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What is 'de-commoditization'?

  • What is 'de-commoditization'?

    by Market Insider

    Thursday, 29 Aug. 2013

    The global population is set to reach nine billion people by 2050; nearly all of this population growth will occur in developing countries and demand for food products is expected to rise by 40% by 2030. The international community will need to fulfil this increasing food demand not only because it is fair but also because it is economically convenient and would help in avoiding major social unrest.

    The increasing development gap and the recent economic crisis, the end of which is thought to be near (though nobody knows when and with what implications for less favoured countries), urges the need to identify solutions that will allow to distinguish food, particularly agricultural products, as top-priority items in the coming years.

    The development sector has largely debated how to use agriculture in developing countries for development; though the issue might appear simple it is in reality very complex because it involves not only national policies, different production systems and different market structures but also the history of each particular production context and its own approach to rural development and related constraints.

    Consider, as examples, the long disputes between big tenants and small-holder producers in the Southern Hemisphere or the different opinions on development in evolved, profit and service–oriented markets, and developing countries, where market and food-security inevitably run on a same path.

    As primarily mentioned at the Produce Marketing Association (PMA) in the October 2011 summit de-commoditization could be the key word. “I dislike the word ‘commodity’ almost as much as I dislike the title ‘VP of Perishables’ for fruits said the president of PMA. “Why have we accepted the commodity fate that was handed to us without question? A commodity classification says we are not unique, we have no story” he continued.

    De-commoditization means presenting fresh products not just as a commodity with no measureable differences between one and the other, but as a special, unique item that is strongly linked to top-priority issues such as sustainability and subsistence. In developing countries millions of people depend on the prioritization of food items for their lives and for food security. In developed markets the de-commoditization may permit not only to promote fresh products but also to avoid the vulgarization of the market particularly putting in evidence product characteristics, origin and history; traditions and nutritional values, and avoiding price standardization. In the words of the President of PMA: “is our focus on price influencing consumer’s perception of value? Are we creating a low price future when many consumers want something more than this?”

    De-commoditization would be all about product valorisation, health and safety, sustainable production systems and markets and eco-sustainability. I think that the high-tech world we are living in today may offer perspectives for the de-commoditization and the promotion of fresh food products; considering that the consumption of fruits in evolved countries is as low as 250 gr. (1 fruit) per day per person and that de-commoditization is now being done even with with music (yes, music) why not attempt to do the same with food. Food for thought? Or should we say thoughts for food!”


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