Competition in the tridimensional urban fresh produce

retail market: The case of the Tshwane Metropolitan

area, South Africa

By:

Hilton Madevu

Student number: 23137496

Submitted in partial fulfilment of the requirements for the degree of

M.Sc. (Agric) in Agricultural Economics

in the

Department of Agricultural Economics, Extension and Rural Development

Faculty of Natural and Agricultural Sciences

University of Pretoria

April 2006
 To the Madevus

My parents Nkululeko & Sisinyana & siblings Victoria & Arnold

MSc. Dissertation: Hilton Madevu

ACKNOWLEDGEMENTS

Firstly I would like to thank my primary sponsor the Canon Collins Trust of Southern
Africa for funding my tuition, registration and my living expenses during my studies.
Needless to say the entire degree and the current research study would not have been
possible without their investment. I also wish to show my gratitude to the additional
sponsors who facilitated the research survey for this study, namely the University of
Pretoria Achievement Bursary fund and the ABSA Chair in Agribusiness.

Acknowledgements are also due to my study leaders Professor André Louw and
Professor Johann F. Kirsten for their expert guidance in turning a lay observation into
a scholarly piece. Not forgetting my special friend who has been the calming voice in
my numerous periods of panic over this project.

Gratitude is due to the practitioners in the fresh produce industry who lent their
valuable time to this research effort. Last, but not least, I wish to thank Sincengile
Ntshingila and Jacky Mampane for their diligent assistance in enumeration and other
valuable functions in the research process.

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MSc. Dissertation: Hilton Madevu

DECLARATION

I declare that the thesis hereby submitted in partial fulfilment of the requirements for
the degree Master of Science (Agricultural Economics) at the University of Pretoria
has not been submitted by me for any other degree at any other institution.

Given and family name: Hilton Madevu

Signature:

Date: July 1, 2006

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MSc. Dissertation: Hilton Madevu

ABSTRACT

Competition in the tridimensional urban fresh produce retail

market:
The case of Tshwane metropolitan area, South Africa

By
Hilton Madevu

Supervisor: Professor Andre Louw

Co-supervisor: Professor Johann Kirsten
Department: Agricultural Economics, Extension and Rural Development
Degree: MSc. (Agric) Agricultural Economics

A few vertically integrated retail chains increasingly dominate South Africa’s agro-
food supply chain. M+M Planet Retail (2004) placed the market concentration among
retailers to be as high as 96% for the top four chains leaving only 4% to the small
competitors. The onset of this trend has led to the demise of a large number of “mom
and pop” general dealers in favour of the sleek new stores as they were either priced
or bought out of business.

Players in the fresh produce market have proved to be resilient to this onslaught. The
green grocers and hawkers have survived the “category killers” and appear to be able
to face this competition head on. It is this resilience that is of interest to this study.

The review of literature revealed a dearth of studies and hence methodology into the
nature of the interaction between the three forms of retail. A preliminary survey also
revealed the lack of coherent and detailed information, particularly among the
greengrocers and hawkers. Thus the established methods of modelling competition
analysis, namely the Structure Conduct Performance and the New Empirical Industrial
Organisation frameworks, were deemed inappropriate. The study therefore took an
exploratory form that relied on measures of central tendency and the perceptions of

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MSc. Dissertation: Hilton Madevu

leading industry practitioners to reveal the nature and magnitude of competition

between supermarkets, green grocers and hawkers.

The study primarily drew on ‘Porter’s forces’ competition model to structure the
investigation. It also employed a chain analysis approach including supply and value
chain analysis (VCA) tools to analyse this competition. The study therefore sought to
unpack the retail sections of the three chains in terms of identifying role-players; their
relationships and interaction; as well as to account for the relative values that different
types of fresh produce retailers generated for the final consumer. Besides the
contribution to the general body of knowledge about the nature of the system that
feeds us, this study provides means for the competing channels to upgrade and
improve efficiency. A developmental and empowerment point of view was
emphasised in the research, as such, identifying possible measures to upgrade and
improve the informal sector was given precedence.

The objective was to describe and analyse the competitive environment in which FFV
was retailed in the Tshwane through a determination of the competitive and strategic
behaviour of retailers and a mapping the flow of value. It was hypothesised that fresh
produce retailers competed by varying elements of their marketing mix to suit their
niche markets. The investigation was conducted in two phases; a pilot study followed
by a survey involving a six-step sampling frame targeting a total of 120 respondents
including 15 supermarkets, 30 greengrocers and 75 hawkers. This analysis was
limited to the bounds of the Tshwane metropolitan area, South Africa, and focused on
six fresh fruits and vegetable lines concurrently traded by supermarkets, greengrocers
and hawkers.

The main findings of the investigation include that tri-dimensional FFV retail
competition was most intense in the middle-income areas of the city. The low income
areas were dominated by informal traders while the large supermarkets chains and the
large format greengrocers dominated the high income areas. The non-syndicated
greengrocers were confined to the middle-income areas where competition was most
intense. When the marketing strategies and chain maps were compared it was
concluded that the tridimensional competitive environment was facilitated by the
existence of multiple niches; the equalising effect of produce market based pricing;

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MSc. Dissertation: Hilton Madevu

the general upgrade in product quality offered by all retailers; characteristics of fresh
produce itself as compared to other foodstuffs and the existence of multiple market
niches in the sector.

Concluding the study were recommendations to improve (upgrade) the marketing

performance of each of the three channels.

Key Words: Competition analysis, fresh produce retail, chain analysis, Tshwane

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MSc. Dissertation: Hilton Madevu

CONTENTS

ACKNOWLEDGEMENTS ..................................................................................... III

DECLARATION....................................................................................................... IV
ABSTRACT................................................................................................................. V
CONTENTS............................................................................................................ VIII
LIST OF TABLES .................................................................................................... XI
LIST OF FIGURES .................................................................................................. XI
LIST OF BOXES .....................................................................................................XII
ACRONYMS .......................................................................................................... XIII

CHAPTER 1: INTRODUCTION & BACKGROUND ............................................1

1.1 BACKGROUND: THE FRESH PRODUCE INDUSTRY ............................................1
1.2 RESEARCH GAP ...............................................................................................4
1.3 RESEARCH QUESTION .....................................................................................8
1.4 HYPOTHESES ...................................................................................................8
1.5 STUDY OBJECTIVES ........................................................................................9
1.6 RESEARCH METHOD .......................................................................................9
1.7 SCOPE ...........................................................................................................10
1.7.1 Selected retailers ........................................................................................... 10
1.7.2 Focal products selected................................................................................. 11
1.7.3 Study area...................................................................................................... 12
1.8 ORGANISATION OF STUDY .............................................................................13
CHAPTER 2: FFV RETAILING IN SOUTH AFRICA: A LITERATURE
REVIEW & EXPLORATORY STUDY..................................................................15
2.1 INTRODUCTION .............................................................................................15
2.2 UNIQUE CHARACTERISTICS OF THE FFV INDUSTRY......................................15
2.3 OVERVIEW OF FRESH PRODUCE RETAILING ..................................................17
2.3.1 Wholesalers ................................................................................................... 17
2.3.2 Wholesale-retailers ....................................................................................... 20
2.3.3 Formal retailers: Supermarkets and Greengrocers ...................................... 21
2.3.4 Supermarkets ................................................................................................. 22
2.3.5 Greengrocers................................................................................................. 24
2.3.6 Informal retailers .......................................................................................... 26
2.4 EXPLORATORY STUDY (PHASE 1) .................................................................29
2.4.1 Players in Tshwane’s FFV retail sector........................................................ 30
2.4.2 Market segmentation in Tshwane.................................................................. 35
2.4.3 Reference product selection .......................................................................... 36
2.4.4 Under and over reporting.............................................................................. 38
2.5 SUMMARY .....................................................................................................40

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MSc. Dissertation: Hilton Madevu

CHAPTER 3: TECHNIQUES IN COMPETITION ANALYSIS .........................42

3.1 INTRODUCTION .............................................................................................42
3.2 PERFECT COMPETITION: THE GROUNDING CONCEPT ....................................42
3.3 COMPETITION ANALYSIS ..............................................................................44
3.4 MARKET TARGETING & THE MARKETING MIX (4PS)....................................48
3.4.1 Market segmentation and targeting............................................................... 49
3.4.2 Marketing Mix ............................................................................................... 49
3.5 CHAIN ANALYSIS ..........................................................................................51
3.6 QUANTIFYING COMPETITION ........................................................................53
3.6.1 Value chain mapping..................................................................................... 54
3.6.2 Performance charting.................................................................................... 56
3.6.3 Factor evaluation matrix............................................................................... 57
3.7 SUMMARY .....................................................................................................58
CHAPTER 4: RESEARCH METHODS & PROCEDURE ..................................59
4.1 INTRODUCTION .............................................................................................59
4.2 SELECTED INVESTIGATION TYPE...................................................................59
4.2.1 Exploratory studies/ case studies .................................................................. 61
4.2.2 Descriptive studies ........................................................................................ 61
4.2.3 Selected study type......................................................................................... 62
4.3 ANALYTICAL TOOLS .....................................................................................62
4.4 PHASE 2: SURVEY SAMPLE DESIGN ..............................................................63
4.4.1 Stratum 1: Population ................................................................................... 64
4.4.2 Stratum 2: Affluence levels............................................................................ 64
4.4.3 Stratum 3: Survey groups .............................................................................. 64
4.4.4 Stratum 4: Focal supermarkets ..................................................................... 65
4.4.5 Stratum 5: Greengrocers............................................................................... 66
4.4.6 Stratum 6: Informal traders/hawkers ............................................................ 66
4.4.7 Overview of sample design............................................................................ 67
4.5 DESIGN OF THE ENUMERATION TOOLS..........................................................67
4.5.1 Questionnaire Structure ................................................................................ 69
4.5.2 Scales of measurement .................................................................................. 70
4.6 MEASURES TO MINIMISE SURVEY ERRORS ...................................................70
4.7 DATA ENTRY & ANALYSIS ...........................................................................73
4.8 SUMMARY .....................................................................................................73
CHAPTER 5: THE MARKETING MIX IN ACTION: FINDINGS &
DISCUSSION .............................................................................................................74
5.1 INTRODUCTION .............................................................................................74
5.2 LOCATION & DISTRIBUTION (PLACE VARIABLES) ........................................75
5.2.1 Selection of trading sites ............................................................................... 75
5.2.2 Trading space ................................................................................................ 77
5.2.3 Establishment ages ........................................................................................ 78
5.2.4 Ownership structures .................................................................................... 79
5.3 TURNOVER, COSTS, MARGINS & PRICING (PRICE)........................................80
5.3.1 Turnover/income ........................................................................................... 81
5.3.2 Pricing strategies & mechanisms.................................................................. 83
5.3.3 Cost structures............................................................................................... 86
5.4 THE OFFERING (PRODUCT) ...........................................................................88
5.4.1 Processing ..................................................................................................... 88
5.4.2 Supply sources............................................................................................... 89
5.4.3 Procurement arrangements & relationships ................................................. 91

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MSc. Dissertation: Hilton Madevu

5.5 COMMUNICATING THE OFFERING (PROMOTION)...........................................93

5.6 OTHER COMPETITIVE PRACTICES ..................................................................96
5.6.1 Targeted markets........................................................................................... 96
5.6.2 Business hours............................................................................................... 98
5.6.3 Competitive edges........................................................................................ 103
5.6.4 Identified competitors.................................................................................. 105
5.7 SUMMARISED FINDINGS ..............................................................................109
CHAPTER 6: RISK ANALYSIS & MAPPING FFV FLOWS ...........................112
6.1 INTRODUCTION ...........................................................................................112
6.2 SITUATION ANALYSIS .................................................................................112
6.3 RISKS, COPING & FUTURE PROSPECTS ........................................................117
6.3.1 Risks, coping & solutions ............................................................................ 118
6.3.2 Past trends & future prospects .................................................................... 120
6.4 FFV SUPPLY FLOW IN TSHWANE ................................................................122
6.4.1 The informal FFV channel .......................................................................... 124
6.4.2 The greengrocer channel............................................................................. 126
6.4.3 The supermarket FFV channel .................................................................... 128
6.5 SUMMARY ...................................................................................................129
CHAPTER 7: SUMMARY, CONCLUSIONS & WAY FORWARD.................131
7.1 INTRODUCTION ...........................................................................................131
7.2 REVEALED STRUCTURE OF COMPETING CHANNELS .....................................131
7.2.1 Market structure .......................................................................................... 132
7.2.2 Comparative use of the marketing mix........................................................ 133
7.3 FACTORS FACILITATING MULTIPLE RETAILER FORMATS............................135
7.3.1 Multiple FFV market niches........................................................................ 135
7.3.2 TM & other produce markets ...................................................................... 136
7.3.3 Characteristics of FFV versus other food & FMCG................................... 137
7.3.4 Characteristics of the players...................................................................... 138
7.4 CHANNEL UPGRADING: WAYS TO IMPROVE ................................................139
7.4.1 Potential upgrades in the informal sector ................................................... 139
7.4.2 Potential upgrades for greengrocers........................................................... 141
7.4.3 Potential upgrades for supermarkets .......................................................... 142
7.5 AREAS OF FURTHER STUDY: THE WAY FORWARD .....................................143
REFERENCES.........................................................................................................146
8.1 KEY INFORMANTS .......................................................................................159
APPENDICES ..........................................................................................................161
9.1 APPENDIX 1: LIVING STANDARDS MEASURE (LSM)...................................161
9.1.1 Trend in Living Standards........................................................................... 162
9.2 APPENDIX 2: HAWKERS QUESTIONNAIRE-CHECKLIST .................................164
9.3 APPENDIX 3: GREENGROCERS QUESTIONNAIRE-CHECKLIST ........................170
9.4 APPENDIX 4: SUPERMARKET QUESTIONNAIRE-CHECKLIST ..........................176
9.5 APPENDIX 5: WHOLESALERS & SUPERMARKET DISTRIBUTION CENTRES .....183
9.6 APPENDIX 6: TSHWANE PRODUCE MARKET QUESTIONNAIRE-CHECKLIST ....188
9.7 APPENDIX 7: HAWKERS’ ORGANISATION QUESTIONNAIRE-CHECKLIST .......193

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MSc. Dissertation: Hilton Madevu

LIST OF TABLES

Table 1.1: Price survey in Sunnyside (October 2004) ...................................................6

Table 2.1: Market share (%) and turnover of South African supermarkets.................22
Table 2.2: Distribution of turnover sources for Tshwane Market ...............................31
Table 3.1: Simplifying power of the Porter’s forces model.........................................46
Table 3.2: Factor evaluation matrix for the informal FFV retailers ............................57
Table 4.1: Classification of investigation according to research strategies .................60
Table 4.2: Aggregation of the nine LSM groups into three survey areas ....................65
Table 4.3: Phase 2 sampling units................................................................................66
Table 5.1: Average mark-up rates on selected FFV among hawkers ..........................84
Table 5.2: Average mark-up rates on selected FFV among greengrocers ...................85
Table 5.3: Peak FFV sales periods for informal FFV retail.........................................99
Table 5.4: Peak FFV sales periods for greengrocers .................................................101
Table 5.5: Peak FFV sales periods for supermarkets.................................................102
Table 5.6: Key competitive factors for informal traders’ FFV retail.........................103
Table 5.7: Key competitive factors for greengrocers’ FFV retail..............................104
Table 5.8: Key competitive factors for supermarkets’ FFV retail .............................105
Table 6.1: Situation analysis of informal retailers using the FEM ............................113
Table 6.2: Situation analysis of greengrocers using the FEM ...................................114
Table 6.3: Situation analysis of supermarkets using the FEM...................................115
Table 7.1: Comparative use of the marketing-mix across the three channels ...........134

LIST OF FIGURES

Figure 1.1: Study Area: City of Tshwane Metropolitan Municipal Area ....................12
Figure 2.1: Relative size of vegetable channels in 2005 (excluding potatoes)............18
Figure 2.2: Average value of top vegetables sold at major FPMs (1991-2003) ..........37
Figure 2.3: Average value of top fruits sold on the 16 major FPMs (1978-2004) ......38
Figure 3.1: Porter’s Five Competitive Forces..............................................................45
Figure 3.2: Postulated competitive rivalries within the fresh produce industry ..........47
Figure 3.3: The marketing mix used to target a market segment.................................50
Figure 3.4: Porter's Generic Value Chain ....................................................................52
Figure 3.5: Example, the Kenya-UK Fresh Vegetables Chain ....................................55
Figure 3.6: Buyer Assessment of Producer Performance (average scores) .................56
Figure 4.1: Summary of Sample Design......................................................................67
Figure 5.1: Supermarket location types in Tshwane....................................................76
Figure 5.2: Ownership structure of informal FFV retail businesses in Tshwane ........79
Figure 5.3: Monthly turnover of Informal FFV retailers in Tshwane..........................82
Figure 5.4: Monthly turnover of Greengrocers in Tshwane ........................................82
Figure 5.5: Primary supermarket FFV promotion strategies .......................................95
Figure 5.6: Informal FFV retailers’ perceptions of relative competitive strength.....106
Figure 5.7: Greengrocers’ perceptions of relative competitive strength....................107
Figure 5.8: Supermarkets’ perceptions on competitive strengths ..............................108
Figure 6.1: Performance profile of informal FFV retailers........................................114
Figure 6.2: Performance profile of greengrocers.......................................................115

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MSc. Dissertation: Hilton Madevu

Figure 6.3: Performance profile of supermarket FFV distribution channel...............116

Figure 6.4: FFV retailers’ relative performance profiles ...........................................117
Figure 6.5: Overview of the supply route for fresh fruit and vegetables in Tshwane123
Figure 6.6: Informal trader channel for fresh fruit and vegetables in Tshwane ........125
Figure 6.7: Greengrocer channel for fresh fruit and vegetables in Tshwane.............127
Figure 6.8: Supermarket channel for fresh fruit and vegetables in Tshwane ............128

LIST OF BOXES

Box 3.1: Competition analysis checklist......................................................................48

Box 3.2: Value chain mapping.....................................................................................54

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MSc. Dissertation: Hilton Madevu

ACRONYMS

AMPS All Media and Products Survey

BMR Bureau of Market Research
CTMM City of Tshwane Metropolitan Municipal Area
DFID Department for International Development (UK)
DoA (National) Department of Agriculture
DOT Department of Transport
FFV Fresh Fruit and Vegetable(s)
FPM Fresh Produce Market(s)
GJFPM Greater Johannesburg Metropolitan Fresh Produce Market,
IDRC International Development Research Centre
nd. Not Dated
NEIO New Empirical Industrial Organisation
RAMS Radio Audience Measurement Survey
RNRA Renewable Natural Resources and Agriculture
SAARF South African Advertising Research Foundation
SCP Structure Conduct Performance
SC Supply Chain
SWOT Strengths Weaknesses Opportunities and Threats
TAMS Television Audience Measurement Survey
TM Tshwane Market
VC Value Chains
VCA Value Chain Analysis

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MSc. Dissertation: Hilton Madevu

1 Chapter 1: Introduction & Background

1.1 Background: The Fresh Produce Industry

The fresh produce industry possesses some characteristics that make it a particularly
difficult sector to engage. Researchers have identified four important challenges
factors in fresh fruit and vegetable (FFV) namely perishability, susceptibility to
shocks, seasonality and subjective standardisation (Cook, 2003; Rathogwa et al.,
1998; Louw et al., 2004 and Farina & Machado, 1999). These authors independently
argue that the products’ perishability and subjective standardisation have the effect of
limiting and varying shelf life. They also find that FFV susceptibility to weather
shocks also affected supply and demand. This leads to price volatility which forces
firms to rely on the spot market prices as opposed to list prices used in other economic
sectors. The seasonality element adds to the price volatility and raises the risks
involved in the business. Concurrently few risk management tools exist to protect
market players beyond geographic and product diversification.

South Africa (RSA) has a well-developed and self-sufficient fresh produce production
and processing industry. The fresh fruit industry is largely geared towards export
especially in the citrus, deciduous fruits and grape industries (ISHS, 2006). The
country also exports fresh and processed vegetables (ISHS, 2006 and DoA, 2005b).
The National Department of Agriculture (DoA, 2005a) estimated that horticultural
production in the 2003/4 season was valued at R 20.78 billion (US$ 3.46 million 1)
which was 29.0 % of the entire value of national agricultural production. Vegetables
were valued at R 6.60 billion (US$ 1.10 billion) with potatoes making the bulk 62.6 %
of this subtotal. Fruit production - including viticulture, citrus, subtropical, deciduous
and dried fruits - amounted to R 13.28 billion (US$ 2.21 billion).

1
Unless otherwise specified Rand/US$ = 6

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MSc. Dissertation: Hilton Madevu

At the retail level, consumers spent R 26.41 billion (US$ 4.40 billion) or 16% of their
R 165 billion (US$ 27.5 billion) food budget on fruit and vegetables (including
potatoes) in 2003/4 (DoA, 2005a). The players sharing this in fresh produce market,
beyond the farm-gate level, can be classified in numerous ways (NAMC, 2000; DoA,
nd.; GJFPM, 2004) but intrinsically into three broad levels in terms of bulk handled
namely (i) wholesalers, (ii) wholesaler-retailers and (iii) retailers. The focus of this
study is on the functioning of the retail sector and how it allows for the existence of
three types of retail formats namely hawkers (informal traders), greengrocers, and
supermarkets. Wholesalers and wholesaler-retailers were briefly reviewed as they
provided important context to the study.

Municipal fresh produce markets (FPM) are the most prominent players in the South
African fresh fruit and vegetable (FFV) industry (DoA, nd.; NAMC 2000). Being the
largest wholesalers, the FPMs have emerged as the FFV price-setters for the entire
industry (GJFPM, 2004; NAMC, 2000; and HSRC, 1991). FPMs serve as a wholesale
and warehouses for both producers and retailers, and also perform informal hygiene,
grading and quality assessment of most fresh produce (GJFPM, 2004). Other FFV
wholesalers include independent FFV wholesalers (Asian markets), wholesale
subsidiaries of retail chains (buying centres) as well as direct (farmgate) sales (DoA,
nd.; NAMC 2000).

The second level of the market is named the wholesaler-retailers sector. With regards
to food marketing as a whole, there are two dominant corporations at this tier namely
Metcash (Metro Cash and Carry) and Massmart (National Brands, 2003). Their
business was concentrated at the branded fast moving consumer goods (FMCG) with
little if any fresh produce. However a relatively new wholesaler-retailer chain
established in 1993 - Fruit and Veg City - does focus on the distribution and retail on
FFV retailing (Fairweather, 2004 and www.fruitandvegcity.co.za).

FFV retailing in South Africa (RSA) exists in the formal and informal sectors. The
formal or registered retailing sector has a complex oligopolistic structure with
approximately 70,000 outlets composed of large retail outlets (hypermarkets and
supermarkets), medium sized retail stores, and small retailers (Weatherspoon &
Reardon, 2003). The latter includes greengrocers and convenience stores. Most food

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MSc. Dissertation: Hilton Madevu

retailers tend to stock negligible amounts of fresh produce e.g. fuel station kiosks.
Thus formal fresh fruit and vegetable retailing is by and large limited to supermarkets
and greengrocers.

Formal food retail is concentrated with a small number of very large, formal
supermarket chains controlling around 70% of retail turnover and had continued to
expand. The large formal chains include Pick‘n Pay, Shoprite-Checkers, Woolworths
and the Spar group. These top four supermarket chains lead the race for the retailers’
market share in South Africa with a concentration ratio (CR4) of 96% and growing in
2004 (M+M Planet Retail, 2004). Concentration was lower at 67.5 % (CR4) when the
wholesale-retail category was included in the 2004 figure and this figure rose to 68.3
% in 2005 (Planet Retail, 2006a). This retail consolidation is expected to continue in
South Africa and has already begun to spread, through mergers and acquisitions, into
other African states and the world (Weatherspoon & Reardon, 2003; Louw et al.,
2004).

Greengrocers, also known as fruitiers, are classified under the larger population of
smaller stores in the formal fresh produce retailing industry. These small format stores
collectively control approximately 30% of total retail and 4% food retail turnover
(Economist Intelligence Unit, 2004 and M+M Planet Retail, 2004). Despite the
relatively small and declining market share of smaller retailers they have collectively
commanded a formidable R3 billion in annual turnover over the past decade (M+M
Planet Retail, 2004).

Another side of FFV retail is the informal sector, which was estimated to generate a
monthly turnover of R2.62 billion (Statistics South Africa, 2002b). This group
includes hawkers on commuter trains, door-to-door traders, street and pavement stalls,
as well as spazas (tuckshops). Informal traders represent a major force in the fresh
produce sector. According to a survey in Louw et al. (2004), hawkers at the Tshwane
market represent 27-29% of monthly turnover and at the Johannesburg market the
figure stands at 50%. Hawkers’ trade in both food and non-food items but FFV is the
most commonly traded (Karaan, 1993; Ligthelm & Van Wyk, 2004; and Ligthelm
2006b). In Tshwane FFV was estimated to constitute 22.6 % of all informal trade with

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MSc. Dissertation: Hilton Madevu

the other foods adding up to 25.1 % and the balance being various non-food items
(Ligthelm & Van Wyk, 2004).

Little research attention is afforded to informal marketing as a business sector despite

its importance in reaching the lower income/township markets (Van Rooyen, 2002).
Karaan (1993) listed the advantages of this sector over the formalised marketers as
that it ensures food security in the townships; absorbs labour in a climate of
unemployment; has more legitimacy in low income areas; is demand driven; promotes
economic activity within townships as it is cash driven and is a valuable source of
income for the players and their typically high number of dependents.

1.2 Research Gap

In the face of expanding corporate (chain) retailing and their every day low pricing
strategies most competing forms of food and grocery retailing are finding it difficult
to compete. The opening of a new chain store often spells the pricing out and eventual
demise of existing independent grocery retailers. This is evidenced by the expansion
of the supermarkets’ share of the market at the expense of the smaller format stores
[Brandt, 2004; M+M Planet Retail, 2004; and various supermarket Annual Reports
(Tiger Brands, 2002; Massmart, 2005; METCASH Trading Africa, 2005; Pick‘n Pay,
2002; Shoprite Holdings Limited, 2002; Spar South Africa; 2003)]. Weatherspoon &
Reardon (2003) found that supermarkets held 55% of the national food retail in South
Africa, similar to the share in Argentina, Chile, Philippines and Mexico (and not far
behind that of the U.S., currently at 70%).

Unlike traditional retail formats such as general dealers, bakeries and butcheries that
have tended to be overrun for market share and absorbed by supermarkets
internationally (Boudreaux & Macaulay, 1996), fresh produce hawkers/informal
traders and greengrocers in South Africa have proven to be resilient to this onslaught.
One often finds a thriving multiplicity of vendors situated at the very entrance of
competing large retail outlets. Along the same street or around the corner one often
also finds a greengrocer plying his trade. In fact, the all three fresh produce retailers

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MSc. Dissertation: Hilton Madevu

appear to attract their own set of consumers who eventually patronise all the retail
formats for different needs. This possibly indicates a level of co-opetition beyond
plain rivalry.

The relatively slow takeover of supermarkets in the fresh produce market is not
unique to South Africa. Weatherspoon & Reardon (2003) found that shifts in the retail
trade have tend to occur first in dry goods and later in perishables and sighted
examples in France and Italy (Braudel, 1979 in Weatherspoon & Reardon 2003, and
Dries et al, 2004). In a separate study, Reardon et al. (2003) further asserted that
supermarkets were less successful in penetrating the fresh fruit and vegetable (FFV)
market than the overall retail food markets. Their research sighted examples in Latin
America where supermarkets' FFV market share was on average between 50% and
75% of their share in overall food retail. The authors attributed this lagged penetration
of the FFV market on the ability of small shops (such as greengrocers) and traditional
wetmarkets 2, to maintain a fresh and convenient shopping option. This explanation
however fails to explain why the lag is peculiar to the FFV markets and why similar
effects were not witnessed in other food and retail markets. Reardon et al. (2003)
predicted that supermarkets would eventually take over the FFV markets as they have
done in other food sectors but tied this outcome to a significant overall rise in
affluence levels. Given that the poor population has persistently formed the majority
in RSA (GCIS, 2005) this income effect is unlikely to occur in the near future.

A possible explanation for the resistance shown by hawkers and fruitiers could be that
they offer fresher products in greater variety or that they simply offer lower prices
than supermarket indicating some negative scale economies in the market. Thus to
rule this prospect out a mini price survey was performed with six retailers in a middle
income neighbourhood to determine whether any of the three fresh produce retailers,
namely hawkers, greengrocers and supermarkets, was inherently cheaper. Potatoes
and tomatoes were used for this illustration because they are high volume products
commonly traded across the three retail channels. It was found, as expected, that not
al retailers used weight in price determination and also that the product packaging was

2
Such as feria libres in Chile or warungs in Indonesia

5
MSc. Dissertation: Hilton Madevu

not homogenous. The prices were therefore standardised to a Rands per kilogram
scale to allow comparison.

Table 1.1: Price survey in Sunnyside (October 2004)

Retailer Potatoes Tomatoes

Price (R) Quantity (kg) R/kg Price (R) Quantity (kg) R/kg
† †
Hawker 1 10.00 3 3.33* 5.00 0.3 16.67**
† †
Hawker 2 10.00 3 3.33* 5.00 0.3 16.67**
Shoprite 4.99 1 4.99** 4.99 0.3 16.63
SPAR 4.95 1 4.95 6.99 0.5 13.98
Greengrocer 1 8.95 2† 4.48 3.95 0.3† 13.16*
† †
Greengrocer 2 8.99 2 4.50 6.95 0.5 13.90
†
Approximate weight; *Cheapest; **Most expensive

The results of the exercise (table 1.1) showed that potatoes were the most expensive in
Shoprite at R4.99 per kilogram and were cheapest among the hawkers at R3.33 per
kilogram. Tomatoes were most expensive at R16.67 per kilogram with the same
hawkers and least expensive at R13.16 per kilogram with greengrocer 1. The middle
order prices were also inconsistent between the two products. The results thus suggest
that none of the three channels was inherently cheapest.

This could therefore indicate that competition between the chains was not based on
the price alone but on some combination of all the elements of the marketing mix
(product, price, place, promotion). Although results of this preliminary survey were
not conclusive they did indicate a need for further investigation to reveal the
peculiarities of the competition in this sector and how it allows this multiplicity of
chain forms to exist in the Tshwane metropolis contrary to the reality in other retail
sectors. Another possibility to investigate is whether a selection/basket of fruits and
vegetables rather than individual product lines would further illuminate the retailers’
competitive practices.

Little literature may be found documenting the competition between the informal
formats of retail let alone that of inter-format competition, that is, between formal &
informal retail formats. Business, academic and policy research typically concentrates

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MSc. Dissertation: Hilton Madevu

on the formal retail sector and in particular the impact of supermarkets. Examples of
such studies include the series of articles on the (Rapid) Rise of Supermarkets in
various parts of the developing world by Thomas Reardon, Dave Weatherspoon and
others (2002, 2003 and 2004); and the collection of international reports on issues of
market access (and particularly access to supermarket markets) found on
www.regoverningmarkets.org.

The focus on the formal sector is driven by the relative ease of access to data such as
costs, sales, turnover and inventory since this information forms the accounting
system which is require to facilitate taxation and has become all the more accessible
given the increasing use on computerised barcode scanners. Informal retailing is
therefore largely ignored due to the scarcity of accounting data, difficulties involved
in accessing the little available information and the dispersion of the subjects. This is
despite the informal sector’s importance in reaching the lower income/township
markets (Van Rooyen et al., 2002) and as a source of income, employment and
ultimately a source of livelihood.

Where studies in the informal food and beverage retail have been performed they have
been limited to a description of the informal trade business within townships. The
interaction between the formal and informal is not explicitly explored. Examples of
such studies include one by Van Rooyen, Mavhandu, Anseeuw and D’Haese (2002).
These authors described the informal trade in fruits, vegetables and cut flowers in the
townships of Gauteng province. Another was by Karaan (1993), which investigated
informal meat marketing in Western Cape townships of South Africa.

An extensive literature search revealed only one published investigation into formal
versus informal retail. This documented a 1976 study performed by Victor Tokman
(1978) in the South American city of Santiago, Chile. Other than this rather old and
contextually removed study, the other studies paid little attention to the competitive
environment and interactions between different types of retailers as they attempt to
capture a portion of the consumers’ income.

This study asserts that understanding this competitive behaviour is important in

understanding how the FFV industry players coexist. Understanding this ability to

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MSc. Dissertation: Hilton Madevu

coexist could possibly be the first step towards extending this aptitude to other sectors
of the economy where informal traders and small businesses struggle to survive. This
gap in literary knowledge is what this thesis sought to fill.

1.3 Research Question

The coexistence of the three forms of retailers begs the question, how have the
comparatively small hawkers and greengrocers managed to compete against the
highly capitalised supermarkets? In answering this question one needs to answer the
following supporting questions:
i) What is the nature of competition in the fresh produce retail market?
ii) What attributes of fresh produce retail sector make it possible for comparatively
small informal traders and greengrocers to participate?
iii) What is the structure of the FFV retail sector in terms of how and why it allows
multiple retail formats?
iv) Are there barriers or constraints peculiar to each type of fresh produce retailer
and how do they create space for competitors?

Conclusions drawn here may be used to draw lessons from this sector will contribute
towards upgrading the channels under investigation and where possible applications
of lessons learnt will be explored. In so doing there was a deliberate partiality towards
seeking upgrading pathways and solutions to the challenges faced by the informal
sector.

1.4 Hypotheses

The following hypotheses are tested:

i) Fresh produce retailers compete for market share by optimising the levels of a mix
of marketing attributes including the four marketing mix Ps (product, price, place
and promotion)

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MSc. Dissertation: Hilton Madevu

ii) The structure of the value chains employed by each of the three retail formats
gives each one an advantage in accessing different types of markets for fresh
produce and thus contributes positively to their competitiveness.

1.5 Study Objectives

The primary objective of this paper is to describe and analyse the competitive
environment in which fresh produce is retailed in the Tshwane Metropolitan area
(formally Pretoria) of South Africa. Accomplishing this objective required the
fulfilment of the following supporting objectives.
i) Determining the competitive and strategic behaviour of players in the three forms
of fresh produce retail in terms of how they adjust their marketing mix to compete
for market share
ii) To map out the links and nodes in the flow of goods, services and ultimate value
within the retail channels in Tshwane
iii) To seek to understand the power dynamics including the degree of chain
governance in Tshwane’s fresh produce retail market and
iv) Ultimately to identify challenges and opportunities for improving efficiency in the
value chains through innovation and upgrading.

1.6 Research Method

The study of competition in fresh produce retailing in Tshwane was conducted in two
phases; the first was a pilot study and the second a survey of a sample of retailers. The
initial stage involved spending up to one week working as an assistant to a member of
each of the types (formats) of retailers with an aim to become embedded into the
issues affecting the trade “first hand”, generate rapport and establish contacts in the
industry. This phase also involved interviews with (a) other relevant and influential
chain members including selected wholesalers and agents (b) lobby groups and
representative bodies of the fresh produce retailers. Information gathered at this stage
was contributed to the subsequent phase by forming a basis for the sample and

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MSc. Dissertation: Hilton Madevu

questionnaire design as well as selecting a set of three fruits and three vegetables to be
used as reference products for the study.

The second phase of investigation was the interviewing of a sample of fresh produce
traders in Tshwane. A six-step sampling frame was designed to target a total of 120
respondents including 15 supermarkets, 30 greengrocers and 75 hawkers across three
living standards/affluence groups in the city. The enumeration tool was a semi-
structured questionnaire/checklist derived from a template developed by Louw et al.
(2004). The template was adapted to generate five questionnaires designed to capture
information relevant different subsets of respondents namely: informal traders,
greengrocers, supermarkets, selected wholesalers and selected retailer organisations.

A more detailed description of the investigation method, the steps involved, phases as
well as the impetus driving the choice of respondents, the tools of investigation and
analysis are discussed in detail and diagrammatically summarised in the methods and
procedure section, Chapter 4.

1.7 Scope

Given the breath of the fresh produce industry described before it is necessary to
reiterate the boundaries within which this study was confined. This is in terms of the
types of individuals, businesses and the products of interest to this study.

1.7.1 Selected retailers

The fresh fruit and vegetable retail industry of interest to this study includes hawkers
(informal traders), greengrocers (fruitiers), and chain retailers (supermarkets) in the
Tshwane metropolis.

The supermarkets of interest are mainly the four top chains in South Africa namely
Shoprite-Checkers, Pick’n Pay, Spar and Woolworths. These retail chains were of

10
MSc. Dissertation: Hilton Madevu

targeted because they were found throughout the metropolis and each brand has a
standard design that included a substantial in-store fresh produce department thus
meeting a minimum requirement of this study. However the smaller chains such as
Freedom supermarkets and other independent supermarkets were also included in the
survey where they were the dominant supermarkets in an area.

Small formal retailers tend to be diversified and trade in a variety of products

including fresh produce. For the purposes of this survey the discriminating factor used
to identify a retailer as a greengrocer was that at least 50% of the value all
merchandise trade were fresh fruit and vegetables.

Similar to greengrocers, informal traders are also diversified. Thus to qualify as a part
of the survey population the hawkers needed to stock at least 80% of the value all
merchandise as fresh produce. The higher minimum to greengrocers is due to the
relatively smaller scale of these vendors.

1.7.2 Focal products selected

To further limit the number variables the study focused on the top three fruits and top
three vegetables traded in the FFV market. This was in an effort to ensure that the
products were found in all three retail formats, were representative of fruits and
vegetables in general and hence facilitating inter format comparison.

The first step in product selection was identification of the top four high turnover,
high volume and high value FFV products. These products also needed be commonly
traded in all three of the supply chains. Therefore a preliminary survey was performed
as part of phase 1 to select the products. Based on that exploratory survey and the
volumes traded at the Tshwane Market, the six products selected were apples, oranges
bananas, potatoes, tomatoes and onions.

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MSc. Dissertation: Hilton Madevu

1.7.3 Study area

The study area for this research is the City of Tshwane Metropolitan Municipal Area
formally known as Pretoria (figure 1.1). This city serves as the administrative capital
of the Republic of South Africa (RSA). The area was originally named after a
Ndebele chief, Tshwane (meaning "Little Ape"). Tshwane is a cross-border
municipality located mostly in the small and most economically active central
province called Gauteng. Some parts of the city, namely Ga-Rankuwa, are part of
North West Province.

Global Location

Provinces

City Boundary

Figure 1.1: Study Area: City of Tshwane Metropolitan Municipal Area

Sources: City of Tshwane (2005) and Municipal Demarcation Board (2004)

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MSc. Dissertation: Hilton Madevu

Tshwane covers approximately 2199 square kilometres and is home to 2.05 million
people (HSRC, 2005) and was declared a metropolitan area on December 5, 2000.
The City of Tshwane Metropolitan Municipality (CTMM) is a result of the integration
of thirteen (13) former city and town councils. The physical areas administered by the
CTMM includes Pretoria, Centurion (formerly Verwoerdburg), Akasia and
Soshanguve, as well as the surrounding areas of Mabopane, Atteridgeville, Eesterrust,
Ga-Rankuwa, Winterveld, Wallmannsthal, Hammanskraal, Temba, Pienaarsrivier,
Crocodile River and Mamelodi (City of Tshwane, 2005 and Municipal Demarcation
Board, 2004).

This metro is composed of five types of residential areas, namely the suburbs,
townships, inner city (CBD), formerly coloured suburbs and informal settlements
(Louw, 2004). These are formally grouped into 2043 areas including farms,
townships, suburbs, business and industrial areas. These fall into seventy six (76)
municipal wards, managed by means of an executive mayoral system headed by an
executive mayor who chairs an eleven (11) member Mayoral Committee including the
mayor as chairperson and ten departmental heads designated as strategic executive
officers.

This study seeks to present the nature of competition among fresh produce retailers
across the metropolitan area thus the area level of 2043 units/suburbs will form the
first stage in stratifying the survey sample. This process is detailed in the methods and
procedure chapter.

1.8 Organisation of study

The dissertation is organised as follows; the current section, Chapter 1 presents an

overview and justification of the research project including the project background,
the gap literary knowledge to be filled. It also includes the study questions, objectives,
hypotheses and research bounds. Chapter 2 is a further review of the FFV industry
and the peculiarities that render it worthy of the current investigation. It also contains
a report on the results of a pilot study (phase 1). Chapter 3 explores the concepts and

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MSc. Dissertation: Hilton Madevu

tools used in competition analysis focusing in on Porter’s forces and chain analysis.
Chapter 4 systematically outlines the methods and procedure employed in the research
process. In so doing it reports on the design of the survey, the sample and the
enumeration tools and details other nuances about the execution of the second
research phase. The subsequent two chapters (5 and 6) present the findings from
phase 2. These results were discussed in terms of their implications towards
answering research questions and meeting the research objectives. The final segment,
Chapter 7, reviews the study in its entirety and gleans the conclusions and
implications as well as areas of possible future research.

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MSc. Dissertation: Hilton Madevu

2 Chapter 2: FFV Retailing in South Africa: A Literature

Review & Exploratory Study
2.1 Introduction

The South African retail market has a concentrated, oligopolistic structure that meets
the domestic demand for food, beverages and tobacco (Economist Intelligence Unit,
2004). This second chapter reviews the section of this complex industry that handles
the marketing of fresh produce. The review is based on the findings of previous
studies on the subject and is augmented by an exploratory study (phase 1) of the
sector in Tshwane.

This review begins with a discussion of the special characteristics of fresh produce
that make it a challenging and unique industry. Next it describes the institutional
structures that have evolved to handle produce in retailing in South Africa. The next
section presents the exploratory study of the FFV industry in Tshwane. This study
was aimed at going beyond literature (generally pitched at the national level) to gain
an improved perspective of the FFV retail; to identify the value generation nodes; and
to enrich the review with anecdotal information. The section also shows how the
phase 1 study served as an important preparatory tool for the subsequent survey in
terms of facilitating the testing and improvement of the questionnaire-checklists;
refining the phase 2 sample design and by helping in the selection of focal FFV
products. The chapter closes with a summary of the findings from literature review
and exploratory study.

2.2 Unique Characteristics of the FFV Industry

The fresh produce industry possesses some special characteristics that make
successful participation particularly challenging. There are four important factors to
consider when planning venturing into this sector. These are perishability,
susceptibility shocks, seasonality and subjective standardisation (Cook, 2003 and
Farina & Machado, 1999). Authors argue firstly that the products’ perishability and

15
MSc. Dissertation: Hilton Madevu

limited storability make it necessary for fresh products to be harvested, dispatched and
marketed without delay. This factor places a premium on the maintenance of efficient
logistics to move the produce quickly; the related infrastructure to maintain a cold
chain; and careful inventory management to minimise wastage.

The second factor identified was that these sensitive products are highly susceptible to
weather shocks which in turn affect supply and demand (Cook, 2003 and Farina &
Machado, 1999). These shocks lead to price volatility that forces firms to rely on the
spot market prices as opposed to list price sales that characterise other sectors.
Concurrently there are few risk management tools to ameliorate these possible
hazards beyond geographic and product diversification (Cook, 2003).

Another uncertainty that fresh produce traders must absorb is that FFV quality is
difficult to measure objectively and varies even within the same lot (Farina &
Machado, 1999). This is despite strides made towards inducing some standardisation
through standards and grading (GJFPM, 2004). These variations have an impact on
the returns of a market player through varying shelf lives, fragility and therefore how
much one can charge the subsequent links in his supply chain.

Fourthly, seasonality that has been identified in most fresh products also resulted in
price volatility and led to elevated risks in conducting the business (Rathogwa et al.
1998, Cook, 2003). A product may appear profitable during off-season price boom but
prove to be a loss-making sector when a glut is experienced at market floors on
season. For instance, Louw et al. (2004) found that small-scale producers supplying
tomatoes to the Johannesburg FPM were particularly susceptible to these price
swings. These farmers failed to capitalise on the higher off-season prices because of a
lack of storage facilities, in adequate access to transport, a poor to none existent cold
chain and inadequate management skills to produce the more demanding off-season
tomato varieties.

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MSc. Dissertation: Hilton Madevu

2.3 Overview of Fresh Produce Retailing

According to the statistics division of the DoA (2005a) the South African food retail
market was worth R 165 billion (US$ 27.5 billion) in 2004. In the same statistical
abstract fruit and vegetables retail (including potatoes) was said to have contributed
towards at least 16% of this food market. The major players sharing this fresh produce
retail market can be classified three broad levels (by bulk handled) namely
wholesalers, wholesaler-retailers and retailers (NAMC, 2000; HSRC, 1991 and DoA,
nd.). In practice, although the industry players will have a core speciality at a certain
level/class, they often strive to penetrate the other classes/levels of the market.
Therefore there is a degree of overlap in the classifications. None the less, the
distinctions serve as a useful tool in giving an overall perspective of the sector. This
discussion was performed in the subsections below. Of note is that the wholesaler and
wholesaler-retailers were on the periphery of the scope of this study, therefore
emphasis was placed on the retail portion of the industry.

2.3.1 Wholesalers

Statistics and market observers concur that municipal fresh produce markets (FPMs)
are, by far, the dominant player and form of wholesaling in the South African FFV
sector (DoA. nd.; DoA 2005b, City of Johannesburg, 2006 and AgriTV, 2006).
However other wholesale forms do exist including independent wholesalers, contract
buyers, supermarket wholesaling subsidiaries, farmer sales direct to retailers and final
consumers (DoA, nd.).

The fresh produce market (FPM) system is the biggest distribution channel for fresh
produce in South Africa and is unique in the world (GJFPM, 2004). There are sixteen
major municipal fresh produce markets in the country; mainly owned and operated by
local authorities with three privately exceptions (GJFPM, 2004). Tshwane Market is
an example of a wholly municipal owned market.

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MSc. Dissertation: Hilton Madevu

The prominence of FPM in the national FFV sector is shown in that it has consistently
handled over half of all domestic fresh produce over the past ten years. More
specifically, in 2005 approximately 54% (figure 2.1) of the volume of vegetables
produced was traded on the sixteen major FPMs (DoA, 2005b). Also, although most
fruit produced in RSA is exported, the FPMs account for over 50% of all domestic
sales (DoA, 2005a and DoA, 2006). Supermarkets and retailer statistics are not
specifically noted. The retailers’ part of the off-take is captured under farm sales,
FPM and processors as they are customers in all three markets.

Being the largest wholesalers, the FPMs have emerged as the FFV price-setters or, as
nicknamed, the “fresh produce stock exchange” (AgriTV, 2006 and CTMM, 2006).
The prices at the FPMs are arrived at through a bargaining process mediated by
market agents who have a dual objective to collect the best prices (and hence
commission) for sales while ensuring that the highly perishable stocks are cleared.
These prices are then used as reference prices even in private transactions outside the
FPMs (NAMC 2000; CTMM, 2006).

Processing 12%

Farmgate sales
& own
consumption Fresh Produce
32% Markets 54%

Exports 2%

Figure 2.1: Relative size of vegetable channels in 2005 (excluding potatoes)

Source: DoA 2006

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MSc. Dissertation: Hilton Madevu

Although there is no formal grading of most fresh produce, the markets also assert
control measures to ensure that all produce meets high quality levels and stringent
hygiene specifications. In an effort to diversify their offering, many municipal
markets also sport auxiliary services including loading spurs for buyers, cold storage
facilities, ripening facilities and trading areas for merchants dealing in foodstuffs and
commodities. FPMs also serve as a warehouse for both producers and retailers. Most
of these additional services are related to the marketing of fresh produce (CTMM,
2006; City of Johannesburg, 2006).

Besides the FPMs other fresh produce wholesalers include non-syndicated FFV
wholesalers (Asian markets), wholesale subsidiaries of retail chains (buying centres)
and farmgate sales (DoA, nd.; NAMC 2000). The smaller wholesalers primarily target
the local retailers including hawkers and greengrocers. Direct farmer sales are
commonly restricted to the producers’ locality, mainly involve newly established
farmers and produce sold here is lower and highly variable quality (DoA, n.d.). This is
a result of farmers either not grading this produce or using this channel to dispose of
lower grade produce while cutting transaction costs associated with accessing urban
markets.

In-house or corporate wholesalers have been established to exclusively supply retail

chains, such as Freshmark supplying the Shoprite-Checkers group. These subsidiaries
are tasked with stocking and managing the entire chain’s FFV inventory through its
network of regional distribution centres. These firms constitute the vertical integration
of supermarket supply chains. This integration is motivated by the need to reduce
transaction costs as well as maintain and grow competitive advantage by controlling
produce volumes, grades and standards. This is achieved by increasingly procuring
directly from preferred farmers using verbal contracts (Louw & Emongor, 2004).
These contracts are backed by the building of long term relationships and establishing
a database of preferred suppliers.

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MSc. Dissertation: Hilton Madevu

2.3.2 Wholesale-retailers

Two large corporations dominate the lucrative food market located in the niche
between wholesaler and retailer format stores. These are Metcash (Metro Cash and
Carry) and Massmart. The stores are classified as wholesale-retailers because their
clientele include both final consumers and traders in similar proportions. This sector
focuses on high volume, low margin and low cost distribution of mainly branded fast
moving consumer goods (FMCG) (Massmart, 2005 and National Brands, 2003). With
the exception of Fruit and Veg City type stores, the wholesale-retailers by and large,
fall outside the bounds of this research because their ware does not normally include
fresh produce.

However these businesses partially fall within the bounds of this study in that they
operate supermarket franchises and supplies buyers’ clubs/associations that do handle
FFV. For instance Metcash has a comparatively stronger involvement in FFV than
Massmart as it runs five franchise brands it calls symbol groups. These are Lucky 7,
Square Deal, Viva, Buy Rite and Pop In (Metcash, 2005). Massmart, on the other
hand, operates two major buying alliances - Shield and Furnex - which both supply
over 600 members and retail outlets including independent supermarkets and
especially small grocers with FMCG but not necessarily FFV (Louw & Emongor,
2004). Thus the retailers involved in these alliances access their FFV from other
channels so for the purposes of sampling in this study they are grouped among the
independent retailers.

A relatively new form of wholesale-retailing is one pioneered by the Fruit and Veg
City chain established in 1993. Unlike traditional wholesale outlets that maintain an
industrial/minimalist appearance, this format sports sleek, tiled, well lit and clean
supermarket style outlets. These act as both wholesalers and retailers in that not only
do they market directly to the public but they also have a significant customer base
among the smaller retailers and food outlets (restaurants and caterers).

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MSc. Dissertation: Hilton Madevu

2.3.3 Formal retailers: Supermarkets and Greengrocers

Formal retailing in the Republic of South Africa (RSA) refers to companies that are
registered with the Companies and Intellectual Property Registration Office (CITRO)
of the Department of Trade and industry (DTI). Formal registration is associated with
a legal obligation to submit tax returns. These taxation laws prescribe that the firms in
the formal sector maintain records of their transactions to facilitate the collection of
Value Added Tax (VAT). The information generated in the process therefore lends
the sector well to research attention since information about the locations, turnovers,
ownership etc. become available from the relevant public authorities such as the DTI,
CITRO and STATSSA. This is in contrast to the informal sector which operates
without such record keeping.

South Africa has a complex retailing structure of approximately 70,000 outlets with
sales of over R 275 billion/US$ 45.8 billion (constant 2000 prices) in 2005
(STATSSA, 2005) and the BMR predicts an average real growth in sales of 6.4 % in
2006 (Ligthelm 2006a). As mentioned previously, the retail sector as a whole is
concentrated and in 2005 the top four large formal retail banners (including wholesale
retail) controlled 68% of turnover (Planet Retail, 2006a) while in retail alone the CR4
was much higher at 96% in 2004 (M+M Planet Retail, 2004). The retail sector can be
broken down into three broad categories: large retail outlets (hypermarkets and
supermarkets), medium retail stores (medium sized retail stores), and small retailers
including greengrocers and convenience stores (Weatherspoon & Reardon, 2003).

Although almost all food retailers stock some fresh produce including for instance
petrol station kiosks, the traders of interest are those trading in significant amounts of
this produce. The logic being that such firms are more embedded in the FFV sector
and would have a clearer understanding of its workings. Retailers fitting this criterion
among the formal retailers are supermarkets and greengrocers. These are discussed in
turn below.

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MSc. Dissertation: Hilton Madevu

2.3.4 Supermarkets

Retail market concentration is most apparent in the intensely competitive supermarket

sector where 2% of supermarkets are responsible for between 50% and 60% of all
food sales in South Africa (Weatherspoon & Reardon, 2003). The top large formal
supermarket chains include the listed companies Pick‘n Pay, Shoprite-Checkers and
Woolworths, and the recently listed Spar group.

These large retail chains often trade under a variety of brand names in order to better
target separate market segments. This strategy also serves to obscure the
concentration within the sector. For instance the four main companies (Pick‘n Pay
Group, Shoprite, Woolworths and Spar) trade under about ten different store names.
For example, Shoprite operates store brands that include Shoprite supermarkets,
Shoprite Checkers, Usave, Sentra, 8 Till Late, Checkers Hyper and OK stores. Pick’n
Pay stores include not only Pick’n Pay hypermarkets, supermarkets, family stores,
liquor, clothing and garage stores; but also the brand names Score, TM and Boxer
supermarkets as well as Franklins in Australia. The top four supermarket chains are
currently leading the race for the retailers’ market share in South Africa. Table 2.1
indicates that this has increasingly been the case over the eleven years between 1993
and 2004. Unfortunately these statistical series have been discontinued to focus on
banner sales (including wholesale retailers) since the merger of M+M EURODATA
of Germany and Planet Retail of UK to form a new Planet Retail (2006b).

Table 2.1: Market share (%) and turnover of South African supermarkets

1993 2003 2004

Market Turnover/ Market Turnover/ Market Turnover/
Supermarket chain
share Retail sales share (%) Retail sales share (%) Retail sales
(%) (R million) (R million) (R million)
SPAR 18.3 5 255.0 26.1 19 312 26.3 21 873.8
P’nP 22.5 6 423.5 35.4 26 194.2 35.2 29 276.0
Shoprite/Checkers 43.4 12 462.7 29.4 21 754.5 27.8 23 121.4
Woolworths 4.2 1 206.1 6.9 5 105.6 7.1 5 905.1
Others 11.6 3 331.0 2.2 1 627.8 3.6 2 994.1
Total 100 28 715.8 100 73 992.3 100 83 170.5
Source: Brandt (2004); Various Annual Reports and M+M Planet Retail (2004)

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MSc. Dissertation: Hilton Madevu

A point of caution in interpreting the table is that the statistics do not show the
contribution of the informal sector in the retailing total. In addition the turnover
figures include all sales made in supermarkets, including hardware, electronics,
clothing etc and not just the food or FFV which are of interest to this study. The
figures do however highlight the scale of market concentration - 96% to the top four
retailers - and the growth of the chain store format. The consolidation reflected in the
table is expected to continue within the South African market and to spill over into
other African states (Weatherspoon & Reardon, 2003).

Supermarkets mainly operated through centralised procurement systems where

distribution centres perform the assembly function of buying FFV from various
sources including directly from farmers and then supply to the various branches.
Individual branches were in instances allowed to perform their own purchasing but
this was an exception rather than a norm. Also this prerogative was the reserve of
outlets in remote locations and franchised stores. The extent of centralised
management and procurement also varies according to corporate culture. Louw et al.
(2004) found that central control was much stronger in the Shoprite and Pick’n Pay
chains than in the SPAR group.

The spreading dominance of supermarkets could be viewed as a progressive step for

livelihood development and food security because supermarkets brought about new
higher product standards, variety and at lower prices (D’Haese & van Huylenbroeck,
2005). On the other hand this expansion could also be viewed negatively as it was
typically at the expense of existing small local retailers, thus killing off local
entrepreneurship. This is evidenced in table 2.1 by the concurrent fall in ‘other’
formal retailers share from 11.6% in 1993 to 3.6% in 2006.

Research shows that this supermarket takeover has not been uniform across the food
sectors in South Africa and internationally (Boudreaux & Macaulay, 1996). Unlike
the general dealer, bakery and butchery retail formats, the fresh produce retailers have
proven especially resilient. Weatherspoon & Reardon (2003) found that supermarkets’
entry path has tended to be first through dry goods and later in perishables. They
sighted historical cases in this point with the evolution of the markets in France and

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MSc. Dissertation: Hilton Madevu

Italy (Braudel, 1979 in Weatherspoon & Reardon 2003). In a separate study, Reardon
et al. (2003) further asserted that supermarkets were less successful in penetrating the
fresh fruit and vegetable (FFV) market than the overall retail food markets. The study
sighted examples in Latin America where supermarkets' FFV market share was
around 30% in Brazil, 10% in Costa Rica and on average between 50% and 75% of
the overall food retail market share across the region. As mentioned previously, the
authors failed to explain why FFV markets proved more challenging than other food
and retail markets.

Researchers warn that supermarkets will eventually take over the FFV markets as they
have done in other food sectors (DFID RNRA, 2005). However this prediction was
premised on the correlation between improve livelihoods (the emergence of two-
earner households, ownership of cars and refrigerators) increased Foreign Direct
Investment and the spread of supermarkets (Reardon et al., 2003). RSA has a dual
economy with both a significant wealthy population and a growing middle class but
an even larger poor population (48% below poverty datum) (GCIS, 2005). Thus the
predicted income effect driving the dominance of supermarkets is unlikely to occur in
RSA in the near future. Institutions such as the DFID and IIED have identified this as
an opportunity to initiate programmes for mitigating action to ensure the survival and
prosperity of the smaller food chain players including farmers and agribusinesses
(DFID RNRA, 2005 and www.regoverningmarkets.org/).

2.3.5 Greengrocers

Greengrocers, also known as fruitiers, are classified under the larger population of
smaller stores in the formal retail industry. These small format stores collectively
control 30% of retail turnover (Economist Intelligence Unit, 2004). Despite the
relatively small and declining market share of smaller retailers (referred to as others in
table 2.1) the approximately R3 billion turnover is still a formidable figure.
Additionally the declining share data refers to all retailers including for instance
hardware stores and other retailers that trade in little if any fresh produce.

24
MSc. Dissertation: Hilton Madevu

Greengrocers are specialised sector classified by Statistics South Africa (STATSSA,

1993) under the standard industry code (SIC 62201) “Retail trade in fresh fruit and
vegetables.” However, small formal fresh fruit and vegetable (FFV) retailers typically
also trade in a variety of other grocery items. They therefore prefer to register their
businesses as general dealerships SIC6211 formally defined as “Retail trade in non-
specialised stores with food, beverages and tobacco predominating”. Unfortunately
this was the same code under which supermarkets classified and renders the SIC
ineffective as a sample stratification tool. Thus for the purposes of this study rather
than using the SIC, the qualifying criterion for classification as greengrocers was that
at least 50% of the trader’s ware be FFVs.

This format of stores is quite versatile because it has displayed the ability to co-exist
with both the hawkers and supermarkets in FFV retail. Unlike informal retailers,
greengrocers are able to compete for market share in the shopping malls where the
urban population increasingly shops. Concurrently greengrocers have been recorded
as holding their own in the townships. For instance a 1988 survey of avocado
consumption among the black population in Pretoria found that 22% bought from
greengrocers this was more that the 20% share of supermarkets although lower than
the street vendors’ average of 48% (Van Zyl & Conradie, 1988).

However as shown in the supermarkets section (table 2.1) the greengrocers and other
small formal retailers are collectively loosing market share to the large retail chains. A
steady declining trend for the greengrocer market share has also been detected in the
UK where it fell from 46% in 1980 to 26% in 1991 (Dolan & Humphrey, 1998). The
decline coincided with the growth of large retailers’ share of FFV retail from 50% in
the 70s to 76% of the trade by 1998 (Dolan & Humphrey, 1998; Liff & Turner, 1999).

The decline of independent greengrocers presents a problem in that the demise of

small retailers represents an erosion of opportunities for entrepreneurship. This is a
key economic asset that has been widely acknowledged as major source of economic
dynamism within capitalist economies such as that of RSA. Entrepreneurship is also
credited with creating up to 90% of the new jobs in countries where the relevant
research has been conducted (Morris, 1997). Seeking ways of fostering small business
is therefore of importance to the economy as a whole.

25
MSc. Dissertation: Hilton Madevu

Research and literature targeting greengrocers is scarce. This is possibly a symptom of

them falling outside the mandate of development research because they are considered
relatively affluent yet they are concurrently too small to be subject of research
conducted by big business. Thus the current dissertation will help to shed more light
on the frequently overlooked greengrocer retail format.

2.3.6 Informal retailers

Informal retailers/hawkers or vendors in this study refers to the traders not formally
registered as businesses with the Companies and Intellectual Property Registration
Office (CITRO) and are also not registered for Value Added Tax (VAT). They may
be registered with municipal or regional services councils but only a minority of about
7.3% of the total appears in such registers (Statistics South Africa, 2002b).

Accurately measuring the social and economic impact of the informal sector in South
Africa remains a challenge. Due to its amorphous and none permanent nature, the
structure and performance of informal business is not routinely monitored along with
other national economic data. In an attempt to bridge this information divide Statistics
South Africa (STATSSA, 2002a and 2002b) endeavoured to estimate the contribution
of the informal sector to the RSA economy using data from the Labour Force Survey
(LFS) of March 2001. The survey estimated that the total turnover of the informal
sector was R2.62 billion in February alone (Statistics South Africa, 2002b, p.4), a
significant sum given that the GDP for first quarter of 2001 was R 243.95 billion at
current prices (Reserve Bank, 2006). They reported that out of the 44.4 million
national population, an estimated 2.3 million (5.1%) ran at least one informal, non-
VAT-registered business and approximately 616 000 (7.7%) of these businesses were
in Gauteng province (Statistics South Africa, 2002a, p.6). Informal businesses totalled
1.3 million (57.8%) in urban, and 1 million (42.2%) in non-urban areas. The vast
majority (89.4%) of the business owners were African and the industry was
dominated by women who owned 1.4 million units (60.6%). The wholesale and retail
trade, catering and accommodation industry, which includes FFV retail, hosted two

26
MSc. Dissertation: Hilton Madevu

thirds (69.4%) of the national total count of informal businesses and over half (53.5%)
of turnover (Statistics South Africa, 2002b, p.4 and p.51).

Informal traders represent a major force in Tshwane’s fresh produce sector. Censuses
conducted in Tshwane by the Bureau of Market Research (BMR) (Ligthelm & Van
Wyk, 2004) and the City of Tshwane (2005) respectively found a total of 3614 and
3385 informal retailers operating in the City if Tshwane. The difference was attributed
to the none-permanence of the traders businesses as well as the widely varying
operating days and times. Also according to research by Louw et al. (2004), hawkers
on the Tshwane FPM represent 27-29% of monthly turnover and 50% of purchases
off the Johannesburg market. In the present study and presented later the figure was
found to have grown from 20% to 30% of the TFPM between 1999 and 2005.

The BMR study, commissioned by the CTMM to look into the regulation of informal
trade in Tshwane (Ligthelm & Van Wyk, 2004) found that, of the 3 614 businesses
interviewed, six types goods traded accounted for 73.5% of all informal business.
These six were fresh fruit and vegetables (22.6 %); clothing, sewing and tailoring
(14.6 %); soft drinks, sweets, cigarettes (13.5 %); prepared food (11,6 %); telephone,
fax and photocopying (5.8 %); toiletries, and cosmetics (5.4 %). The remaining
quarter of all traders dealt in 16 different mostly non-food items and individually
accounted for less than 4% of the total. These figures confirmed that FFV as the
dominant form of informal retailing in the City. An explanation for this is offered by
the DFID RNRA team (2005) is that the FFV market was a fairly scale-neutral sector
meaning that it allowed entry to even the smallest of entrants and thus was also a
promising route out of poverty.

Some economist, theorists and legislators were of the opinion that the informal sector
was an important means of reaching the lower income/township markets, ensured
food security in those areas; and was an important employer especially for the low
skills level groups. They also found that it had more legitimacy than formal business
in low income areas where socio-political forces were quick to destroy businesses that
were perceived to be exploitative; was consumer oriented hence demand driven;
promoted entrepreneurship and economic activity in the poor areas as it is cash

27
MSc. Dissertation: Hilton Madevu

driven; and was a valuable source of income for the players and their dependents
(Karaan, 1993; Van Rooyen, 2002; and Ligthelm & Van Wyk, 2004).

On the other hand, antagonists to this positive view of the informal sector point to a
number of its shortcomings. Primary among these was their observation that informal
trading was geared towards personal survival as opposed to maximising a return on
investment (Rauch, 1991) and as a result only generated a subsistence existence for
the players (Morris, 1997). To add to this argument, Hirschowitz (1992) showed that
there was a net flow of money from the informal to the formal sector and that the
sector was characterised by low and intermittent returns. From a labour perspective
the sector was also judged to be insecure and unstable, involving long working hours
as well as poor working conditions (Devarintert & Watson, 1981). Given these factors
and his own analysis, Marius (1987) concluded that the informal economy was an
overall indicator of a general level of poverty and underemployment in an economy.
Of note however is that these authors fell short of condemning the informal sector as
detrimental because it intuitively has a net positive socio-economic impact on a
growing economy.

Restrictions to informal trade were relaxed significantly in the 1990s through the
Business Acts of 1991 and 1993 and the subsequent amendments to various municipal
bylaws (ILO, 2003). Local governments were charged with the overall administration
of the sector and have widely varying approaches to this task. For instance the
Johannesburg Municipality followed an antagonistic approach while there were
cordial relations between Durban Municipality and local hawkers (eThekwini Online,
2004). Irrespective of the approach, the bylaws have limited the trading locations as
well as the number of traders. Trading areas such as road verges, pavements and
islands are considered to be obstructions to traffic yet these locations form the most
lucrative markets because of the high volumes of traffic. Van Rooyen (2002) noted
that informal traders have done little to have their point of view heard by policy
makers. The hawkers are fragmented and are hardly ever part of lobby groups or
traders’ associations that may serve as rallying points for their concerns.

Aside from the static head counts such as those of Statistics South Africa the BMR
and the CTMM, little business, economic or marketing research attention has been

28
MSc. Dissertation: Hilton Madevu

afforded to informal retailing. This is despite its importance as a livelihood option for
the lower income groups. The primary reason sighted by researchers for avoiding this
sector has been the lack of reliable data on these traders (NAMC, 2000. p.38 and
Morris, 1997) forcing each one to rely on individual surveys and case studies which
make generalisation difficult. The result is that the few studies on the sector collect
information specific to their objectives or collecting general information that leaves
little room for subsequent use of this data (such as in Statistics South Africa, 2002a,
Myburgh, 1997 in NAMC, 2000, Morris et al., 1992 and Morris 1997). Thus gaps in
knowledge of the business of informal trade exist, including that of the nature of
competitive interaction between the different forms of retailers of fresh produce.

2.4 Exploratory Study (Phase 1)

Most retail industry literature reviewed so far was pitched at the national level and
pertained to a single type of retailer at a time. While these provided the broad macro
level background it was not sufficiently targeted towards Tshwane and/or missed the
interplay between the three types of retailers. It was therefore judged that an
exploratory study (phase 1) was necessary to fill this information gap and establish an
informed basis for a broader survey needed to fulfil the research objective namely to
describe and analyse Tshwane’s competitive FFV retail environment.

The terms of reference for phase 1 were to characterise the FFV industry in Tshwane,
identify preliminary value generation nodes and form a basis to testing and fine-
tuning the phase 2 survey questionnaire-checklists as well as to refine the phase 2
sample design. This exploratory study would also enrich the study with anecdotal
information and thus help to gain an improved perspective of the FFV retail industry.
In addition phase 1 set out to help to identify FFV to focus on in the study.

Operationally the exploratory study began with an embedding period. This involved
spending up to one week shadowing and working with a member of each of the types
of retailers thereby learning about the fresh produce retail business “first hand”. This
embedding and rapport building was especially important among the hawkers who

29
MSc. Dissertation: Hilton Madevu

tended to be suspicious of the intentions of the research. The three Tshwane retailers
chosen for this exercise were Pick’n Pay Supermarket at the Tramshed Shopping Mall
in the Central Business District (CBD), a registered informal trader in Attridgeville
and a Greengrocer in Mamelodi. This embedding period was followed by a series of
key informant interviews with officials and agents at Tshwane Market; Freshmark
(Shoprite’s in-house fresh produce wholesaler); the Informal Business Forum (IBF)
and the Gauteng Hawkers Association (GHA). The aim of the interviews was to gain
additional background on the current issues in the industry and the state of
competition from their point of view.

2.4.1 Players in Tshwane’s FFV retail sector

Expert interviews and the embedding process conducted in phase 1 revealed a number
of nuances about structure of the fresh produce industry beyond the descriptions
found in literature. The first observation was that FPMs play an increasing role in
international FFV trade. Not only have they always been an important FFV source for
cross boarder traders (CTMM, 2006) but some produce markets authorities, especially
those with significant private ownership, are beginning to export some produce
(Dodds, 2005; personal communication).

Another observation was that produce markets, in this case the Tshwane Market
(TM), are important information hubs in the fresh produce sector due to two factors.
Firstly these markets hold a key role as the largest wholesaler in the sector handling at
least 80% of all fresh produce in the country (Dodds, 2005; personal communication).
Secondly the markets, including the TM, routinely record all transactions performed
on their floors using a system of prepaid buyer’s cards. TM therefore has a database
of daily purchases made by each of its clients.

Although the TM possesses this raw data, the processing of this data is at its infancy.
The main use of the data has been little more that price monitoring. Only four brief
market analysis reports had been compiled at TM by December 2005. The first report
was written in 1999 with the process being subsequently abandoned until 2005 when
three monthly reports were produced. Results of these reports are summarised in table

30
MSc. Dissertation: Hilton Madevu

2.2 that presents the percentages of sales off the TM attributed to each of the industry
players. The top 10 buyers accounted for 26% (R70 865 784), 25% (R75 058 406) and
26% (R83 345 219) of the market’s turnover in January, February and March of 2005
respectively.

Table 2.2: Distribution of turnover sources for Tshwane Market

Period Informal Retail Whole- Contract Chain Processor Final

trade (%) sale Buyer Store (%) Consumer
(%) (%) (%) (%) (%)
1999 20 28 29 1 18 1 1
Jan 2005 28 27 23 4 14 2 2
Feb 2005 31 24 25 3 13 2 2
March 2005 30 26 24 3 13 2 2
Data source: Dodds & Sedutla (2005)

Another output of the TM information system is the classification of the fresh fruit
and vegetables (FFV) industry into seven classes namely wholesalers, chain stores,
retailers, informal traders, processors, contract buyers, and final consumers. The
definitions of each type of buyer are not entirely novel but present an interesting
perspective of the industry. In addition, when discussed in cognisance of table 2.2 the
classifications better illustrate the relative size and contribution of each class of FFV
player.

Similar to the current study, wholesalers are defined as buyers who sell more than half
of their stock to other businesses. This class is considered critical because they
individually “move” of large volumes of fresh produce and they collectively account
for about a quarter of the TM sales.

Buyers off the TM are considered retailers when they sell more than 50% of their
goods directly to final consumers. This cluster, including small formal retailers
(greengrocers and convenience stores) and the none-syndicated supermarkets, buys a
second 25% of the all TM sales. An interesting note was that a large proportion of
greengrocers and fruitiers in this group were owned and run by immigrants (or their
decedents). These were typically South Africans of southern European decent
(including the Greek, Italian and Portuguese). Key informants commented that these
people traditionally consumed large amounts of a wide variety of fresh produce and

31
MSc. Dissertation: Hilton Madevu

therefore had a long history of handling these products. Observers also point out that
the independent greengrocers have all but disappeared in small towns and cities such
as Nelspruit in Mpumalanga province. Most have converted their stores to
convenience stores especially as franchises under the SPAR brand. (Roos B. 2006,
personal communication). However, the business format was currently vibrant within
the large cities and metros (Dodds, 2005; Bezuidenhout, 2006, personal
communications)

Chain stores constitute the fourth largest market to the TM and were classified
separately to other formal retailers. Chain stores are only recognised as such when
they employ a centralised procurement system. Thus when a single outlet makes a
purchase it is classed among the other retailers and not as a chain store. Their share of
purchases off the TM was on the declining from 18% in 1999 to 13% in March 2005
(table 2.2). The primarily sourced FFV directly from producers about (70%) and the
rest from produce markets (30%) except when produce was out of stock when they
imported. Specialised supermarkets procurers such as Freshmark stated that they
maintained verbal contracts with supplying farmers and had formal contracts with
corporate as well as franchise outlets with regards to the conditions of accepting fresh
produce, pricing and payment procedures.

Processors are defined as businesses that buy produce in bulk, transform to add value
and then resell it. Processors, constituting 1% to 2% of TM turnover, typically acquire
slightly lower grade produce with the types of defects (such as minor blemishes) that
only affect aesthetic appeal. In so doing they take advantage of the relatively lower
prices.

The contract buyers’ class are another relatively small group not mentioned in
previous literature accounting for 1% to 4% of sales at TM. They include individuals
or companies that enter into contracts with private and state bodies to buy and deliver
bulk produce to specified locations as set out in the contract documents. Typical
clients of contract suppliers include the catering and hospitality sector (i.e. fast food
chains, hotels, corporate canteens) as well as institutions (hospitals, prisons, children’s
and retirement homes) Contract buyers play the important product assembly and risk
mitigation functions. Essentially they charge client institutions a premium for

32
MSc. Dissertation: Hilton Madevu

insulating them from the hassle of finding their produce needs from a variety of
suppliers as well as reducing the ever-present risks of wastage in transit, quality
variations, seasonality, daily price movements and other shocks associated with the
FFV industry.

In March 2005 informal traders were the largest single buyer category at TM (table
2.2). This group refers to individuals or groups of individuals operating in small units
and who are not formally registered as businesses. Although players in this group
make small individual orders informal traders are considered important not only
because of their collective size but their versatility. They are most able to recognise
and react to price differentials and take advantage of special offers while other buyer
classes tend to follow rigid buying patterns and schedules. This market agility is an
important trait because it helps to clear instances of oversupply at the market thus
reduces potential wastage losses.

Informal traders were observed to operate three modes namely fixed location, semi-
mobile and roving. The majority operate from fixed locations such as rented
municipal stalls, tables and pavements (Dube P. 2005, personal communication). The
semi-mobile traders’ business model included a combination of a fixed base (a
roadside stand or train station) and sales to customers in transit (motorists in traffic
stops or commuters seated in trains and buses). Their bases where primarily used to
store and process (sort, package and clean) inventory although some sales were also
made there. This second format existed at busy neighbourhood intersections and at
major accesses routes to the central business district. Semi-mobile traders operating in
the railway system located their bases at minor train stations that had ample space and
limited interference from rail officials such as the Mears Station. These traders carried
their ware on their person making sales within train cars and restocking was
performed during the brief stops at base stations.

The roving operators included those marketing their ware by displaying it on portable
displays including shopping trolleys, baskets, boxes, bags, self styled displays and
displays hung on the sellers’ person. The mobile format hawker, and particularly
those using old shopping trolleys, focused on door to door sales and special events.
Some could be classed as semi-mobile since they tended to ‘park’ their trolleys at a

33
MSc. Dissertation: Hilton Madevu

particular preferred location on most days. These classifications cover the comparable
list of locations of informal traders presented in Ligthelm & Van Wyk (2004; p. 10
and 21). Another interesting observation was that informal tuck-shop (spaza) typically
avoided FFV focusing instead on fast moving consumer goods (FMCG). Although
this factor excluded many spazas from the scope of this research the observation
warranted further enquiry. This revealed that the comparatively frequent (if not daily)
restocking necessary in the FFV trade was a strong deterrent for spaza owners.

The final consumers group identified at the TM were individuals that buy fresh
produce in relatively small quantities for personal household use. An additional
category named ‘cash sales’ encompasses all buyers who prefer to remain
anonymous. These buyers were reclassified in table 2.2 based on their transaction
histories, which showed that 40% of the unregistered group displayed the traits of
retailers and 60% could be linked to informal traders.

Exploratory study interviewees emphasised the importance of produce markets

(FPMs). Despite the supermarkets trend towards more direct procurement from
farmers (Louw et al., 2004), they are still among the top buyers off the national fresh
produce market floors. For instance Shoprite obtains approximately 70% of its fresh
produce from various produce markets (Du Toit G. 2005, personal communication)
and as shown before, chain stores typically account for 13% to 18% of the TM’s
turnover (Dobbs 2005, personal communication). Procurement directly from
producers was mainly reserved for acquiring the more sensitive and/or specialised
product lines such as baby marrow, lettuce and spinach. This is so because an intimate
knowledge of post harvest treatment (that is, cold chain management, traceability etc.)
is critical to making full use of the products’ short shelf lives and ultimately to
reducing the wastage bill (Du Toit G. 2005, personal communication). Also as shown
in the subsequent phase 2, the smaller retailers purchased almost all their FFV
supplies from municipal produce markets.

Key informants and practitioners reported another interesting trend that, in response to
consumer preference and demand, all retailers had progressively moved towards
exclusively trading in high quality, first grade FFV. The lower grades have
increasingly become the reserve of fresh produce processors. This revolution had in

34
MSc. Dissertation: Hilton Madevu

part been facilitated by the use of the HACCP (Hazard Analysis and Critical Control
Point) processes to improved grading and classing at the TM and other markets.
Existing and new suppliers were also provided with specific packaging, grading and
sorting requirements for all FFV thus facilitating uniformity, increasing speed of
transactions and reducing the need for inspection.

2.4.2 Market segmentation in Tshwane

Another interesting find of the exploratory study was that although all three FFV retail
formats (supermarkets, greengrocers and hawkers) exist across Tshwane their relative
strengths as a market competitor vary according to the affluence areas. The tri-
dimensional nature of retail competition is most evident in the middle-income areas
(LSM 5, 6 & 7) of Tshwane where all three formats appeared to be virulent. This was
less so in other affluence group areas. This observation was contrary to comments in
Ligthelm (2006b) that hawkers only accessed (an undefined set of) low income areas.

The low-income areas (LSM 2, 3 & 4) were dominated by informal traders and there
were very few greengrocer outlets found in these areas. The few supermarkets present
in the low-income areas do not deal in fruits or vegetables. A senior Freshmark
official noted that FFV are perennial loss making sections of their outlets in low
income and lower middle income areas such as Hillbrow, Johannesburg and Silverton
in Tshwane (Du Toit G. personal communication, 2005). Nevertheless the FFV
sections in these outlets were kept running primarily to maintain the strategic
corporate brand image which includes an assurance that all branches under the same
store brand would be similarly stocked nationwide. Another remedy to this problem
was to use store brands that have a small to zero FFV component in such areas.
Examples of such supermarket brands (and particular outlets) include Freedom (Belle
Ombre), BuyRite (Attridgeville), Usave (CBD) and Boxer Supermarkets.
Interestingly, these supermarkets tended to serve as draw cards for the informal
traders’ customers as they would typically buy groceries in the supermarket and fresh
produce from the hawkers outside.

35
MSc. Dissertation: Hilton Madevu

FFV market shares in Tshwane’s high-income areas (LSM 8, 9 & 10) were held
almost exclusively by supermarkets and the wholesale-retail chain Fruit and Veg City.
This outcome was facilitated, in part, local residents access to private transport, and
an observed preference for enclosed shopping malls. Shops in these malls tend to be
the reserve of chain retailers. A few small greengrocers were observed in isolated
shopping centres within these affluent neighbourhood but the hawkers were
effectively confined to public transport nodes including taxi ranks, bus and train
stations. A survey by the National Department of Transport (DOT, 1998) found that
the majority (78% to 94%) of high income households in South Africa do not use
public transport. Thus the informal FFV sector observed at transport nodes is serving
a minority of the areas’ residents and mostly non locals in transit.

The revealed structure and location of the three tier competition in FFV industry had a
significant impact on the survey (phase 2) sample design. It was initially envisaged
that equal samples would be drawn from high, middle and low affluence areas.
However, in light of phase 1 findings, it was judged that the types of respondents were
unlikely to be found in the high and low-income areas. Therefore the resolution was to
focus on middle-income areas while maintaining the gross sample size. Details of how
was achieved are outlined in the methods and procedure chapter.

2.4.3 Reference product selection

Other than the important perspective forming function documented thus far, phase 1
also assisted in the selection of the set of top three fruits and three vegetables to be
used as reference products in the study. The need for this product selection was firstly
to limit the number of variables under review, secondly to ensure that the products
selected were commonly traded in all three retail formats, thirdly that they were as
perennially traded as possible and lastly that the chosen products were representative
of the FFV industry. Fulfilling these conditions would therefore facilitate the intended
inter retail format comparisons.

The first step in product selection was identification of the top, high turnover, high
volume and high value fresh products in the domestic retail market. Based on

36
MSc. Dissertation: Hilton Madevu

historical data on the average value of vegetables sold at local produce markets (DoA,
2005a), the top three vegetables sold in South Africa are potatoes, tomatoes and
onions. Over the last twelve years they have consistently been the most prominent
products both among the top twenty vegetable lines (figure 2.2) and among the top
seven perennial vegetables lines sold across the country’s sixteen major fresh produce
markets (FPMs).

1,600,000

1,400,000

1,200,000

1,000,000
Rands ('000)

800,000

600,000

400,000

200,000

0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Years
Potatoes Tomatoes Onions Cabbages Pumpkins
Carrots Gem squashes Sweet potatoes Cauliflower Green beans
Hubbard squashes Beetroot Cucumbers Lettuce Green peas
Green mealies Marrows Turnips Butternut squashes All vegetables

Figure 2.2: Average value of top vegetables sold at major FPMs (1991-2003)

Data source: DoA (2005a)

A similar result was obtained in the domestic fruit retail sector where three product
lines (bananas, apples and oranges) had been dominant over the last twenty years. The
average rand values of the three fruits was found to be highest among the set of 27 top
fruit lines sold across the country’s 16 major FPMs (figure 2.3) (DoA, 2005a).

37
MSc. Dissertation: Hilton Madevu

500000000

450000000

400000000

350000000

300000000
Rands ('000)

250000000

200000000

150000000

100000000

50000000

0
19 78

19 79

19 80

19 81

19 2

19 83

19 84

19 85

19 86

19 7

19 88

19 89

19 90

19 91

19 2

19 93

19 4

19 95

19 96

19 97

19 98

19 9

20 00

20 01

20 02

20 03

20 03

4
/8

/8

/9

/9

/9

/0
/

/
77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

02

03
19

Production Seasons (Years)

Banana Apples Oranges Apricots Grapes Pears Peaches
Plums Prunes Cherries Quances Figs Straw berries Other berries
Watermelons Musk melons Sw eet melons Avocados Granadilla Litchis Guava
Mangoes Paw paw s Pineapples Lemons Grapefruit Naartjes

Figure 2.3: Average value of top fruits sold on the 16 major FPMs (1978-2004)

Data source: DoA (2005a)

The second criterion for product selection was that they be commonly traded in all
three of the retail channels (supermarkets, greengrocers and informal traders).
Verification of whether this criterion was met by the six highest volume and turnover
FFV involved evidence and views gathered from different sources. These were (i) the
three retailer hosts of the phase 1 embedding period, (ii) interviews with TM officials,
(iii) interviews with retailer organisations and (iv) author’s observations of which
FFV were commonly traded. These sources subsequently confirmed that the six
products identified above (bananas, apples, oranges, potatoes, tomatoes and onions)
were suitable as reference FFV for the present study.

2.4.4 Under and over reporting

A high incidence of under and over reporting of financial information was detected
among the hawkers and greengrocers. This included data on turnovers, profit margins

38
MSc. Dissertation: Hilton Madevu

and costs. This was not a surprise since numerous statistical, financial and economic
studies have also reported this underreporting, overreporting and misreporting
particularly in the informal sector (Luttikhuizen & Kazemier, 2000; IMF, 2003;
UNESCAP, 2004; and Gholami, 2005). This error source also featured in a
comparable South African study by the BMR (Ligthelm, 2006a). The problem is tied
to various strategic and economic motives. Profits, for instance, are typically
understated to avoid and minimise taxes due. In the case of development studies,
respondents understate the incomes obtained to qualify for assistance. On the other
hand incomes may also be overstated to impress peers, partners and stakeholders.
They may also be overstated to intimidate competitors. In many cases respondents
were found to be reluctant to share financial information and resulting in a high
amount of misreporting or none response errors.

Wherever inconsistency was verified either the interview was redone or that
respondent was replaced with another similar case. In contrast the supermarkets were
far more willing to share detailed reports of trends in sales over years. This problem
underscores the lack of trust displayed by these traders especially among the
greengrocers who clearly knew the figures but chose not to disclose them. In the case
of informal traders the possibility of this error occurring was confounded by their lack
of record keeping.

A related observation was that the concept of turnover was foreign to hawkers as they
separated the cost of purchasing stock from the profits. Greengrocers also tended not
to maintain a record of turnover per se. They immediately separated the profit from
the cost of sales. Conversely respondents from corporately owned supermarkets (store
managers and fresh produce supervisors) were generally ignorant of the costs
involved in the purchase and transportation of stock. They therefore were only aware
of the turnover they made at store level. The sources of profit and cost data were
therefore the regional and national heads of the FFV sections. Thus in cognisance of
these differences, care was taken during the data collection process to distinguish
between costs, turnover and profits. This was particularly important where the
interviews were conducted in languages other than English.

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MSc. Dissertation: Hilton Madevu

2.5 Summary

This chapter provided a review of the FFV industry based on literature and an
exploratory study. It began with an illustration of the exceptional difficulties and risks
involved in conducting business in this industry due to, among other things,
perishability, seasonality, and susceptibility of the products and sector to systemic
shocks. It went on to describe the previously documented players geared towards
tackling these challenges at three levels namely wholesalers, wholesaler-retailers and
retailers.

The municipal fresh produce markets (FPM) were found to be dominant in the sector
and perform a vital price-setting function. Other wholesalers were the independent
wholesalers, supermarket wholesaling subsidiaries and farmer’s gate sales (DoA n.d;
NAMC 2000). Wholesaler-retailers were primarily involved in the FMCG trade, with
a relatively few focusing on FFV besides the relatively new Fruit and Veg City chain.
These newer wholesaler-retailers were found to closely resemble supermarkets in
appearance and practices.

The FFV retail sector found to have two categories, the formal and informal traders.
Being in the formal sector implied a need to be registered for VAT and thus following
legal prescriptions for record keeping. This made the sector easy to study, and
especially so for the supermarket chains that were often also listed in stock exchanges
making their information ever more publicly accessible. These studies on formal
retailing have found that formal retailing is highly concentrated but less so in FFV
retail. Penetration into the sector has proven to be more challenging for supermarkets.
This lagged market entry has also been witnessed in other regions including Europe
and more recently in Latin America. The reasons for this have been subject to
speculation and form part of the questions addressed by this study.

Resilience of small retailers (greengrocers) and the informal traders has lead theorists
to define the FFV market as a scale neutral sector offering access to all sizes
entrepreneurs. They cite it as a possible ground for the growth of small businesses and
thus new employment. The review of literature also noted that most studies were at

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the national level and failed to compare the three forms of FFV retailing. This implied
that a hybrid method of analysis was needed to obtain this background, thus an
exploratory study (phase 1) initiated.

Phase 1 involved observations made during an embedding period and key informant
interviews. These helped to confirm the presence of all the national level FFV players
in Tshwane. It went on to define the relative sizes of the players based on sales off the
Tshwane Market. Although the existence of this inter-format retail competition is
confirmed, it was most apparent in the middle income areas with the high income
areas dominated by large format retailers and the low income areas primarily being
the reserve of informal retailers. This prompted an adjustment to the phase 2 sample
design. Six products were then selected as reference products for the present study.
This was based on phase 1 findings backed by data on volumes and product value
from national produce markets. These selected six were apples, oranges, bananas,
potatoes, tomatoes and onions.

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3 Chapter 3: Techniques in Competition Analysis

3.1 Introduction

This chapter provides a review of the theory, methods and tools used in the evaluation
of competitive economic agents. It begins with a review of the basic economic model
of competition, perfect competition. It subsequently evaluates popular classical and
contemporary competition analysis tools in terms of their suitability for the current
study. The section subsequently zeros in on Porter’s framework, market targeting, the
marketing mix (Ps) and chain analysis as the appropriate tools to investigate the
competitive environment in Tshwane’s fresh produce retail market. It further
describes how chain analysis and associated tools including chain mapping, radar
charting and the factor evaluation matrix (FEM) help to quantify an otherwise
qualitative and descriptive evaluation of competing FFV players.

3.2 Perfect Competition: The Grounding Concept

As stated in the objectives this study seeks to analyse competitive behaviour in a

specific setting. It is therefore important to define this economic phenomenon named
competition. Basic economics texts such as one by Samuelson (1967) use “perfect
competition” as point of departure in teaching ideal conditions for economic activity,
that is, to achieve a Pareto 3 optimal equilibrium. A set of four requirements is
necessary to achieve this point:
i) Perfect knowledge of market conditions and instantaneous resource mobility
ii) A large number of buyers and sellers in an industry (so that none can influence
prices)

3
Pareto optimal equilibrium is where no improvement in the well-being of an economic agent can be achieved
without resulting in a reduction in the well-being of another.

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MSc. Dissertation: Hilton Madevu

iii) A standardised or non-differentiated product throughout an industry (thus, no

brand names nor advertising)
iv) Free entry (meaning relatively costless admission of a new operating company
into an established industry)

Having defined perfect competition, textbooks describe models of lesser competition

in terms of their failure to meet requirements. Thus "monopolistic competition" is
pure competition without meeting the standardisation. Also, "oligopoly" (from Greek,
meaning "few sellers") is pure competition without meeting the ‘many sellers’
requirement for perfect competition. Monopoly is thus the opposite of perfect
competition. Monopoly consists of one seller selling a unique product and that is
"protected" by high costs of entry (Peterson, 1973).

Critics to the optimality of meeting these four requirements often point to it being a
static point of analysis and thus object to its use in analysing a dynamic world.
However this model retains its value as a tool for analysing the competitive
environment. One need only use other analytical tools to complement this model and
therefore not to judge a market purely on how far it departs from the purely
competitive state.

Similar to international studies (Richards & Patterson, 2003), Chapter 1 of this study
and literature quoted demonstrates the levels of concentration in South African retail
(Brandt, 2004; Weatherspoon & Reardon, 2003 and M+M Planet Retail, 2004) and
specifically in the agro-food chains. This is a violation of the “many sellers”
requirement. Similarly other requirements are violated to different extents including
“perfect knowledge”, through branding and costs of market entry. The study therefore
maintains the a-priori persuasion that the fresh produce market under review will
depart from the ideal perfectly competitive market. The severity of this departure
among Tshwane fresh produce retailers will therefore form part of the subject matter
to be analysed and discussed.

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3.3 Competition Analysis

Competitive behaviour is intrinsically the choice of marketing strategies with the aim
maximising profit through increased market share. Numerous studies have been
performed to evaluate the choice of marketing mix and its effect on the profitability of
firms. Empirical research of this nature began in the 1950s and followed what is
named the structure conduct performance (SCP) paradigm of empirical industrial
organisation. The SCP uses cross-sectional data across industries to find empirical
patterns across industries. Many of these studies in marketing have used the Profit
Impact of Marketing Strategies (PIMS) data (Buzzell & Gale, 1987 for a review of
PIMS studies). These studies were successful in drawing statistical relationships
between marketing mix choices such as the marketing Ps and costs to the profits of
firms (Kadiyali, 2001).

Developments in game theory in the 1970s led to criticisms of the SCP framework for
failing to account for industry and firm specific characteristics (Moorthy, 1993). As a
result the New Empirical Industrial Organisation (NEIO; reviewed in Bresnahan,
1989 and Kadiyali, 2001) was proposed to remedy these shortcomings. However as
with all modelling techniques, access to comprehensive and reliable data is critical.

For the purposes of this study one could assume that supermarkets had sufficient data
for modelling. However this data would not be available at store level and would be
aggregated at their distribution centres in addition such information would be
strategically confidential and only available internally. Phase 1 of this survey revealed
that greengrocers barely kept accounting records let alone formulated or kept record
of a marketing strategy. In addition the lack of records, let alone marketing strategies
in the informal sector was almost universal. Therefore any attempt to empirically
analyse or model competitive behaviour using SCP, NEIO or any modelling methods
was deemed infeasible.

At the level of international competition there are similarly numerous ex-post and
predictive methods used to measure competitiveness. These models include real
exchange rate, foreign direct investment, accounting methods, domestic resource costs

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and mathematical models (Frohberg & Hartman, 1997 in Esterhuizen & Van Rooyen,
2004). Of these, Michael Porter’s forces and Balassa’s Revealed Comparative
Advantage (RCA) method are the most widely used (Esterhuizen & Van Rooyen,
2004). Given their international focus and, for instance, their reliance of RCA on trade
data these models were also deemed inappropriate for the purposes of this study.

Porter (1979) had earlier developed the five forces model. This model was considered
appropriate for this study used in market or industry level competition analysis. As
illustrated in figure 3.1, Porter’s five forces model refers to how four forces (namely
bargaining power of customers, the bargaining power of suppliers, the threat of new
entrants, and the threat of substitute products) combine to influence a fifth force, the
level of competition in an industry.

Threat of
new entrants

Bargaining Competitive Bargaining

power of rivalry within power of
Suppliers the industry buyers

Threat of
substitutes

Figure 3.1: Porter’s Five Competitive Forces

The strength of Porter’s forces (Porter’s diamond) is that it was able to condense the
study of microeconomics into one simple model as shown in table 3.1.

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Table 3.1: Simplifying power of the Porter’s forces model

Porter’s Forces Areas of Microeconomics

Bargaining power of suppliers Supply and demand theory, cost and production theory, price
elasticity
Bargaining power of customers Supply and demand theory, customer behaviour, price elasticity
Rivalry between existing players Market structures, number of players, market size and growth
rates
Threat of substitutes Substitution effects
Threat of new entrants Market entry barriers
Æ Industry attractiveness Æ Profitability, supernormal profits

Theorists propose two related extensions to Porter, first is the concept of limited
cooperation between market rivals to achieve mutual benefit. This named cooperative
competition or co-opetition (Brandenburger & Nalebuff, 1996). Secondly are
complementors (strategic alliances) as seen in game theory.

The detractors of Porter's framework (Coyne & Subramaniam, 1996) highlight the
weakness in three underlying assumptions: (a) that buyers, competitors, and suppliers
are unrelated and do not interact and collude; (b) that the source of value is structural
advantage (creating barriers to entry); (c) and that uncertainty is low, allowing
participants in a market to plan for others behaviour.

Albeit these shortcomings Porter’s framework remains a useful tool in the analysis of
inter-form competition in Tshwane’s fresh produce retail industry. The model is also
simple enough to apply in an environment where perceptions of industry players will
be more readily available than detailed historical data. Figure 3.2 illustrates an
application of Porter’s model to represent the postulated competitive rivalry in the
fresh produce industry of Tshwane.

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MSc. Dissertation: Hilton Madevu

Intra-format
Large Retailer Inter-format
competition
competition

Large Retailer

Greengrocer
Hawker

Greengrocer Hawker

Figure 3.2: Postulated competitive rivalries within the fresh produce industry

Traill & Pitts (1997) proposed a means of operationalizing Porter’s model in

analysing competitiveness in the business environment. This is done by answering a
series of questions as listed in the following checklist (Box 3.1).

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Box 3.1: Competition analysis checklist

1. Who are your five nearest direct competitors? (Intra-market competition)

2. Who are your indirect competitors? (Inter-market competition)
3. Why do you consider these your competitors?
4. Is their business growing, steady, or declining (turnover over the past 5 years)? - Is the market for
your product growing sufficiently so there are enough customers for all market players (Industry
and trade association publications; Industry research and surveys)
5. What can you learn from their operations or from their advertising?
6. What are their strengths and weaknesses? - The customer's viewpoint. State how you will
capitalise on their weaknesses and meet the challenges represented by their strengths.
7. How does their product or service differ from yours? – In terms of location, quality, advertising,
staff, distribution methods, promotional strategies, customer service, etc
8. How can you overcome your challenges?
9. How do you see your prospects for the future?

Another useful exercise is to start a file on each of your competitors including advertising, promotional
materials, and pricing strategies. Review these files periodically, determining how often they advertise,
sponsor promotions, and offer sales. Study the copy used in the advertising and promotional materials,
and their sales strategies.

Adapted from Traill & Pitts (1997)

This checklist provides a practical list of issues to address in conducting a competitive

analysis and therefore also served as a useful guide to the design of the enumeration
tool used in this study. The questionnaires (appendices 2 to 7) were designed to
address these questions and thus elicit the respondents’ perception of the competitive
environment in the fresh produce market.

3.4 Market Targeting & the Marketing Mix (4Ps)

Market targeting and the marketing Ps are two related marketing tools employed both
in the analysis and pursuit of competitive advantage. Given the focus of this research
the two concepts require a brief review.

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3.4.1 Market segmentation and targeting

Market segmentation is based on the principle that one product cannot serve the needs
of all consumers. Thus segmentation involves the division of a population of possible
customers (prospects) into homogenous groups using for instance, the LSM. Theorists
suggest that this intra-group similarity implies that prospects in each segment are
likely to respond similarly to a given set of marketing stimuli. The purpose of
segmenting (dividing) a market is therefore to allow a business to focus on the subset
of prospects that are most likely to react positively to a marketing strategy (purchase
the product).

Successful segmentation ensures the business is able to identify the segments with the
highest return for marketing/sales expenditures. The enterprise then selects (targets)
one or more of these segments and adapts or designs its offering to meet that
segment’s needs (Kotler, 2003). In investigating competition, this study will therefore
investigate the means by which FFV retailers have chosen to segment and target their
prospects.

3.4.2 Marketing Mix

An important element of this study was to establish the means by which fresh produce
retailers adjust their offering to better ‘compete’ by attracting more customers, market
share and ultimately profits. The marketing mix is a model designed to analyse this
offerings matrix. The marketing mix approach stresses the mixing of various factors
in such a way that both organisational and consumer (target market) objectives are
attained (figure 3.3). The marketing mix model originates from work by Neil Borden
(1964) who first started using the phrase, in 1949. The most common variables used
in constructing a marketing mix are price, promotion, product and place (location and
distribution) commonly referred to as the four Ps as suggested by Jerome McCarthy
(1960).

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Figure 3.3: The marketing mix used to target a market segment

Sources: Wikipedia (2002) and NetMBA.com (2005)

Bitner & Booms (1981) extended the model to seven P's by adding participants,
physical evidence, and process. The ‘participant’ or ‘partners’ P was to highlight the
importance of the human element and collaborative channel relationships in
marketing; ‘process’ to account for intangible service element of an offering.
‘Physical evidence’ or ‘peripheral clues’ refer to the physical surroundings this is
therefore closely related to the place and promotion variables. Given that the exact
number of Ps used can vary in each situation the terms marketing Ps or just Ps were
preferred in this research.

Robert Lauterborn (1990) proposed a four C's model that has more of a consumer
focus. This model involved the transformation of the marketing mix Ps to Cs, which
was accomplished by converting Product into "customer solution", Price into "cost to
the customer", Place into "convenience" and Promotion into "communication".
However, this transformation added little value because it merely amounted to a
renaming of the four Ps while maintaining its essence.

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Given this review, the marketing mix was judged to be an ideal instrument in
answering the research questions which involve evaluating the strategic marketing
and competitive behaviour of the players Tshwane’s fresh produce retail market

3.5 Chain Analysis

A foresighted international survey conducted by Zuurbier (1999) (in Van Rooyen,

2000) indicated that vertically integrated supply chains, networks and trust
relationships would determine the structure of the food and agribusiness industry. He
listed the drivers to be technology and an understanding of consumer behaviour. The
report concluded that the winners in the competition for market share would be those
that achieve efficiency in their supply chains. The dominance of vertically integrated
supermarkets serves to verify Zuurbier’s forecasts. In support of this view, Philip
Kotler (2003) noted that, firms no longer only compete against each other. It is now a
matter of competition between supply chains. Theorists therefore agree that players in
the business environment need to focus on becoming more than islands of efficiency,
but to ensure that their partners both up and down stream are equally if not more adept
(Kaplinsky & Morris, 2000).

Given this school of thought it was appropriate to analyse competition within the fresh
produce market in terms of competition between three supply channels/routes, namely
between supplying FFV through supermarkets, greengrocers and the informal traders.
However this study does not investigate the entire farm to fork supply chains and is
limited to the last portion from when retailers take possession of FFV and pass it on to
consumer. Thus the supply chain (SC) and value chain analysis (VCA) methodology
serve as an important supporting tool. The following text puts the key concepts of the
SC and VCA in the contextual of the current study.

Value chains (VC) describes the full range of activities which are required to bring a
product or service from conception, through the different phases of production
(involving a combination of physical transformation and the input of various producer

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services), delivery to final consumers, and final disposal after use (Kaplinsky &
Morris, p.4, 2000).

Michael Porter (1985) introduced a generic value chain model that comprises a
sequence of activities found to be common to a wide range of firms. Porter identified
primary and support activities as shown in the following diagram:

General Administration
Support Activities

Human Resource Management

Margin
Research technology

Research, technology and systems development

Procurement

Margin
Inbound Outbound Marketing
Operations Service
Logistics Logistics & Sales

Figure 3.4: Porter's Generic Value Chain

Adapted from Porter (1985)

Van Roekel (2002) described supply chains (SC) as institutional arrangements that
link producers, processors, marketers and distributors. They are forms of industrial
organisation that allow buyers and sellers separated by space and time to
progressively add and accumulate value as products pass from one member of the
chain to the next.

These terms VC and SC describe closely related concepts. The SC is more popular in
agribusiness literature as it more explicitly involves the flow (supply) of some
physical product. VC is a more general term as it emphasises the importance of
intangible services in the delivery of a final product. Value chain analysis (VCA) will
be favoured in this text because it possesses more robust and formal analytical tools
and methodology that will be of use in decomposing the fresh produce market. It also

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allows for analysing the value generated at the retailer level without necessarily
having to refer to upstream players.

Upgrading and improving efficiency of the value chains was named as an important
aim of this research process. Kaplinsky & Morris (2000) listed four broad means by
which this may be achieved using the VC approach:
Process upgrading: an introspection to improve internal efficiency
Product upgrading: introducing new products and improving existing lines
Functional upgrading: improving the mix of activities within the organisation and
shifting the general focus (e.g. from manufacturing to a design orientation)
Chain upgrading: moving to new lucrative value chains

The VC model and its approaches to channel upgrading were therefore also seen to
contribute to the framework through which this study will seek to analyse the three
competing fresh produce retailer formats and identify possible avenues for
improvement.

From a game theory point of view, the outcomes of any attempt to upgrade in a
competitive environment are not guaranteed because of the range of possible reactions
of other market stakeholders. From Porter’s model, these stakeholders include the up
and down stream players, possible new entrants, substitutes, as well as current peers
within the industry. Therefore investigating the possible outcomes of each suggested
upgrade to find an optimal solution would lead to a whole other research study. Thus
the current study is limited to identifying opportunities for channel upgrades without
speculating on the range of possible outcomes.

3.6 Quantifying Competition

Competition analysis, as with other qualitative social and managerial evaluation tools,
are often labelled as woolly because they were not generated through rigorous
statistical methods and therefore do not facilitate easy generalisation (Epstein, 1992).
Thus tools that add quantitative elements and systematic structure add to shared

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understanding and reduce inherent subjectivity (Taylor & Bogdan, 1998). For this
purpose, three VCA tools were employed to add this element of measurement to the
competition analysis. These were namely ‘value chain mapping’, ‘critical success
factor charting’ and the ‘factor evaluation matrix tools’. These are described in the
following sub-sections.

3.6.1 Value chain mapping

Value chain maps provide a basic diagrammatic layout of a food system which forms
the basis for subsequent development and analysis (Humphrey, 2005). The iterative
steps involved in the mapping process are laid out in box 3.2.

Box 3.2: Value chain mapping

1. Identify about six main function/activities between the start of the production process and sale to
the final customer.
2. Identify distinct marketing channels or final outlets (for example, supermarkets, wholesale
markets, etc.). Choose not more than three of these (in this case supermarkets, greengrocers and
informal traders)
3. Work backwards along the chain identifying the types of enterprises and participants that carry out
each successive function as well as what these functions and activities entail.
4. Consider the governance relationships and inter-relationships between adjacent enterprises in the
chain using the following conventions:
• A dotted line to denote an arm's-length/ uncoordinated market relationship.
• A single unbroken line to show a persistent, network relationship between independent firms
(e.g. contractual relationships)
• A thickened line representing vertical integration (successive stages value chain activities
within a single enterprise)

Indicate areas for which adequate information is not available by placing question marks on the map.
Source: Humphrey (2005) and McCormick & Schmitz (2001).

This process produces value chain maps similar to figure 3.5 depicting Kenyan fresh
vegetables export channels to the UK.

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Figure 3.5: Example, the Kenya-UK Fresh Vegetables Chain

Source: Humphrey (2005)

Having carried out the first iteration, the map produced would be checked for
adequacy in terms of number of stages detected; level of detail; need to divide into
separate maps; the accuracy of connecting and end points; as well as its validity for all
products in the defined category (FFV in this instance).

Of note though is that although the tool displays the entire farm to folk value chain
and can stretch back to input sources too. This mapping tool is typically used in
mapping international chains (see: Schmitz & Knorringa, 1999; McCormick &
Schmitz, 2001; and Humphrey, 2005). However, given that the subjects of interest in
the current study are fresh produce retailer within a city, application of this charting
system to will be limited to the retail portion of the chain within this environment
putting less emphasis on the production and international trade.

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3.6.2 Performance charting

Polar, or `Radar' charts of performance are another important tool in VCA and
competition analysis. Their power lies in facilitating a visual comparison between
several quantitative and/or qualitative aspects of a situation using the same axes
(poles). Thus competitive performance of an industry, channel or a single player can
be judged against rivals and/or benchmarks.

Quality
5

4
Design 3 Price

Large Order Response Time

China
India
Small Orders Punctuality
Brazil
Italy

Figure 3.6: Buyer Assessment of Producer Performance (average scores)

Data source: Schmitz & Knorringa (1999)

The example in figure 3.6 is a plot of the average producer performance scores of
footwear producers in four countries according to global buyers (Schmitz &
Knorringa, 1999). For clarity, the number of attributes on each plot is limited to
between three and eight with scales for each attribute arranged radially. The points
plotted on each radius are joined to generate a shape that can be compared different
entities or to perform a gap analysis between a desirable/benchmark state and the
present situation to demonstrate graphically the gap between them.

This tool will therefore be ideal in the comparison of the performance of each of the
FFV retail channels and in identifying the opportunities for their upgrading.

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3.6.3 Factor evaluation matrix

The factor evaluation matrix (FEM) has been used in business as a means of
quantifying and summarising the SWOT analysis (Ehlers & Lazenby, 2004). FEM
was therefore an ideal tool to help evaluate and compare the competitiveness of the
three retail FFV formats, in a less qualitative manner. The application of FEM in this
study began with the inclusion of table 3.2 in the enumeration tools (see appendices 2
to 7). Note that the original form of the FEM handles the internal (strengths and
weaknesses) and external (opportunities and threats) environments separately. The
current application of FEM presents the two environments simultaneously with a
particular focus on the marketing Ps as key strategic issues.

Table 3.2: Factor evaluation matrix for the informal FFV retailers

Strategic Issues Importance Hawkers’ Hawkers’ Score

(Weight out by all Performance (Multiply)
retailers) (Out of Ten)
Place α β χ
Price
Product
Promotion
Other (Name)
Other (Name)
Total δ ε
Adapted from Ehlers & Lazenby (2004)

Generating the FEM includes firstly listing the strategic issues, in this case, beginning
with the marketing mix Ps. Next step is to generate weights (α) to each factor with the
total weight (δ) adding up to 1. Respondents were then asked to rate performance out
of 10 (β). Then scores for each factor (χ) are calculated by multiplying weight by rate.
Finally the scores are totalled to come up with an overall performance score (ε) for
that business (Ehlers & Lazenby, 2004 and Frost, 2003).

Overall weights are generated collectively in order to create a peer review mechanism
for each business’ performance (Frost, 2003). This is done by averaging the weights
out across respondents so that the performance of each enterprise is judged on the

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basis of a collective weighting generated by averaging the weights assigned by all

respondents.

3.7 Summary

This chapter reviewed procedures used in the evaluation of competition. This began
with the view of seeing real life competition as a departure from perfect competition.
Next were popular competition analysis tools such as Structure Conduct Performance
(SCP) and the New Empirical Industrial Organisation (NEIO). These were
disqualified for the current study due to their heavy reliance on detailed marketing
data, which cannot be found particularly among the FFV greengrocers and hawkers.

Porter’s forces competition model was subsequently most appropriate to serve as the
overall guide to the investigation into the competition between the three channels of
FFV distribution. Being mindful of market targeting, the marketing mix (Ps), the
research was to use chain analysis (CA) as the operationalizing tool. CA was to be
used in unpacking the retail section by identifying role-players; their relationships and
interaction; opportunities for channel upgrading; as well as to account for the value
they generate. The chapter further describes how associated tools - chain mapping,
radar charting and the factor evaluation matrix (FEM) - would help to quantify this
evaluation.

It was envisaged that the chosen set of tools; namely Porter’s diamond, chain
mapping, performance charting and FEM as motivated in the text; would result in the
best view of competitive situation needed to answer the research questions and supply
the opportunities for upgrading the chains as required to fulfil the study’s objectives.

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4 Chapter 4: Research Methods & Procedure

4.1 Introduction

The methods and procedure chapter describes the means by which the study wishes to
perform three functions which are (i) to answer the research question (how
competition in FFV retail is occurring); (ii) how it would address the research
objective (describe and analyse the competitive environment) and; (iii) how the
research hypotheses were tested. It also serves to fulfil scientific requirement of
repeatability since it is a detailed guide to allow other researchers to replicate the
study whether in the same location or elsewhere.

The chapter begins by locating this study among the available methods of
investigation. This is followed by a brief review of how the competition analysis
framework was applied. Next is an account of how the phase 2 descriptive-cross
sectional survey was conducted including a detailed breakdown of the sample design.
The enumeration tool, a questionnaire-checklist, was then deconstructed followed by
a discussion of the measures used to minimise the occurrence of research errors. A
summary section forms the last part of Chapter 4.

4.2 Selected Investigation Type

Research can be broadly classified into two, the intervention and non-intervention
studies. Non-intervention studies involve the observation and analysis of researchable
objects or situations without intervening. This includes systematic observations,
synthesis, and social sciences. Researchers in intervention studies, on the other hand,
manipulate the objects or situations and measure the outcome of this manipulation.
This includes designed experiments and system design (Varkevisser et al., 2003 and
Rossiter, 2005). This study is thus firmly in the non-intervention category since the

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researcher could not possibly affect competition in Tshwane’s fresh produce retail for
purposes of analysis but can only observe it in action.

After classification, the selection of the type of study in research depends on the type
of problem, the state of knowledge available about the problem and the resources
available for the study (Varkevisser et al., 2003). Table 4.1 presents the classifications
of types of study according to these three decision factors.

Table 4.1: Classification of investigation according to research strategies

Knowledge of the problem Type of research questions Type of study

Knowing that a problem exists • What is the nature/magnitude Exploratory studies or
but knowing little about its of the problem? descriptive studies:
characteristics or causes • Who is affected & how? • Descriptive case studies
• What do they know, believe • Cross sectional studies
about the problem & its
causes?
Suspecting certain factors Are certain factors indeed Analytical (comparative)
contribute to the problem associated with the problem? studies:
(e.g. is low education related to • Cross-sectional comparative
low productivity related to studies
quality) • Case-control studies
• Cohort studies
Having established that certain • What is the cause of the • Cohort studies
factors are associated with the problem? Experimental or quasi-
problem: desiring to establish • Will the removal of a experimental studies
the extent to which a particular particular factor prevent or
factor causes or contributes to reduce the problem? (e.g.
the problem providing training)
Having sufficient knowledge • What is the effect of a Experimental or quasi-
about cause(s) to develop and particular experimental studies
assess an intervention that intervention/strategy? (e.g.
would prevent, control or solve being exposed a certain
the problem training program)
• Which of 2 or more
alternative strategies is more
effective and or efficient
Adapted from: Varkevisser et al., 2003

Given this classification (table 4.1), the exploratory and descriptive studies category
was judged to be the closest fit to the situation in this study thus warranting further
investigation.

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4.2.1 Exploratory studies/ case studies

Case studies are small-scale studies of relatively short duration, and are carried out
when little is known about a situation or a problem. They typically include description
as well as comparison. These studies may be called exploratory case studies if they
lead to plausible assumptions about the causes of the problem and explanatory case
studies if they provide sufficient explanations to take action (Yin, 1984).

Exploratory studies gain in explanatory value through triangulation where the

problem is simultaneously probed from different angles. For instance, in this study
financial data was verified when respondents’ answers to questions on turnover, profit
margin, and average costs were consistent. A form of exploratory study the ‘rapid
appraisal’ is commonly used in management and may provide sufficient information
to take action. Otherwise, a larger, more rigorous comparative study will have to be
developed to test differences between groups with respect to various independent
variables (Briggs, 1992)

4.2.2 Descriptive studies

There are two types of descriptive studies the small-scale case studies and larger-scale
cross sectional surveys.

Descriptive case studies are common in social sciences and management sciences.
They involve the description of the characteristics of a particular situation, event or
case. Such a study can provide quite insight into a problem. However a more
extensive, cross-sectional survey is necessary if one aims to generalise the findings to
the population (Moser & Kalton, 1989)

A cross-sectional survey seeks to describe and quantifying the distribution of certain

variables in a study population at one point of time. Cross-sectional surveys can cover
a selected sample of the population or the total population. In the latter cases they
become a census. Given the frequently large number of units involved these surveys

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investigate a limited number of variables in order to avoid problems with analysis and
report writing. At this scale the surveys are also invariably costly (Patton 1990).

If cross-sectional surveys are smaller they can be more complex. Thus small surveys
can reveal interesting associations between certain variables, such as that between
level of affluence and their preferred form of fresh produce retailer. Descriptions of
study population are frequently combined with a comparison of a number of groups
within that population. Thus there exists a grey area between descriptive and
comparative studies (Yin, 1984).

4.2.3 Selected study type

Given the appraised literature it was decided that the study of competition in fresh
produce retail would best be performed in two phases. The investigation was to begin
with a series of short exploratory case studies (phase 1) followed by a descriptive -
cross sectional survey (phase 2). A further description of how this process was
implemented and the chronology of events are described in the subsequent chapter of
this report that discusses the methods and procedure of the study.

4.3 Analytical Tools

Two types of investigation, namely value chain and competition analysis, were
employed as the core investigation tools in this research. Theory behind these tools
was discussed in detail in the previous chapter. Highlighted below is how the two
tools were subsequently used in the investigation of the nature of competition in the
fresh produce retail market.

The competition analysis provided a framework that set the bounds of analysis of the
competition in Tshwane’s FFV industry. This was achieved by means of viewing this
rivalry in terms of the five competitive forces namely: competitive rivalry within the
industry, the threat of new entrants, bargaining power of suppliers, threat of

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substitutes and bargaining power of buyers. The primary force of interest in this
research was the intra-industry rivalry. Further detail was then extracted using value
chain analysis.

In essence VCA is a descriptive tool that was used to unpack and lay out the three
supply/value chains. This was achieved by firstly producing a map outlining the flow
of value generating activities in the three retail channels. This chart demonstrated how
and at which points each of these types of economic agents generated value. Secondly
VCA sheds light on the governance and ownership structures involved in the business.
It showed who owns and controls these FFV retail channels. The tool also facilitated
the documentation of the relationships within and between three forms of retailers.
The final step in VCA was a situation analysis (Strengths, Weaknesses, Opportunities
and Threats) of the players in the competitive environment. These were geared at
understanding the standpoint of each of the players and opportunities for channel
upgrading.

4.4 Phase 2: Survey Sample Design

Assessment of the competitive environment and delineation of the value chains was
conducted in two phases. The first was a pilot and case study conducted during the
preparatory literature review stage (Chapter 2). The phase 2, presented here, included
a survey of 120 fresh produce retailers in the City of Tshwane.

Phase 2 followed a systematic, although non–probabilistic, sample selection process

that paid cognisance of the available marketing data and findings from phase 1. The
sampling procedure was a multi-level stratification followed by a random sample of
the fresh produce retailers in Tshwane. The following text presents a breakdown of
how the 120 respondents in a total of six (6) sampling strata were selected.

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4.4.1 Stratum 1: Population

The population of study, the FFV retailers, is found within the 2043 areas (townships,
farms, suburbs, business and industrial areas) in the City of Tshwane. This therefore
forms the first level of the sampling frame.

4.4.2 Stratum 2: Affluence levels

Market segmentation was demonstrated to be an important determinant of the nature

of competition (Chapter 2). Therefore the second sampling stratum involved dividing
Tshwane into market segments. The tool identified for this purpose was the Living
Standards Measure (LSM 4) designed and maintained by South African Advertising
Research Foundation (SAARF, 2004). The LSM differentiates the South African
population into ten market segments from LSM 1 to LSM 10 in order of increasing
affluence. Stratum 2 of the study was created by aggregating the 2043 areas/suburbs
of Tshwane into ten affluence group areas by means of calculating the dominant LSM
group in each. This aggregation revealed that the lowest wealth group, LSM 1, was
not populated in the city. This observation was in line with the conclusions of SAARF
demographics report that stated that LSM 1 is composed almost entirely of the rural
population. Thus the second stratum produced nine sample groups, LSM 2 to 10.

4.4.3 Stratum 3: Survey groups

Stratum 3 was a further aggregation of the nine LSM groups into three survey groups
according to affluence levels. That is; low (A), medium (B) and high (C) income
groups as shown in table 4.2.

4
The construct, origins and trends of the LSM index are outlined in Annexure 1

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Table 4.2: Aggregation of the nine LSM groups into three survey areas

Survey Group Affluence levels (LSM groups) Description

A 2, 3 and 4 Low income
B 5, 6 and 7 Middle income
C 8, 9 and 10 High income

As part of phase 1 (Chapter 2), each of the three survey areas was checked to ensure it
contained a sufficient set of supermarkets, greengrocers and hawkers from which
random sample could be drawn. It was found that areas A and C did not have
sufficient sets of the three retail types. As a result of the observed distribution of FFV
retailers and recommendations made by the key informants, it was decided that the
study (and hence stratum 3) would focus on the middle-income areas (B) while
maintaining the target sample size. This was achieved by reducing the sample drawn
from the high and low income areas and redirecting the bulk of the survey to the
middle-income areas as shown in table 4.3.

4.4.4 Stratum 4: Focal supermarkets

The aim of sample stratum 4 was to select a set of nodal/focal supermarkets in each of
the sample groups (A, B, and C) through a random sampling process. To do this a
sample frame was generated listing all supermarkets in Tshwane and the sampling
groups within which they were located. This list was obtained from a combination of
sources including business directories; the yellow pages; Mbendi online directory;
memberships in retailer organisations as well as branch lists from supermarket
websites. As stated in stratum 3, focus was on the middle income group B. Thus a
total of 15 supermarkets were randomly selected including 13 in group B, one drawn
from group A and a final one in group C. As shown in table 4.3 this selection was
structured such that the targeted 120 respondents would be organised at a ratio of
1:2:5 between nodal supermarkets, greengrocers and hawkers.

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Table 4.3: Phase 2 sampling units

Supermarkets Greengrocers Hawkers Area Totals

Low affluence areas (A) 1 2 5 8
Middle affluence areas (B) 13 26 52 104
High affluence areas (C) 1 2 5 8
Totals per retail format 15 30 75 120

4.4.5 Stratum 5: Greengrocers

Similar to the supermarkets case, the greengrocer sample frame involved a listing of
all greengrocers and their locations in Tshwane. The difference though was that there
was a purposeful sampling of two establishments within the vicinity of each nodal
supermarket. Compilation of the greengrocer list was complicated by the observation
that many were not necessarily registered as greengroceries but as general dealers.
The additional selection criteria that at least 50% of the value of merchandise traded
be FFV, helped ameliorate this problem.

4.4.6 Stratum 6: Informal traders/hawkers

As noted in the literature review (Chapter 2) just over 7% of all informal

traders/hawkers in South Africa are registered with municipal or regional services
councils (Statistics South Africa, 2002b). This combined with the transitory nature of
the business format (Ligthelm & Van Wyk, 2004) frustrated attempts to compile a
formal sampling frame for hawkers. Thus the informal trader sample units were
identified mainly by means of a rolling sample where the first few near the nodal
supermarket located on sight. The subsequent units were located by means of
referrals. The target sample size in this case was 75 across the board including 52 in
group B, five drawn from group A and another five from group C (table 4.2).

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4.4.7 Overview of sample design

Figure 4.1 shows a schematic overview of the entire sample design. Of note, as shown
in table 4.2, is that the selection of five hawkers (stratum 6) and two greengrocers
(stratum 5) competing with each nodal supermarket (stratum 4) formed a 5:2:1 ratio.

Tshwane Metropolitan Area

Stratum 1 Stratum 2 Stratum 3

Type: Population Type: LSM groups Type: Survey
Total: 2043 Total: 9 groups (A, B
Townships and C)
farms & Total: 3
suburbs

Stratum 5
Type: Greengrocers
Total: 30 Stratum 4
Type: Supermarket survey nodes
Total: 15

Stratum 6
Type: Hawkers
Total: 75

Figure 4.1: Summary of Sample Design

Also of note was that the target number of respondents sampled in per survey group
was eight in group A, 104 in group B, and eight in group C. This tally totalled 120
respondents composed of 15 supermarkets, 30 greengrocers and 75 hawkers.

4.5 Design of the Enumeration Tools

The primary data collection tool in phase 2 was a set of semi-structured

questionnaire/checklists (appendices 2 to 7). These were deemed the ideal tool due to
the dual nature of information required from the study. On the one hand, to facilitate

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comparison, there were key, often numerical, questions to be asked across the board.
Concurrently, open ended questions were required to allow the enumerators enough
flexibility to capture anecdotal information which was essential in capturing the more
qualitative and opinion related questions on the competitive situation needed to the
mapping the value chains.

Numerous guides to research stress that the quality of research is largely influenced
by the quality of the data collection tools (Pretty et al., 1995 and Varkevisser et al.,
2003). Thus, as recommended in the guides, the enumeration tools were developed
and tested in an iterative process.

Experience and literature (Streiff et al., 2001 and Armstrong & Overton, 1977) notes
that people generally have little patience for questionnaires and ‘form filling’ unless if
they can accrue tangible benefits for it. This was especially true among
businesspeople, the target respondents of this study’s survey. Therefore minimising
the questionnaire length and simplicity were important design principles. However
this aim needed to be balanced with the need to for triangulation, an important facet of
cross sectional surveys (Varkevisser et al., 2003) used to verify information and add
value to the study. The use of flexible (semi-structured) interviews was also
recommended especially in studies such as the present one were there is little apriori
knowledge about the problem or situation and where the topic is sensitive/confidential
as is the case in eliciting strategic business information. This semi-formal approach
also reduces the problem of no response errors. Given these insights a system of six
questionnaire-checklists was designed to serve as the enumeration tools in the
investigation.

The six questionnaire-checklists were derived from a template developed by Louw et

al (2004) and the competition analysis checklist (Box 3.1, Traill & Pitts, 1997). The
template was modified to meet the study’s information requirements and then
subdivided to capture information relevant to the hawkers (appendix 2), greengrocers
(appendix 3), supermarket outlets (appendix 4), wholesalers & supermarket
distribution centres (appendix 5), the Tshwane Market (appendix 6) and Hawkers’
Representatives (appendix 7). This was followed by further rounds of modification
since some questions were not relevant to all retailer formats. The final rounds of

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adjustments were performed in response to observations made in phase 1 of the study,

which included questionnaire testing.

4.5.1 Questionnaire Structure

The enumeration tool was organised in such a way as to capture the following
categories of information firstly identification of the study units; the marketing mix
elements - which formed the core of the study; and a situation analysis.

The identification section briefly recorded the name and position held by the
respondent; the establishment name and location; contact information as well as the
interview date. The enumerators were also instructed to record their assigned codes
and whether this trader was located in the low (A), medium (B) or the high (C)
income areas.

The marketing mix section sought to record the marketing strategies employed by the
respondent retailers. This included eliciting data on the respondent retailer’s choice of
a competitive strategy. That is, the structure of marketing mix elements (the
marketing Ps) namely place, product, price and promotion. The section also included
a review of the respondent’s perceptions of the competitive environment and their
reactions to the thereof. A situation (SWOT) analysis was performed to further
understand the competitive environment faced by fresh produce traders.

The data discussed in the results chapters (five and six) may appear to have excluded
some questions raised in the questionnaire-checklists. This is a result of three factors
that expanded the enumeration tools. Firstly the triangulation process required that
some questions be posed in different forms to check for consistency of responses.
Secondly some variables were dropped because the questions and sections were not
applicable to the majority of respondents and thus did not warrant attention. Lastly the
interview also contained numerous qualifying questions. For instance greengrocers
were disqualified from the survey if less than half of their stock was FFV.

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4.5.2 Scales of measurement

In order to allow for comparison and to apply some context to the data collected it
was necessary to apply a standard period within which perceptions of the competitive
situation were elicited. The selected period for this survey was July 2004 to July 2005.
This was to allow for a long enough period to have formed opinions about the
prevailing competitive trends. Another motivation for this period was that monthly
average over the period was needed. For instance questions on turnover and profit
margins referred to the average monthly figure during the reference year. An
implication of this standard was that one of the criteria to qualify as a respondent was
to have been in business for a minimum of the one year in question.

There were numerous instances within the interview were interviewees were asked to
rate a variable. One such instance was in eliciting the perceived strength of a
competitor. This was performed using a scale of 1 (main competitor) to 4 (not a
competitor). Although scales are considered to be analytically clumsy, the mode was
selected in preference to the more conventional attitude scales, more complex bipolar
Likert-type scales and Osgood’s (normally seven or nine point) semantic differential
scales. Statisticians recommend this simpler positive scale measure because it would
be more comprehensible especially when interviewing the generally less educated
informal traders and therefore would yield better results (Sangster et al., 2001, Kotler
p.135, 2003).

4.6 Measures to Minimise Survey Errors

Although the study had a qualitative inclination efforts were made to maximise the
representativeness and hence validity of the findings. Minimising statistical errors was
essential to achieving this end. Statistical theory highlights two types of errors
inherent in survey data, random and systematic errors. To mitigate their occurrence
and severity the following measures were implemented.

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Mitigating random (non systematic) error:

Stratification of the population into the similar residential areas served by fresh
produce retailers as well as treating each of the three supply chains differently would
minimise the possible sampling errors. These measures are explained in the sample
selection section above.

Mitigating systematic errors:

Possible systematic errors in this study could range from badly-phrased questions to a
dishonest enumerator. Incidence of this type of error was minimised through a number
of methods. The phasing of the study into two helped mitigate systematic errors by
offering the researcher the opportunity to pre-test the questionnaire, gain an
appreciation for the challenges involved in interviewing each type of business and
most importantly to gain rapport among the respondents. Cases of non-response errors
in phase 2 were drastically reduced due to the trust built in the first phase. Moreover,
wherever possible, telephonic appointments were made to increase convenience and
to reduce cases of non-response. Appointments were scheduled so as to
simultaneously survey all sample units within a geographic area of Tshwane before
moving to the next. This strategy not only reduced systematic errors by allowed
immediate call-backs but it also reduced travel costs.

Firstly the research used a small team of three enumerators including the researcher
himself. The use of the two assistants introduced the risk of systematic errors since
questionnaires may be misinterpreted, falsified or incompletely enumerated. In
mitigation the assistants were carefully selected trusted individuals experienced in
enumeration and fellow post graduate students in agricultural economics who were
conversant with the dominant local languages (Pedi, Afrikaans and English).
Additional error reduction measures included a two-day training exercise was to gain
a common interpretation of the questionnaires. Enumerators were also inspected by
having a supervisor during their first two interviews.

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Another important source of systemic error detected in the exploratory phase (Chapter
2) was the high incidence of under and over reporting particularly with regards to
financial information such as monthly turnover, profit margins and costs. Although
sophisticated models have been developed to minimise the effect of misreporting
(Maki, 1996), these were deemed inappropriate given the scope of this study and the
available data. Varkevisser et al. (2003) recommended that the observations be
verified through a simpler process of triangulation, whenever this misreporting was
suspected, as in the case of outliers. This process entailed checking the consistency
between average monthly turnover (t), average profit margins (m) and average costs
(c) against the following algebraic formula:

t ≈ c + mc

As highlighted in Chapter 2 this error was especially prevalent among the hawkers
and greengrocers indicating their reluctance to share such information.

Other potential sources of errors

Results of this survey were expected not to be readily representative of the country
due to a big-city bias. The competitive situation in small towns and rural areas may
differ from those in Tshwane Metro. Thus the study of competition in these
environments will be left to future studies.

Despite the measures listed before some non-response errors were experienced as
sampled respondents refused to cooperate. This however was concentrated among the
hawkers alone. Reason for refusal was that many hawkers were knowingly operating
without licences. Thus any attempt to collect information about their business was
viewed with suspicion. Replacing these respondents was relatively easy in the low and
middle income areas (survey groups A and B) given the large population of hawkers
in most areas. However in the high income areas (survey groups C) there were cases
of insufficient available substitutions in specific suburbs. These units were replaced in
other similar areas. In contrast little resistance was encountered among the formal
retailers with numerous requests for copies of the completed research report.

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A final error reduction exercise was to perform random call-backs with sample units
to verify accuracy of the information provided.

4.7 Data Entry & Analysis

Data collected using the six questionnaire-checklists (see annexure) was initially
entered, verified, coded and cleaned using the Microsoft Excel software package due
to its ease of handling both string and coded variables. The coded data was
subsequently exported into the Statistical Package for Social Sciences (SPSS 13.0) for
Windows. SPSS was chosen for its superior analysis capabilities while retaining an
ability to handle the multiple forms of data collected in the survey. SPSS was
therefore used to calculate all frequency and descriptive statistics as well as most
graphical presentations presented in the findings chapters. Supplementary charts, such
as the chain mapping, were generated either in the Microsoft Excel or Microsoft Word
software packages due to their compatibility with the final document layout and that
unlike SPSS they permitted post production editing.

4.8 Summary

This chapter described the procedure by which the research tools were operationalized
to answer the research questions, meet the research objectives, test the hypotheses and
thus to achieve repeatability. Competition analysis was briefly discussed in terms of
how it was used in the study. Next was an outline of the sample selection process used
in phase 2 survey. This was followed by an account of the contents and design of the
questionnaire-checklist (appendices 2 to 7) as well as the measurement conventions
used. The final section discussed the measures used to minimise the occurrence of
errors in the research.

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5 Chapter 5: The Marketing Mix in Action: Findings &

Discussion

5.1 Introduction

This chapter discusses the results of the second stage of the investigation, which was a
survey of the competitive environment in the fresh fruit and vegetable retail sector of
Tshwane. The chapter contributes towards meeting the study objective, to describe
and analyse the competitive environment, and especially the first sub objective
(Chapter 1) by; firstly, substantiating some anecdotal phase 1 findings by establishing
some indication of their prevalence; and secondly by providing a more systematic
review of the competitive environment by applying the frameworks of marketing mix
analysis, Porter’s forces to a broader set of industry respondents than the key
informants in phase 1.

Execution of phase 2 involved a series of interviews held with a total of 120 fresh
produce traders in Tshwane including 15 supermarkets, 30 greengrocers and 75
hawkers. A detailed description of the sampling frame is provided in the methods and
procedure section (Chapter 4).

This chapter is organised to respond to the research objective by presenting survey

findings in an order that address each of the supporting objectives (stated in Chapter
1). It begins by evaluating the competitive and strategic behaviour of players in the
three forms of fresh produce retail. Thus findings on how the players tweak their
marketing mix (place, price, product, promotion, people and processes); target market
segments and how they perceive their competitors are presented. Once again a
summary of the main outcomes forms the concluding section of chapter.

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5.2 Location & Distribution (Place Variables)

This section deals with first of the Marketing Mix Ps – Place. It analyses the group of
variables pertaining to and related to the influence of business location and
distribution on the competitiveness of the FFV retail enterprises.

5.2.1 Selection of trading sites

Most of the sampled FFV hawkers (72.4%) stated that they sought to locate their
businesses at a prime or busy site. This included transport links, flat residents and
customers visiting the nearest malls and shopping centres. For the balance, location
was simply a function of where stalls were assigned by the municipality. Secondary
but important motivators for location were that of following the customers and were
other traders had been successful. All responses indicated that main driver for trading
location among informal traders was the presence of high volumes of traffic and this
included both motor and pedestrian. This is similar to findings in previous studies
including Motala (2002) and Ligthelm & Van Wyk (2004). Statistics South Africa
(STATSSA, 2002b) also found that the modal motivation for informal business
location was near customers however at a lower average of 58.0%.

As established in phase 1, informal traders operated from a variety of locations that

may be classed into fixed, semi-mobile and roving. Fixed location traders formed the
majority, 89.5% of the sample. Their stall sizes varied from one to twelve square
metres (12m2), the modal size being four square metres (4m2) and with the mean at
five square metres (5m2).

Greengrocer locations were chosen mainly for two related reasons. These were to
access large customer bases (53.8%) and accessibility (26.9%). The remaining 19.2%
had merely occupied the first available space. Popular locations were therefore
shopping centres (50.0%); close to shopping malls 36.7%; hospitals and other large
institutions (6.8%); and main access routes and intersections (6.6%).

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As shown in figure 5.1 supermarkets were located near shopping malls (40.0%), in
shopping malls (33.3%), at neighbourhood centres (20.0%) and at train stations
(6.7%).

Type of location
Near shopping mall
Neighbourhood
centre
Train Station
Mall
Mall
33.33%
Near shopping mall
40.0%

Train Station
6.67%
Neighbourhood centre
20.0%

Figure 5.1: Supermarket location types in Tshwane

The majority (66.7%) of the supermarkets were corporately owned. This meant that
the store location decision had been taken at corporate level. Thus the interviewed
store level managers were usually ignorant of the motives behind store location.
However, according to their tallied speculations, 46.2% of store sites were chosen to
access a prime area like a transport link or an area with dense population. Other
motives included finding a convenient and accessible site (30.8%); available space
(15.4%) while a few had merely taken over an existing business (7.7%). Therefore,
and similar to both greengrocers and informal retailers, supermarket sites are
primarily chosen to tap into existing customer bases. It is also feasible that shopping
complex developers target supermarkets and other retail chains to secure a stable set
of branded stores as tenants.

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5.2.2 Trading space

Size of trading areas devoted to FFV indicates the level of commitment to the sector,
and limits the product range on offer. Thus it also affects turnover, profitability and
competitiveness of a venture.

The size of hawker trading stands varied from one to 12m2 in size with a mean and
mode of 4.79 and 4m2 respectively. The limiting factor to size was primarily the area
that could be operated by a single individual. Hawker stalls that were less than 4m2
were typically limited by available space.

Modal store size of greengrocer was 200m2 (25.8% of the sample) with a range of
between 40 and 375 square meters. These areas were limited by the physical property
sizes forcing the booming businesses to minimise aisle space and place some produce
on pavements adjacent to the store. The majority (48.4%) of the sampled small
businesses were located in neighbourhood centres, 35.5% were in shopping malls
while the balance (13.3%) were in other locations including near hospitals, and
converted caravans. Similar to hawkers, the majority (83.9%) of respondents among
the greengrocers stated that the choice of store location was primarily to tap into an
existing large customer base. However 16.1% stated that they had purchased failed
businesses thus had no real control over their location and they were merely seeking
any “available space”. Only one incidence of store relocation was recorded and this
was because the business had failed in the previous location.

The size of fresh produce sections in supermarkets ranged from 30 to 266m2 with a
mean of 135 m2. This meant that the area dedicated to FFV was, on average, smaller
in the supermarkets than in the greengrocers, which averaged 188 square meters.

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5.2.3 Establishment ages

The range of ages of establishments within a business format can be viewed as an

indicator of the success rates, ease of entry and exit, future prospects as well as the
attractiveness of the sector to budding entrepreneurs.

Mean age of informal traders’ businesses was a relatively young six years with almost
a quarter of the sample having been in business for just over a year and the first half
concentrated in the one to four years old group. Numerous cases were also excluded
from the sample because they fell below the one-year minimum required to participate
in the survey. However the range of business ages was wide stretching from one to
twenty (20) years in operation with 20% of the sample being over ten years old. A
study into the regulation of informal trade in Tshwane (Ligthelm & Van Wyk, 2004)
found a similar low modal age informal businesses. This can be attributed to an
apparent ease of entry and exit in the sector as well as an apparent gradual relaxation
of the enforcement of by-laws and reduced harassment of informal traders since the
end of apartheid in 1994 (Motala, 2002). Contrary to findings in the current study,
Ligthelm & Van Wyk (2004) found that informal business ages were more evenly
spread. Their divergent result may be a result of a dissimilar sampling frame as their
investigation was not limited to the fruit and vegetable hawkers as is the case here.

The greengrocers group was found to be composed of relatively old businesses with
average of 23.7 years in operation with the youngest business being 5 years old and
the oldest at 70 years. The low incidence of new entrants and the numerous instances
of fail businesses among this group may indicate that the sector is atrophying. This
was consistent with expert views that the small independent greengrocer format was
in decline (Roos B., 2006, personal communication).

The supermarkets also had a fairly old set of stores ranging from 3 to 75 years with
over 60% of the cases being at least 10 years old. However from a portfolio analysis
point of view (such as the BCG Matrix), supermarkets had a comparatively balanced
set of store ages. That is, one quarter of stores being between 3 and 6 years old, a

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second quarter up to 15 years old, the third up to 26 years and the last quarter between
27 and 75 years old.

5.2.4 Ownership structures

The ownership and management structure of a business has important implications for
instance on the access to finance needed for any venture to expand. Bankers and
investors alike are more willing to put money into publicly owned corporations than
in a sole proprietorship let alone into an informal one. This subsection looks into how
FFV retailers in Tshwane are owned and run.

As illustrated in figure 5.2, at 40.3%, partnerships were the most prevalent ownership
structure among FFV hawkers followed by independent the owner operated (35.5%)
and family alliances (19.4%). This finding deviated from that of Ligthelm (2006b,
p.32) who found owner operated businesses in FFV retail to be at 91.1%. The
difference may be due to a differing classification of ownership as that study was only
concerned with whether the respondent was an owner or employee.

Ownership structure
Partnership
Group Independent
4.84% Family business
Group
Family business
19.35%

Partnership
40.32%

Independent
35.48%

Figure 5.2: Ownership structure of informal FFV retail businesses in Tshwane

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Of the informal FFV retailer businesses approached, hired employees operated 27.4%.
Otherwise over half of the ventures were owner operated including 51.6% single
proprietors and 21.0% run by one of the partners. This also confirmed the, albeit
none-quantified, observations in Motala (2002) that the hawker trade was either
owner operated or run by employees (bambelas).

None of the greengrocers were part of retail chains or franchise groups. Family
businesses was the dominant ownership structure accounting for 61.3% of
greengrocers and the balance, 35.5%, classified themselves as independent retailers.
The high incidence of independent and family ownership supports the assertion made
in the problem statement (Chapter 1) that the greengrocer sector was highly
entrepreneurial. In addition, an impressive 40.0% of the greengrocers stated that they
had more than one outlet. Among these, two outlets in the group accounted for the
modal (50.0%) of the stores with more than one outlet. The largest number of outlets
reported was four and this was 12.9% of the subgroup. However none of the ventures
had ventured beyond the country’s borders.

In summary therefore, the majority of the supermarkets were corporately owned with
the rest being franchises and family owned businesses. Similar to greengrocers and
informal retailers, supermarket location was primarily chosen to tap into large existing
customer bases.

5.3 Turnover, Costs, Margins & Pricing (Price)

This section presents the results of enquiries into how FFV retailers in Tshwane used
the second market mix element, pricing, in their competitive strategies. This includes
the issues of turnover, cost of sales, profit margins and pricing. However, before
presenting these results it is important to reiterate (as in Chapter 2) that eliciting
financial information was a particularly delicate challenge. Financial data was often
under or over stated for various strategic and economic reasons. For instance profits
could be understated to avoid taxes or to access possible assistance. On the other
hand, incomes may be overstated to impress peers or to intimidate competitors. As

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described in the methods chapter, this potential research error was mitigated by
checking for consistency of responses as part of the triangulation processes.

5.3.1 Turnover/income

Turnover refers to the amount of money retailers received for their goods and services
(revenue in US English). It is also termed income in the case of individuals. This
value is an important indicator of the relative volumes of business handled by each of
the retailers. An interesting note about the definition is that the distinction between
profit and turnover was not always apparent among the informal traders. The variable
often needed to be calculated by adding their reported costs to profits. Conversely,
many fresh produce managers in corporate supermarkets were only aware of, and
were judged upon, trends in store or section turnover and not profits or costs. This was
a symptom of store level managers being excluded from the pricing and margin
setting decisions.

Turnover for informal traders varied from R600 to R63 515 per month and averaged
at R15 538 per month. As shown in the scatter plot, figure 5.3, the cases were
somewhat evenly spread throughout the range of values. The first quartile of the
respondents had turnovers between R600 and R2 126, the second quartile was up to
R9 778 and the third set was at R25 718. This spread illustrated the variety of types of
informal traders in existence from the survival to successful types. This result was
different from findings in Ligthelm (2006a) whose average turnover was R2 357 for
FFV with only 7.1% of the sample exceeding R10 000. A possible reason for the
differences is that his sample was concentrated in the low income townships while the
current study focused on the middle income suburbs.

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70000

60000

50000
Turnover (R)

40000

30000

20000

10000

0
0 15 30 45 60
Case number

Figure 5.3: Monthly turnover of Informal FFV retailers in Tshwane

Among the greengrocers’ turnover varied from R21 000 to R400 000 per month with
an average takings of R165 521 per month. Wider gaps can be seen in the distribution
of incomes (figure 5.4) but this could merely reflect the small sample size.

450000

400000

350000

300000
Turnover (R)

250000

200000

150000

100000

50000

0
0 6 12 18 24
Case number

Figure 5.4: Monthly turnover of Greengrocers in Tshwane

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Supermarket turnovers for their fresh produce sections started out lower than the
greengrocers ranging from R7 000 to R1.5 million per month but had a higher average
of R480 692 per month. The low minimum turnovers illustrate the point made by key
informants that FFV was a loss-leader component of some outlets. The focus was on
maximising the consumers spending on the ‘shopping experience’ rather than on
individual store sections. A successful strategy when one considers the overall
turnovers reported in table 2.1. An additional contributor to the low minimum
turnovers was that, as shown in the place variables section (above), the greengrocers
were on average larger than the supermarket FFV sections. Thus they carried more
variety leading to higher turnover.

The relative sizes of the three FFV market players are apparent from the average
turnovers with supermarkets dwarfing the rest followed by greengrocers and informal
traders being smallest on average. Interestingly the ranges of turnovers show
considerable overlap in these sizes given that there were large informal traders whose
FFV sales outstripped those of some of the small supermarkets.

5.3.2 Pricing strategies & mechanisms

Marketing margins (mark-ups) charged by retails are a key leaver used by retailers to
adjust their final prices and thus have an impact on their competitive position. The
retailers confirmed the literature that all FFV prices were derived from average
produce market (TM and JPFM) prices, which are driven by supply and demand. As a
result prices at retail level fluctuated seasonally in the long run albeit at a less volatile
rate. Although marking up was not the universal pricing mechanism as shown in the
subsequent text, it was a convenient parameter for comparing pricing behaviour
across the three FFV channels.

Table 5.1 presents a summary of informal traders’ pricing behaviour for the select list
of reference products. For the fruits, the mean mark-up was 25.3%; for apples it was,
41.1%, and 29.8% for bananas. For the vegetables the mean mark-up was 25.4% with
29.4% being charged for potatoes, 26.8% for tomatoes and 45.5% for onions. Across

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the board the absolute minimum margin was 8.0% charged for tomatoes. However the
average minimum for all six products was 9.5%. The maximum was 125.0% on the
purchase price charged for oranges with an average maximum margin of 83.7% across
the product lines. Over half the respondents (50 percentile) typically charged a mark-
up below 25.0% except for tomatoes, which were at 22.5%.

Table 5.1: Average mark-up rates on selected FFV among hawkers

Apples Oranges Bananas Potatoes Tomatoes Onions FFV

(%) (%) (%) (%) (%) (%) Average
Mean 25.28 41.07 29.78 29.40 26.84 45.47 32.97
Mode 15.00 15.00 15.00 15.00 15.00 15.00 15.00
Minimum 10.00 10.00 9.09 10.00 8.00 10.00 9.52
Maximum 50.00 125.00 75.00 69.60 70.00 112.50 83.68
Percentiles 25 15.00 15.00 15.00 15.00 15.00 15.00 15.00
50 25.00 30.00 25.00 25.00 22.50 25.58 25.58
75 32.00 66.00 42.38 44.74 35.29 48.14 48.14

Of note was that at face value hawker prices were very sticky. This was a symptom of
their mode of price setting. They would first set an offer price, which was a round
figure to the nearest 50 cents. The traders then calculate their returns from sales so
that the amount would covers costs plus a profit. Rather than varying their prices in
response to wholesale price fluctuations, hawkers adjusted bundle sizes while keeping
the price constant. That is, by packaging less fruit per package or packing a mix of
FFV when their respective prices were offsetting each other. Collusion in pricing was
witnessed whenever hawkers traded in close proximity. However a single city block
was considered enough to allow for independent pricing. Another observation was
that mark ups were also added through a complex and rather irregular process. That is,
a group of traders at a single location would decide to add a fixed amount of profit,
say R10, to the wholesale price of a crate of produce and would proceed to repackage
the produce so as to reach that target final profit.

As shown in table 5.1, the mean mark up for the selected FFV was 44.7% in
greengrocery stores. The floor rate for mark ups was 10% across the board while the
maximum rate was between 70% and 80%. The percentiles section of the same table
shows that over half the respondents kept their mark-ups below the 50%.

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Table 5.2: Average mark-up rates on selected FFV among greengrocers

Apples Oranges Bananas Potatoes Tomatoes Onions FFV

(%) (%) (%) (%) (%) (%) Average
Mean 43.74 40.04 34.74 45.96 40.43 45.33 41.71
Mode 70.00 50.00 60.00 80.00 80.00 80.00 70.00
Minimum 10.00 10.00 10.00 10.00 10.00 10.00 10.00
Maximum 70.00 70.00 60.00 80.00 80.00 80.00 73.33
Percentiles 25 20.00 20.00 18.00 20.00 16.70 19.12 20.00
50 50.00 50.00 35.00 50.00 35.00 45.00 50.00
75 70.00 55.00 60.00 80.00 80.00 70.83 80.00

An interesting note was that greengrocers typically reported that their pricing
procedure was to charge a fixed mark up on all fresh produce except in exceptional
cases when they ran promotions in the form of price discounts.

As expected, the supermarkets store level managers in corporate stores were typically
unaware of, or in some cases unwilling to divulge their pricing procedures and/or
mark-up rates. Efforts to source this data at corporate level proved even less fruitful
due to confidentiality. The independent supermarkets were the primary source of cost
and pricing related data although they also on occasion chose to pass the finance
related questions. Given that the sample was already small for supermarkets these
non-response error made the results even less representative. With these data
inadequacies in mind it was found that supermarket margins ranged between 10.0%
and 50.0% with a mean and mode of 22.5% and 15.0% respectively.

Although it was possible to obtain secondary information on supermarket price and

cost spreads from data mining agencies such as ACNielsen and Planet Retail, this
route was not pursued due to a number of compatibility issues. Firstly, and as the
authors (ACNielsen, 2006) admit, this data was generated by ‘integrating information
from a variety of sources’ and not from direct observation. Hence the information had
reliability problems associated with merging data sources. Secondly the data was not
specific to the sampled nodal stores or LSM areas of Tshwane as the sampling frame
demanded (Chapter 4). Thirdly, accessing the data involved significant subscription

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fees which were beyond this study’s budget. Therefore this avenue was left for pursuit
in future studies.

The Food Pricing Monitoring Committee (DoA, 2004) also reported (based on
ACNielsen data and their own survey) that fresh produce prices were generally stable
aside from seasonal fluctuations. They also did not specifically refer to price spreads
between different types of retailers. The subsequent update of this publication
(NAMC & DoA, 2006) came closer to being statistically relevant to this study.
However, its farm-to-retail price spreads included the contributions of food
manufacturing, distribution, wholesaling as well as retailing (NAMC & DoA, 2006,
p.10-11) rendering those figures too broad for use in the current assessment.

Generally, this sub section showed that the hawkers charged both the highest and
lowest margins for FFV. This is in contrast to assertions by Van Zyl & Conradie
(1988) that (for avocados) supermarkets were consistently cheaper followed by
greengrocers and hawkers being the most expensive channel. Of note, however, was
that the authors were surveying consumer perceptions and did not substantiate this
perceived pricing hierarchy.

5.3.3 Cost structures

The way in which costs of trading are incurred has a significant bearing on what
pricing the retailers’ can afford; their revenues; profitability and thus on their
competitiveness.

Hawkers on average incurred running costs of R20 419 with a wide range from R1
550 to some R61 289 per month and these were dependent on the scale of operation.
Procurement of stock was generally the top expense in the informal FFV trade and on
average constituted 88.7% of the costs. This was similar to findings in Ligthelm
(2006b) and this was because hawkers paid little if any overheads. Another important
cost was that of transportation averaging at 6.6% of the costs. Two other frequently
occurring costs were stall rentals and packaging, which accounted for 2.0% and 2.3%

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of costs on average. Other costs including electricity, hired help, storage, taxes and
licence costs rarely occurred.

Greengrocers spent between R21 000 and R125 000 on monthly expenses averaging
at R84 435. Inventory was also the largest single cost item but on average constituted
less than half (41.6%) of reported costs. Other important costs as a percentage of the
total were staff (22.9%), rentals (20.2%), taxes (11.8%) as well as repairs and
maintenance (12.0%). Some other comparatively lower costs were as transportation
(5.1%), packaging (6.1%), and utilities at (7.1%).

Once again the supermarket respondents displayed low response rates. From those
that answered the range of monthly costs was between R68 494 and R300 000 with an
average monthly cost R145 663 for the FFV sections alone. Rentals featured as the
main cost item accounting for 15.0% of the total followed by staffing salaries (11.4%)
and utilities (11.0%). Inventory featured at a low 6.5% of monthly costs but this was
partly because many of the main costs such as salaries and utility were bundled costs
and thus could not be charged to FFV section in their entirety. It is notable here that
the literature review (Chapter 2) established that supermarkets enjoyed scale
economies associated with central bulk buying and sourcing from farmers.

The overall observation was that the informal sector had the significant advantage of
having little if any overhead costs. This is especially true when compared to corporate
retail stores that not only needed to cover store level costs but a portion of the
corporate overhead and staff costs too. This could potentially erode their scale
economies. The situation for greengrocers differed in that they avoided the corporate
costs by conducted all administrative tasks at store level and this was typically the
role of owner-managers thus leaving more funds for operational activities. On the
other hand the greengrocer overheads and staffing costs were still quite high,
constituting at least a fifth of the monthly bills. In addition they had limited scale
advantages over the hawkers.

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5.4 The Offering (Product)

Results of data on the next P of the Marketing Mix ‘product’ are presented in this
section. This pertains to the means by which competing channels manipulated the
physical offering in order to maximise their market share. This included modification
of form, sourcing and the associated services.

5.4.1 Processing

Value addition on the product offering has the important benefit of adding variety,
increasing shelf life, which broadens access to the customer base by personalising the
products to their needs and allowing more time for the sale and thus if used effectively
improves competitiveness.

The array of value addition activities, reportedly performed by retailers at store level,
included packaging (breaking bulk), washing, cutting, freezing, and ripening. Over
three quarters (77.8%) of hawkers, half (51.6%) of the greengrocers and a third
(33.3%) of the supermarkets were performing at least one of these processing
activities. Of note however was that all supermarket chains stated that they performed
some value addition activities at distribution level. Therefore the 33.3% highlighted
before referred to supermarkets performing value addition at store level.

Repackaging was the predominant activity among those that did perform some
processing activities featuring in 98.0%, 93.8% and 100% of the cases for hawkers,
greengrocers and supermarkets respectively. This activity was primarily a bulk
breaking exercise where products were brought down to household sized portions. As
stated before, this repackaging process was closely linked to the pricing strategies.
Package sizes and assortments were such that the targeted profit margins were
reached. All respondents who performed the repackaging activity accepted that it had
a positive effect on sales. This perceived effect was intuitive to hawkers and
greengrocers since none had empirically evaluated the efficacy of the processing
activity. Some store level management at supermarkets that performed processing in-

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store also could not explicitly state the effect of repackaging on sales. Where they did
answer this question the responses were guesses of 100% and 50% sales increases.

The only other processing activity hawkers performed was washing and cleaning and
this was done in 5.9% of the cases where some processing was performed. Just over a
tenth (11.1%) of processing greengrocers also performed washing, cleaning and pre-
cutting of FFV in-store. Among the processing supermarkets 60.0% did washing,
cleaning and pre-cutting 5 and 40.0% also produced their own frozen FFV.

5.4.2 Supply sources

The source of FFV stocks has an impact on the possible margins that can be earned,
quality sold, shelf life and thus competitiveness.

Tshwane market (TM) was a clear favourite supply source for informal traders with
85.5% sighting it as their primary supplier and none of the hawkers who could access
TM used it as a secondary supplier. Marabastad satellite market was the supplier of
choice for 14.5% of the hawkers. These were mainly the informal traders moving
smaller volumes (average monthly turnover below R10 000). A third (33.3%) of
hawkers who had a secondary source sighted Marabastad market as their secondary
supplier but the remaining majority (66.7%), bought supplies direct from farmers in
the Brits area (in the surrounding North West province) as the secondary inventory
source. The primary drivers for supplier selection were quality (30.2%), low prices
(17.5%), proximity (3.2%) and ability to buy as a group (9.5%). The remaining 39.7%
of the hawkers could not state any reason for their choice. Being cheap or having the
‘best deals’ was the secondary reason for source choice in 18.1% of the cases with
being nearest featured 3.2%. The remaining respondents had no secondary source
selection criteria to report. Informal traders also stated that the procurement practices,
choices and perceptions did not differ by product thus the presentation of results as
FFV rather than on a target product basis.

5
Where FFV is presliced and packed in ‘ready to cook’ portions. This may be fresh or frozen FFV.

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Nine out of every ten greengrocers favoured TM (90.0%) over Marabastad (10.0%) as
the primary source of trading stock. Johannesburg FPM was the only secondary
market identified by only 9.7% of the sample. JFPM was only visited after there were
critical stock-outs at the TM or in cases where the trader happened to be collecting
other stocks in Johannesburg. Surprisingly and unlike hawkers, most greengrocers
(38.7%) highlighted distance to the market as their first sourcing criteria over quality
(9.7%). Prices and ‘choosing the best deals’ featured as the most important
consideration in 9.7% of the cases. Similar to hawkers, greengrocers showed no
differences in policies on a product-by-product basis. They did however stress that
quality gained prominence when sourcing the more sensitive leafy vegetables, exotic
lines and products with short shelf lives. Surprisingly, few respondents identified
secondary criteria for source selection and there was a high incidence (41.9%) of ‘I
don’t know’ or non-response answers. This was attributed to interview fatigue, as
procurement issues were one of the last topics raised.

Only two supply sources were highlighted at supermarket store level management.
These were 73.3% from buying centres and 26.7% from TM as the primary supply
source. Corporate buying centres were identified as the only secondary source of FFV
for 13.3% of the cases, while the balance did not procure from any other sources but
the primary one. Similar to the previous two channels, there were no product specific
procurement strategies. Managers of corporate supermarket in Tshwane stated that
they had no choice over selecting a supply source because the corporate policy was to
purchase all FFV through the corporate buying centres. Although franchised stores
had more freedom over supply source they found that the buying centres offered the
best deals and thus only used produce markets in cases of stock-outs of key produce
lines. Non-syndicated supermarkets behaved similar to the greengrocers and primarily
patronised the TM and Marabastad markets.

The findings presented in this section confirm the overall dominance of FPMs, and
particularly Tshwane Market in this case, as highlighted in the literature review
(Chapter 2). What was interesting was the importance of the secondary, Marabastad
municipal market, as a FFV supplier for hawkers, greengrocers and independent
supermarkets. Although prices at this secondary market were higher since Marabastad
sourced produce from the TM, it was chosen over TM because the TM favoured bulk

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customers and that TM ran out of stock very early in the morning since its trading
hours were between 03h00 and 10h00. These were important considerations
especially for traders that moved small volumes of FFV and/or had no access to their
own/reliable transport. Another interesting overall observation was how frequently
hawkers could not state their reasons selecting any particular product lines beyond the
experience that certain lines sold more than others. Greengrocer operators and more
so, supermarkets were more aware of the comparative attributes of their produce lines
in terms of flavour, texture, nutritional content, cooking qualities and shelf life. This
knowledge made them better able to target their offering to particular market
segments. For instance one greengrocer near a school stated that when stocking apples
he focused on the sweeter varies of apples that were popular among the school
children.

5.4.3 Procurement arrangements & relationships

This sub-section discusses findings regarding the means by which retailers interact
with upstream suppliers. This is with regard to transaction modes and their interaction
with suppliers.

All informal traders in the survey stated that they did not enter into any form of
contracting verbal or otherwise with suppliers. Some sighted loose social relations
with ‘friendly agents’ at the produce markets but were quick to point out that they
always shopped around for the best deals despite these relationships. All respondents
also stated that they always paid for merchandise on a cash-on-delivery basis. Almost
all (96.8%) of the surveyed hawkers stated that they faced predetermined produce
prices. The 3.2% that was able to negotiate for lower prices only did so occasionally
and this was when they purchased as a group.

Although informal traders highlighted an array of problems they faced while

procuring stock, the majority (52.3%) could not identify any problems. Top on the list
of problems was the fluctuating prices sighted in 17.5% of the cases. This was a major
problem because the hawkers’ clientele was highly price inelastic thus any price
changes had to be absorbed at retail level. Other priority problems included failing to

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secure lower bulk purchasing prices (11.1%), poor and inconsistent quality (9.5%),
early market stock-outs (6.3%), perceived racial discrimination (3.2%) from market
agents. Secondary problems were merely a repetition of the above list and only 9.5%
of the hawkers sighted more than one procurement problem. The majority (54.9%) of
the valid cases said they did nothing to resolving these problems while 13.5% stated
that building rapport with market agents helped. Some 9.5% made sure they compared
prices and inspected produce received in an effort to avoid quality problems. With
regards to the stock-outs the only recourse identified was to wake up earlier.

All greengrocers sampled also stated that they operated on a cash only basis with their
suppliers. A lower than expect 20.0% stated that they were in a position to negotiate
terms of trade with suppliers. The majority 80.0% were faced with predetermined
prices. The same 20.0% of greengrocers stated that they entered into verbal contracts
with the suppliers. The contracts primarily related to reserving quantities of stock or
certain grades and were then purchased at prevailing market rates. Half of this group
(10% of the total) stated that prices were also secured as part of the verbal contracts.
Interestingly, most (80.6%) of the greengrocers could not think of any problems
relating to their supply source. The balance sighted poor security as their top concern
and this was at the produce markets. The only other concern was the inconsistent
quality offered for some produce lines. Half the complainants stated that they felt
powerless to resolve the problem while the other could resolve the quality problems
by returning the products.

With regards to the supermarkets the procurement relationships depended on FFV the
sources. This resulted in three distinct groups (and thus sets of data) pertaining to
corporate, franchise and independent supermarkets. Since the supermarket sample was
the small (15 respondents), it was deemed necessary to drop the statistics and report
on the results in an anecdotal manner.

Corporate supermarket sourcing decisions were performed at the buying centres. Thus
store level management were ignorant of most procurement issues and problems.
Results of enquiries with the buying/distribution centres (DCs) were presented as part
of the exploratory study in Chapter 2. Store level managers did however state that
they faced intermittent problems with regard to quality and late deliveries. DCs were

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able to take advantage of on-season price slumps to stock up on those product lines
and then progressively release them to the outlets. The downside however was that if
a farmer resided next to a chain outlet they normally could not sell directly to that
store. The produce was typically transported to the central DC only to be shipped back
to the same outlet. Besides the increased logistical costs the system also increased the
time from harvest to presentation for sale. This was a problem since food
technologists agree that fresh produce loses nutrients and hence quality over time
(unless frozen).

Independent supermarkets faced a situation similar to greengrocers but none were able
to negotiate prices received because their volumes were even lower than that of the
greengrocers. They also did not secure contracts with suppliers beyond general
rapport with preferred agents. Other procurement problems highlighted were stock-
outs, the power of agents in determining terms of trade, and the high frequency of
FFV price fluctuations. Independent outlets also implemented remedies similar to
those of the greengrocers. These solutions included developing preferred agents,
checking quality of purchases and returning spoilt purchases.

Size of transactions therefore a critical factor in securing favourable terms of trade.

This finding concurred with Louw et al. (2004) who found that although FPM agents
strove to give similar terms of trade to all clients, there were clear benefits associated
with securing the larger volume buyers. Thus extra effort was made to secure these
deals including lowering prices, reserving better quality for them and an overall
preference for them. A personal relationship with market agents was also revealed to
be critical to the level service received. For instance building such a relationship
ensured that a buyer received better prices, was able to return spoiled stock and was
assured of stocks even during the periods of shortages.

5.5 Communicating the Offering (Promotion)

The last marketing mix variable, promotion is presented in this section. This text
highlights how players in the three competing retail formats used the tools and

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methods of creating awareness of their products and services and thus encouraged
patronage.

In general hawkers relied on personal selling and other forms of promotion that did
not involve a direct payment. The promotion strategies sighted as ‘primary’ included
announcing the FFV and the attributes to potential customers (39.7%); an attractive,
carefully arranged and clean display (38.1%); building rapport especially with regular
customers (6.3%); as well as offering free samples (4.8%). Many of these same
answers were repeated as secondary strategies including good customer relations
(4.8%), attractive displays (3.2%) and announcing (3.2%). A few (3.2%) of the
informal traders and especially those in residential areas stated that they offered
limited monthly credit to preferred customers. Similar informal credit sources were
highlighted in Motala (2002). A sizable proportion (11.1%) stated that they did not
perform any active promotional actions. Also of note was that none of the
promotional efforts were product specific.

The most favoured promotional mechanism among the greengrocers was price
discounts (specials). This was sighted as the primary strategy in 64.5% of the cases.
Although specials were, for the most part, applied to fast moving FFV lines
(tomatoes, onions and potatoes) they were also implemented to the slower lines
particularly when that line’s prices fell at the market. This was particularly the case
when products such as mangoes and oranges came into season. A number of
greengrocers (19.4%) highlighted the print media (advertisements, flyers and posters)
as their primary promotion method. Comparatively few (3.2%) considered attractive
displays their first line of promotion. The balance (12.9%) of greengrocers was not
actively promoting their businesses. Specials featured as the only a secondary
promotional activity in 19.4% of the cases with the balance sighting none.

Corporate supermarkets were seen to use the full array of mass marketing tools from,
television and radio promotion to print advertising and publicity. These activities were
conducted at regional and national levels and were usually not specific to FFV
promotion but aimed at promoting the store brands. Thus corporate supermarket FFV
promotion as was primarily conducted at outlet level similar to the non-syndicated

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supermarkets. Print media was sighted as the most popular primary promotion
strategy in 60.0% of the cases (figure 5.5).

Figure 5.5: Primary supermarket FFV promotion strategies

This was followed by in store promotions (13.3%) these included free tasting and
promotional in store announcements. Price related promotions were similarly popular
at 13.3% and these included discounts, lower margins and in some cases selling FFV
below cost price. Corporate coordinated promotions were also important at 6.7%. This
involved the synchronisation of promotions for stores within a brand. Placement of
FFV stands and attractive displays was another important promotional activity used in
6.7% of the cases as a primary strategy. In terms of the secondary promotion of FFV
corporate sponsored efforts featured prominently (66.7%). Maintaining superior
quality was used 13.3% of the time and an attractive display in 6.7% of the cases.

All supermarkets considered in this investigation identified at least one active primary
promotional activity and only 13.3% failed to identify a second activity. This was a
comparatively high proportion figure given that their competitors, hawkers and

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greengrocers, respectively had 11.1% and 12.9% incidence respondents with no

promotional strategy at all.

5.6 Other Competitive Practices

This section begins with a presentation of findings on other general competitiveness

variables that did not quite fit under the marketing mix Ps. It also reviews the issues of
risks and problems faced by FFV retailers, how they have sort to address these issues
and their impact on the competitive environment. This part of the study also began to
elicit possible avenues for product, process, function and chain upgrading.

5.6.1 Targeted markets

As explained in Chapter 3, one of the keys to a successful competitive campaign is

correctly identifying the segments of ones market followed by selecting the most
promising targets.

It was clear from the onset and in the pre-testing phase that hawkers did not employ
formal methods of segmentation and targeting. However the overwhelming majority
(98.7%) were intuitively aware of the types of customers to whom they aimed to
market their wares. Some 17.5% of the hawkers identified at least three target
segments. Top among the primary targets were commuters (73.0%), followed by
residents in the surrounding area (17.5%), children (4.8%) and others primarily
targeted people as they left a nearby shopping centre/mall (3.2%). Secondary
segments were mall customers (27.0%), locals/residents (7.9%), commuters (3.2%)
and passers-by (1.6%). The third level of hawkers’ targeted clients was
residents/locals (12.7%) and passers-by (4.8%).

Greengrocers were surprisingly less specific with regard to their target markets. The
most frequent response was that the primary target was ‘all people’ at 48.4% followed
by a similarly none specific ‘locals and passers-by’ at 32.3%. A group specifically

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highlighted as an important target market were flat dwellers (10.7%). This indicated
the importance of lower middle affluence groups (around LSM 4 and 5) in densely
populated apartment blocks as greengrocer customers. Another 9.7% chose the ‘don’t
know’ category for this question. At the secondary target market level ‘all people’
was still the prime target at 22.6%. Restaurants and caterers were seen as the second
most important secondary target market (12.9%) followed by passers-by (9.7%). The
remaining majority 54.8% could not identify a secondary target.

Supermarket managers were similarly nondescript about their target market as

compared to hawkers. The majority of respondents, 46.7%, stated that they targeted
all people. Residents of surrounding apartments (flats) were the next most important
group with 20.0% of the supermarkets identifying them as their primary target market.
Adults and black people were equally important as a primary target market as
identified by 13.3% (each) of the supermarkets. Finally, 6.7% of the supermarkets
primarily targeted office staff. Given that the majority had already stated that they
targeted all people, there were few supermarkets that identified a secondary target
market. These second level targets included ‘LSM 2 to 8’ (6.7%) and workers from
surrounding businesses (6.7%).

The comparatively low amount of market targeting among the supermarkets and
greengrocers may be explained by the observation that the two traded in a larger
variety of merchandise in store. Another issue to consider, in the case of corporate
supermarkets, is that store level respondents were not privy to the strategic marketing
decisions involved in targeting and segmentation. Therefore observing the location of
stores and differences in varieties of stock were clearer indicators of the intended
market targets than the store managers’ perceptions. Enumerators observed that
greengrocers carefully avoided commenting directly on any racial elements of their
typical customer. However enquires into perceived shifts in the industry (elaborated in
the future prospects sub-section of Chapter 6) revealed an implied view that the
increasing in black population in a greengrocer’s vicinity spelt a decline in patronage.
Another overall, but expected, outcome was that market targeting was a function of
location with those in residential areas targeting residents and those in business areas
focusing on workers in the vicinity.

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5.6.2 Business hours

Tracking the operating hours and periods of best FFV sales serves as a further
indication of the comparative types of consumers or markets that each of the retail
types served. This is the subject of the current subsection that presents results of
enquiries into the operating hours and peak periods experienced in the FFV retail
sector (also see section C of annex 2 to 7).

Informal traders were generally operational between 9 and 11 hours a day, six days a
week. About 25.4%, 61.9% and 47.6% did not operate on Saturday, Sunday and
public holidays respectively. Table 5.3 shows the top three peak sales periods per day,
week month and over the year. The figures in percentages show the proportion of
respondents that highlighted particular periods as their peaks.

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Table 5.3: Peak FFV sales periods for informal FFV retail

Period Proportion of retailers experiencing peak sales

Best (%) Second Best (%) Third Best (%)
Daily sales Mornings 25.4 - -
periods Mid-morning 4.8 - -
Afternoons 31.7 17.5 -
Late Afternoon 11.1 15.9 17.5
Throughout 25.4 - -
Evening - 3.2 9.5
Subtotal 98.4 36.5 27.0
Do not have 1.6 63.5 73.0
Total 100 100 100
Weekly sales Monday 12.7 - -
periods Tuesday - 9.5 -
Wednesday - - 9.5
Thursday 6.3 3.2 -
Friday 11.1 3.2 3.2
Saturday - 11.1 -
Sunday 3.2 - 3.2
Throughout 47.6 - -
Week days 9.5 - -
Subtotal 90.5 27.0 15.9
Do not have 9.5 73.0 84.1
Total 100 100 100
Monthly sales Early month 17.5 - -
periods Month-end 20.6 17.5 -
Throughout 52.4 - -
Subtotal 90.5 17.5 -
Do not have 9.5 82.5 100
Total 100 100 100
Yearly sales Jan-Feb 7.9 - -
periods March-Apr 9.5 - -
May - 3.2 -
June -July - 3.2 -
Sept-Oct - 4.8 -
Nov-Dec 12.7 3.2 11.1
Throughout 50.8 - -
Subtotal 81.0 14.3 11.1
Do not have best 19.0 85.7 88.9
Total 100 100 100

Highlights of this analysis of peak sales periods include that informal traders typically
experience two daily peak sales periods as 31.7% and 25.4% of the respondents
identified afternoons and mornings as their best sales periods. The afternoon peak was
more pronounced as it stretched into the late afternoon and was considered as primary
and secondary peaks (table 5.6). Over a quarter (25.4%) had even sales throughout the

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day. Almost half the hawkers found that they had steady sales throughout the week
with some experiencing their primary peaks on Mondays (12.7%), Fridays and
Thursdays (11.1%) and Thursdays (6.3%). As expected month-ends were important
primary (20.6%) and secondary (17.5%) sales peaks but over half the cases (52.4%)
had even sales throughout the month. The results were similar on a yearly basis with
50.8% showing steady sales throughout the year. The yearly ‘bonus’ period
(November and December) was also recognised in 12.7%, 3.2% and 11.1% of
responses as a good primary, secondary and tertiary peak sales period respectively.

The majority (74.2%) of greengrocers operate seven days a week for between 10 and
15 hours on weekdays then closing two to three hours earlier on Saturdays and
operating for half a day (6 hours) on Sundays and public holidays. The peak turnovers
periods highlighted in the greengrocers’ businesses are as shown in table 5.4.

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Table 5.4: Peak FFV sales periods for greengrocers

Period Proportion of retailers experiencing peak sales

Best (%) Second Best (%) Third Best (%)
Daily sales Mornings 29.0 - -
periods Afternoons 38.7 - -
Late Afternoon - 19.4 -
Evening 25.8 - 9.7
Fluctuates 3.2 - -
Subtotal 96.8 19.4 9.7
Do not have 3.2 80.6 90.3
Total 100 100 100
Weekly sales Thursday 3.2 - -
periods Friday 38.7 - -
Saturday 35.5 32.3 -
Sunday - 35.5 19.4
Throughout 9.7 - -
Week days 9.7 - -
Subtotal 96.8 67.7 19.4
Do not have best 3.2 32.3 80.6
Total 100 100 100
Monthly sales Early month 38.7 - -
periods Midmonth 32.3 - -
Month-end 25.8 19.4 -
Subtotal 96.8 19.4 -
Do not have best 3.2 80.6 100
Total 100 100 100
Yearly sales Jan-Feb 45.2 - -
periods March-Apr - 9.7 -
Sept-Oct 9.7 9.7 -
Nov-Dec 12.9 25.8 9.7
Throughout 9.7 - 9.7
Subtotal 77.4 45.2 19.4
Do not have best 22.6 54.8 80.6
Total 100 100 100

Mornings, afternoons and evenings were the best sales periods for 29.0%, 38.7% and
25.8% of greengrocers. On a weekly basis, the Fridays and the weekend featured as
strong sales periods (table 5.4). Unlike hawkers, greengrocers experienced widely
differing monthly sales peaks with none reporting constant sales throughout an
average month. The yearly figures also differed from the competitors with 45.2% of
the greengrocers highlighting January and February (Christmas and New Year) as
their best selling periods.

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Only 13.3% of the Tshwane supermarkets operated six days a week as the balance
was open seven days a week. These supermarkets were open between 10 and 16 hours
a day on weekdays and just over half (53.3%) reduced their operating hours to seven
on Saturdays. Only 13.3% and 33.3% were closed on Sundays and public holidays
with the rest either closing two to three hours earlier or not adjusting trading hours at
all.

Table 5.5: Peak FFV sales periods for supermarkets

Period Proportion of retailers experiencing peak sales

Best (%) Second Best (%) Third Best (%)
Daily Mornings 13.3 - -
sales Mid-morning 46.7 - -
periods Afternoons - 13.3 -
Late Afternoon 13.3 13.3 -
Evening 13.3 20.0 13.3
Night - 13.3 13.3
Throughout 13.3 - -
Do not have - 40.0 73.4
Total 100 100 100
Weekly Monday 26.7 - -
sales Wednesday 13.3 - -
periods Thursday 20.0 - -
Friday - 13.3 -
Saturday - 33.3 -
Sunday - - 20.0
Throughout 26.7 - -
Do not have 13.3 53.3 80.0
Total 100 100 100
Monthly Early month 26.7 - -
sales Midmonth 26.7 - -
periods Month-end 46.7 40.0 -
Do not have - 60.0 100
Total 100 100 100
Yearly Jan-Feb 13.3 - -
sales June –July 6.7 - -
periods Sept-Oct - - -
Nov-Dec 13.3 20.0 -
Throughout 60.0 - -
Do not have 6.7 80.0 -
Total 100 100 100

Supermarkets in this study highlighted midmornings as their first peak period in

46.7% of the responses. Evenings featured strongly as primary (13.3%), secondary
20.0%) and tertiary (13.3%) peak periods. Monday, Wednesday and Thursday were

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weekly peaks in 26.7%, 13.3% and 20.0% of the stores respectively. Another 26.7%
had even sales throughout the weeks. Although month-ends were important primary
(46.7%) and secondary (40.0%) peak periods; many stores had early and mid month
peaks (table 5.5). More than half the supermarkets (60.0%) had steady FFV sales
throughout the year. The festive season was also an important primary and secondary
period in 13.3% and 20.0% of the instances.

5.6.3 Competitive edges

Another key to trade success is in knowing and exploiting the business’s fortes or, in
the words on the questionnaire-checklist (appendices 2 to 7); the key is in knowing
‘Why customers buy fresh produce from you as opposed to other traders?’ Thus this
subsection presents findings on retailers’ perceptions of what draws customers to their
businesses and what they use as barriers to fend off competition.

As shown in table 5.6 informal traders highlighted low prices as their key
draw/competitive factor in the overwhelming majority 71.4% of the cases. This
finding contradicted with conclusions in Van Zyl & Conradie (1988) that the informal
sector was generally more expensive than the others. Being conveniently on the way
home was the primary draw card for 12.7% of the cases. The other three factors were
less frequently identified as primary.

Table 5.6: Key competitive factors for informal traders’ FFV retail

Factors attracting patronage Primary factors Secondary Tertiary factors

(%) factors (%) (%)
Low price 71.4 - -
On the way home 12.7 42.9 -
Close to home - - 3.2
Wide variety 3.2 7.9 -
High quality 3.2 3.2 -
Long/flexible trading hours 3.2 - -
Kinship with locals - 3.2 -
Subtotal 93.6 57.1 3.2
None 6.4 42.9 96.8
Total 100 100 100

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Being on the route home was the most prominent secondary draw card at 42.9% the
next was having a wide variety at 7.9%. Generally these findings concurred with the
results were in line with findings in Ligthelm (2006b) where reasons for buying from
hawkers was that they carried the right mix of products (52.0%), were affordable
(36.2%), convenient (7.1%), long flexible trading hours (2.0%). Surprisingly, no
mention was made of product quality. Another interesting finding was the
identification of the kinship bond with fellow low-income earners as one of the draw
cards. This is similar to a conclusion made by Karaan (1993) that informal traders
have socio-economic legitimacy in areas low income areas. This finding is indicates
the use of another P of the marketing mix namely, people and processes.

Greengrocers also perceived low price as their primary selling point in 64.5% of the
cases (table 5.7). Quality and freshness featured as the key secondary (19.7%) and
tertiary (9.7%) attractant. A high 12.8% professed ignorance with regards to any
particular draw cards.

Table 5.7: Key competitive factors for greengrocers’ FFV retail

Factors attracting patronage Primary factors Secondary Tertiary factors

(%) factors (%) (%)
Low price 64.5 - -
High quality and freshness 3.2 19.4 9.7
Industry experience 9.7 - -
Convenient location 9.8 9.7 -
Wide Variety - 3.2 -
Subtotal 87.2 32.3 9.7
None 12.8 67.7 90.3
Total 100 100 100

Other important selling points were securing a location that is convenient to

customers (nearby) and having experience in the industry. Contrary to expectations
that consumers sought an exotic variety of FFV from greengrocers, the practitioners
rated variety as a small secondary factor.

Over half the supermarket respondents identified low price as their key selling point
for their FFV retail (table 5.8). Being conveniently located also featured highly in the
competitive factor list (20.0%) followed by long operating hours (13.3%).

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Table 5.8: Key competitive factors for supermarkets’ FFV retail

Factors attracting Primary factors Secondary factors Tertiary factors

patronage (%) (%) (%)
Low price 53.3 - -
Convenient location 20.0 - -
Habit 6.7 - -
One stop shop 6.7 13.3 -
Open till late 13.3 6.7 -
Cleanliness - 13.3 -
High product quality - 13.3 13.3
Customer service - - 26.7
Subtotal 100 46.7 40.0
None - 53.3 60.0
Total 100 100 100

Other key issue stressed by supermarkets respondents that being able to acquire all
food requirements under a single roof was an especially unique and powerful factor in
their favour.

Retailers in all three channels on average perceived their top selling point to be low
prices. This confirms the earlier assertion that lowest prices were not the reserve of
any particular channel. Thus maintaining low prices appears to be a minimum entry
point rather than a distinguishing edge. Further interpretation of the three preceding
tables shows that beyond this primary factor each retail format possesses a key
competitive factor above and beyond the others. For hawkers this is the convenience
of making a quick small purchase without interrupting the journey home.
Greengrocers emphasise high product quality and freshness and to a smaller extent
location. Supermarkets on the other hand, rely on their long working hours and the
one stop shopping experience to encourage patronage.

5.6.4 Identified competitors

The competition analysis checklist (Box 2.1) emphasized the importance of tracking
the relative performance of competitors. This is also a key aspect in Porters forces
analysis as this process tracks the strength of perceived competitive threats
surrounding each of the three channels. This subsection explores the FFV retailers’
perceptions of their peers’ relative competitive strength.

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Figure 5.6 shows that hawkers considered ‘fellow hawkers’ as the main competitor in
most (63.5%) of the cases (comparing the red ‘main competitor’ bars). Another 17.5%
considered other hawkers as minor competitors and 11.1% saw their peers as serious
competitors (comparing the yellow ‘serious competitor’ bars). Greengrocers were, in
76.2% of the cases, viewed as non-competitors and minor competitors in 14.3% of the
cases. Also shown in figure 5.6 is that views on the effect of supermarkets were mixed
That is, 11.1% of hawkers saw supermarkets as the main competitor, 22.2% saw
supermarkets as serious competition, 30.2% as minor competition and 34.9% felt they
did not compete with supermarkets.

%
% %
%

.1 .2

.9
.2

Supermarkets 11 30

34
22

%
2%
8%

.3
.2

Greengrocers 3. 14
76
4.

% %
%

3%

.5 .5
.1

Haw kers 63 17
11

6.

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%
main competitors serious competitor minor competitor not competitor

Figure 5.6: Informal FFV retailers’ perceptions of relative competitive strength

A separate enquiry into the impact of these main competitors revealed an almost even
split between those who felt no effect (51.6%) and those who thought sales had
declined (48.4%). Most hawkers (73.7%) did not change their pricing in response to
this competition. The primary reaction was to stock wider variety and higher quality
of FFV.

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When greengrocers were asked to rate their competitors they highlighted

supermarkets as their main competitors in 64.5% of their responses. The views on the
efficacy of fellow greengrocers were mixed as seen in figure 5.7. A few (9.7%) of the
greengrocers added wholesaler-retailers among the ‘other’ competitors category and
labelled them as serious competitors. Note that ‘missing data’ was not added as a
category in figure 5.7 so some bars fall short of 100%. That is, as shown below,
wholesale-retailers were highlighted as serious competitors by 9.7% of greengrocers.
The balance, 90.3%, did not recognise wholesale-retailers among the players in FFV
retail and thus did not rate them at all (missing data). Therefore this was excluded
from the diagram.
7%

Wholesale-retail
9.

%
%
Supermarkets .5 .6
64
22
%

%
%

.4 7%
.4
.4

Greengrocers 19 9.
48
19

%
7%

.4

Hawkers
77
9.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

main competitors serious competitor minor competitor not competitor

* Bars may not make 100% because ‘missing data’ was not counted
Figure 5.7: Greengrocers’ perceptions of relative competitive strength

As a result of this competition 46.7% of the greengrocers stated that their sales had
declined while 43.3% had no change in sales. Another 10.0% actually recorded better
sales as the competition brought more customers for all. In terms of the pricing
reaction to competition 46.7% of the greengrocers stated that they had reduced prices
while 53.3% had not changed prices.

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The supermarkets identified their strongest threat in FFV retail as their fellow peers.
As shown in figure 5.8, supermarkets were typically rated as the main competitor
(20%) and serious competitors (66.7%). This means competing supermarkets were at
rated at least as serious competitors in 86.7% of the case. Greengrocers and hawkers
were also considered serious threats to supermarkets in at least 20% of the cases.
Wholesale-retail and fresh produce markets were also identified as competitors of
supermarkets, albeit minor ones, in 13.3% and 6.7% of the cases respectively.

%
7%

.3
Produce Markets 6.

93
%

%
.3
.0

Wholesale-retail 13
40

%
%

7%
.0 7%
.7

Supermarkets 20 6.
66

6.
%

%
7%
7%

.0
.7

Greengrocers 20 6.
66
6.

% %
.7 .3
.0

Haw kers 26 13
60

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

main competitors serious competitor minor competitor not competitor

* Bars may not make 100% because ‘missing data’ was not counted
Figure 5.8: Supermarkets’ perceptions on competitive strengths

Just over half (53.3%) of supermarkets felt that their main competitors had no effect
on sales. The others (33.3%) felt that they had lost sales to competition while a few
(13.3%) thought the effect was seasonal. In terms of pricing responses to competition,
60.0% had made no price changes while 13.3% had reduced retail prices in response
to competition. Interestingly 26.7% of the respondents reported that they had
increased their prices in response to competition. The logic in these cases was to opt
to widen variety and product quality rather than to compete in terms of pricing. This

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had the effect of increasing wastage as well as stocking costs thus the need to increase
the retail price.

Thus in summary, intra-format was considered more serious among supermarkets and
among hawkers than inter-format competition. Greengrocers found cross format
competition with supermarkets as being most intense. It was also observed that the
closer a competitor was, the more likely he was to be perceived as the main
competitor. The perceived effect of competition on sales was generally indeterminate
and more than half the retailers reiterated that competitors did not affect their pricing.

Smaller supermarkets and convenience stores also stated that their main threat to
survival, outside the FFV sector, was the proliferation of expanded fuel station kiosks.
Their advantages were seen to be the longer business hours (often 24 hour) and that
customers could refuel and perform their convenience shopping at one stop.

5.7 Summarised findings

This chapter presented and discussed the results of the competition survey. This
included the findings on how FFV retailers adjusted their marketing mix (place, price,
product, promotion, people and processes) were presented first. Subsequent sections
were on market targeting, as well as the relative perceptions of rivalry and
competitiveness. All this was in aid of achieving the primary study objective, to
understand Tshwane’s the FFV retail trade. Highlights of the chapter include the
following.

The FFV retailers generally sought to locate their businesses at prime/busy areas,
which entailed the transport nodes and areas with high population densities. It was
revealed that the area dedicated to FFV was generally smaller in the supermarkets
(average 135 square meters) than in the greengroceries, (200 square meters). This
meant that greengrocers could carry more variety. It was established that informal
traders’ businesses were relatively young, averaging six years. This reflected the
relative ease of entry, exit and recent improved tolerance for the sector. The

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greengroceries were found to generally be old businesses with average of 23.7 years.
Combined with the low incidence of new entrants this could indicate a business
format in atrophy. The supermarkets had a fairly balance set of ages ranging from 3 to
75 years. Partnerships were the most prevalent ownership structure among FFV
hawkers, while greengroceries were primarily family run thus confirming their
contribution to entrepreneurship. Supermarkets were a mix of corporately owned
stores, franchises and family owned businesses.

Monthly FFV turnover for informal traders varied from R600 to R63 515 per month
and averaged at R15 538 per month while the greengrocers’ FFV turnover varied from
R21 000 to R400 000 per month, an average of R165 521. Supermarket FFV sections
ranged from R7 000 to R1.5 million per month and averaged at R480 692 per month.
In terms of pricing behaviour, informal traders’ charged a mean mark-up of 32.9% for
the basket of reference FFV. In greengrocery stores the average was 44.7%.
Supermarkets’ pricing data was plagued with non-response errors. Based on the few
valid responses supermarkets had mean and modal mark ups of 22.5% and 15.0%
respectively. The informal sector had a cost advantage since they had few overhead
costs, which may offset the scale economies enjoyed by supermarkets buying centres.

Retailers reportedly performed packaging (breaking bulk), washing, cutting, freezing,

and ripening at store level. Over 75% of hawkers, 50% of the greengrocers and a 33%
of the supermarkets were performing at least one processing activity but this was
usually limited to repackaging. Tshwane market (TM) and Marabastad market were
the supply sources of choice for both informal traders and greengrocers. All informal
traders in the survey stated that they did not enter into any form of contracting verbal
or otherwise with suppliers. Greengrocers and independent supermarkets occasionally
had informal reservation arrangements with market agents. Corporate supermarkets
chose to source FFV from the centralised distribution centres. Store level management
were therefore generally ignorant of most procurement issues.

Hawkers primarily relied on personal selling as the only promotional activity while
among the greengroceries, price discounts was the favourite mechanism. Non-
syndicated supermarkets were similar to greengrocers in FFV promotions while
corporate supermarkets were seen to use the full array of promotional tools but these

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were implemented at corporate level and were rarely product specific. Surprisingly,
hawkers were more able to define their target markets than greengrocers and
supermarket managers as the latter two typically targeted ‘all people’ (that is all
LSMs) .

Results revealed that most retailers in all three channels perceived their top selling
point to be low prices. This confirmed an earlier assertion that lowest prices were not
the reserve of any particular channel. Supermarkets and hawkers found intra-format
competition to be more serious than inter-format competition. On the other hand
greengrocers felt that cross format competition, particularly with supermarkets, was a
more serious concern.

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6 Chapter 6: Risk Analysis & Mapping FFV Flows

6.1 Introduction

This chapter serves the purposes of highlighting the risks and problems faced by fresh
fruit and vegetable (FFV) retailers; followed by a situation (SWOT) analysis of the
three FFV channels and lastly a mapping of the industry, based on evidence gathered
in the study. Thus the chapter addresses important parts of the study objective by
addressing sub-objectives four, three and two. These sub-objectives respectively dealt
with identify challenges and opportunities; revealing power dynamics and mapping
the channels (Chapter 1).

In terms of organisation, Chapter 6 begins with a discussion of the results of a

situation analysis of each of the three FFV retail formats. It subsequently analyses the
retailers’ perceived risks and risk mitigation strategies. Both of these sections are
based on results from the phase 2 survey. The next section addresses the mapping of
the links and nodes in the flow of goods, services and thus value within the informal,
greengrocer and supermarket FFV channels. Cognisance was also made of the power
dynamics and the degree of chain governance. The mapping was based on evidence
gathered during the literature review, exploratory study as well as survey sections of
the research, hence its placement as the last set of study findings. A summary of the
main outcomes is used to close Chapter 6.

6.2 Situation Analysis

As stated in the introduction, this section presents the weaknesses and threats faced by
FFV retailers and the arsenal of strengths and opportunities employed to overcome
them. The SWOT analysis could be seen as follow-on (triangulation) to the previous
section on risk and mitigation. That is, in assessing the risks and challenges in FFV

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retail, one also elicits the weaknesses and threats in SWOT language. Similarly
strengths and opportunities analysis bears resembles the section on
coping/amelioration strategies and analysis perceived future prospects. This sub-
section adds value to the previous analysis by further quantifying the retailers’
perceptions of their competitive situation in tabular and graphical forms. The section
therefore looks into relative attractiveness of each of the channels (an element of
Porter’s framework).

The tabular part is the factor evaluation matrix (FEM) of the retailers’ strategic
marketing mix issues (table 6.1, 6.2 and 6.3). As described in the methods chapter, the
importance/weights are average weights calculated across all three retail channels and
the performance is an average self assessment within each channel. Scores were
calculated by multiplying ‘Importance’ by ‘Performance’.

The scores were then used to generate corresponding radar charts that graphically
illustrate the relative performance of each channel by showing each channel’s scores
against the industry average scores. Note that, to facilitate comparison, only variables
considered important in all three channels were included in the analysis. Thus people
and processes were excluded and sourcing, which is technically part of the product
variable, was added because respondents widely sighted it as a separate strategic
marketing issue.

Table 6.1: Situation analysis of informal retailers using the FEM

Strategic Importance Hawker Performance Hawker Scores

Issues (Weight out of 1) (Out of 10) (Importance * Performance)
Place 0.1912 7.2857 1.4868
Price 0.2054 7.5370 1.5517
Product 0.2085 7.8519 1.6252
Promotion 0.1944 7.7037 1.4473
Sourcing 0.2005 6.9348 1.4910
Total 1.0000 7.6020

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Place
2.0

1.8

1.6

1.4
Sourcing Price
1.2

1.0

Promotion Product

Haw kers Industry Average

Figure 6.1: Performance profile of informal FFV retailers

According to their FEM (table 6.1) and performance profile (figure 6.1), hawkers
performed better in the Place variable of the marketing mix as compared to the
industry average. This reflects their relative mobility which means they were more
able to relocate in pursuit of maximum patronage than other retailers. Informal traders
generally underperformed in all other mix variables compared to the industry average.
Overall, hawkers marketing performance rated at 7.6 out of ten or 76.0% (table 6.1).

Table 6.2: Situation analysis of greengrocers using the FEM

Strategic Importance Greengrocer Performance Greengrocer Scores

Issues (Weight out of 1) (Out of 10) (Importance * performance)
Place 0.1912 7.3462 1.5505
Price 0.2054 7.4231 1.8031
Product 0.2085 7.7308 1.8530
Promotion 0.1944 6.3846 1.3753
Sourcing 0.2005 7.6923 1.5375
Total 1.0000 - 8.1195

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Place
2.0

1.8

1.6

1.4
Sourcing Price
1.2

1.0

Promotion Product

Greengrocers Industry Average

Figure 6.2: Performance profile of greengrocers

Greengrocers rated their marketing performance as being above average with regards
to Place, Price and Product (figure 6.2). Their Sourcing and Promotion activities were
found to be below par on average and as shown in table 6.2, greengrocers’ total
average marketing score was 8.12 out of ten or 81.2%.

Table 6.3: Situation analysis of supermarkets using the FEM

Strategic Importance Supermarket Performance Supermarket Scores

Issues (Weight out of 1) (Out of 10) (Importance * performance)
Place 0.1912 6.6923 1.3087
Price 0.2054 8.5385 1.6750
Product 0.2085 8.3077 1.6998
Promotion 0.1944 8.6364 1.6790
Sourcing 0.2005 8.4000 1.7648
Total 1.0000 - 8.1272

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Place
2.0

1.8

1.6

1.4
Sourcing Price
1.2

1.0

Promotion Product

Supermarkets Industry Average

Figure 6.3: Performance profile of supermarket FFV distribution channel

Supermarkets outperformed the average retailer in their Sourcing and Promotions

scores (table 6.3). They were marginally lower in terms of Pricing and Product and
performed poorly for Place (figure 6.3). The overall score for this marketing channel
was 8.12 out of 10 (81.2%).

To summarise and for comparison’s sake, the radar chart in figure 6.4 shows the
weighted scores of all three channels against the industry average scores (in one
graph). The diagram graphically confirms the FEM marketing performance rankings
that feature supermarkets fairing best with a score of 8.13, followed by greengrocers
marginally lower at 8.11 and lastly hawkers at 7.60 out of ten.

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Place
2.0

1.8

1.6

1.4
Sourcing Price
1.2

1.0

Promotion Product

Haw kers Greengrocers Supermarkets Industry Average

Figure 6.4: FFV retailers’ relative performance profiles

Another point to note though is that the scores were based on a self assessment
process. Thus they are more reflective of how retailers felt about their performance
and not necessarily what consumers believed. Therefore beyond rankings, the
performance profiles highlight each channel’s comparative strengths as well as
indicating the potential areas of improvement and upgrade. These are expanded upon
in Chapter 7.

6.3 Risks, Coping & Future Prospects

This section presents the reported constraints and risks faced by FFV retailers as well
as the measures they currently employ to cope if not solve the quandaries. This is an
important consideration as it reveals the level of innovation, adaptability and thus
competitiveness of players in FFV retail. This was more so given the retailers’ lack of
access to direct private or public assistance that ran respectively at 96.8% and 93.7%

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for hawkers; 88.9% and 92.3% for greengrocers; and 96.8% and 100% for
supermarkets.

6.3.1 Risks, coping & solutions

In keeping with the research theme the findings are presented channel-by-channel to
enable comparison between informal retailers, greengrocers and supermarkets.

The primary constraint identified in the hawker business was a lack of shelter for
trading and storage. This was identified in 20.6% of the sample followed by wastage
or poor quality stock (16.7%), volatile FFV demand (12.7%), metro police raids on
illegal and unlicensed trading (11.2%), and robbery (11.1%). Other less prominent
constraints and risks included fines for expired stall rentals (6.3%), lack of transport
(6.3%), fluctuating market prices (4.8%), stock-outs at the wholesales (3.2%),
gambling among the young employees and helpers (3.2%) and competition (2.4%). Of
note here was how low competition featured in the hierarchy of problems. Also of
interest was that the ordering differed from that of Ligthelm (2006b). His ordered list
of constraints included weather conditions, competition, police raids, crime, lack of
shelter, bad debtors, stock-outs and others. Thus the list of constraints were more or
less consistent albeit the differing hierarchy.

The majority (63.5%) of hawkers could not sight any means of mitigating their
problems but to continue as usual. This was especially so with regard to the police
raids where, when probed for a solution; some hawkers suggested ‘running faster’. To
cope with shelter and transport shortages informal traders aimed for zero carry over
stock through trying to procure just enough daily stock, hard selling and disposal of
day end stock at reduced prices. The threat of robbery forced many to either limit
trading hours to daytime or to relocate their operations. As for the problems with late
rentals and related fines, hawkers opted for weekly rather than monthly payments as
they felt these were easier to budget for than the monthly payments. In terms of
eradicating these problems in the long term, most respondents (66.7%) had no ideas.
The remaining few suggested provision of secure overnight storage to alleviate that
problem. This is a measure that was being pilot tested by the TM (Dodds, 2005;

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personal communication). Informal traders also suggested spot fines rather than the
mass confiscation and arrests that ensued during the police raids.

Over a quarter of greengrocers (25.5%) identified shrinkage (shoplifting) as the main

risk in the trade. Wastage (i.e. losses due to reduced quality or rotten stock) was
another major concern in 23.4% of the cases. Less prevalent problems included
market stock-outs (12.8%) and fluctuating sales (8.5%). A sizeable proportion of the
greengrocers (29.8%) stated that they had no problems to report. This may have been
as a result of respondent fatigue since this was one of the last sets of issues covered in
the questionnaire-checklist (annex 3).

Similar to the informal traders, a substantial third (33.3%) of the greengrocers that had
identified constraints were simply ‘carrying on’. Of those with mitigation strategies in
place the shoplifting problem was being tackled through rearranging store layout to
remove blind spots, removal of enterprises such as arcade games that attracted
shoplifters as well as supporting municipal efforts to relocate street children who were
the main shoplifting culprits. Coping with wastage and spoilage involved a
combination of carefully checking all stocks upon delivery, using trusted suppliers
(market agents) and avoiding overstocking. In terms of long-term solutions to the
greengrocers’ shoplifting problem, some were of the opinion that it would require a
macroeconomic solution that solved the underlying problems of unemployment and
poverty. Others considered implementing tighter surveillance and security. Wastage
and spoilage problems were to be fixed by even better stock management.

Shrinkage was an even bigger problem in the supermarkets (41.5%) than with
greengrocers. This included theft by delivery people, in-store staff, as well as the
general public. Other supermarket FFV retail problems included wastage (31.7%), and
this was compounded by fluctuating sales (9.8%), which made demand forecasting
difficult. Labour disputes, go-slows and strikes were also an important business risk
for this group (4.9%). The proportion sighting no problems or risks in their business
was also high (12.2%).

A variety of coping strategies were suggested dealing with supermarkets’ trading

problems. For the theft problem, supermarkets had implemented tighter and more

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sophisticated stock management, surveillance and security as well as hiring visible

guards in the high shrinkage stores. Quality control was the catch phrase for dealing
with wastage and this included checking all deliveries and returning all damages.
Dialogue with trade unions was the current mitigation means for solving labour
problems. In terms of long-term solutions to trading problems most supermarket
managers (46.7%) felt that things would continue as is because this was the nature of
the FFV business. They also could see little, other than more security, to solve the
shrinkage problem. As for wastage, more detailed demand forecasting based on
weekly, monthly and annual trends was planned wherever it was not yet in place.
Proactive and ongoing dialogue with trade unions was the suggested long term
solution to labour disputes.

As part of the risk analysis, inquires were made into reasons why corporate store
management tended to exclude store level supervisors from the strategic marketing
process. It was discovered that DC level managers and buyers at that level felt that the
skills level at the stores was too low to engage. Concurrently, store level supervisors
felt their supervisory posts were meaningless since they had little room to make
decisions. One such supervisor commented that he was a ‘glorified shelf packer’. In
addition, an adversarial relationship was detected in some retail chains between store
level supervisors and DC buyers as each one tried to push wastage losses to the other.
This was therefore another important problem faced in corporate supermarkets.

6.3.2 Past trends & future prospects

Traders’ views of past trends and future prospects are firstly an indication of how they
have faired in the competitive environment and secondly, whether, in their overall
assessment, they foresee a positive future for the trade and their enterprise. Findings
from an elicitation of these views are presented as follows.

Popular opinion among the informal traders was optimistic about the past five years of
FFV retail. However there were numerous detractors in their midst. The positive
views were attributed to a general increase in income levels (24.3%), fewer
confiscations by metro police (9.1%) and increased consumer demand for their FFV

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(5.4%). A number of the respondents (31.1%) stated that the industry had been static
over the period. The negative trends witnessed included the decreased earning from
the retail trade (9.5%), and a decline in customer demand (10.8%).

Future prospects and plans shared by the hawkers included expanding operations
(47.4%), expected further improvements in general income levels (23.7%), increased
sales (10.5%), plans to formalise trading (5.2%). The group of traders expecting no
future changes formed 10.5% of the sample while only 2.6% expected a worsening
trade environment. This overall positive sentiment gives credence Ligthelm’s (2006b)
findings that most hawkers preferred to continue their current occupation as opposed
to a hypothetical job offer in the formal sector.

Greengrocers were comparatively pessimistic about the FFV industry trends. The
majority (38.5%) had seen little change over the past half decade. Some 15.4% had
seen their customer’s incomes decline while crime and shrinkage were on the increase
for 7.7%, as well as fewer customers in 7.7% of responses. Another change
highlighted by 15.4% of respondents was an increase in the number of black middle-
income earners. Although not explicitly declared, there was an implied link between
the changing demographics (to more black people) and a decline in the greengrocer
trade. A sizeable 56.7% of respondents failed to comment on the envisaged near
future for the FFV industry. The balance was optimistic with 33.3% predicting
increased business and 10.0% expected their customers’ incomes to rise.

Supermarket managers were divided about the past five years in FFV marketing.
Some recalled an increase in crime and shrinkage (44.4%), while others felt this had
decreased (22.2%). Some (11.1%) thought incomes and thus demand had increased
while 5.6% though incomes and demand were falling. Another change highlighted by
11.1% of the respondents was the increased racial mix of their customers.
Interestingly and unlike the other two retail formats, all the respondents felt trading
conditions had changed in one way or the other.

In terms of expected future trends and changes the supermarket outlet managers were
positive albeit that a quarter of them (25.0%) predicted no real changes for the next 5
years. The optimists attributed their view to improved FFV standards (25.0%), the

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reported expansion of corporate retail chains both domestically and internationally

(25.0%), as well as a general trend towards healthier living that generated demand for
FFV. Some (12.5%) also envisaged the resolution of the shoplifting problem through
their improved surveillance and because of the generally buoyant macroeconomic
outlook in South Africa.

6.4 FFV Supply Flow in Tshwane

In keeping with one of the research objectives to map out the links and nodes in the
flow of FFV value in Tshwane, figure 6.5 traces the overall flow of fresh fruit and
vegetable products from producers to the consumers in the city. The structure was
elicited from the various key informant interviews and augmented with observations
made during the study. The figure purposefully omits all links and flows of fresh
produce destined for consumption outside the City of Tshwane.

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Producers
(Commercial & small-scale farmers countrywide)
Less own consumption

Municipal Markets
(Tshwane &
Johannesburg
markets) Informal
Wholesalers and Traders
Wholesaler-retailers
Chain Retailers (e.g. F&V City,
(e.g. Pick & Pay, Marabastad market) Contract Buyers
SPAR and Freshmark
of Shoprite)
Small formal retailers
(including greengrocers &
convenience stores)
Catering & Hospitality
(restaurants, fast-food &
institutions)

Final Consumers (individuals & households)

Figure 6.5: Overview of the supply route for fresh fruit and vegetables in Tshwane

Sources: Own findings, Dodds & Sedutla (2005) and Ligthelm & Van Wyk (2004)

An important note in interpreting the flow diagram (figure 6.5) is that each of the
arrows in the figure show that FFV flows in that one direction. In addition and to
avoid clutter, the arrows intersect wherever produce can join an alternate route. For
example, the diagram shows that restaurateurs source their fresh produce from a
combination of chain retailers, wholesalers, independent retailers as well as contract
buyers and municipal markets although no direct links to the latter two are shown.

The proceeding three sub-sections represent a further breakdown of the FFV supply
route into that used by each of the three retailers. These are presented in greater detail
with additional information added on the power/governance structures faced and
wielded by each of the three focal retail players. The breakdowns therefore contribute
to an understanding of how the relevant competitive (Porter’s) forces manifest in FFV
retail. That is, at each link in the chains an assessment of the strength of the links were
made and categorised at four levels as defined in Chapter 3 and by Humphrey (2005).

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These are, in order of increasing strength arms length relationships, balanced

relationship, directed networks, and hierarchical (subsidiary) relationships.

6.4.1 The informal FFV channel

The following figure 6.6 presents a schematic of the value chain associated with the
FFV informal retail in Tshwane Metro. The flow diagram adds detail to the overview
flow by omitting channel links that show FFV flowing through alternate channels. In
other words only links that eventually go through the informal retailers are shown in
figure 6.6.

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Fruit & Vegetable Farmers Countrywide

ƒ Large-scale farmers ƒ Small-scale farmers Local Farmers

Mainly
PRODUCERS ƒ Brits area
(North West
Produce Markets province)
WHOLESALE
ƒ Tshwane Market

Chain Independent Satellite Municipal

Wholesale- Wholesale- Markets
WHOLESALE- Retailers Retailers ƒ Marabastad (mainly)
RETAIL ƒ Mainly Fruit ƒ ‘Asian &
& Veg City markets’ ƒ Hammanskraal
ƒ 2-3 outlet ƒ Single outlet
stores W-Rs W-Rs

Fixed location Semi-mobile Roving hawkers

hawkers hawkers Partnerships & family
INFORMAL Partnerships & Partnerships & alliances using movable
RETAIL family alliances family alliances displays including:
permanently located with a fixed base ƒ Trolleys
at: plus: ƒ Baskets
ƒ Roadside stands ƒ Between ƒ Boxes
ƒ Transport nodes stopped traffic ƒ Bags &
(e.g. bus, taxi & ƒ Aboard ƒ Hangings
train stations) commuter trains ƒ Other
ƒ Tuck-shops

Final Consumers
Target individuals & households
CONSUMERS ƒ Commuters ƒ Residents in the surrounding area
ƒ Children ƒ passers-by
ƒ Shopping mall visitors

Figure 6.6: Informal trader channel for fresh fruit and vegetables in Tshwane

= arms length market relationship = balanced relationship

= directed (top down) network = hierarchy (subsidiary)

Of note is that most links in this channel are arms length trading relationships
characterised by short term, transaction related relationships. The exception included
the directed link between municipal markets and their semi-autonomous satellite

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markets. Another was the balanced relationship with customers who were said to
share a kinship and good rapport.

As explained in the sourcing section of Chapter 5, informal traders typically used

different suppliers and outlets as primary and secondary routes for their business
under differing conditions. Thus, since the flow diagram is static, the quantities
flowing through node were excluded in favour of simply acknowledging the nodes
positions in the chains, their links and the direction of FFV flow.

6.4.2 The greengrocer channel

Following on the previous subsection, the current presents flows of FFV through the
greengroceries channel in figure 6.7. Similar to the previous flow chart, only links
showing FFV that eventually go through the greengroceries are shown here.

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Fruit & Vegetable Farmers Countrywide

PRODUCERS
ƒ Large-scale farmers ƒ Small-scale farmers

Municipal Markets
WHOLESALE ƒ Tshwane Market
ƒ Johannesburg FPM
Marabastad
Satellite Municipal
WHOLESALE-
Markets
RETAIL

Greengrocers
Mainly single outlet but up to 3 stores owned:
RETAIL ƒ Family alliances ƒ Independently

Catering Hospitality Institutions

FURTHER ƒ Restaurants ƒ Hotels ƒ Corporate
PROCESSING ƒ Fast-food ƒ Bed & Breakfasts ƒ Government
ƒ Functions ƒ Lodges ƒ Hospitals
& Events ƒ Prisons

Final Consumers
Highlighted target individuals & households
CONSUMERS ƒ All people ƒ Apartment dwellers
ƒ Locals and passers-by ƒ LSM 4 and 5

Figure 6.7: Greengrocer channel for fresh fruit and vegetables in Tshwane

= arms length market relationship = balanced relationship

= directed network = hierarchy (subsidiary)

Compared to informal traders, the greengrocers enjoy closer links (balanced

relationships) with market agents and can negotiate for preferential treatment. This is
due to the larger volumes of FFV traded per transaction. Some are also contracted as
suppliers to the institutional, catering and hospitality industries. On the other hand
they had weaker links to end consumers than the hawkers.

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6.4.3 The supermarket FFV channel

The supermarket flow chart (figure 6.8) features many more organised links than the
previous two. This is a symptom of two factors, their stronger bargaining power and
the high level of integration and concentration in the channel.

Fruit & Vegetable Farmers Countrywide

PRODUCERS ƒ Large-scale farmers ƒ Small-scale farmers

Municipal Markets
WHOLESALE Mainly:
Distribution Centres ƒ Tshwane Market
Including: ƒ Johannesburg FPM
ƒ Freshmark (Shoprite) Also other 14 FPMs
ƒ Pick n’Pay DCs when in short supply
ƒ SPAR DCs
ƒ Other buying alliances

Corporate Franchise Independent

Supermarkets Supermarkets Supermarkets
RETAIL ƒ Corporate owned ƒ Partnerships & ƒ Mainly family
ƒ Marketing mix family owned owned
controlled at DC ƒ Loosely allied ƒ Preferred
with DC FPM buyers
ƒ Preferred FPM
buyers

Catering &Hospitality
FURTHER ƒ Small functions & Events
PROCESSING ƒ Bed & Breakfasts
ƒ Small Lodges

Final Consumers
Highlighted target individuals & households
CONSUMERS ƒ All people ƒ Adults
ƒ Surrounding residents ƒ Office workers

Figure 6.8: Supermarket channel for fresh fruit and vegetables in Tshwane

= arms length market relationship = balanced relationship

= directed network = hierarchy (subsidiary)

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Of note is the absence of the wholesale-retailers in the supermarket channel (figure

6.8). This was replaced to some extent by the distribution centres (DC). These centres
did not qualify as wholesale-retailers because they were not open to the public. Also
of note is the use of a hierarchical link between DC and corporate supermarkets. This
was a strong link compared to the link with the semi-autonomous franchise outlets.
Another highlight in the figure is the link between supermarkets and the catering and
hospitality industries. These were weaker (arms length relations) than in the case of
greengrocers because there were typically no contractual arrangements between the
two.

6.5 Summary

Chapter 6 analysed FFV retailers in terms of a SWOT analyses; the risks and
problems they faced; how they mitigated or solved them; and ended with a set of
channel maps of the three competing retail channels and the power dynamics therein.

A performance profiling based on the factor evaluation matrix revealed that informal
traders required the most improvement in their marketing mix. Greengrocers were in
an intermediary position with supermarkets scoring highest.

Informal traders highlighted the lack of shelter, wastage, volatile demand and Metro
police raids as their prime constraints and mostly did nothing to ameliorate the
problems. Most greengrocers could not site any significant challenges to their trade
but others sited shrinkage, wastage and fluctuating demand. Over 33% of the sampled
greengrocers just carried on despite the problems with a few suggesting solutions.
Shoplifting was also a major problem for supermarkets followed by wastage and
fluctuating sales. Their solutions were increased hi-tech security, quality control and
improved demand forecasting.

Generally retailers shared a positive outlook for the FFV retail industry although there
were marginally more pessimists among the greengrocers. The main source of this

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positive outlook was the generally positive macro-economic trend leading to a

growing middle class; higher incomes and less crime.

The last section on mapping graphically summarised the findings on what links and
market governance relationships prevailed in each of the three retail channels which
served to fulfil two important research sub objectives.

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7 Chapter 7: Summary, Conclusions & Way Forward

7.1 Introduction

This chapter aims to review the study in its entirety so as to glean the main
conclusions of the research findings as well as areas of possible future research. The
guiding principles of the process were to pick out the key findings that address the
specific (supporting) research questions as stated in Chapter 1 and thus the overall
research questions, hypotheses and objectives.

In so doing the chapter begins with a review of the revealed structure of competing
channels in FFV retail in terms of their comparative market positions. This is
followed by an outline of factors that facilitate multiple retail formats in the sector
including a discussion of the comparative barriers to trade and how they create space
for competitors. Based on this review a brief action plan is suggested to show how
each of the competing channels could upgrade.

The study is concluded with an account of areas beyond the scope of this research that
could add to understanding the FFV sector and building more customised action
plans.

7.2 Revealed structure of competing channels

The value chain diagrams in Chapter 6 provided a comprehensive overview of the

FFV industry and the three channels in terms of structure, governance with an
inference on competitive (Porter’s) forces, thus meeting the study objectives. This
section provides a summary of the text preceding those channel maps including a
comparative review of the marketing strategies employed by the different channels.
This gives a further overview of the competitive forces faced by the types of FFV
retailer and how they employed other attributes and barriers to defend market share.

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Concurrently the section highlights how the study as a whole tested and confirmed the
hypotheses, stated in Chapter 1, that retailers compete by using differing levels of a
mix of marketing attributes and that the structure of the value chains employed by
each of the three retail formats gives each one an advantage in accessing different
market segments.

7.2.1 Market structure

Fresh produce markets (FPMs) including Tshwane Market (TM) were confirmed as
being the largest most important player in the FFV industry as it handles about 80% of
all produce in the country and setting the price baselines. Thus the proportion of sales
off their floors served as an indication of the relative size of the players.

These TM statistics showed that informal traders (hawkers) as a group were

intermittently the top single buyer category. They were also acknowledged for their
ability to react to price differentials that often helped to clear instances of market
oversupply, thus reducing potential wastage losses. They operated in three business
models, fixed location, semi-mobile and roving operations. Hawkers were found
through out the city of Tshwane, dominated the sector in the low affluence suburbs,
were competitive in the middle and confined to transport nodes in the exclusive
neighbourhoods.

Despite their relative unit sizes, chain retailers were typically at fourth place on the
TM books. This was because about a third or more of their FFV supplies were
obtained directly from farmers. This direct procurement was mainly reserved for
acquiring the more sensitive and specialised product lines. The independent
supermarkets by and large operated their fresh produce departments similar to the
greengrocers. The supermarkets were dominant in the high-income areas where they
were strategically found in the shopping malls.

Experts and practitioners were divided over the general plight of greengrocers.
Evidence suggests that the business format is declining in small centres but is still

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viable in the big cities. TM statistics bundles greengrocers and independent

supermarkets into a set that accounts for a significant quarter of market turnover. In
terms of presence, the greengrocers have a weak showing in high income areas,
competitive presence in the middle and are almost none existent in the poor
neighbourhoods.

7.2.2 Comparative use of the marketing mix

The use of the marketing mix and other competitive variables in the three FFV retail
channels is best summarised compared in the following table 7.1. This summary is
derived not only from retailer responses but also from key informant reviews and
observations made during the course of the research. It is especially geared towards
highlighting differences in approaches to marketing FFV and thus answering the
research question and its supporting plots as outlined in Chapter 1.

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Table 7.1: Comparative use of the marketing-mix across the three channels

Variable Informal FFV Retail Greengrocers Supermarkets FFV retail

Place • A young (6.0 years) set of retailers • Relatively old (23.7 years) set of • A balanced mix of old and new outlets
located at transport nodes with small (4.8 businesses found at neighbourhood centres. (average 25.3 years) located in shopping
m2) often movable displays • Have the largest average area under FFV malls and centres with a relatively large
retail (188 m2) area under FFV (135 m2)
Price • Low with a mean mark-up of 33.0% • Low on high volume ranges with mean • Low, mark ups are kept secret but
• Advantage of low to zero overhead costs mark-up of 41.7% estimated at 22.5%
but little bargaining power with suppliers • Relatively low overhead costs with some • High overhead costs balanced by strong
bargaining power negotiating power
Product • Source from FPM & satellite markets • Source almost exclusively from FPMs but • Main source are direct from farmers but
• High volume and quality over a limited Marabastad satellite used in stock-outs also include FPMs and off season imports
range of popular FFV • Key in this channel was carrying a wide • Relatively wide product range and quality
• Low if any carry over stock helped keep range of high quality produce. This comes range. Dependant on store location, brand
freshness and quality up to counter lack of at a cost of high wastage and accepted balance between wastage
shelter and refrigeration • Most repackaged FFV in store but a few losses and quality
• Repackaging is the main processing also did some washing, cleaning and pre- • Repackaging washing and cleaning
activity with little else done cutting performed mainly at DC but some in store
• Strong personal relations & kinship bonds • Relatively personal/neighbourly rapport • Impersonal service & queues
with customers with little queuing
Promotion • Aggressive personal selling is the main • Price discounts (specials) are favoured • Marketing corporate brand of one stop
promotion route but also keep neat displays with some using print media shopping using a wide range of mass media
and personal rapport with clients (advertisements, flyers and posters) • Also run store level price and trail
• Also run limited monthly credit in • An attractive display is also important inducing promotions
residential operations
Target • Uses a mass marketing approach with • The mass market with emphasis on • Also mass marketing but with emphasis
market emphasis on low to lower middle affluence middle affluence areas on middle to high affluence areas
groups

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7.3 Factors Facilitating Multiple Retailer Formats

Fresh fruit and vegetable business leaders were in agreement with the current study
that the FFV sector is peculiar because of its ability to allow the existence of a wide
spectrum of types and sizes of business entities. They report that this was not only
true at the retail level but also among the producers, wholesalers, processors and
consumers (Roos, 2006; Dodds, 2005 and Du Toit, 2005, personal communications).
Their views and analysis in this report point towards a number factors causing this
phenomenon including the existence of multiple niches; the equalising effect of
pricing at TM; the general upgrade in product quality offered by all retailers;
characteristics of FFV and an inability of any single players to satisfy all market
segments.

7.3.1 Multiple FFV market niches

The existence of multiple FFV market niches was a key factor to explain the
numerous retailer formats. As a result FFV retail in Tshwane, and similarly in other
South African urban areas, had evolved into the three main retail formats –
supermarkets, greengrocers and hawkers – and each concentrated on different but
overlapping market segments serves different needs. That is, as indicated in table 7.1,
the informal traders concentrate on the low to lower middle affluence groups
(approximately LSM 2 to 6) especially when they are in transit by providing
convenient and quick transactions at transport nodes. Greengrocers on the other hand
target middle groups (about LSM 5 to 8) while supermarket FFV looks at middle to
high affluence groups (LSM 5 to 10). Thus there is limited direct cross retail format
competition. On the other hand, because there are a finite number of prospects for
FFV, these target groups overlapped considerably. Therefore the existence of an
alternate source of FFV meant that competitive rivalry does exist.

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7.3.2 TM & other produce markets

Another reason for the multiplicity of retail formats in Tshwane’s FFV retail sector
was in the effect of the TM. This market created a relatively level playing field for
retailers large and small. Firstly, although high volume buyers such as wholesalers
and chain retailers could receive discounts for buying in bulk, these discounts had a
marginal effect. The reason being, although the small retailers and informal traders
made small individual purchases, their combined buying power formed more than half
the turnover of the TM. This weakened the bargaining power of bulk buyers and
effectively pushed the market closer to the ideal - many small buyers - scenario
needed in perfectly competitive markets (Chapter 2). In addition the large players also
faced high overhead costs that did not apply in the informal sector thus further
levelling the competitive plane. At the centre of this price balancing process were
market agents who sought to maximise prices (and hence commission) for farmers
while still clearing the stocks while they are fresh. As noted in Chapter 2, the TM
prices were referred to in transactions outside the market. Thus the forces of supply
and demand ultimately influenced prices used across the board.

Another previous source of inequity and competitive advantage in FFV retail that had
since been levelled was that of product quality. As reported in Chapter 2 all retailers
had progressively moved towards exclusively trading in high quality, first grade FFV.
The lower grades were increasingly the reserve of fresh produce processors. These
changes had been facilitated by improved grading systems at the TM and other
markets.

The central role of the TM in facilitating cross format competition is seen in the
previous paragraphs. However the system was not flawless because the municipal
markets also acted as FFV markets of last resort. Market managers complain that this
meant that, for instance, when a consignment of produce was rejected by an export
market, the exporter had the option to offload the produce at the municipal markets.
This caused a flooding of the local markets and thus an abundance produce that either
started out low grade or suffered from spoilage. This had the dual effect of

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compromising prices received by other producers and lowering buyers’ perception of

quality supplied at the markets.

7.3.3 Characteristics of FFV versus other food & FMCG

The perishability of fresh produce does not only affect the retailer in terms of
potential wastage but also in terms of altering consumers buying behaviour compared
to the Fast Moving Consumer Goods (FMCG). Strategies employed at household
level to maintain access to freshness include buying small quantities less frequently.
This is contrary to the ‘one stop shop’ appeal of supermarkets where people purchase
monthly food supplies in a single transaction. A further deterrent to one stop shopping
at supermarkets is convenience. Accessing the larger supermarket typically involved
some travel, incurring parking costs and sometimes also included queuing to make the
purchases. In comparison, the day-to-day requirements of FFV may be purchased
from a hawker while waiting at a traffic light. Alternatively one could do the same at
the neighbourhood greengrocer.

Another consideration was that fruits were an important snack food allowing one to
buy and consume without need for preparation and with minimal health risks given
the wholesale level standards and grading. This risk is especially low where the fruits
had a protective peel such as the case in bananas and citrus. FFV were also fairly easy
assessed in terms of quality by their appearance, hence there was less need for the
comfort of buying particular brands or from known outlets. Their low unit prices
made them even lower involvement purchases. Therefore consumers were more likely
to trust the smaller retailers.

The FFV retail sector was also characterised by asymmetrically low entry barriers
(Ligthelm, 2006b) especially when compared to FMCG. That is, start-up and branding
costs were so low that the sector allowed even the smallest player to trade. It had no
special skills requirements since the main value addition processes were break bulk,
some cleaning and simple arithmetic to ensure a profit was made. Many FFV were
also hardy to handling and thus required even less skill or specialised handling. The

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relaxation of city bylaws on street trading and lax enforcement reported in Chapter 2
also contributed towards lowering entry barriers.

7.3.4 Characteristics of the players

The large supermarkets suffered the fate of being perceived as part of the impersonal
and faceless corporations versus the neighbourly, community and family rapport
generated by informal traders and to a smaller extent with greengrocers. The
supermarkets’ self service approach adds to this impression compared to the more
personal service offered in greengroceries and by hawkers.

The value chain mapping conducted in Chapter 6 indicated that the retailers’ channels
had a similar number of links from ‘farm to fork’. However the time between
harvesting and sale is usually shorter for the smaller retailers. This could be explained
by two factors, storage capacity and volumes traded.

As indicated in Chapter 5 hawkers typically did not possess storage facilities and this
was the top business risk identified in 20.6% of the interviews. Thus carry over stock
was kept at minimal or zero level each day. A side effect of this problem was that
hawkers’ stocks were kept fresh by maintaining this daily 100% stock turnover.
Greengrocers and small independent supermarkets were in a milder but similar
situation as their storage space was limited to the size of the store/outlet.

Supermarket chains on the other hand, typically maintained DCs with massive
ripening, storage and refrigeration facilities. For instance Freshmark Centurion, which
supplies Shoprite and Checkers outlets in Tshwane, is the largest DC in the group.
DCs also reportedly stocked up on some product lines in the on-season price slumps
then progressively released them to the outlets (Chapter 5). Also highlighted in
Chapter 5, centralised buying often increased the ‘farm-to-fork’ time and thus
decreased FFV quality. However supermarkets could counter this with fewer chain
links through sourcing from producers unlike its competitors who typically purchased
through the TM (as shown in Chapter 4).

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7.4 Channel Upgrading: Ways to improve

One of the primary aims of this research (Chapter 1) was to identify pathways to
improve the functioning of each of the three channels. This is channel upgrading in
value chain language (Kaplinsky & Morris, 2000). As shown in Chapter 3, this
upgrading can occur at four levels: internal efficiency (process upgrading), improving
the offering (product upgrading), improving and shifting productive activities
(functional upgrading) or else moving into new value chains (chain upgrading).

Also as highlighted in Chapter 3, the outcomes of the upgrading are not guaranteed
because of the possible reactions of other market players. These can range from
copying the innovations to negating/blocking them. Thus the following text is limited
to suggesting market improvements for each of the FFV retail formats based on
opportunities identified in this study without exploring the range of possible
outcomes. Also embedded in the text are potential institutional, policy and
government intervention points where the relevant authorities could facilitate, initiate
and contribute to channel upgrading.

7.4.1 Potential upgrades in the informal sector

In terms of process upgrades obtaining hawkers’ licenses should occupy top priority
for the informal traders. This is especially so given the recent regulatory changes
enabling informal trade as shown by Motala (2002) and in Chapter 2. Informal traders
are also missing opportunities to band together into business, lobby and advocacy
groups such as marketing groups and unions to take advantage the current political
dispensation that favours the small business development as guided by White Paper
on Small Business Development (Parliament of RSA, 1995), the BEE policies as well
as the Department of Trade and Industry (DTI) efforts through Ntsika Enterprise
Promotion Agency and Khula Enterprise Finance (http://www.dti.gov.za). As the
implementing bodies, municipal authorities have a direct role to play in facilitating the
negotiated legalisation of hawking. This negotiation presents an opportunity to

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identify feasible means of regulating hawking and thus remove the adversarial
relationship between municipal (metro) police and hawkers.

Many barriers faced by informal traders are also related to their small scale of
operation. A key upgrade recommendation for the sector is therefore to grow this unit
size. Once again a group approach is the fastest means to do so. Groups have the
potential to gain better terms of trade such as better sourcing prices, lower transaction
costs access to training and other services (Louw et al., 2004). However, care must be
taken to form natural alliances of like minded people because externally imposed
groups have proven to be unsustainable. The DoA uses this approach on the supply
side to facilitate smallholder production but struggles to access markets the resultant
produce (Louw et al., 2004). Thus the DoA could add a market development element
to their efforts by facilitating a direct link between producer groups and informal
retailer groups. A supporting finding to this suggestion is that in chapter 5 only 6.3%
of hawkers had access to the farm-gate markets in Brits. This constituted lost
opportunities for hawkers to collectively negotiate better and more stable sourcing
prices thus widening their profit margins.

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 though cellular SMS
market updates as well as data on supply and demand trends, all of which would
facilitate better FFV demand forecasting. Armed with this, the informal traders could
improve the timing of their stocking levels in line with the demand and thus reduce
wastage/spoilage loses. This solution may be expensive or beyond the scope of the
individual hawker but a viable possibility if a group were to seek such services. A
possible source of these services is TM and other municipal markets because they
have expertise in the field and have a standing mandated to develop and assist small
businesses. Another possible partner in the suggested upgrade is the National
Agricultural Marketing Council (NAMC).

Finally in terms of chain upgrading, informal traders could look into widening product
ranges to take advantage of their convenience appeal. This could include other
convenience items such as snacks, cigarettes, confectionary and even more durable

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convenience items like penlight batteries and toys (chain upgrades). Some hawkers
were already successfully diversifying in this manner.

7.4.2 Potential upgrades for greengrocers

Greengrocers currently hold an advantage over the large supermarkets chains of

having more personal service and neighbourly rapport. Entrenching and expanding
this service advantage could be an important upgrade opportunity. Operationalizing
this strategy could simply include more visible management and service teams in-
store and an emphasis on courteous service, say at pay points. Since greengroceries
were usually small outlets averaging less than 200 square metres, this could have the
additional effect of reducing the shoplifting problem without intimidating potential
customers with bag checks and more surveillance.

Fluctuating demand and the resultant spoilage costs was highlighted as key
‘functional’ and ‘process’ related challenges for the greengrocers yet there was little
evidence of an effort to formally forecast demand and reduce this threat. This is thus
an important avenue of upgrading and would only require more detailed record
keeping that would feed into generating trends for future use. Statistics of the markets
could also serve a valuable indicator of consumption trends. This is therefore a means
by which municipal markets could assist greengrocers as part of their promotion of
small businesses.

Another possible ‘functional upgrade’ for this channel would be to perform the
purchasing and delivering services for smaller traders and hawkers in particular. This
leverages the fact that greengrocers, who would already be going to the market for
their own outlet’s purchases, would get better deals for making larger purchases and
could therefore form a side wholesaling business. On the demand side, it would solve
the stated hawker problem of failing to reach the markets before stock-outs. The
danger of generating competition for greengrocer’s outlets is minimal given the
assessment in Chapter 5 that 77.4% of greengrocers felt they were not in competition
with hawkers and 0.7% found them as minor competition.

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A final upgrade avenue to consider is that of joining franchised chains whether within
FFV retail sector or among the supermarkets. This option could open up access to
credit, management support, accessing market information, trend analysis, better
terms of trade, advertising under known national brands and an opportunity to
diversify into other FMCG items (chain upgrading). A milder version of this would be
to associate with or form buying alliances so as to obtain most of these benefits while
maintaining the independent identity and retaining control.

7.4.3 Potential upgrades for supermarkets

As reported in the risk analysis section (Chapter 6) there was friction between
corporate management and store level managers because of the top down approach
used by DC level managers and buyers. The problem indicated that frontline staff
were undervalued and underutilised despite being a critical link to the final consumer.
Therefore the upward flow of information was compromised. This is a critical loss to
the chains particularly in FFV given their problems of wastage and demand
fluctuation. Revising this trend through better communication, consultation and
training are therefore key ‘functional upgrade’ opportunities for the supermarkets.

An innovative solution to the impersonal appearance of supermarkets was witnessed

during the survey. This involved placing the supervisory team station on pedestals
behind the pay-points, near entrances rather than in the traditional enclosed offices or
behind two-way security mirrors. This approach had the synergic effects of having a
visible management team monitoring and motivating junior staff, having a senior
team easily accessible to customers on their way in and out of the store and being a
possible additional deterrent to shrinkage and shoplifting. Although such a change
may be unpopular for reducing the managers’ privacy, it is an overall gain to the
business to which people would eventually adapt.

Still on the ‘process upgrade’ front, although queuing is an unfortunate part of labour
cost cutting and self service, the queuing times should be carefully optimised as they
caused a loss of convenience sales.

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On the product and chain upgrade front, numerous key informants identified
processed fruits and vegetables and especially pre-cut FFV as the fastest growing
fresh produce sub-sector. Given their current access to facilities, credit as well as the
scale of operation the supermarkets were best positioned to take advantage of this
growing market segment.

The informal traders at the store fronts are unlikely to disappear in the near future.
Therefore rather than view them as a threat, supermarkets could see opportunities for
mutual complementarities. One potentially replicable model was found where a
supermarket began supplying hawkers with their FFV requirements at just below
retail price. This was a win-win situation because it removed the need for the hawkers
to travel to the FPM while the previously struggling supermarket FFV section made a
profit by moving higher volumes of FFV. This also provided an opportunity to
negotiate trading in different product ranges to reduce direct competition. The model
could also be combined with selling a market information provision and demand
forecasting service to the hawkers. Similar to the greengrocers’ case this would not
cause a conflict of interest given that only a minority (26.7%) saw them as
competition and even so, this strategy would constitute turning an adversary into a
potential customer.

7.5 Areas of Further Study: The Way Forward

The current study was an exploratory study by design hence it was intended to pave
the way for further study in inter-format retail competition. The current section
highlights issues that may add value to the subject matter but were not covered due to
study scope and other reasons specified where appropriate.

This study was performed based on the supply side perceptions of the FFV retail
industry. A demand/consumer side perspective would have been interesting to pursue
but for a number of concerns. Firstly and as stated in Chapter 1, the interest here was
on the comparative use of marketing strategy, a supply side issue. Secondly, eliciting
consumer perspectives on the FFV retailers’ actions would require a separate

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sampling and enumeration procedure. Also, to draw conclusions about the types of
consumers and their perception would require cross tabulation of responses with
respondents’ demographic data. These tasks were judged to be beyond the scope of a
single study and thus are reserved for subsequent research.

The current study established that almost all FFV retailers conducted some sort of
value addition but the effect of these practices was only intuitively judged as positive.
Thus empirically testing the effect of value addition on profitability, sales and
competitiveness could be an interesting area for further study.

Collective effort is often, including in the current research, recommended to resolve

the scale issues facing the informal sector. An investigation into the economic and/or
social feasibility of such efforts in FFV retail could be another subject to pursue.

Tshwane Market was reportedly losing clients due to early stock-outs and their early
trading hours (Chapter 5). It would be useful for the market to investigate this issue to
ascertain whether these were merely seasonal shortages or if allegations that
wholesalers and secondary markets (such as Marabastad) were purposefully stripping
FPM supplies to generate retailer demand for themselves. A symptom of this problem
was that some Tshwane retailers were forced to obtain stock from the Johannesburg
FPM some 50km away and yet still making a profit.

Stakeholders in the FFV sector argued that TM was slow to react to market trends and
was missing opportunities because it was plagued with bureaucracy associated with
being controlled by a local government. On the other hand, privatising FPMs stands
the risk of placing FFV price setting into private hands driven by a profit rather than
equity objective. Experience from privatised markets, such as Polokwane FPM,
showed that where farmers controlled the markets, they manipulated terms of trade in
their favour. The NAMC found that a similar but reversed situation could arise where
buyers controlled privatised markets (Rathogwa et al., 1998). Theoretically, market
agents as middlemen would equalise the situation but in the long run they would also
align themselves to market owners.

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There has recently been a growth and transformation of FFV wholesaler-retailers into
what can be termed ‘super-greengrocers’. Cases in point include the Fruit & Veg City
chain and the Evergreens Housewives Market at the TM. Unlike wholesalers this
format is increasingly targeting the final (housewife) consumers rather than small
retailers. This is evident in the supermarket like appearance of their outlets. They are
therefore poised to become a fourth dimension in FFV retail. However, trends and
commentators also indicated that small independent greengroceries were a dying
business format (Bezuidenhout, 2006, personal communication). Therefore if they
were to disappear the FFV retail sector would revert back to three competitors. Thus
competition between retail, wholesale-retail and wholesale could be another topic to
investigate.

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Management: To Stimulate Cross-Border Trade in Developing Countries and
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8.1 Key Informants

BEZUIDENHOUT C. (2006). Representative, Tomato Producers Organisation (TPO),

Pretoria, Tshwane

DODDS T. (2005), Deputy Manager, System Information and Development. Tshwane

Market (TM), Pretoria West, Tshwane

DU TOIT G. (2005), Chief Executive Officer, Freshmark Distribution Centre,

Centurion, Tshwane

DUBE P. (2005) Pretoria Informal Business Association (PIBA). Tshwane

MABUZA J. (2005). Perishables supervisor. Pick’n Pay, The Tramshed Shopping

Mall, Van der Walt Street Tshwane

MOLEFE B. (2005). Informal Fresh Fruit and Vegetable Retailer. Siso Street
Atteridgeville, Tshwane

MRASI C. (2005). Gauteng Hawkers Association (GHA) and National African

Federated Chamber of Commerce and Industry (NAFCOC), Johannesburg

ROOS B. (2006). Fruit & Veg City Franchiser and Former Freshmark National Fresh
Produce Buyer. Value Mart, Whiteriver Road, Nelspruit, Mpumalanga.

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WILLIAM W. (2005). Manager, Watloo Greengrocery, Set Street, Mamelodi,

Tshwane

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9 APPENDICES

9.1 Appendix 1: Living Standards Measure (LSM)

The LSM grouping was used as a major stratification tool in the sampling design
process. Therefore before describing how this tool was employed it is necessary to
discuss this index and why it was considered appropriate for use in the sampling task
described in the methods section.

The South African Advertising Research Foundation (SAARF) developed the first
version of the SAARF LSM ™ (Living Standards Measure) in early 1990. The
development of the LSM Index was stimulated by a realisation that single variable
differentiators such as urban/rural, income or other demographic variables were
loosing their power as segmentation indices. Statistical theory backs this observation
in asserting that multivariate techniques have superior power especially given a large
sample size (n ≥ a + 20; where ‘a’ means number of levels for repeated measurement)
(Kramer, 2005). There was thus a need for a multivariate market segmentation index
hence the development of the LSM index.

The LSM index was designed to divide the nation into relatively homogeneous groups
according to their living standards. The LSM is therefore a wealth measure based on
standard of living rather than income. Many commonly used demographic variables
such as income; education and occupation were tested as part of the first LSM but
proved statistically insignificant.

The latest LSM version used here, the Universal LSM, was created in 2001 out of four
SAARF surveys (AMPS 6, RAMS 7 and TAMS 8) 9. This LSM divides the population

6
All Media and Products Survey
7
Radio Audience Measurement Survey
8
Television Audience Measurement Survey
9
SAARF AMPS, RAMS and TAMS provide the common measure used by advertisers and their agencies to select
and buy appropriate media space and time. Media owners on use the indices to market their media and for editorial
and programme planning.

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MSc. Dissertation: Hilton Madevu

continuum into a hierarchy of ten groups according to affluence. That is from the least
affluent at 1 at the bottom, to 10 at the top. The LSM groups were calculated using 29
variables derived from the SAARF All Media and Products Survey (AMPS). These
variables are not only powerful in differentiators of the market but they were also
found to be consistent in doing so. Despite this robustness, the LSM maintains its
agility by being responsive to market developments. This is evident when the index
variables and weights are reviewed periodically the latest, used here, being in 2004.

The LSM index has become one of most commonly used marketing research tools in
South Africa. The tool is essentially a marketing segmentation tool that uses an index
to differentiate between people with different behaviour patterns and group together
those people with similar behaviour (Haupt, 2001). One of the primary aims of this
study is to track the competitive efficacy of the three types of fresh produce retailers.
As shown in a previous section, marketing theorists suggest that firms are more likely
to succeed when they target the appropriate market segments. The LSM grouping is
therefore an ideal means by which the fresh produce market in Tshwane may be
divided into relatively homogenous segments.

9.1.1 Trend in Living Standards

From the onset of democracy in 1994 to 2005 the economy has grown at an average
rate of 94% per annum, a considerable improvement on the two decades before 1994
when per-capita growth was negative. Real per-capita growth has been about 1% per
year over the same period although this is a steady growth it is slow compared to most
developing economies (GCIS 2005, p.56). Population growth has been subdued at
1.8% (mainly due to HIV/AIDS) over the same period. Concurrently the disposable
income of households grew at an average of 3.96% (1994 to 2004). These figures
indicate relatively small but positive changes over the decade. The real flux was
recorded in the distribution of incomes.

An encouraging aspect of the growth in GDP has been the rapid growth in the number
of black middle class South Africans nicknamed the buppies - black up-and-coming
professional people. According to SouthAfrica.info (2004), at least 300 000 black

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MSc. Dissertation: Hilton Madevu

nationals became middle-income earners (LSM 5, 6 and 7) between 2001 and 2004
alone while the income composition of Asians and Whites had stagnated. The results
were verified in similar - more recent - studies by the SAARF (2004) and the Bureau
of Market Research (Van Aardt, 2005; Tustin, 2006; Van Wyk, 2006 and Martins
2006). These studies calculated that the share of whites in disposable income had
declined from 70,4% to 44,6% between 1960 and 2005 while that of blacks had
increase by 22,5% to 43,1%. Growth in the buppies was attributed to a combination of
factors, including the government's black economic empowerment drive.

The impact of this transformed market on the competitiveness of fresh produce

retailers will be of interest in the current study. Especially given that the previously
low income buppies were likely to have a different attitude towards, for instance,
purchasing from informal traders than their white counterparts.

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MSc. Dissertation: Hilton Madevu

9.2 Appendix 2: Hawkers questionnaire-checklist

A. Identification
Establishment name ------------------------------ Date-------------------------------------------------
-------------------------------------------------------
Name of interviewee ----------------------------- Position --------------------------------------------
------------------------------------------------------- -------------------------------------------------------
Address/Location--------------------------------- Tel. -------------------------------------------------
------------------------------------------------------- -------------------------------------------------------
-------------------------------------------------------

B. Place - Trading History

1. Year established 2. Stall size (m2) 3. Ave. monthly turnover (R) last year

4. Type of location
Shopping mall Neighbourhood centre Train Station
Other (specify)------ ----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
5. Why was this site chosen? ----------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
6. Has it moved from other locations? (Tick 9) Yes No
If yes, why and when did you move? --------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
7. What is the ownership structure of this business? (Tick 9)
Independent stall Group (describe) Other (specify)
Please explain: ----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

C. Competition – Effect & Response

8. What is your target market for fresh produce? (E.g. adults, office staff, flat dwellers,
learners etc…)-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------
9. Why do you think customers buy fresh produce from you as opposed to other traders?
Low price On the way home Habit One stop shop
Other (specify)-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

10. Who are your competitors in fresh produce sales?

Please rank (1 = main competitor; 2 =serious competitor; 3 =minor competitor; 4 =not competitor)
Greengrocers Supermarkets Hawkers Other
(name)
11. If other please specify and rank----------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
12. How have your main competitors affected your sales? (Tick 9)
Increased Decreased No change

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 MSc. Dissertation: Hilton Madevu

13. Do you know of any fresh produce traders (retailers and hawkers) that have had to close
down in the last 5 years? Why? ---------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
14. When do you make the highest fresh produce sales?
(Tick 9 across if demand is evenly spread)
a. Daily► Mornings Mid- Afternoons Late Evening Night Late Night
morning Afternoon
b. Weekly► Monday Tuesday Wednesday Thursday Friday Saturday Sunday

c. Monthly► Early Mid- Month end

Month
d. Yearly► Jan-Feb March- May June -July August Sept-Oct Nov-Dec
Apr

15. How many days of the week do you operate?

16. How many hours do you operate on:
a) Mon-Fri b) Saturday c) Sunday d) Public holidays

D. Price - Determination & Margins

17. How has the competition stated above affected your pricing? (Tick9)
Increased Decreased No change
Why? ---------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
18. How do you determine the price for the following?
Product
Price Determining Method (e.g. mark up = ⎡⎢
price-cost ⎤
⎣ cost ⎥ *100% )
⎦
Apples

Oranges

Bananas

Potatoes

Tomatoes

Onions

E. Product - Procurement/Sourcing (chain entry point)

19. What proportion of business/sales does fresh produce constitute? %

20. How is the buying of the fresh produce organised? (Tick9)
Tshwane FPM Marabastad Market Buying Centre Agent From farmers
Other (specify)------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Where do you currently source the following products?

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MSc. Dissertation: Hilton Madevu

Product Number of varieties Source % from Why buy from these

each source sources? (e.g. quality)
Apples

Oranges

Bananas

Potatoes

Tomatoes

Onions

21. How long do you take to pay suppliers after delivery of fresh produce? (Tick9)
Cash on delivery 30 days 60 days Other (specify)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
22. What pricing arrangements do you make with your supplies? (Tick9)
Predetermined Contractual Auction Other (specify)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
23. Do you enter into contracts with suppliers? (Tick 9) Yes No
a. If yes, what types of contracts they? (Tick9)
Formal (Written) Informal (Verbal) Other (specify)
------------------------------------------------------------------------------------------------------------
b. How often are contracts reviewed? ------------------------------------------------------------
c. Is price set in the contract? (Tick 9) Yes No
d. How? -----------------------------------------------------------------------------------------------
24. What procurement problems do you face? ---------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
25. How do you resolve these? ---------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
26. Do you perform any processing e.g. Packaging/ Washing? (Tick 9) Yes No
27. If so, by how much does it cost and how does this processing change sales?
Product Packaging Washing Cutting Freezing Other (list)►
Apples
Cost

Sales
Change

Oranges
Cost

Sales
Change

Bananas
Cost

Sales
Change

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MSc. Dissertation: Hilton Madevu

Product Packaging Washing Cutting Freezing Other (list)►

Potatoes
Cost

Sales
Change

Tomatoes
Cost

Sales
Change

Onions
Cost

Sales
Change

28. What are your main costs of doing business?

Item Cost (Specify units e.g. R/Km) Percentage of total of costs (%)
Stock of fresh
produce

Transport

Rentals

Packaging

Electricity

Staff

Cooling

Taxes

Other (specify)

Total

F. Promotion & Advertising

29. What do you do to get people to buy and/or buy more from you? ------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Products Type of promotion per product (Please explain & cost activity)
Adverts/flyers/p Sale/discounts/c Competitions/pri (Other, list) ►
osters oupons zes
(Cost R) (Cost R) (Cost R)
Apples

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MSc. Dissertation: Hilton Madevu

Type of promotion per product (Please explain & cost activity)

Oranges

Bananas

Potatoes

Tomatoes

Onions

G. Problems, Risks & Coping

30. How many people are direct dependants of this business?
31. Do you have any other sources of income? (Tick9) Yes
No
32. What are the problems and risks you face in your business? ------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
33. How do you currently cope with these problems and risks? -------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
34. What do you think could be done to solve the stated problems? --------------------------------
------------------------------------------------------------------------------------------------------------
35. Do you receive any private assistance in conducting your business (e.g. from
suppliers/financers)? If so what kind of assistance? ---------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
36. Do you receive assistance from government, local authorities or NGOs in conducting
your business? If so what kind of assistance? ----------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
37. What changes have noticed in your business in the last 5 years in your business? E.g. in
terms of income, race, demographics, crime, etc.-------------------------------------------------------
--------------------------- -------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
38. What do you expect in the next 1or 2 years? ------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

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MSc. Dissertation: Hilton Madevu

H. SWOT Analysis
39. How do you rate your performance in the following marketing mix elements?
Strategic Issues Importance Your Performance Score
(Weight out of 10) (Out of Ten) (Multiply)
Place

Price

Product

Promotion

Sourcing

Other (Name)

Total

40. Finally, what are you top five strengths, weaknesses, opportunities and threats in the fresh
produce industry (SWOT analysis)?
Strengths Weaknesses
1) _____________________________ I) _____________________________

2) _____________________________ II) _____________________________

3) _____________________________ III) _____________________________

4) _____________________________ IV) _____________________________

5) _____________________________ V) _____________________________

Threats Opportunities
1) _____________________________ 1) _____________________________

2) _____________________________ 2) _____________________________

3) _____________________________ 3) _____________________________

4) _____________________________ 4) _____________________________

5) _____________________________ 5) _____________________________

Thank you for your time!

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MSc. Dissertation: Hilton Madevu

9.3 Appendix 3: Greengrocers questionnaire-checklist

A. Identification

Establishment name ------------------------------ Date-------------------------------------------------

-------------------------------------------------------
Name of interviewee ----------------------------- Position --------------------------------------------
------------------------------------------------------- -------------------------------------------------------
Address/Location--------------------------------- Tel. -------------------------------------------------
------------------------------------------------------- -------------------------------------------------------
-------------------------------------------------------

B. Place - Company profile

1. Year established 2. Stall size (m2) 3. Ave. monthly turnover (R) last year

4. Type of location
Shopping mall Neighbourhood centre Train Station
Other (specify)------ ----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
5. Why was this site chosen? -----------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
6. Has it moved from other locations? (Tick 9) Yes No
If yes, why and when did you move?
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
7. What is the ownership structure of this business? (Tick 9)
Independent store Family Business Part of retail chain Franchise
Other (specify): ---------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
8. If it is part of a chain how many branches or chains does it have?
South Africa SADC countries Other (specify)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

C. Competition - Effect & Response

9. What is your target market for fresh produce? E.g. (adults, office staff, flat dwellers,
learners etc…)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
10. Why do you think customers buy fresh produce from you as opposed to other traders?
Low price On the way home Habit One stop shop
Other (specify)-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
11. Who are your competitors in fresh produce sales?

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MSc. Dissertation: Hilton Madevu

Please rank (1 = main competitor; 2 =serious competitor; 3 =minor competitor; 4 =not competitor)
Greengrocers Supermarkets Hawkers Other
(name)
If other please specify and rank---------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

12. How have your main competitors affected your sales? (Tick 9)
Increased Decreased No change

13. Do you know of any fresh produce traders (retailers and hawkers) that have had to
close down in the last 5 years? Why? --------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------
14. When do you make the highest fresh produce sales?
(Tick 9 across if demand is evenly spread)
a. Daily► Mornings Mid- Afternoons Late Evening Night Late
morning Afternoon Night
b. Weekly► Monday Tuesday Wednesday Thursday Friday Saturday Sunday

c. Monthly► Early Mid- Month

Month end
d. Yearly► Jan-Feb March- May June -July August Sept-Oct Nov-
Apr Dec

15. How many days of the week do you operate?

16. How many hours do you operate on:
a) Mon-Fri b) Saturday c) Sunday d) Public holidays

D. Price - Determination & Margins

17. How has the competition stated above affected your pricing? (Tick9)
Increased Decreased No change
Why? ---------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
18. How do you determine the price for the following?
Product
Price Determining Method (e.g. mark up = ⎡⎢
price-cost ⎤
⎣ cost ⎥ *100% )
⎦
Apples

Oranges

Bananas

Potatoes

Tomatoes

Onions

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 MSc. Dissertation: Hilton Madevu

E. Product - Procurement/Sourcing (chain entry point)

19. What proportion of business/sales does fresh produce constitute? %
20. How is the buying of the fresh produce organised? (Tick9)
Tshwane FPM Marabastad Market Buying Centre Agent From farmers
Other (specify)------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
21. Where do you currently source the following products?
Product Number of varieties Source % from Why buy from these
each source sources? (e.g. quality)
Apples

Oranges

Bananas

Potatoes

Tomatoes

Onions

22. How long do you take to pay suppliers after delivery of fresh produce? (Tick9)
Cash on delivery 30 days 60 days Other (specify)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
23. What pricing arrangements do you make with your supplies? (Tick9)
Predetermined Contractual Auction Other (specify)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
24. Do you enter into contracts with suppliers? (Tick 9) Yes No
a. If yes, what types of contracts they? (Tick9)
Formal (Written) Informal (Verbal) Other (specify)
------------------------------------------------------------------------------------------------------------
b. How often are contracts reviewed? ------------------------------------------------------------
c. Is price set in the contract? (Tick 9) Yes No
d. How? -----------------------------------------------------------------------------------------------

25. What procurement problems do you face? ---------------------------------------------------------

26. How do you resolve these? ---------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
27. Do you perform any processing activities? (Tick 9) Yes No
28. If so, by how much does it cost and how does this processing change sales?
Product Packaging Washing Cutting Freezing Other (list)►
Apples
Cost

Sales
Change

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MSc. Dissertation: Hilton Madevu

Product Packaging Washing Cutting Freezing Other (list)►

Oranges
Cost

Sales
Change

Bananas
Cost

Sales
Change

Potatoes
Cost

Sales
Change

Tomatoes
Cost

Sales
Change

Onions
Cost

Sales
Change

29. What are your main costs of doing business?

Item Cost (Specify units e.g. R/Km) Percentage of total of costs (%)
Stock of fresh
produce

Transport

Rentals

Packaging

Electricity

Staff

Cooling

Taxes

Other (specify)

Total

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F. Promotion & Advertising

30. What do you do to get people to buy and/or buy more from you? ------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Products Type of promotion per product (Please explain and cost activity)
Adverts/flyers/p Sale/discounts/c Competitions/pri (Other, list) ►
osters oupons zes
(Cost R) (Cost R) (Cost R)
Apples

Oranges

Bananas

Potatoes

Tomatoes

Onions

G. Problems, Risks & Coping

31. How many employees does your store employ?
32. Do you have any other sources of income? (Tick9) Yes No
33. What are the problems and risks you face in your business? ------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
34. How do you currently cope with these problems and risks? -------------------------------------
-----------------------------------------------------------------------------------------------------------------
35. What do you think could be done to solve the stated problems? --------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
36. Do you receive any private assistance in conducting your business (e.g. from suppliers/
financers)? If so what kind of assistance? ---------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
37. Do you receive assistance from government, local authorities or NGOs in conducting
your business? If so what kind of assistance? ----------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
38. What changes have noticed in your business in the last 5 years in your business? E.g. in
terms of income, race, demographics, crime, etc.-------------------------------------------------------
--------------------------- -------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

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-----------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
39. What do you expect in the next 1or 2 years? ------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

H. SWOT Analysis

40. How do you rate your performance in the following marketing mix elements?
Strategic Issues Importance Your Performance Score
(Weight out of 10) (Out of Ten) (Multiply)
Place

Price

Product

Promotion

Sourcing

Other (Name) ▼

Total

41. Finally, what are you top five strengths, weaknesses, opportunities and threats in the
fresh produce industry (SWOT analysis)?
Strengths Weaknesses
1) _____________________________ I) _____________________________

2) _____________________________ II) _____________________________

3) _____________________________ III) _____________________________

4) _____________________________ IV) _____________________________

5) _____________________________ V) _____________________________

Threats Opportunities
1) _____________________________ 1) _____________________________

2) _____________________________ 2) _____________________________

3) _____________________________ 3) _____________________________

4) _____________________________ 4) _____________________________

5) _____________________________ 5) _____________________________

Thank you for your time!!

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9.4 Appendix 4: Supermarket questionnaire-checklist

A. Identification

Establishment name ------------------------------ Date-------------------------------------------------

-------------------------------------------------------
Name of interviewee ----------------------------- Position --------------------------------------------
------------------------------------------------------- -------------------------------------------------------
Address/Location--------------------------------- Tel. -------------------------------------------------
------------------------------------------------------- -------------------------------------------------------
-------------------------------------------------------

B. Place - Company profile

1. Year established 2. Stall size (m2) 3. Ave. monthly turnover (R) last year

4. Type of location
Shopping mall Neighbourhood centre Train Station
Other (specify)------ ----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
----
5. Why was this site chosen? ----------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------
6. Has it moved from other locations? (Tick 9) Yes No
7. If yes, why and when did you move? ---------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------
8. What is the ownership structure of this business? (Tick 9)
Independent store Family Business Part of retail chain Franchise
Other (specify): ---------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------
9. If it is part of a chain how many branches or chains does it have?
South Africa SADC countries Other (specify)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

C. Competition – Effect & Response

10. What is your target market for fresh produce? E.g. (adults, office staff, flat dwellers,
learners etc…)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
11. Why do you think customers buy fresh produce from you as opposed to other traders?
Low price On the way home Habit One stop shop

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Other (specify)-------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
12. Who are your competitors in fresh produce sales?
Please rank (1 = main competitor; 2 =serious competitor; 3 =minor competitor; 4 =not competitor)
Greengrocers Supermarkets Hawkers Other
(name)
If other please specify and rank---------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
How have your main competitors affected your sales? (Tick 9)
Increased Decreased No change

13. Do you know of any fresh produce traders (retailers and hawkers) that have had to close
down in the last 5 years? Why? ---------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
14. When do you make the highest fresh produce sales?
(Tick 9 across if demand is evenly spread)
a. Daily► Mornings Mid- Afternoons Late Evening Night Late Night
morning Afternoon
b. Weekly► Monday Tuesday Wednesday Thursday Friday Saturday Sunday

c. Monthly► Early Mid- Month end

Month
d. Yearly► Jan-Feb March-Apr May June -July August Sept-Oct Nov-Dec

15. How many days of the week do you operate?

16. How many hours do you operate on:
a) Mon-Fri b) Saturday c) Sunday d) Public holidays

D. Price - Determination & Margins

17. How has the competition stated above affected your pricing? (Tick9)
Increased Decreased No change
Why? ---------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
18. How do you determine the price for the following?
Product
Price Determining Method (e.g. mark up = ⎡⎢
price-cost ⎤
⎣ cost ⎦ ⎥ *100% )
Apples

Oranges

Bananas

Potatoes

Tomatoes

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Product
Price Determining Method (e.g. mark up = ⎡⎢
price-cost ⎤
⎥ *100% )
⎣ cost ⎦
Onions

E. Product - Procurement/Sourcing (chain entry point)

19. What proportion of business/sales does fresh produce constitute? %

20. How is the buying of the fresh produce organised? (Tick9)
Tshwane FPM Marabastad Market Buying Centre Agent From farmers
Other (specify)------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
21. Where do you currently source the following products?
Product Number of varieties Source % from Why buy from these
each source sources? (e.g. quality)
Apples

Oranges

Bananas

Potatoes

Tomatoes

Onions

22. How long do you take to pay suppliers after delivery of fresh produce? (Tick9)
Cash on delivery 30 days 60 days Other (specify)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
23. What pricing arrangements do you make with your supplies? (Tick9)
Predetermined Contractual Auction Other (specify)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
24. Do you enter into contracts with suppliers? (Tick 9) Yes No
a. If yes, what types of contracts they? (Tick9)
Formal (Written) Informal (Verbal) Other (specify)
------------------------------------------------------------------------------------------------------------
b. How often are contracts reviewed? -------------------------------------------------------------
c. Is price set in the contract? (Tick 9) Yes No
d. How? -----------------------------------------------------------------------------------------------

25. What procurement problems do you face? ---------------------------------------------------------

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26. How do you resolve these? ---------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
27. Do you perform any processing activities? (Tick 9) Yes No
28. If so, by how much does it cost and how does this processing change sales?
Product Packaging Washing Cutting Freezing Other (list)►
Apples
Cost

Sales
Change

Oranges
Cost

Sales
Change

Bananas
Cost

Sales
Change

Potatoes
Cost

Sales
Change

Tomatoes
Cost

Sales
Change

Onions
Cost

Sales
Change

29. What are your main costs of doing business?

Item Cost (Specify units e.g. R/Km) Percentage of total of costs (%)
Stock of fresh
produce

Transport

Rentals

Packaging

Electricity

Staff

Cooling

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Item Cost (Specify units e.g. R/Km) Percentage of total of costs (%)
Taxes

Other (specify)

Total

F. Promotion & Advertising

30. What do you do to get people to buy and/or buy more from you? ------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Products Type of promotion per product (Please explain and cost activity)
Adverts/flyers/ Sale/discounts/ Competitions/ (Other, list) ►
posters coupons prizes
(Cost R) (Cost R) (Cost R)
Apples

Oranges

Bananas

Potatoes

Tomatoes

Onions

G. Problems, Risks and Coping

31. How many employees does your store employ?
32. What are the problems and risks you face in your business? ------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
33. How do you currently cope with these problems and risks? -------------------------------------
-----------------------------------------------------------------------------------------------------------------
34. What do you think could be done to solve the stated problems? --------------------------------
-----------------------------------------------------------------------------------------------------------------
35. Do you receive any private assistance in conducting your business (e.g. from suppliers/
financers)? If so what kind of assistance? ---------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

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36. Do you receive assistance from government, local authorities or NGOs in conducting
your business? If so what kind of assistance? ----------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
37. Do you give assistance to any of you chain members? If so what kind of assistance? -------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
38. What changes have noticed in your business in the last 5 years in your business? E.g. in
terms of income, race, demographics, crime, etc.-------------------------------------------------------
--------------------------- -------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
39. What do you expect in the next 1or 2 years? ------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
H. SWOT Analysis
40. How do you rate your performance in the following marketing mix elements?
Strategic Issues Importance Your Performance Score
(Weight out of 10) (Out of Ten) (Multiply)
Place

Price

Product

Promotion

Sourcing

Other (Name) ▼

Total
41. Finally, what are you top five strengths, weaknesses, opportunities and threats in the fresh
produce industry (SWOT analysis)?

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MSc. Dissertation: Hilton Madevu

Strengths Weaknesses
1) _____________________________ 1) _____________________________

6) _____________________________ 2) _____________________________

7) _____________________________ 3) _____________________________

8) _____________________________ 4) _____________________________

9) _____________________________ 5) _____________________________

Threats Opportunities
1) _____________________________ 1) _____________________________

2) _____________________________ 2) _____________________________

3) _____________________________ 3) _____________________________

4) _____________________________ 4) _____________________________

5) _____________________________ 5) _____________________________

Thank you for your time!!

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9.5 Appendix 5: Wholesalers & supermarket distribution centres

A. Identification

Establishment name: ----------------------------- Date: ------------------------------------------------

Name: ---------------------------------------------- Position: -------------------------------------------

Contact no: ---------------------------------------- -------------------------------------------------------

B. Place - Company profile

1.Year established 2. Ave. monthly turnover (R) for F&V∗ in Tshwane in the last year

3. How many of these do have under your brand in South Africa?

Corporate stores Franchise Other (specify & no.)

Other (specify & number): --------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
4. How many branches do you have in these areas?
RSA SADC countries Other (specify & Other (specify &
no.) no.)
Other (specify & number): --------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------
5. How do you communicate your marketing strategy to the stores?
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------

C. Competition – Effect & Response

6. What is your target market for fresh produce? E.g. (Affluence level, LSM Groups,
Regions)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
7. Why do you think customers buy fresh produce from you as opposed to other traders?
Low price On the way Habit One stop shop
home
Other (specify)--------------------------------------------------------------------------------------- ------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
------------------------------------------
8. Who are your competitors in fresh produce sales?
Please rank (1 = main competitor; 2 =serious competitor; 3 =minor competitor; 4 =not competitor)

∗
Fruits and vegetables

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Greengroce Supermark Hawke Tshwa Other

rs ets rs ne (nam
FPM e)
If other please specify and rank---------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
9. How have your main competitors affected your sales? (Tick 9)
Increased Decreased No change

D. Price - Determination & Margins

10. How has the main competition affected your pricing? (Tick9)
Increased Decreased No change
Why? ---------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
11. How do you determine the price for the following?
Product
Price Determining Method (e.g. mark up = ⎡⎢
price-cost ⎤
⎣ cost ⎦ ⎥ *100% )
Apples

Oranges

Bananas

Potatoes

Tomatoes

Onions

12. Do you have database of purchase and sales prices for the products above that I
could use? (Tick9) Yes (please attach) No (Please state why not) -----
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------

E. Product - Procurement/Sourcing (chain entry point)

13. What proportion of total business/sales does fresh produce constitute? %
14. What selection process if any, do you employ to select suppliers?
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------
15. Where do you buy your fresh produce supplies? (Tick9)
Tshwane FPM Agents Large scale farmers Small scale farmers
Other (specify)------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------
16. Where do you currently source the following products?

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MSc. Dissertation: Hilton Madevu

Product No. of Sources % from Why buy from these sources?

varieties each source (e.g. quality)
Apples

Oranges

Bananas

Potatoes

Tomatoes

Onions

17. How long do you take to pay suppliers after delivery of fresh produce? (Tick9)
Cash on delivery 30 days 60 days Other (specify)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------
18. What pricing arrangements do you make with your supplies? (Tick9)
Predetermined Contractual Auction Other (specify)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------
19. Do you enter into contracts with suppliers? (Tick 9) Yes No
a. If yes, what types of contracts are they? (Tick9)
Formal (Written) Informal (Verbal) Other (specify)
------------------------------------------------------------------------------------------------------------
---------------
b. How often are contracts reviewed? -------------------------------------------------------------
---------------
c. Is price set in the contract? (Tick 9) Yes No
d. How? -----------------------------------------------------------------------------------------------
---------------

20. What procurement problems do you face? ------------------------------------------------

--------------------------------------------------------------------------------------------------------
21. How do you resolve these? ---------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
22. Do you perform any processing activities? (Tick 9) Yes No (why)
23. If so have you measured the effect of the processing activities on sales? Yes No
(why)
24. If so, by what percent does this processing change sales?
Product Packaging Washing Cutting Freezing Other (list) ►
Apples
Sales
Change
Oranges
Sales
Change
Bananas

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MSc. Dissertation: Hilton Madevu

Product Packaging Washing Cutting Freezing Other (list) ►

Sales
Change
Potatoes
Sales
Change
Tomatoes
Sales
Change
Onions
Sales
Change

F. Promotion & Advertising

25. What do you do to get people to buy and/or buy more fresh produce from you? ------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
26. How much do you your budget for the promotion of fresh produce? --------------------------
--- -------------------------------------------------------------------------------------------------------------
------------------------------
27. How do you calculate your fresh produce promotion budget? ----------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------

G. Problems, Risks and Coping

28. What are the problems and risks you face in your business? ------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
29. How do you currently cope with these problems and risks? -------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------
30. What do you think could be done to solve the stated problems? --------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------
31. Do you receive assistance from (e.g. from suppliers, financers, government, NGOs in
conducting your business? If so what kind of assistance? --------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------
32. Do you give assistance to any of you chain members? If so what kind of assistance? -------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
33. What trends/changes have noticed in your business in the last 5 years in your business? ---
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
34. What trends/changes do you expect in the next 1or 2 years? ------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------

H. SWOT Analysis
35. How do you rate your performance in the following marketing mix elements?

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MSc. Dissertation: Hilton Madevu

Strategic Issues Importance Your Performance Score

(Weight out of 10) (Out of Ten) (Multiply)
Place

Price

Product

Promotion

Sourcing

Other (Name) ▼

Total

36. Finally, what are you top five strengths, weaknesses, opportunities and threats in the fresh
produce industry (SWOT analysis)?
Strengths Weaknesses
1) __________________________________________ 1) __________________________________________

2) __________________________________________ 2) __________________________________________

3) __________________________________________ 3) __________________________________________

4) __________________________________________ 4) __________________________________________

5) __________________________________________ 5) __________________________________________

Threats Opportunities
1) __________________________________________ 1) __________________________________________

2) __________________________________________ 2) __________________________________________

3) __________________________________________ 3) __________________________________________

4) __________________________________________ 4) __________________________________________

5) __________________________________________ 5) __________________________________________

Thank you for your time!!

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9.6 Appendix 6: Tshwane produce market questionnaire-checklist

A. Identification

Name of interviewee ----------------------------- Date-------------------------------------------------

------------------------------------------------------- -------------------------------------------------------
--------- ---------
Position -------------------------------------------- Tel. -------------------------------------------------
------------------------------------------------------- -----
--------- Email------------------------------------------------
----

B. Place - Company profile

1. Year established 2. Ave. monthly turnover (R) for F&V ∗ in Tshwane in the last year

3. What is the structure of TFPM (number of branches, sections outlets)?

Please specify & number): --------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------
4. How was the location of TFPM selected? -----------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
--------------------------
5. Has it moved from other locations? (Tick 9) Yes No
If yes, why and when did you move? --------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------

C. Competition – Effect & Response

6. What is your target market for fresh produce? E.g. (Affluence level, LSM Groups, Regions)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
7. Why do you think customers buy fresh produce from you as opposed to other traders?
Low price On the way home Habit One stop shop
Other (specify)--------------------------------------------------------------------------------------- ------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
------------------------------------------
8. Who are your competitors in fresh produce sales?
Please rank (1 = main competitor; 2 =serious competitor; 3 =minor competitor; 4 =not competitor)
Greengrocers Supermarkets Hawkers Other Other
(name) (name)
If other please specify and rank---------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

∗
Fruits and vegetables

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MSc. Dissertation: Hilton Madevu

-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
9. How have your main competitors affected your sales? (Tick 9)
Increased Decreased No change

D. Price - Determination & Margins

10. How has the main competition affected your pricing? (Tick9)
Increased Decreased No change
Why? ---------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
11. How do you determine the price for the following? ----------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
12. Do you have database of purchase and sales prices for the products above that I
could use? (Tick9) Yes (please attach) No (Please state why not) -----
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------

E. Product - Procurement/Sourcing (chain entry point)

13. What proportion of total business/sales does fresh produce constitute? %
14. What selection process if any, do you employ to select suppliers?
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------
15. Where do you currently source the following products?
Product No. of varieties Sources Why buy from these sources? (e.g. quality)
Apples

Oranges

Bananas

Potatoes

Tomatoes

Onions

16. How long do you take to pay suppliers after delivery of fresh produce? (Tick9)
Cash on delivery 30 days 60 days Other (specify)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------
17. What pricing arrangements do you make with your supplies? (Tick9)
Predetermined Contractual Auction Other (specify)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------

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MSc. Dissertation: Hilton Madevu

18. Do you enter into contracts with suppliers? (Tick 9) Yes No

a. If yes, what types of contracts are they? (Tick9)
Formal (Written) Informal (Verbal) Other (specify)
------------------------------------------------------------------------------------------------------------
---------------
b. How often are contracts reviewed? -------------------------------------------------------------
---------------
c. Is price set in the contract? (Tick 9) Yes No
d. How? -----------------------------------------------------------------------------------------------
19. What procurement problems do you face? --------------------------------------------------------
------------------------------------------------------------------------------------------------
20. How do you resolve these? ---------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
21. Do you perform any processing activities? (Tick 9) Yes No (why)
22. If so have you measured the effect of the processing activities on sales? Yes No
(why)

23. If so, by what percent does this processing change sales?

Product Packaging Washing Cutting Freezing Other (list) ►
Apples
Sales
Change
Oranges
Sales
Change
Bananas
Sales
Change
Potatoes
Sales
Change
Tomatoes
Sales
Change
Onions
Sales
Change

F. Promotion & Advertising

24. What do you do to get people to buy and/or buy more fresh produce from you? ------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
25. How much do you your budget for the promotion of fresh produce? --------------------------
--- -------------------------------------------------------------------------------------------------------------
------------------------------
26. How do you calculate your fresh produce promotion budget? ----------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------

G. Problems, Risks and Coping

27. What are the problems and risks you face in your business? ------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
28. How do you currently cope with these problems and risks? -------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------

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MSc. Dissertation: Hilton Madevu

29. What do you think could be done to solve the stated problems? --------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------
30. Do you receive assistance from (e.g. from suppliers, financers, government, NGOs in
conducting your business? If so what kind of assistance? --------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------
31. Do you give assistance to any of you chain members? If so what kind of assistance? -------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
32. What trends/changes have noticed in your business in the last 5 years in your business? ---
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------
33. What trends/changes do you expect in the next 1or 2 years? ------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------

H. SWOT Analysis
34. How do you rate your performance in the following marketing mix elements?
Strategic Issues Importance Your Performance Score
(Weight out of 10) (Out of Ten) (Multiply)
Place

Price

Product

Promotion

Sourcing

Other (Name) ▼

Total

35. Finally, what are you top five strengths, weaknesses, opportunities and threats in the fresh
produce industry (SWOT analysis)?

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MSc. Dissertation: Hilton Madevu

Strengths Weaknesses
1) __________________________________________ 1) __________________________________________

2) __________________________________________ 2) __________________________________________

3) __________________________________________ 3) __________________________________________

4) __________________________________________ 4) __________________________________________

5) __________________________________________ 5) __________________________________________

Threats Opportunities
1) __________________________________________ 1) __________________________________________

2) __________________________________________ 2) __________________________________________

3) __________________________________________ 3) __________________________________________

4) __________________________________________ 4) __________________________________________

5) __________________________________________ 5) __________________________________________

Thank you for your time!!

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9.7 Appendix 7: Hawkers’ Organisation questionnaire-checklist

A. Background
Organisation name ------------------------------- Date-------------------------------------------------
------------------------------------------------------
Name of interviewee ----------------------------- Position --------------------------------------------
------------------------------------------------------- -------------------------------------------------------
Address/Location--------------------------------- Tel. -------------------------------------------------
------------------------------------------------------- -------------------------------------------------------

1. Year established 3. Total member’s turnover 4. Ave member’s turnover

2. No. of members

5. Geographic areas covered? ---------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
6. What is the purpose/aim of this organisation? -----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
B. Fees
7. What subscription fees if any do you charge? -----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
8. Other sources of funding for the organisation? ----------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
9. Do you receive any private assistance in conducting your business (e.g. from suppliers/
financers)? If so what kind of assistance? ---------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
10. Do you receive assistance from government, local authorities or NGOs in conducting
your business? If so what kind of assistance? ----------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
C. Competition
11. Who are your competitors in fresh produce sales? ------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Please rank the following players (1 = main competitor; 2 =serious competitor; 3 =minor
competitor; 4 =not competitor)
Greengrocers Supermarkets Hawkers Other
(name)
12. If other please specify and rank----------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
13. Do you assist in the operations of Hawker’s businesses? (e.g. procurement, transport etc)
-----------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
D. Problems, Risks & Coping
14. What are the main problems and risks you faced by your members? --------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

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15. How do you currently cope with these problems and risks? -------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
16. What do you think could be done to solve the stated problems? --------------------------------
-----------------------------------------------------------------------------------------------------------------
17. What changes have noticed in your business in the last 5 years in your business? E.g. in
terms of income, race, demographics, crime, etc.-------------------------------------------------------
--------------------------- -------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
18. What do you expect in the next 1or 2 years? ------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
E. SWOT Analysis
19. How do you rate hawker’s performance in the following marketing mix elements?
Strategic Issues Importance Your Performance Score
(Weight out of 10) (Out of Ten) (Multiply)
Place

Price

Product

Promotion

Sourcing

Other (Name)

Total
20. Finally, what are hawker’s top five strengths, weaknesses, opportunities and threats in the
fresh produce industry (SWOT analysis)?
Strengths Weaknesses
1) _____________________________ 1) _____________________________

2) _____________________________ 2) _____________________________

3) _____________________________ 3) _____________________________

4) _____________________________ 4) _____________________________

5) _____________________________ 5) _____________________________

Threats Opportunities
1) _____________________________ 1) _____________________________

2) _____________________________ 2) _____________________________

3) _____________________________ 3) _____________________________

4) _____________________________ 4) _____________________________

5) _____________________________ 5) _____________________________

Thank you for your time!

194