modern marketing systems perform in early stages of roll-out
Summary
There is increased attention for the delivery of quality and safe food in value chains of developing countries overall and of Africa in particular (Jaffee et al 2018). Raw milk that is not pasteurized and is not stored under refrigeration – as is often the case in rural areas in developing countries – is associated with quick growth of bacteria and other pathogens and is considered an unsafe food (USFDA 2001) Despite this knowledge, the consumption of pasteurized milk is still relatively rare in in Africa, because of the costs associated with the production of pasteurized milk – which is done in modern processing plants – leading to higher retail prices for pasteurized compared to raw milk or because of the preference of local consumers for raw high-fat milk (Omore et al 2001). As consumers seemingly perceive that prices paid for pasteurized milk do not reflect desired quality and safety, they are willing to pay increasingly higher prices for raw milk, driving down price differences between modern and traditional channels In doing so, they are reducing the incentives to invest in needed modern marketing arrangements. This might improve affordability of safer milk and allow for further improvements of safe hygienic practices in the dairy value chain (Dries and Swinnen 2004)
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