Ethiopian Development Research Institute and International Food Policy Research Institute (IFPRI/EDRI), Tenth International Conference on Ethiopian Economy, July 19-21, 2012. EEA Conference Hall

1. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
Prices and Quality in Food Retail in Addis
Authors
By Thomas Woldu (MSc) [IFPR/ESSP II],
Girum Abebe (PhD) [EDRI],
Indra Lamoot (PhD) [IFPRI/ESSP II]
Bart Minten (PhD) [IFPRI/ESSP II]
Ethiopian Economic Association
Conference
July 19-21, 2012
Addis Ababa
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2. Introduction
• We look in this study at food retail practices in the city
of Addis Ababa
• Three reasons that motivate this study:
1. Urban food retail is important: a) Almost all residents
of Addis rely on the retail market for their food; b) A
large number of people make their living from
employment in this sector; c) Given increasing
urbanization, the volume of people relying on this
market is quickly growing over time.
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3. Introduction
2. Policy interest. Government often intervenes in these
markets and there is thus large interest to understand the
exact functioning;
– For example, the government would like to know which retail
outlets are the most important in distributing different food
products to better tailor their potential interventions.
3. Modern retail outlets (like supermarkets/minimarkets) are
quickly emerging and spreading throughout the city.
– This may have implications on the prices and quality of food in
the market as well as upstream implications on producers.
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4. Fast growth rate in penetration of
modern retail outlets
Number of outlets opened
40
30
20
10
0
1992/93- 1997/98- 2002/03- 2007/08-
1997/98 2002/03 2007/08 2011/12
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5. Research questions
• What is the importance of different retail outlets in
urban food distribution?
• What is the quality and price that different retail outlets
sell?
• What is the potential implication of the emergence of
modern retail (defined as having at least one cash
register and self-service) on prices and quality of food in
the market?
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6. Sample set-up
• 10 sub-cities in Addis: half of them randomly selected
(after geographical stratification)
• Choose 4 main cereals, 5 main fruits and vegetables, and 4
processed foods
• Collected census data on the importance of different
outlets in each sub-city
• Randomly selected outlets to be interviewed
• Survey was done in April – May 2012
• Survey collected detailed information on turnover, prices,
and quality of products (among other information)
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7. Data
Food products Retail outlet type No. Obs. Sampling Remark
Cereals Supermarkets 160
Teff Consumer Coop. 109
Maize Private commercial 2 All in in the 5 sub-cities out of 10
Wheat farms sub- city in the city
Sorghum Kebele shops 7
Fruit and Veg.
Etfruit shops 29
Potato
Flour Mills 264 All in the selected
Tomato
kebeles
Onion
Regular shops 201 10 randomly
Banana 4 kebeles out of 10
Fruits and Vegetable 187 sampled in each
Orange (on average) in a
grocery shops kebele
Processed foods sub-city
Edible Oil Cereal shops 61 5 randomly
Sugar Baltena shops 99 sampled in each
Shiro kebele
Berbere Gulit (Micro Sellers) 107 3 in each ketene 2 ketenas out of 5 (on
average) per kebele
Total 1226
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8. Results
• What is the market share of modern retail outlets?
Cereals
1
.8
.6
.4
.2
0
Maize Sorghum Teff wheat
Supermarkets Consumer Cooperatives
Kebele Shops Flour Mills
Cereal Shops Modern Outlets
Others
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9. 1
.8
.6
.4
.2
0
Fruits and Vegetables
Onion Orange Potato Tomato
Supermarkets Regular Shops
F&V Grocery Shops Micro sellers of F&V (Gulit)
Private Commercial Farms Etfruit
Modern Outlets Others

10. 1
.8
.6
.4
.2
0 Processed Foods
Berbere Edible Oil Shiro Sugar
Supermarkets Consumer Cooperatives
Kebele Shops Cereal Shops
Regular Shops Private Commercial Farms
Etfruit Baltena Shops
Modern Outlets Others

11. Results
• Quality comparison by retail outlet
Modern Kebele shop Flour mill
Maize 91 % white 60 % white 64 % white
Cereals 100 % packed 0 % packed 0 % packed
Wheat 86 % white 83 % white 80 % white
100 % packed 33 % is packed 0 % is packed
Modern F&V grocery Gulit (Micro
shop sellers)
Onion 74 % first grade 31 % first grade 9 % is first grade
Fruits and
Banana 6 % high level of 11 % high level of 33 % high level
Vegetables
rotting rotting of rotting
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12. Results
• Quality comparison
Outlets Modern Consumer Kebele Regular
cooperative shop shop
Edible oil 80 % best oil Less than 25 % best Less than
Processed (The best oils 4 % best oil oil 30 % best
foods defined as oil
olive,
soya bean and
sunflower oil)
Berbere 86 % 40 % 0% 68 %
branded branded branded branded
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13. Results
Price comparisons
• We run hedonic price regression for each product
• Price in Birr/kg is dependent variable
• Right-hand variable are type of retail outlet, location
(with dummies for sub-cities), quality indicators, and
time of survey (with a dummy to differentiate the data
collected before and after Ethiopian Easter)
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14. Results
• Price comparisons (hedonic price regressions)
Without controlling for quality indictors Controlling for several quality indictors
Variables Teff Wheat Maize Sorghum Teff Wheat Maize Sorghum
(1) (2) (3) (4) (5) (6) (7) (8)
Modern Na 9.48*** 29.68*** Na 5.64*** 28.71***
MM & RS 2.00 3.34*** 8.00*** -0.01 1.82
Cons Cop. 0.47 -1.67 0.03 -0.19 -0.94 -0.47 0.17 0.57
Kble shop 1.03 -1.25 -0.15 -0.93 -0.40 -2.52 0.11
Flour Mills 0.90 -1.11 -0.09 0.02 -0.38 -1.21 -0.06 0.44
No. Obs. 1,042 603 452 338 1,003 368 350 231
Notes: Outlet type dummies are included in all the regressions; standard errors are in
parenthesis [* 10% significance levels; ** 5% significance levels ;* ** 1 percent significance
levels], MM & RS=Minimarkets and Regular shops; Kble shop=Kebele Shops; No.
Obs.=Number of observations
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15. Results
Price comparisons
Without controlling for quality indictors Controlling for several quality indictors
Variables Potato Tomato Banana Onion Orange Potato Tomato Banana Onion Orange
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Modern 3.15*** 1.89* 0.79 1.09* 3.44 0.53 1.20 0.44 0.64 2.71
MM & RS 1.84** -0.27 0.64 -0.15 3.18 -0.20 -0.27 0.39 -0.02 2.92
F & V shops 1.15 -0.52 0.17 -0.15 0.44 -0.87 -0.60 0.01 -0.07 1.18
Gulit (M.S.) 0.66 -1.39 -0.83 -0.04 -1.30 -1.11 -0.56 0.20
P C F 3.50*** 2.64** -0.00 -0.56 -0.00 1.44 2.23* -0.65 -0.55 0.14
No. Obs. 297 330 201 386 105 253 327 201 378 90
Notes: Outlet type dummies are included in all the regressions; standard errors are in
parenthesis [* 10% significance levels ;** 5% significance levels ;*** 1 percent
significance levels] ; MM & RS=Minimarkets and Regular Shops; F & V =Fruits and
Vegetables; M.S.=Micro sellers; PCF= Private Commercial Farms; No. Obs.=Number of
observations.
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16. Results
Price comparisons
Without controlling for quality indictors Controlling for several quality indictors
Variables Edible oil Shiro Berbere Sugar Edible oil Shiro Berbere Sugar
(1) (2) (3) (4) (6) (7) (8) (9)
Modern 46.57*** 20.34*** 23.05*** 0.46 26.55*** 17.47*** 23.86*** 0.13
MM & RS 13.29 4.76*** -5.67*** 0.20 10.93 3.25*** -5.06** 0.08
Con. Cop. -6.28 -15.0*** -17.7** -0.32 7.62 -17.98*** -18.15** -0.45***
No. Obs. 1,210 689 570 313 1,185 653 538 312
Notes: Outlet type dummies are included in all the regressions; standard errors are in
parenthesis [* 10% significance levels; ** 5% significance levels; *** 1 percent
significance levels]; MM & RS=Minimarkets and Regular Shops, Con. Cop.=Consumer
Cooperatives; No. Obs.=Number of observations.
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17. Results
• Important quality differences in market
• Location effect exists sometimes but not for all products
• Time effect important for some products (prices
significantly decline after the Easter period)
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18. Conclusion
• There is a large variation in food retail outlets in Addis
that all focus on different products
• Consumer cooperatives are very important for wheat,
sugar and edible oil; prices are mostly lower than in
other outlets but rationing issues exist (running out of
supplies and queuing)
• Modern retail is still a very small niche market
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19. Conclusion
• Significant variation of prices among different outlets;
– Modern retail outlets in general charge higher prices
• However, there are also important differences in quality;
– Modern retail outlets offer in general better quality foods
• For cereals and processed foods
– Modern retail outlet charge higher price controlling for quality
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20. Thank you!
This is work in progress.
More results later!
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