Price-quality relationships in the fresh produce industry in Bali

Abstract

As the number of tourist arrivals in Bali (Indonesia) continues to increase, a greater number of opportunities are emerging for local farmers to expand production to meet the increasing demand for food. While there are various production and marketing constraints which limit the ability of small farmers to individually meet the hotels quality specifications, this paper demonstrates how collector agents and distributors are able to assemble sufficient produce to meet the quality specifications imposed by the high class hotels. Intense competition between the many distributors for a share of the hotel patronage has resulted in a significant reduction in price, so much so, that the second grade produce which fails to meet the specifications of the high class hotels, often achieves a higher price in the wet market.Consequently, the small, lower class hotels, who purchase the majority of fresh produce they require from the wet market, experience much greater problems with both variable product quality and price. Not unexpectedly, under the current system of marketing, there are no financial incentives to encourage local farmers to improve product quality.