ESSP Working Paper 146, by Bart Minten, Yetimwork Habte, Kaleab Baye, and Seneshaw Tamru.
Abstract: Modern marketing arrangements are increasingly being implemented to assure improved food quality and safety. However, it is not well known how these modern marketing arrangements perform in early stages of roll-out. We study this issue in the case of rural-urban milk value chains in Ethiopia, where modern processing companies - selling branded pasteurized milk - and modern retail have expanded rapidly in recent years. We find overall that the adoption levels of hygienic practices and practices leading to safer milk by dairy producers in Ethiopia are low and that there are no significant differences between traditional and modern milk value chains. While suppliers to modern processing companies are associated with more formal milk testing, they do not obtain price premiums for the adoption of improved practices nor do they obtain higher prices overall. If there are rewards by modern processing companies, they are mostly done through non-price mechanisms. At the urban retail level, we find that there are surprisingly no price differences for branded pasteurized versus raw milk and find that modern retailers sell pasteurized milk at lower prices, ceteris paribus. Modern value chains to better reward hygiene and food safety in these settings are therefore called for. Download the PDF.
