CHAPTER II

LITERATURE REVIEW

2.1 INTRODUCTION

The purpose of this chapter is to provide a detailed review of the relevant literature and to
introduce the literature gaps and research questions. Before one undertakes any study, to
look at the previous studies in the field is of utmost importance. Review of literature
would provide navigation to researcher to take the research work in desired direction. The
review of the work done by past researchers in the field are presented below. The present
review of literature has been made under the themes: a) Consumer behaviour about
purchasing of FFV, b) Branding attributes of F&V and willingness to pay (WTP) for FFV
brands, c) Different FFV retail formats and supply chain management, d) Factor analysis
and e) Focus group discussion.

2.2 CONSUMER BEHAVIOUR ABOUT PURCHASING OF FFV

Historically, Indian consumers have preferred raw and fresh foods over processed and
packaged (Goyal and Singh, 2007; Pysarchik et al., 1999; Ling et al., 2004; Shaw et al.,
1993). With the emergence of supermarket and hypermarket culture in India, the consumer
preference of packaged food products has increased significantly in the recent years
(Silayoi and Speece, 2004). Though, the difference between taste of urban and rural
customers is continuously decreasing (Shrivastava and Praveer 2009). In many ways, rural
consumers have quite different consumption as well as shopping pattern than urban
consumers. There are enormous opportunities for the retailers that can be encashed if they
enter rural markets with suitable formats in order to serve the rural consumers. The major
factors such as increased purchasing power of the Indian consumer in a booming
economy, changing lifestyle, greater willingness to experiment with new products and
flavours, desire for convenience in packaged food products and an increase in the number
of working women have led to the strong growth in consumption of packaged food
products (Goyal and Singh, 2007). Besides, urban consumers have been increasingly
responding towards changes in quality food intake and becoming more conscious in terms
of nutritional diet, health and food safety issues. To meet these emerging trends, retailing
in India is undergoing unprecedented transformation with a number of national and

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multinational organizations trying to capture the huge and exponentially growing
consumer market.

While all of these studies have investigated either how consumers‟ preferences and
perception of quality features of fruit and vegetable products impact on their purchasing
behavior or on how socio–economic and behavioral factors affect fruit and vegetable
consumption, only a few studies have examined the influence of consumers‟ lifestyles on
their attitudes towards quality aspects of F&V. The food-related lifestyle (FRL) approach
was first developed by Grunert et al. (1993). Then, it was applied in different cultural
contexts (Wycherley et al. 2008; de Boer et al. 2004; Brunso et al. 1995) and tested for
cross-cultural validity. Applications of the FRL model aimed at describing people
according to the role that food plays in their lives (Perez-Cueto et al. 2010), linking
generic food-related attitudes to the achievement of desired consequences (Brunso et al.
2004). With regard to vegetable consumption a first application of this approach is
reported by Nijmeijer et al. (2004), who investigated to what extent the food-related
lifestyle model, adapted to include personal values (Schwartz 1992), predicts differences
in the consumption of 24 vegetables among a sample of 276 South Australian consumers.
Results confirm that vegetable consumption is linked to a number of contextual and
cognitive factors such as personal values, perceived food attributes and cooking skills.

According to Johnson (2004) when defining retailing it is necessary to recognise its

distinct facts and orientation. Retailing involves i) Interpreting the needs of the consumers
ii) Developing a good assortment of merchandise and iii) Presenting them in an effective
manner so that consumers find it easy and attractive to buy.

An investigation by Semeijna et.al (2004) on how store image factors and various
categories of perceived risk associated with product attributes affect consumer evaluations
of store-branded products. A structural model is developed and tested, providing
indications of the likelihood of store brand success in various product categories. They
have made an attempt to distinguish conceptually between explicitly branded and un-
branded store labels or between private labels and store brands could be a first step to
further improve understanding of consumer evaluations of store brands.

Ali and Kapoor (2008) analysed in their study that majority of Indian consumers purchase
F&V in fresh and loose form from local vendors or hawkers. To reap the benefits of
changing consumer preferences, organized retailing in the form of supermarket and

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hypermarket are witnessing phenomenal growth across the country. These outlets selling
sorted and graded in a very hygienic environment with own-labelled brands. The level of
F&V packaging is at an infancy stage and is anticipated to rise fast due to increased
consumer preference on one hand and emergence of organized and integrated retail
formats on the other. Results of the study suggest that most of the consumers are
concerned with the packaging material and attributes. The analysis indicates that
consumers expect all the packaging to be environmental friendly and bio-degradable and
the packaging should focus more on safety and quality issues of the product followed by
attractiveness & appearance and the environmental issues.

Kuhar and Juvancic (2010) studied consumer purchasing behaviour of organic and
integrated F&V using Probit model. Results show that purchase of analysed produce is
most significantly influenced by their availability in retail outlets, followed by consumers‟
income, health and environmental considerations, and visual attractiveness of products.
Demand for organically and integrally produced F&V could be further stimulated by
targeted knowledge and awareness raising actions.

The current buying pattern of Indian rural consumer showed that they indeed travel to buy
their daily wares, More than 40 per cent of the villagers buy their groceries from
City/Town and more than 70 per cent travel 5km and buy consumer durables, agri inputs
and apparel from nearest City/Town. He concludes that affordable producer range,
customer friendly layout and innovative marketing programmes like Choupal Mahotsav
have made ITC Choupal Saagar truly a front runner in Rural Retail Business (Sheshu
Kumar 2010).

Lima- Filho Do et al. (2009) have evaluated behavior of the FFV produce section, under
the point of view of the consumer, in three types of food retail stores in Campo Grande,
Brazilian southeast: a grocery store “quitanda”, a supermarket, and an open-air market. A
quantitative-descriptive survey was conducted with 120 individuals, responsible for
purchasing FFV produce for their homes. To accomplish that, twelve variables were
investigated and adapted from the parameters used in the SERVQUAL model, in which
the attributes of the retail outlet are pointed out, such as store hygiene and cleanliness and
manner by which produce is displayed; employee training traits, such as courtesy and
helpfulness; and quality, price range, and variety of the produce for sale. The results reveal
that shopping for grocery is done weekly; 80% of the shoppers interviewed do their

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shopping in supermarkets and 94% do theirs in open-air markets. The open-air market had
the best results in the attributes for which they were evaluated when compared with the
grocery store and the supermarket. The study also pointed out that the older the shopper
the more often he/she does grocery shopping.

The result of surveying True Food Co-operation (TFC) customers in United Kingdom by
Pearson et al. (2011) which offers a wide range of organic whole foods, FFV, groceries
and eco-friendly household products found that, vast majority of customers (96 per cent)
think there is a good range of products on sale at its markets. More specifically, locally
sourced products were the most frequently identified reason for shopping there. Other
issues mentioned were a preference for organic products, or eco and environmentally
products, or those that are healthier. Some customers also liked the fact that TFC offers an
alternative, or antidote, to supermarkets. They also like the fact that they were able to buy
loose foods and hence minimise product packaging.

Lippe et al., (2010) opine that consumption behaviour is a crucial prerequisite for local
supply chain actors to develop effective strategies to meet changing demand patterns.
Their study fills this research gap by estimating the disaggregate demand parameters for
FFV that have different product- and process-related attributes. Consumers‟ decision to
purchase fresh produce from modern retailers and minimally processed FFV are
significantly influenced by total household expenditure and educational levels of
household heads. The influence of safety and quality indications (i.e. logos, brands and
labels) on purchase decision is significantly related with the educational levels of
household heads; this suggests that higher educated buyers give more attention to product
safety and quality attributes when deciding to buy.

Ahmad and Anders (2012) studied a large panel of consumer packaged food products to
estimate monetary value of brand, convenience, and other quality attributes in processed
meat and seafood products. The authors found that evidence of consumer preferences for
perceived “natural” and health attributes over products with higher degrees of processing.
The authors are of the view that branding, package size, meat cut, and seafood species as
well as product and process forms add distinct value to value added chicken and seafood
products. The result of the study indicate that the process of adding value to value-added
food products is intricate and dependent on multiple other indicators of product quality,
not least health.

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Ekelund et al., (2007) examined Swedish consumers‟ perception and preferences of
domestic vegetables compared to on the one hand imported and on the other hand
organically grown vegetables The conjoint analysis indicates that Swedish origin is
considered more important than organic production methods. The text analysis shows that
Swedish is associated with positive values, for instance, high quality, while imports have a
more negative image. Organic is associated with characteristics such as being non-toxic,
good quality and expensive while conventional is associated with poison, being good
enough and traditional. In a real shopping situation supermarkets promote their own
private brands, regardless of origin, thus make origin less accentuated.

An exploratory study by Sabbe (2009) focussed on consumers‟ general attitude,

consumption behaviour, motives for and barriers to tropical fruit consumption in Belgium.
From the group discussions, it became apparent that people search for pleasure and
healthiness in terms of “naturalness” and “no or low processing”. The participants
considered fruits to be inherently healthy and hence health promoting in a very natural
way.
Batt (2004) investigated the criteria used by consumers in selecting fresh fruits from a
retail store and concluded that overall fruit quality was generally more influential than
price in consumers‟ purchasing decisions. In a similar vein, various other studies indicate
that health motives and sensory quality expectations (e.g., freshness, colour, smell, taste,
firmness) are major drivers for fruit choice and subsequent consumption intention
(Pollard, Kirk, & Cade, 2002; Harker, Gunson, & Jaeger, 2003; Poole et al., 2007).

Although buyers have a limited knowledge of the exact price paid for frequent, low value
purchases such as FFV, price is still important to them but only within the context of
reference prices (Pearson 2005). Buyers are only likely to change their buying behaviour
when the price is outside their reference price range for that individual product. The role
that price plays for consumer purchases of FFV is complex. Price is important to buyers
but not in any simplistic manner. It would appear that the exact role that the price of a
product plays will depend on the buyer, the individual product being purchased and the
specific buying situation.

Mandhachitara et al,(2007) conducted two identical shopper surveys in Wichita, Kansas

(United States) and Prakanong-Bangna, Bangkok (Thailand) to examine possible factors
relating to retail grocery shopping differences. The authors found that poor market

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knowledge and the tendency of Thai consumers to infer product quality by using extrinsic
cues such as high price were salient. Additionally, Thai choices were influenced more by
social factors than Americans, making them less prone to bargain hunting.

Oliveira-Castro (2008), studied the consumer behaviour using Behavioural Perspective

Model (BPM). The results showed that for all products (except black beans) the measure
of brand equity varied considerably across brands, indicating that they differed with
respect to how consumers evaluated how well known they are and their level of quality.
Despite this variation, brand performance measures did not change similarly across
products. Increases in market share were significantly associated to increases in consumer-
based brand equity for 11, out of 15, product categories and to decreases in average brand
price for only two products. For four product categories, market share was not
significantly related to changes in consumer based brand equity or in price. For 11
products, total brand revenue seemed to be a positively accelerated function of increases in
consumer-based brand equity.

2.3 BRANDING OF AGRO COMMODITIES

Branding may be one important way to add value to the food product, to differentiate the
food product and to escape price competition (Steenkamp, 1997). A brand helps to
position a product and facilitates communication with consumers. Brands have the ability
to create consumer franchise, which can be defined as consumers' awareness of, their
favourable attitudes towards, and their willingness to (re) purchase a brand, a concept
similar to that of Brand Equity (Aaker, 1991; Van Trijp et al., 1997). The stronger the
brand, the stronger its consumer franchise.

Country- or region-of-origin labelling of fresh produce was not identified by consumers as

a highly important criterion in selecting produce or a produce market in the US (Brooker
et al., 1988). However, the survey results did reveal that origin ranked above national label
brand names in position of importance. This suggests that origin-related promotion has
more potential than national label brand names for increasing the sales of locally grown
produce. The in-store tomato sales experiments revealed a favorable consumer response to
the locally grown tomatoes on the basis of quality alone (U.S. No, 1 Extra Large and
Large).

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Study in Netherlands by Nijssen et al., (1998) on impact of branding on FFV identifies the
variables that influence the level of consumer franchise of fresh foods brands for
meat/poultry, cheese, and vegetables/fruit. The results show that both traditional success
factors for building strong brands (i.e., order of market entry and level of promotional
expenditure) and characteristics closely linked to the nature of fresh food products (i.e.,
physical possibility to brand, and shelf-life) are important. Furthermore, brands with a
higher consumer franchise have a higher financial pay-off for both the supplier and the
retailer than brands with a lower consumer franchise. Strong brands also generate more
sales at the retail level. Brands are only valuable to buyers when the attribute being sought
fluctuates and is hidden from them at the time of purchase. Such as tastes with respect to
apples. On this basis, for example, brands are relevant for apples, oranges, rockmelons and
grapes, but not for potatoes, onions or mushrooms (Pearson 2003). However, it may not
even be possible to develop successful brands with products for which they are relevant.

Barcala and Diaz(2006) concluded from their study that a) a brand name is less valuable
when the recipient of the brand does not show a substantial informational disadvantage, as
in business to business transactions, than when the brand name addresses the end
consumer who is usually less informed about the real quality of the produce b) when it is
difficult to assess quality because of high search and measurement costs, small pieces,
fragility and perishability, brand name will be more valuable by the buyer because the
brand name saves on such costs. c) brand equity will be higher if external and independent
control systems have been established as these are perceived by the consumer as proof that
the firm is not trying to cheat. Greater the specialization and the higher the number of
quality signs, the higher the added value for the consumer. This is because each brand
specializes in assuring a different type of quality aspect (homogeneity, organoleptic
attributes, safety), giving the end consumer greater certainty about their purchase.

An exploratory study to understand the retailing of F&V in Indian context by Bulsara and
Matharu (2010) revealed that retailing is an integral part of the social infrastructure of any
country. There has been virtually no development of the organised retailing, the retailing
scenario in the villages has been even more depressing due to various factors. The concept
of agri-retailing was first brought to India by Mother Dairy in Delhi, in the early 1980s.
F&V unit was set up in the year 1988 by National Dairy Development Board, an institute
of national importance, a body corporate created by Government of India, with an
objective to provide a direct link between fruit and vegetable growers and consumers.

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Retailing of F&V with brand names is still a growing field of research in Indian context
and lot of scope of detailed conclusive research is there in this area.

Minten et al., (2012) conducted a detailed case study of makhana in Bihar, they
documented the fast emergence of more expensive packed and branded products. Two
types of brands can be distinguished, low-price and high-price brands. Low-price brands
focus exclusively on attractive glossy packaging with little consideration for quality.
Investments and profits are small. The high-price brands pay attention to quality beyond
packing, including investment in advertisements and promotion, and they explore options
for value-addition and employ specialized salesmen. They found that there are little direct
benefits to the farmers from the emergence of these brands.

Battacharyya (2009) agrees that the rural people are now willing to spend on branded
products whether regional, national or international thereby throwing up tremendous
opportunities for the corporate sector, to push their retail trade. Responding to this
emerging demand, the first rural mall under the banner „Choupal Saagar‟ was established
by the tobacco major, ITC. This was followed by the Tatas (Tata Kisan Sansar), Mahindra
& Mahindra (Mahindra Shubhlabh and Mahindra Krishi Vihar) and DCM Shriram
Consolidated Ltd. (Hariyali Kisan Bazaars), to name a few.

Food products are experiencing an intensive process of Branding. Empirical observations

found that the marketing share of branded food products increased from 7 to 19% in the
U.S. market in the period between 1987 and 1997. Minimally processed vegetables (salad
ingredients or ready to eat salads) has increased from 1% to 15% (Kaufman et al., 2000).

This process created some difficulties regarding the establishment of policies for
agribusiness companies. Problems related to brand management are a novelty for these
organizations, which are more accustomed to deal with issues related to supply chain
management and food security concerns, issue than with the dynamics of the food industry
and competition inherent in it (Baker et al., 2006).

Branding strategies gain importance in markets flooded with similar products as happens
to the agricultural commodities. Consumers find difficulty to select the best deal possible.
Known and trustworthy brands can be a valuable tool in decision-making buying process.
The identification of reliable products mediated by well known brands signalize to
consumers a bargain purchase (Hanf and Kuhl, 2005).

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In agribusiness commodities some peculiarities can be perceived. Although consumers of
food, fibre and bio energy are potentially less sensitive to such connections with brands
given to the high degree of similarity of such products, and therefore the process of
establishing brand identity have to be made within particular parameters, new consumer
demands are transforming this framework. Confidence attributes are becoming more and
more important, and issues that had received little attention so far as origin (products from
specific and certified regions such as cheese, wine, etc.), standards of production (like
organic production, animal welfare, among other factors), traceability and food safety are
receiving unprecedented attention. (Ali, et al. 2010; Canavaro, et al., 2010).

Nair (2011) stated that, private labels or store brands are on escalating journey for growth
in last few years in Indian market. The growth of private label brands (PLBs) is quite
impressive in food and grocery segment, in spite of presence of leading national
manufacturers brands in most of the categories. In her study she concludes that if private
label manufacturers can consistently provide value to customers on factors rated high by
customers and even if it is low on status symbol, there is a high possibility for them to
establish these brands as acceptable in the minds of customers and to improve customers‟
perception regarding the same. Though this perception may not be as high as a branded
product enjoys but it could still become high enough for retailers to increase the sales of
these brands and thereby raise their profit margin considerably.

Filippo Arfini et al. (2008) studied on two company brands (Melinda and Marlene) in the
fruit and vegetable sector and, one collective brand, “QC - Qualita Controllata” set up by a
regional authority, Emilia Romagna Region. They concluded that collective brands and
geographical markers contribute to enhancement of very fresh products only where there
exists a culture of „brand‟ in the widest sense. Where the firm is efficient, the consumer
relies on „brand‟, incorporating distinctive product characteristics as well as company
history, consumer experience of the product, the level of recognition, the capacity to meet
expectations of potential purchasers.

Stanton et al., (2005) brought out the fact that, food processors have focused more on
branding and value-added products. There are three main reasons for this focus: a) it has
been shown that consumers will pay substantial premiums for branded and value-added
products; b) the increased emphasis on price has led to price promotions and lost margin

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and branding provides a basis for differentiation and a competitive advantage and c) it
provides an opportunity to introduce new products and exploit line extensions more easily.

Kuhar and Ti (2008) examined that consumers in Slovenia perceive private labels as a
lower price alternative of comparable quality to producer brands. Disposable income and
family size proved to have significant effect on propensity to buy private label food. Study
confirms that the information about brand significantly affect consumer sensory judgment.
The effect of assimilation has been confirmed also in the case of private label. The
consumers strongly perceive private labeled products as a low-price alternative to
producer label, however not all believe that they do not scarify on product quality. And it
has been noticed that consumers have a set of expectation related to a certain private label
which is furthermore influenced by the perceived image of the retailer.

Fraser (2009) finds that the effect of store image is positively associated with attitudes to
private labels but differs by retail chain and private label type. Store assortment quality is
the major determinant of attitude to private labels. The results show that one store image
variable – perceived quality of the products offered by the store – was a consistent
predictor of private label attitude across most combinations of stores and private labels.
The author suggests that consumers use the quality of the store‟s product assortment,
namely national brands, as a cue to the quality of private labels to reduce perceived risk
associated with private labels. Finally author concludes that store image can play an
important role in attitudes to private labels, yet retailers should be aware that the effect of
perceived store image in practice can vary between different private label types.

Medina et al., (2004) studied the relationship between the price differential and the mean
category price with the market share of retail brands, for foodstuff, perfumes and cleaning
materials categories. The authors have used ANOVA to determine if there are significant
differences in price levels between manufacturer brands and retail brands, and found that
35 out of the 60 categories of the sample present significant price differences at a level of
90 per cent between manufacturer brands and retail brands. Through analysis found that
there is negative relationship between both variables market share of retail brand and price
differential between retail brand and manufacturer brand. The regression results show that,
as average price of the category decreases, the market share of retail brands increases.

Carter et al., (2006) have highlighted the conditions necessary for a profitable branding
strategy via origin labelling for farm produce in the U.S. context. Authors also identified

10
the conditions necessary for a price premium to be realized for farm produce (F&V)
labelled as “product of the United States”. Product differentiation via branding, which we
interpret this labelling to be, is one means by which a firm can “distance” its product from
that of competitors and reduce the (absolute value of the) relevant elasticity of demand.
The price premia for F&V depends critically on the ability of producers to control supply
or restrict entry.

Chrysochou (2010) have used a case study approach drawn from the Danish food industry
to throw light on the practice of health brands and health branding. The author found that
the increased interest in healthy eating, both by authorities and by consumers themselves,
provides a potential for food companies to launch health brands. However, health branding
is difficult and various factors need to be considered in order for a health branding strategy
to be successful.

Brunso and Grunert (2009) tested the structural equation model of the effect of retail brand
architecture allowing the two brand architecture indexes to influence „satisfaction‟
directly, but both relations turned out to be insignificant – indicating that the effect of
brand architecture is mediated by the image factors as expected. Their result shows that
even though most consumers are not very conscious about choosing between private labels
versus manufacturer brands at category level (Juhl et al., 2006). The retail brand
architecture still has a significant effect when it comes to store image, and also indirectly
influences satisfaction and loyalty. Further authors suggested four strategies for food
retailing House-of brands strategy; which involves a set of independent, stand-alone
brands. Branded-house strategy; a master brand is the primary driver across multiple
offerings. Endorsed brand strategy (independent brands endorsed by another brand) in
between House-of brands strategy and Branded-house strategy end-points are the endorsed
brand strategy. Sub-brand strategy; where brands are connected to a master brand.

Bhardwaj and Jha (2012) states that the store brands of retailers, are making their
presence felt in the Indian retail story, the growth of organized retail, growing middle
class, increased disposable income and a spirit to try new, have fuelled this growth,
represent a sizable portion of modern retailing and are becoming a significant source of
profits to the retailers. This has flagged off a combat between PLs and manufacturer
brands. PLs which were perceived as inferior goods in terms of quality took a U-turn by
making their mark in the premium-end segment too.

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Berge`s-Sennou (2006) analysed the trade-off faced by a retailer when choosing his
Private Label(PL) production policy on one hand, retailer can assign PL production to the
leading National Brand (NB) manufacturer and enjoy positive production externalities
because of low unit cost. On the other hand, the retailer can choose a firm from the Carry
Forward (CF) to make his PL product. He then incurs a higher unit cost due to the absence
of production externalities, but he keeps all the profits from his PL, since the producing
firm has no bargaining power. The result is that the retailer will entrust his PL production
to the manufacturer as long as the latter‟s bargaining power is low.

Hsu & Lai (2008) explored how different determinants of perceived risk help explain
variations in purchasing preferences for national brands versus private label brands (PLB)
of the packaged food market in urban China in the Chinese packaged food market. They
found that (1) PLB purchase in a category increases when consumers perceive reduced
consequences of making a mistake in brand choice in that category; (2) when that category
has more “search” than “experience” characteristics; and (3) consumer‟s degree of price
consciousness in that category, through which we brought in PLB favoring variables such
as lower incomes, high deal-proneness, and a decreased belief in price-quality
associations.

Chen et al., (2009) have provided a positive theory of private labels in new product
development when a non-integrated distribution channel is faced with demand uncertainty.
The presence of private labels is an indication of channel efficiency, and that allowing
retailers to develop private labels raises the likelihood of new product introduction and its
success rate. Moreover, a private label is more likely to prevail when the existing branded
product is a premium item.

Ching-Liang (2009) opines that private brands retail channels should focus on a private
brands strategy that leads to brand equity, if possible. If the retailers offer a more complete
PB strategy and bridge it with brand equity as a mediator, customers‟ shopping
preferences will be reflected on the store‟s performance. Then, retailers can formalize a
strategic retail channels‟ power and property: getting PB, bridging and mapping PB. The
results display that the retail channels‟ PB strategy has a significant effect on customers‟
shopping preferences; however, if this research involves brand equity as a mediator, the
directly positive effect between the PB strategy and customers‟ shopping preferences will
attenuate contemporaneously.

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Hariprakash (2011) opines that most consumers trust a retailer brand to sell quality
products and retailers are able to cut out middlemen, they pass on the cost benefit to
consumers. Retailers also get the upside. They not only make more profits by selling
private labels than the brands (margins are 60 per cent more than what they get from
FMCG companies), these labels help differentiate themselves from their rivals. And in the
long run, they can use the private labels to attract customers. The author states that, Private
labels won‟t work by just keeping the products cheap. Retailers must look at developing
good quality and value-added products. Also, they must make sure that they don‟t over
exercise the private label option. If they fall into the trap of using too many private labels,
they will end up losing customers.

Gehlhar et al., (2005) states that branded manufacturers can be a major source of
innovation in the food industry as they have the potential for earning superior returns.
Leadership is maintained when firms are able to differentiate their product offerings from
competitors. However, maintaining leadership position requires not only branding power
but also innovative products. Author suggests firms to use their unique resource base and
form strategies to capitalize on their capabilities. A single dominant orientation is not
necessary to maintain leadership. Rather process innovation can facilitate product
innovation leading to successful product differentiation and enhancing leadership position

Anselmsson & Johansson (2009) studied the Swedish grocery market and 34 different
food categories capturing one third of the market for consumer packaged food. The study
represents a broad variety of categories with regard to level of process, storage as well as
ranges in retailer brand share (from 1% to 53%). The result shows that retailer brand
market share per se has no impact – negative or positive – on the degree of innovation in a
category. However, while high market share of retailer brands was not related to lower (or
higher) levels of innovation in a category, there was a significantly positive relationship
between growth in the retailer market share in a category and level of innovativeness in
the category.

2.4 BRANDING ATTRIBUTES OF F&V AND WILLINGNESS TO PAY (WTP)

FOR FFV BRANDS.

Consumers‟ perception of quality is influenced by the product‟s intrinsic attributes as well

as by extrinsic indicators and cues provided by the seller of the product (Caswell et al.
2002). Food as goods can be classified into search, experience and credence goods

13
according to the level of quality that can be discovered by the consumer at different stages
(Nelson 1970; Darby and Karni 1973). Good are identified as search goods when
consumers can evaluate relevant attribute information before the purchase (e.g., price,
dimension, size, color), while it is defined as experience goods when relevant attribute
information can be determined only after consumption e.g. experiential eating quality such
as taste and convenience, (Nelson, 1970 and 1974). Credence products are those whose
relevant attribute information is difficult to ascertain directly by consumers at any stage of
purchase, even after consumption of the food (Darby and Karni 1973; Torjusen et al.
2001; Grunert et al. 2004). For this reason, credence goods require a judgment or a
certification by an authority figure such as a governmental agency, or organizations that
consumers trust to lend information on credence attributes. Many agro-food goods fall into
this category (Caswell and Mojduszka 1996; Becker 1999).

While experience and search goods involves usually private goods characteristics,
credence good provides private benefits to those who consume the good, while its
production often has “affiliated public dimensions” (Lusk et al. 2007). The credence good
category incorporates a wide range of fairly intangible and often interrelated
characteristics such as outcomes related to public health, environmental conservation,
origin, creation of employment, supporting small-scale agriculture and local rural
communities, farmers living and producing in marginal and/or disadvantaged conditions
and workers‟ rights. All these attributes fully or partially fall under the realm of public
goods (non-excludable, non-rivalrous), (Becker 1999; Midmore et al. 2005; Darby et al.
2006). An example is food produced according to organic or low impact environmental
production systems (such as Integrated Pest Management (IPM)) because they not only are
perceived by some as safer for consumption, but also reduce the impact on environment,
may protect biodiversity and/or reduce greenhouse gas emissions.

Credence attributes play an increasingly important role in consumer preference formation

(Zanoli 2003; Heuvel et al. 2007). Subsequently, the „bundle of attributes‟ which
constitute goods evolving in the food system (Arunachalam et al. 2009) as evidenced by
the emerging set of new certifications trying to establish themselves as market standards
(Food Alliance, Ocean Trust Fish, Fair Trade). Thus, many agribusiness stakeholders
could benefit from understanding patterns, consistencies and conflicting research on
consumer values for these credence attributes (Travisi and Nijkamp 2008).

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In recent decades, efforts to understand consumer attitudes, or overall buying behaviour
and the relative importance of various attributes in purchasing food have been widely
explored (Kiesel and Villas Boas 2007), primarily with stated preference techniques such
as Contingent Valuation (CV) and Choice Experiments (CE). Stated preference methods
are grounded in consumer utility theory and, by employing econometric models, they
allow one to measure the amount people would be WTP for goods or for a specific
attribute. But, there may be reasons to compare and contrast approaches that use the two.
Both CV and CE methods ask people to express their preferences by choosing between a
base case and another alternative in a hypothetical situation (Mitchell and Carson 1989;
Naidoo and Adamowicz 2005). CV is more suitable to evaluate goods in its wholeness,
while CE focuses on the „bundle of attributes‟ which constitute a good, according to
Lancaster‟s theory (1991). CE involves constructing multiple scenarios, presenting a
choice set and asking respondents to choose the preferred option among different
alternatives described by various attributes and prices (Naidoo and Adamowicz 2005). In
short, it allows researchers to specifically investigate trade-offs between several competing
product attributes and to determine the relative importance of various attributes in
consumers‟ choice process. More recently, the experimental approach has also been used
by employing auction and lab experiments (Lusk and Shogren 2007; Combris et al. 2009).
Finally, general information on consumer preferences and purchasing behavior can be
collected through quantitative and qualitative (focus group or in depth interviews) surveys
employing rating or ranking questions and Likert scales.

Regardless of the approach, to conduct an effective study, correctly identifying the

relevant attributes is key. The chosen attributes should be relevant for respondents, since
the conclusions drawn about consumer choice would change if we ignore the existence of
important factors (Lancaster 1991, 56). Moreover, the presence of either too many or
irrelevant attributes may lead to an overly complex decision for respondents, and
therefore, may result in more inconsistent and random choices (Bennett and Blamey
2001).

Previous studies focus on understanding the cues between quality and credence aspects
and investigating the role of specific labels or certifications (Marchesini et al. 2007). The
choice to focus only on F&V is driven by the fact that, as Gil et al. (2000) suggested that
environmental attributes are more important in fresh and perishable products, (or at least it

15
is easier to directly identify them in such products), and also, consumers are willing to pay
a higher premium for organic F&V.

Pay et al., (1996) have studies the validity of branding and labelling from the perspectives
of producers and consumers. From the consumer‟s perspective, in their search activities a
label is not required for attributes which have revealed intrinsic cues. Where the important
attribute is a hidden intrinsic cue, a label provides the consumer with information to
reduce their search costs. They found that producers and suppliers may use brands to gain
market share, rather than simply a price premium. Thus any attempt to label a product
must involve consideration of how much control can be exerted over various product
attributes either during production or post production to generate the consistency within
certain product attributes.

Poole and Martinez-Carrasco (2007), tested consumer perceptions of fruit quality by

evaluating consumers‟ WTP for five different varieties of soft citrus fruit under three
different information conditions: visual inspection of the fruit before peeling; visual
inspection after peeling; and after consumption. They have employed a second price
Vickrey experimental auction method and found significant differences in consumers‟
valuation of the different varieties as they gained more information. Juiciness, sweetness
and acidity were the attributes most closely correlated with WTP when the information
was most complete, and also in the overall evaluation of the different varieties. Peneau et
al. (2009), using direct elicitation by means of an open-ended questionnaire, asked
respondents in Switzerland to write down what they understood by “freshness” in general,
and for F&V in particular. Their results suggest that freshness signifies a degree of
closeness to the origin of the product, in terms of distance, time and processing.

Jin et al. (2005) presented a framework to analyze how uncertainty about product
attributes affects consumers‟ WTP for brand name products over generic ones,
incorporating key elements of a random utility model and product attribute models. In
comparison to electronics, clothing, and processed food, consumers buy branded F&V
mainly because of quality uncertainty, and they pay little attention to product appearance
and attributes symbolizing social status and fashion images. Authors conclude that
consumers can easily reduce uncertainty of product quality of FFV by seeing, touching,
smelling, and tasting. Therefore consumers are less willing to pay for brands of FFV.

16
Rickard et. al, (2011) developed an experiment to examine consumers‟ WTP for five apple
varieties .They included three treatments to estimate the effect that the brand, in this case
the varietal name, has on consumer valuation. Their research shows that brands have the
capacity to be important in the fresh produce category with limited use of brands.
Furthermore, they found that the brand used for the new variety influences consumer
valuation of the managed apple varieties, but has little impact on markets for traditional
apple varieties. Ultimately the success of a new product will depend on consumer
response, and it is especially difficult to measure how well a new apple variety will
perform in the marketplace.

Nganje et al. (2011) estimated the part-worth utility of each commodity attribute.
Consumers‟ WTP was then calculated and compared across commodities. Findings reveal
that consumers are willing to pay a premium of $0.18 per pound for locally grown spinach
marked with the Arizona Grown label, over locally grown spinach that was not labelled.
This premium was higher than the $0.10 premium, that would be paid for state branded
carrots. This difference highlights consumers‟ perceptions of locally grown as an
indicator, or “cue,” of safety in their food supply. Additionally, consumers have a higher
WTP for local produce bearing the Arizona Grown label than for local produce labelled
USDA-certified. The gap between labels was lessened, but still significant when
associated with spinach. This result corroborates the association consumers have between
local food and safe food.

Moser et al. (2011) studied and confirm that the choice to buy and WTP for FFV is
primarily driven by privately-oriented attributes such as personal health or experiential
eating quality. Authors have analyzed differences across countries and conclude that only
health related aspects are similarly valued across regions, while the importance of others
attributes varies considerably by consumers‟ place.

Several other studies have investigated how consumers‟ willingness to purchase and to
pay for F&V are influenced by attributes such as (i) health related components (ii) visual,
smell and taste qualities (Ernst et al. 2006);(iii) environmental attributes (Caputo et al.
2012) origin, local and farmers‟ support (Darby et al. 2008; Thilmany et al. 2008); (iv)
labels and certification (Caputo et al. 2012). Finally, in addition to these studies, there
have been others which have focused on heterogeneity issues among consumers of F&V,
pointing out that factors such as socio–demographic (Gao et al. 2011; Schafer et al. 1999),

17
household, and attitudinal (Gao et al., 2011; Moser et al. 2011) considerations all affect
fruit and vegetable consumption.

Consumers may be willing to pay a premium price (WTPP) for domestic produce if they
perceive it to be of higher quality (Brooker et al. 1999), but taking advantage of that
opportunity requires meeting a number of conditions that are not feasible for many
products at even the regional level of geographic branding. One the national level as
proposed by Country-of-Origin Labelling (COOL). Use of geographic identifiers to
achieve differentiation is viable, and those producing differentiated goods should take
advantage of the opportunity, but any hope that such differentiation will prove useful at
the country level for farm produce seems likely to be misplaced.

2.5 DIFFERENT FFV RETAIL FORMATS AND SUPPLY CHAIN MANAGEMENT

Growing demand for high-value food commodities is opening up opportunities for

farmers, especially smallholders to diversify towards commodities that have strong
potential for higher returns to land, labour and capital. Linking smallholders to markets
through institutions as co-operatives, growers‟ associations and contract farming that
reduce marketing and transaction costs would alleviate some production constraints.
Evidence has shown that smallholders do participate and make a sizeable contribution to
the production of high-value food commodities, but their links to markets are not strong,
(Pratap, et al., 2007). In the present era of globalization agriculture is facing some new
challenges which relates to linking farmers to modern supply chains, lack of technical
knowledge to meet stringent quality and food safety standards, export competitiveness due
to phyto sanitary measures (Singh et al. 2008)

Jitender Singh (2011) studied the procurement system adopted by the two agencies,
Mother Dairy (MD) and Reliance Fresh (RF), suggest that the approach adopted by RF is
more informative in terms of price information, quality monitoring, mode of payments etc.
The author concludes from his study that direct procurement of MD has enhanced the
farmer‟s revenue. The indirect benefits are not confined only to those supplying vegetables
to MD, these rather get extended to all those farmers supplying to local Mandi or Terminal
Market.

The efforts of retail food chains in terms of backward integration to link with farmers have
been found to be limited. Spencer‟s food retail chain has organized a F&V Consolidation

18
Centre and offers a better price to farmers, provided the produce is of good quantity direct
supply by farmers has allowed the retail chain to simultaneously increase control over the
quality, supply reliability and price stability (Mangala and Chengappa 2008).

SAFAL Market in Bangalore which has increased integration among growers, wholesalers
and retailers resulting into a co-operative market system in contrast to present traditional
wholesale markets in a short span of time, SAFAL Market is a one-stop shop for buyers
and sellers of F&V. After the successful trials of SAFAL Market in Bangalore, many state
governments have expressed their desire to establish similar markets. Similarly, the
Namdhari Fresh model can also be adopted at both government and non-government
levels to have an efficient supply chain and economic development of farmers. Mittal‟s
(2007) study recommends that fruits and vegetable sector needs to be developed as an
organized industry and has to be managed collectively by all the stakeholders with farmers
as the entrepreneurs. Reddy et al.,(2010) analysed the emergence of modern retail chains
have created new food value chains and have helped in reduction of price and production
risks and thereby have increased returns from farming. The demand for quality, safety and
other specific requirements may exclude small scale farmers. But, for consumers there is
an improvement in product quality and convenience.

Singlaa et al. (2011) studied that fresh food retail chains are largely found working with
only large farmers and exclude small farmers for various reasons. In this context, the
authors have examined the operations of a fresh food retail chain named „Easy Day‟ and
its interface with farmers in Punjab. The study has revealed that fresh food retail chain
primarily works with small intensive vegetable cultivators. It has been found that the retail
chain farmers could realize higher profits compared to non-retail chain supplying
(traditional market supplying) farmers mainly because of higher yield and higher price
realization in the traditional market because of better quality produce. The retail chain
procures only a part of the farmers‟ produce and the remaining produce has to be sold in
the local markets. The retail chain has not made a genuine effort to provide agri inputs and
extension services to the farmers. Their study has proposed a number of strategies to
further facilitate the marketing of produce of small farmers.

Digal (2005) has surveyed 207 vegetable farmers in Kapatagan and found that, grading
appears to be more important in vegetables like potatoes, tomatoes, carrots and cabbage.
Around 113 or 84 % of the total farmers who graded their vegetables are accounted for by

19
these four commodities. Around 32% of the farmers surveyed did not grade their produce.
The reasons is that the buyers prefer that they do the grading than the farmers. For some
farmers, part of the arrangement with creditors is that they sell all their produce to them
subject to prevailing prices at the time of harvest. When grading is not done, they
negotiate the price for the whole harvest. Author also found that around 53% of the
vegetable farmers get a higher price for grading their vegetables.

Zuurbier (1999) analysed the retail companies in the United States, France, and the
Netherlands who co-ordinate their supply chains of F&V. The author found that 3 of 11
retailing companies have an integrated supply chain for F&V. Most of the 11 have an
extensive coordination system, and just a few have a spot market/limited co-ordination
system. The author concludes that the fresh produce industry faces an increase in collusion
on the retail level and on the shipper level. This industry-wide phenomenon urges
suppliers to provide larger quantities within the specificities of product and process
requirements as defined by retailers.

Madevu et al., (2009) studied using „Porter‟s forces‟ model and chain analysis in Tshavne,
South Africa. They found that, tri-dimensional competition was mostly in the middle-
income areas. The low-income areas were dominated by hawkers while large chains
dominated the high income areas and greengrocers were mostly confined to middle-
income areas. They have identified four important challenge factors in FFV; namely
perishability, susceptibility to shocks, seasonality and subjective standardisation (Farina &
Machado, 1999; Cook, 2003; Louw et al., 2004). The authors conclude that, a key
challenge for all FFV retailers including hawkers, in the product upgrade realm, is how to
cope with fluctuating demand and wastage costs. To solve this would require better means
of accessing market information, say through cellular SMS market updates as well as data
on supply and demand trends, all of which would facilitate better FFV demand
forecasting.

Entry of organized retail to India and its exponential growth, specifically in fresh
vegetable marketing, has impacted the whole spectrum of supply chain practices.
Rajkumar (2010) opines that „Food miles‟ is relatively recent concept in the fresh
vegetable retailing. Shorter food miles is an indicator of near sourcing and longer food
miles of fresh vegetables is an indicator for agricultural outsource. The result of this study
reveals that significant increase in food miles in case of organized retailers. The

20
capitalization of emerging opportunity by the agribusiness is shift towards outsourcing of
agriculture. At present all organized retailers are adopting „Hub and Spoke‟ model of fresh
vegetables chain with minor modifications to fit in to their marketing and logistical
strategies of their organizations. Fewer players are involved in this model compare to the
traditional retailing model. Farmers, organized retailers, wholesalers and customers form
this chain. Buying centres, hub and stores (retail outlets) are operational units of the
organized retailers.

According to a study conducted by Gandhi and Namboodiri (2002) in India,

improvements in market infrastructure such as storage (godown) facilities, cold storage,
better loading and weighing facilities, proper stalls, better road links, etc, would also be
helpful in improving the marketing efficiency. They have recommended that, first it is
important to bring more markets under regulation and put them under the supervision of a
well represented market committee. Secondly it is important to promote, and perhaps even
enforce thorough rules or laws and the practice of open auction in the markets. Thirdly it is
also important to bringlarger numbers of buyers and sellers to the wholesale markets so as
to encourage healthy competition close to perfect market conditions and better price
realisation to the producer farmers.

Arumugam et al., (2010) examined the factors that lead farmers to participate in the
contract farming in the Peninsular Malaysia. Based on the analysis, five factors were
identified as the reasons for contracting, namely, market stability, and access to marketing
information and technology, transfer of technology to improve farming practices, access to
inputs and indirect benefit. Contract farming or contract arrangements can be a valuable
source of an additional income and knowledge that can be employed to enhance the
productivity of the entire farming enterprise. The evidences show that contract farming or
contract arrangements can be a valuable source of knowledge that can be employed to
enhance the productivity of the entire farming enterprise.

Lynch (1994) studied the Dar es Salaam (Tanzania) F&V supply chain. He found that in
1989 the formal sector accounted for only about 50 per cent of the F&V wholesaling for
the city, the remainder being dealt with by informal wholesalers or being sold by
producers or rural-based traders direct to retailers. He concluded that more pragmatic
approach to the problems of urban food supply in the light of this research may be the
decentralization of the wholesaling function to a peripheral location. This could be carried

21
out both structurally, effectively handing over the wholesaling function to smaller scale
wholesale markets, and spatially, where those markets are located on more peripheral
sites.

Indian agribusiness and retailing are on the verge of a great upheaval. There are
developments in urban as well as rural areas in grocery as well other types of retail. While
there are significant developments at the organized retail level, the farm-to-shop supply
chain is fragmented, inefficient and has no supply chain integrator. The Indian retail
market cannot be competitive until the supply chain is made integrated, efficient and
customer centric. There are thus huge opportunities at various levels. The opportunities
range from agriculture and meat products production, food processing, storage and
transport and management of supply chains and also retail chains. There are opportunities
in retail mall construction in urban as well as rural areas (Viswanadham 2006).

Halder and Pati (2011) opines that, as the private sector players increase due to
competition, investment in logistics and infrastructure would also increase which would
lead to an increase in the efficiency of complete agricultural chain. The organized retailers
who adopt Value Chain Model (VCM) procure the produces directly from farmers and sell
to customers by avoiding intermediaries. This model is based on its core growth strategy
of backward integration and progressing towards building an entire value chain starting
from the farmers to the end consumers. Very fewer players are involved in this model
compared to the Traditional Retailing Model or organized retailer's Hub and Spoke Model.

Abatekassa and Peterson (2011) examined and explored relationships and linkages
between local food producers and conventional food buyers from the perspective of
retailers and wholesalers. The study identified that local food is desirable and interviewed
retailers and wholesalers show an interest in sourcing these food products. The results
indicate that local food market success within the conventional food supply chain depends
not only on the traditional supplier selection criteria such as price, volume and quality, but
also on factors such as trust, reliability and information sharing that affects long term
relationships.

Wijnands et al., (2004) studied the Dutch supply chain of fresh products had been
described with respect to branding requirements. They found that, governance and
structure of chains for FFV products, differs largely from chains of industrial consumer
goods. Product specificity in the greenhouse industry is a myth based on assumptions and

22
not on a scientific specification of the attributes based on consumer or customer
perceptions. Value creation by branding specific products will only be possible for a
specified market segments based on a shared focus of the chain participants and it
demands huge and long-term investments. Business-to-business branding seems to have
more prospects than consumer branding. Investment in branding seems less profitable than
cost reduction research.

Fearne (1999) in his study on success factors in the fresh produce supply chain: insights
from the UK, found that the power of retailers increase along with their interest on own
label products. So, they become increasingly dependent on few large suppliers who can
deliver safe products on a large scale at a competitive price. He suggested that farmers and
growers should directly link with other sector of the marketing chain in order to supply the
right and consistent quantity and quality of different products. The producer of raw
material need to accept the fact that the financial benefit, which comes from partnership
will invariably distributed in relation to value added. Helen (2000) has studied the Buyer-
Supplier relationships in the UK fresh produce industry and found out that the relationship
development in fresh produce retailing is dependent on product, service performance,
levels of trust and commitment. The average life expectancy of relation measured was 8
years and one third of relationships were more than 10 years. Both the suppliers and
retailers gain more profit if they attain a mature supply chain stage.

Appropriate combination of vertical co-ordination arrangements like contracts, informal

agreement and joint venture can improve supply chain performance by providing adequate
supplies to the shippers from packers and growers, aiding standardization and packaging
of fruit products and risk sharing between the shippers, packers and growers (Ricks et al.
1999).

Ioanna Reziti (2003) in a study “An investigation into the relationship between producer,
wholesale and retail prices of Greek agricultural products” verified the nature of the
response of the wholesale price to changes in the producer price and also the response to
the retail price to producer price changes. He found out that changes in the price at one
stage need some time to be transmitted to another stage for various reasons, such as
policies, storage and inventory holding and delays caused in transportation and processing.

Narayana Reddy (2004) from his study “Efficiency benefits pass on to consumers. New
development in retail market environment in India”, reported that most (61per cent) of the

23
retailers get their requirements from wholesalers, 15 per cent from the large and other
retailers. Over 17 per cent of the selected retailers get their goods from more than one
source, but a small percentage of retailers get some of their requirements from producers.
From the side of the terms of supply 67 per cent of retailers get their requirement by
paying cash. Only 13 per cent of the retailers get their requirements on credit and 19 per
cent get credit partly from the suppliers. The organized retailers and super markets get
wholesalers margin plus concession as they buy in bulk.

Subha (2004) in a study of managing supply chain, found that, by suitably integrating the
members of the supply chain and maintaining the information flow within the organization
will surely help it to meet the demand in the market place providing satisfaction to the
customer. Adding value through differentiation is a powerful means of achieving an edge
in the market place. When companies create vision, try to restructure their organizational
structure, exercise caution in implementing supply in their organization and they will
definitely be able to enjoy a competitive position in the market.

Suneel Arora and Mukesh Vyas (2006) discussed the importance of IT in organized retail
management. With the use of information technology, a retailer can link with supplier
order and planning systems to enable more accurate forecasting and production planning.
With small cost increments, a retailer can provide better customer service and manage the
inventory and get value propositions of such investments.

Ramanathan and Hari (2008) opine that though Indian retail distribution is completely
fragmented, India tops in the list of emerging markets for global retailers. India is also
rated among the top 10 FDI destinations and ours is the fastest growing market in Asia-
Pacific and consumers are in for a rapid transformation. Organised retailing is spreading
and is making its presence felt in different parts of the country. A countrywide organised
retailing is yet to be established. Indian retail sector is becoming widely recognised
amongst domestic enterprises and investors as one of the biggest opportunities in India.

Rajkumar and Jacob (2010) reported the finding from the study on business models of
vegetable retailers in Chennai, by including research instruments like interviews and
survey through questionnaire with players in the vegetable supply chain, in both
unorganised and organised retailing. Entry of organised retail in India in vegetable
marketing has impacted the whole spectrum of supply chain practices. Organised retail
trade has increased the transport of vegetables from cultivation to ultimate consumption.

24
Measuring food miles is a simplistic concept relating to the distance food travels as a
measure of its impact on business.

With growing demand for local or regional food products, conventional marketing
channels are ill-equipped to supply local food where and in the manner people wish to
purchase it. Ramanjaneyalu & Subhas (2011) have suggested RPSOs (Rural Procurement
And Supply Outlet) which help producers and consumers connect in a marketing manner
that retains the valuable information as to where a food item was produced and how it was
grown. Large grocery retail chains rarely have farmers themselves offering produce for
sale in their stores, yet this is the essence of farmers markets and the direct marketing
experience so many people desire. By bundling together the product from multiple farmers
for distribution to other direct markets- such as restaurants, schools, hospitals, workplace
cafeterias, and other end consumers -RPSOs make it possible to supply them with fresh,
local products produced by local growers in the quantities and packaging the customers
require.

Giridhar (2011) suggested the retailers with a model comprising three key elements of
success for organized retailing in rural markets (a) Understand rural market and
consumers; (b) Setting up cost-efficient distribution and supply-chain system; and
(c) Ensure delivery of optimal value and satisfaction to rural consumer.

Jeyachandran & Yasmeen (2011) opine that rapid expansion of organized retailers may
have both positive and negative impact on traditional retailers, wholesalers, manufacturers
and suppliers. Retail chains and hypermarkets owned by corporate businesses, and other
large retail stores owned individuals or group of individuals who are registered as retailers
and pay sales tax, income tax etc., come under organized retailing (Guruswamy et al.,
2005).

Verdouwa et al., (2010) presented a new reference model for designing business processes
in fruit supply chains. The model combines fruit-specific knowledge with the reuse of
generic knowledge as captured in cross-industry standards. It bridges the gap between
supply chain design and information systems engineering by providing a consistent set of
process models that are on the one hand understandable for business managers and on the
other hand serve as a basis for information system implementation. Contrary to most
existing supply chain models, the reference model does not prescribe a strict blueprint of

25
the „best‟ supply chain design , but it supports fruit companies in design and
implementation of their specific supply chain configurations.

Dalvi and Pataskar (2011) have researched and concluded that, advent of organized
retailing into smaller cities and the rural hinterland is a win-win situation for all the parties
concerned. The retailers benefit from increased sales and higher profit margins for their
premium brands and private labels by reaching out to the rich class in the non-metros. The
farmers and small and medium enterprises benefit as organized retailing makes sourcing
possible at their doorstep. The establishment of logistics and warehousing systems reduce
wastage and improve supply chain practices. Moreover, the threat of looming recession
and closure of multiple stores in the metros makes it more important for retailers to spread
their risks across geographies and not be confined only to the larger cities.

Matsui (2012) investigated the impacts of marketing channel concentration at each

distributive channel stage on brand level retailer gross margins. A unique official Japanese
dataset, the National Survey of Prices - which reports brand level wholesale prices as well
as retail prices of national brand items in various consumer product categories – enables us
to estimate the retail margin directly for each specified brand. The most notable
conclusion is that an inverse relationship is found between brand level retailer margins and
the degree of wholesaler concentration, which is consistent with empirical results in
previous marketing and economic studies that investigated the impacts of manufacturer
concentration on category level retailer margins.

2.6 FACTOR ANALYSIS

The fundamental intent of factor analysis "is to determine the number and nature of latent
variables or factors that account for the variation and co-variation among a set of
observed measures, commonly referred to as indicators"( Brown, 2006: 12–13). A factor
in this case is "an unobservable variable that influences more than one observed measure
and that accounts for the correlations among these observed measures" (Brown, 2006: 13).
Factor analysis involves analysing the structure of covariance and correlation matrices (see
Lawley and Maxwell, 1971: 3; Brown, 2006: 17).

Exploratory factor analysis (EFA) was found to be ideal for this research topic, which
matches the description given by Kline (1994:10), i.e., a situation "where data are complex
and it is uncertain what the most important variables in the field are". Brown (2006)

26
described EFA as a "data-driven" approach involving no a priori specifications of the
number of latent factors or the pattern of relationships between the common factors and
the observed variables. Therefore, in this context, EFA is employed as an exploratory and
descriptive technique to determine the appropriate number of common factors and to
determine which measured/observed variables are reasonable indicators of the various
latent dimensions (see Brown, 2006: 14). Accordingly, the overriding objective of EFA,
based on the observations of Brown (2006), is to evaluate the dimensionality of a set of
multiple indicators (e.g., items addressed in a questionnaire) by identifying the smallest
number of interpretable factors needed to explain the correlations among them.

PCAwas used to generate the interpretable factors. According to Fox and Skitmore (2007),
PCA successively extracts factors based on the maximum variance between the variables.
The first factor extracted accounts for the largest amount of variance in the variables. The
second factor extracted accounts for the next largest amount of .The third factor extracted
accounts for the next largest amount of variance and so on. The first few factors therefore
form the principal components (most important factors) at the end of the factor extraction
(Bryman and Cramer, 1997).

This study relied on two main statistical measures as the basis of its conclusions: Eigen
values and the total variance explained. Thompson (2004: 21) defined Eigen values as "a
set of squared area-world statistics also known as characteristic roots". Eigen values are
useful in factor analysis as deciding criteria as to what are the most important factors to be
considered in the analysis. The default position in making a decision about the number of
factors to consider in statistical analysis is the "Eigen value greater than 1.0 rule". The
logic of this rule follows the Guttman argument of 1954 that noteworthy factors should
have Eigen values greater than 1.0 (Thompson, 2004). Nevertheless, researchers should
exercise judgement when applying the "Eigen value greater than 1.0 rule" in determining
the number of factors to consider because Eigen values, like all sample statistics, entail
some sampling error (Thompson, 2004). For purposes of analytical comparison, the screen
test and parallel analysis were applied in deciding on the number of factors to retain.

2.7 FOCUS GROUP DISCUSSION

A focus group is a collection of individuals that have been brought together to discuss a
particular topic, issue or concern. A moderator (a chair) provides a framework and
structure to the meeting, integrating open-ended questions to promote discussion. The

27
method relies upon the interaction between the individuals during the discussion – also
referred to as the synergy of the group (Kitzinger 1994). A focus group is, according to
Lederman (see Thomas et al. 1995), „a technique involving the use of in-depth group
interviews in which participants are selected because they are a purposive, although not
necessarily representative, sampling of a specific population, this group being „focused‟ on
a given topic‟. Participants in this type of research are, therefore, selected on the criteria
that they would have something to say on the topic, are within the age-range, have similar
socio-characteristics and would be comfortable talking to the interviewer and each other
(Richardson & Rabiee, 2001). This approach to selection relates to the concept of
„Applicability‟, in which subjects are selected because of their knowledge of the study
area (Burrows & Kendall, 1997).

The material gained from focus groups is therefore very different in nature from that
obtained by quantitative methods. In comparison to surveys, focus groups allow more
flexibility in the way questions are asked. The method is more open-ended, because the
content of the discussion might take unexpected directions or open up new topics.
Accordingly, answers vary and standardisation of the data can be problematic. Moreover,
focus groups require a largely subjective data analysis. Focus groups are not suitable
where results need to be generalised over larger populations, but where in-depth
knowledge about the reasons for peoples‟ behaviour is required (Morgan 1998). The
validity of the data can be increased by purposive sampling – through selecting
participants that belong to specific user groups (Erlandson et al. 1993).

One of the distinct features of focus-group interviews is its group dynamics, hence the
type and range of data generated through the social interaction of the group are often
deeper and richer than those obtained from one-to-one interviews (see Thomas et al.
1995).

The uniqueness of a focus group is its ability to generate data based on the synergy of the
group interaction (Green et al. 2003). The members of the group should, therefore, feel
comfortable with each other and engage in discussion. Krueger & Casey (2000) point out
that for some individuals‟ self-disclosure is natural and comfortable, while for others it
requires trust and effort. In comparison to interviews, the depth of the data is limited, as
there is less time for each participant to contribute and draw out ideas. Through focus
groups, different types of data are gained through the interaction with others and the social

28
group context, resulting in reactions such as encouragement and stimulation. Focus groups
can be more efficient than interviews as they avoid overlap and repetition (Morgan 1997).

Krueger (1994) believes rich data can only be generated if individuals in the group are
prepared to engage fully in the discussion and, for this reason, advocates the use of a
homogenous group. Based on the topic under investigation Krueger (1994) suggests that
participants should share similar characteristics: gender group, age-range, ethnic and
social class back-ground. Most researchers, although they would not disagree with the
concept of homogeneity, recommend that participants should not know each other, thus
encouraging more honest and spontaneous expression of views and a wider range of
responses. It also prevents set behaviours relating to pre-existing relationships and patterns
of leadership in the group (Thomas et al. 1995).

2.8 RESEARCH GAP

From the above literature review it is evident that, studies have investigated either how
consumers‟ preferences and perception of quality features of fruit and vegetable products
impact on their purchasing behaviour or on how socio–economic and behavioural factors
affect fruit and vegetable consumption, only a few studies have examined the influence of
consumers‟ lifestyles on their attitudes towards quality aspects of F&V. The development
of fresh produce brands is a relatively new phenomenon in world markets.

The challenge is to create a brand for perishables like F&V. The physical possibility and
shelf-life are important for making a fruit or vegetable as a brand. There is growing
recognition that branding promotes future financial growth and prosperity for agricultural
companies and for agribusiness in general. Fresh produce is regarded as the most
important department of supermarket and retail stores. It is the first thing the consumer
sees when entering the store and sets the scene for the entire shopping experience. For this
reason, there have been increased supply chain efficiency, product promotions, promotions
to raise awareness of health benefits. In todays retail stores, fresh produce is marketed as a
commodity product and consumers treat F&V as commodities with little perceived value.
Using brands can change the way that consumers view fresh produce to increase its
perceived value and therefore increase rupee value and increase sale volumes.

Literature also shows that, purchase of analysed produce is most significantly influenced
by their availability in retail outlets, followed by consumers‟ income, health and

29
environmental considerations, and visual attractiveness of products. Demand for
organically and integrally produced F&V could be further stimulated by targeted
knowledge and awareness raising actions.

It is found that fresh produce on the domestic market is being sold as a commodity and
thus growers/retailers are not getting maximum returns for their produce. Therefore,
growers/retailers should create brands to communicate to the consumer the value and
quality of their products.

The brand will only survive when the organisation investing in it receives some benefit.
With many organisations participating in the supply chain for most FFV the ability of the
organisation making the investment to receive a benefit is reduced. Thus, many FFV
products are likely to remain unbranded. These same issues in relation to branding are
relevant to other products, such as fresh meats, where the determinant attributes fluctuate
and are hidden from the buyer at the time of purchase. Studies show that in fresh produce
the investment in creating a brand rarely paid for itself. A rule of success that makes an
agricultural product strong and successful is the division of products into groups according
to distinct and noticeable levels of quality. Therefore, one must define a number of
categories of quality and brand each separately. The guiding principle is that the highest
quality products will be sold under the brand name while the lower quality goods will be
sold as generic products (without identifying the manufacturer).

The physical possibility to brand is important for consumer franchise across product
categories. FFV are likely to remain unbranded because the brand will not be of sufficient
assistance to the buyer.

It is found that, few fruits are branded- either by region or by some standard. The use of
brands in fresh produce is much less pronounced than the use of brands in all the
categories. Hence, the only way to improve market of FFV is to create some kind of
standardization, evolve parameters for standardization and then do the branding on the fact
that one can expect standard quality, taste and performance if grouped according to the
place of origin, tree, etc.

Products that are easier to label can be branded more easily and stand a better chance of
developing into brands with a strong consumer franchise. For FFV, unexpected negative

30
impact of control of the supply chain on consumer franchise would encounter. So, much
care should be taken.

Branding in the FFV has not been fully developed or explored. However, some recent
forays have shown that given the proper positioning and retailer, branded FFV can
successfully boost an entire category-store brands and all. Retailers are under constant
pressure to differentiate in order to win a larger share of consumers‟ wallets, and carrying
distinctive brands can go a long way towards enhancing store image perception and
gaining shopper loyalty. No matter the strategy, the brand has to resonate with the target
consumers. Choosing a brand that fits with the message the store wants to give to shoppers
is vital to success. In some retailers, it might work to demonstrate a commitment to the
community by stocking a locally made brand.

31
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