Selecting A Distribution Channel

For fresh produce, the distribution channel refers to the way and means by which the farm product is moved from the farm to the market. The mechanisms used vary depending on where the market is in relation to the farm and on the requirements of the market. Commonly used distribution channels include wholesalers, distributors, sales representatives and retailers.

The preferred packaging required by the target market for fresh farm products is an important role in the choice of distribution channel. Fruit destined for the local wholesale market is usually packed either into jute or plastic pockets, usually in 10kg or 5kg units, or into 15 kg cartons. Cartons are stacked onto wooden palletised and transported by road or rail. Pockets are either stacked directly into trucks or palletised for the journey to the market.

Informal traders who collect fruit directly from the packhouse in their own vehicles may load fruit lose into their vehicles.

Fruit for export is packed into specified cartons, most commonly 15kg, with dimensions that are configured for palletisation. Stacked pallets are either loaded onto vehicles or rail trucks, or into shipping containers at the packhouse.

We can now see that there are many different forms and ways in which fresh farm products leave the farm for their journey to the market. Some products are transported following a cold chain. In the case of lettuce, the harvested lettuce is transported from the field to a packing shed that is refrigerated. The lettuces are packed using specific packaging, under refrigeration, stored in cold rooms and transported to the retailer in refrigerated trucks by road.

The farmer or packhouse decides which markets to serve, and ensures that the packaging form is aligned with market requirements and is cost-effectively utilised. The farmer or packhouse then decides, alone or in consultation with the market agent or exporting company, how the product will be transported to the market or port terminal.

In the case of exports, decisions also must be taken about which logistics service provider and shipping company to use. The cost of transporting the product to the markets of choice in good condition depends on the efficiency and capability of the agencies used.

Deciding on which logistics service provider in the distribution channel to use depends on:

• The ability to provide the desired service
• The reputation of the service
• The cost of the service

Transport Modes

The choice of distribution mode has cost implications and therefore has an influence on the distribution budget.

The farmer or packhouse must decide which mode of transport to use to convey the packed product to the market. Cost is the main consideration in making this decision, but not the only one. Other factors include the practicality, reliability, reputation, and general standard of service delivery associated with the different modes of transport and transport contractors.

Export fruit must be transported from the packhouse to a local depot or port, from there to an overseas port, and from the overseas port to an overseas depot or market. Different modes of transport are in most cases used for the different sectors of this journey.

The inland part of the transport leg can be completed by road or rail, or a combination of the two, depending on where the packhouse is located. All cooperative pack houses and some independently run pack houses are located on rail sidings, in which case rail transport is the logical option. However, in many instances, poor rail services, because of unreliable capacity, time delays and uncompetitive tariffs, have resulted in road transport being more attractive. Market forces will determine what mode of transport is used.

Before the 1980s, a high proportion of farm products were transported from the interior of the country by rail. Today the situation is quite different, with a much higher proportion being transported by road, simply because of competitive rates and service delivery requirements driving producer decisions.

Sea freight accounts for virtually 100% of the transport mode used to convey farm products from South Africa to its various export markets. This is even the case with African markets other than those with borders close to South Africa.

On rare occasions, air freight is used for exports, but this is usually early in the season of a popular cultivar when a producer and his export agent decide to be the first on a poorly supplied market. Speciality crops that are placed in niche markets are often transported by air. An example of this is the air freighting of blueberries from South Africa to the UK. South African blueberry exports occur in the months when blueberry is not harvested in Europe. The consumers are then willing to pay a levy on the produce. In some instances, market prices may, for a short period of time (days), justify the high cost of airfreight.

On arrival at overseas ports, the palletised farm product is conveyed most often by road transport to depots or directly to retailers in the case of supermarkets.

In the case of locally marketed fresh farm products, depending on the quantities of produce involved, the proximity of rail stations, the location and nature of the market to which the products are being sent, and the price quoted, either road or rail is used. Since small volumes of product are sent by any single producer to any specific market, the road is the most commonly used transport mode.