Raising the value of commodities can do much to reduce poverty. By using commercial marketing principles and supply-chain innovations, farmers in developing countries can create consumer demand, giving producers leverage in negotiations with major buyers.
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Agricultural commodities matter to development. Commodity products such as sugar, coffee or beef contribute to more than a quarter of GDP in developing countries, where over 1 billion farmers derive at least part of their income from them. As most of these farmers are smallholders, raising the value of commodities can do much to reduce poverty.
Unfortunately, the trend has been the opposite. Modern food chains place increasing importance on branding, distribution and services—activities "downstream" of farmers' traditional role in supplying produce to markets. As a result, primary producers of agricultural commodities have been capturing less and less of the total value of their products. At the same time, power has become concentrated in the hands of a small number of buyers—the giant supermarket chains and manufacturers who dominate the global food market.
By branding commodities, producer countries and organizations can reverse this growing imbalance. Branding creates consumer demand, giving producers leverage in negotiations with major buyers.
This paper examines the potential for branding agricultural commodities in developing countries. We look at how producers in these countries can exploit the same commercial marketing principles and supply chain innovations commonly used in the mature markets of the developed world.
How commodity branding works
Branding is not just glossy advertising. A brand comprises all that distinguishes one product or service from similar competitors—from advertising and packaging to provenance and ethics. For basic commodity products, it may seem unlikely that consumers will recognize such distinctions, but the task is little different from branding many other consumer products. There is no more physical variation between brands of mineral water, for example, than types of sugar or beef.
To distinguish one commodity product from another, branding efforts must combine marketing expertise, an efficient supply chain, financial resources and effective organization. Brands should be seen as an integral part of making supply chains sustainable and profitable. This means abandoning a classic mindset about commodities: upon successful branding, commodities' core value lies not in the physical products but in the brand—intellectual property owned in the country of origin.
Authors: Chris Docherty
Publisher: International Institute for Environment and Development (May 2012)
Booklet: 32 pages
Dimensions: 6.89 x 9.45 inches
Posted on January 16, 2013