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Is Cargills better than Keells?

3/7/2013 12:00:00 AM   

Leading supermarket chains have managed to keep vegetable prices relatively low, despite the price manipulations by Naadi-mafia operating from Dambula, the centre of the country’s vegetable supply chain.

Following The Nation’s exclusive exposure of how vegetable prices are kept consistently high by the ‘Naadi Mafia’, investigations were launched as to how the various supermarket chains keep vegetable prices relatively low. The Nation focused on the two largest chains, Cargills Food City and Keells Super [see chart for price comparisons on selected vegetables].

Ranjith Page, Chairman, Cargills (Ceylon) PLC, pointed to a long standing strategy of linkages with producers and mechanisms to reduce wastage as the main reasons for relatively low prices: ‘We maintain a strong relationship with farmers and we have a strategy to strengthen them as farmers constitute a very important part of our internal vegetable supply chain. We work with farmers to make sure that they do not over-produce. Also, we make utmost efforts to reduce wastage, not only in farms, but also during transportation. We, as a company, can do that because we have a direct relationship with farmers. That is how we keep the cost-factor down.’ Charitha Subasinghe, Vice President John Keells Holdings, said that they use collection centers to eliminate the costs of middlemen.

“We have our own vegetable collection centers at three places- Nuwara Eliya, Suriyawewa and Thambuttegama. We directly purchase vegetables from farmers and send them to warehouses. From warehouses, we send vegetables to our various outlets on a daily basis. We don’t deal with outside vendors and therefore we don’ have to deal with middlemen who allegedly manipulate vegetable prices.”

Subasinghe, when asked why Food City prices were generally lower than Keells Super prices, said that Keells has its own price comparisons: ‘We sell local potatoes, which are relatively more expensive than potatoes imported from India, for example.’ The Nation, however, used Friday’s prices posted in the Keells website and averages of store prices in selected Food City outlets for this comparison.

Page declined to comment on the strategies and pricing mechanisms of competitors. A cross section of consumers told The Nation that vegetable prices are one of many criteria considered in choosing a supermarket. These include the quality of service, the range of non-produce items and convenience of location. It was noted, in general, that there were ‘store-specific’ factors, both positive and negative, that impacted choice.

The Nation learns that while the proliferation of supermarket chains across the length and breadth of Sri Lanka has all but hoofed out of business smaller vegetable vendors in the vicinity of such outlets, their collective market share is still very small and too weak to stump the likes of the Naadi Mafia.

Source: http://www.nation.lk/edition/latest-top-stories/item/16330-is-cargills-better-than-keells?.html