The economic breakdown of the early transition process weighed heavily on food supply relationships in the Eastern European and Central Asian (EECA) countries. Small and medium-sized farm suppliers and processors suffered from lack of necessary production inputs whereas processors and retailers faced problems of insufficient quantity and quality of supplies. At the same time, changes in consumer demand as well as the accompanying entry of foreign investors in the retail and processing sectors necessitated significant and lengthy reforms and adjustments in the structure of food commodity chains to overcome these problems. Based on an extensive literature overview and a synthesis of five case studies conducted upon the assignment of Food and Agriculture Organization (FAO) of the United Nations, the current chapter demonstrates how small and medium-sized food processors manage to install effective procurement systems in weak institutional environments of EECA. The chapter also identifies the factors that drive small farmer-processor business linkages and their integration into national and international value chains in order to develop options for support and assistance.
Part of the book: Agricultural Value Chain
The current chapter demonstrates an application of the theoretical framework of vertical coordination, more specifically the application of contracting in productive partnerships, to integrate smallholders into the value chain of a specialised crop. The aim of the chapter is to derive implications for industry participants on how to integrate smallholders with vertical coordination. Therefore, we take a closer look on vertical coordination and contracting in productive partnerships. We have taken the value chain of brandy production in Armenia and used the Yerevan Brandy Company (YBC) to perform our case study, with which we can analyse vertical coordination mechanisms used by the company. Further, we want to identify factors that drive processors and smallholders to enter into contracts. Qualitative interviews were conducted with the YBC, their grape suppliers, as well as experts from related fields. We analysed the data with a qualitative content approach. Results show that the YBC uses different measures of vertical coordination, i.e., contracts and farm assistance in the form of consultancy and input supply. The company tends to use production contracts rather than pure marketing contracts, as it is actively engaged in the production process. The use of contract farming is beneficial for both the processing company and the smallholders.
Part of the book: Agricultural Economics