Bali is a small island with an area of about 636.66 km2. It is also one of the provinces in Indonesia and is a well-known world tourist destination. Bedugul is a mountainous region (1,300 m) located in the middle of the island of Bali with three lakes (Lakes Beratan, Buyan and Tamblingan) and having cool temperatures (18-25oC), which makes this region the centre of vegetable production for the needs of the people of Bali and foreign tourists. More than 100 kinds of vegetables and herbs are grown in this area in response to the needs of the tourism industry.
The cultivation of vegetables in Bedugul is performed by small-scale family farmers with land area ranging from 0.25-0.50 ha. This horticultural cultivation is the main business activity providing family income. Family farmers generally cultivate more than one plant species (multiple cropping), so that if one species gets a very low price, the cost of its production can be covered from the price obtained for the other species. The farmers are very flexible and can choose between alternative high value species and varieties of vegetables or herbs in accordance with market demand, based on their interaction with actors in the upper distribution chains. Small-scale cultivation is carried out with the intensive involvement of family members using a simple technology that has evolved in response to market needs. Closed cultivation in greenhouses with simple construction using bamboo or wood and plastic Ultraviolet (UV) resistant roofing to regulate the penetration of sunlight has also emerged. End markets of the vegetables and herbs vary widely, and include traditional village markets, urban traditional markets, modern supermarkets, institutional consumers (hotels, restaurants and catering services) and small markets such as incidental Sunday organic markets in the tourist area of Ubud and Sanur. The volume of organic products for the purpose of this small weekly market is insignificant compared to the total production which is mostly non-organic.
Vegetable distribution channels
There are five significant distribution channels for fresh vegetables and herbs from the region of Bedugul with different chain lengths (Figure 1).
About 75 per cent of the production flows in the first, second and third channels, and the remaining 25 per cent in the fourth and fifth channels. Based on a value chain orientation assessment conducted in 2013 using eight criteria (Collins, 2009; DFID & SDC, 2008), namely the balance between price and value, amount and type of information shared, time orientation, the nature of relationships, interactions between chain members, dependence in the chain, power in the chain, and orientation of chain members, the first to third distribution channels showed very weak value orientation. While the fourth and fifth channels were found to be already value-oriented, they were still in need of strengthening of the value chains in accordance with increasing market sophistication, especially with regard to the intrinsic and extrinsic qualities assessed (namely, compliance with quality and food safety assurance, and environmentally friendly production). Table 1 provides a list of the characteristics associated with different types of end markets. While some international hotels in Bali require certification of quality assurance and food safety as well as environment-friendly production, this cannot be fulfilled by the existing agribusiness system for vegetables in Bali which indicates that the system has not been effective in taking advantage of the opportunities offered by the dynamic market.
The level of product loss depends on the agribusiness chain system or distribution channel. In general, the loss of production on farm as rejected or non-harvested vegetables is about 5-10 per cent due to the production size not being in accordance with market demand, and defects due to pest attack or diseases. The percentage of loss at the production stage can be greater depending on the level of pests and disease attack during the production process. The loss in the local traditional retail market located close to the production area (within 15-30 minutes travel time) occurs due to mechanical, physiological, and micro-biological damages during marketing. The damage ranges from 5-10 per cent which is lower than the damage that occurs in case of city traditional retail markets (10-15 per cent) that involve longer travel from the farm. It seems that consumer quality preferences in the urban areas are higher than for consumers in the villages, so the waste in the city traditional retail markets is more than in the local traditional retail markets. The loss is relatively lower at the local collectors' level as the vegetables are quickly distributed to city collectors who come directly to the village. The maximum delay in distribution of the fresh products from local to city collectors is only one night.
The first, second and third distribution channels are all subject to weight deduction. For instance, a weight deduction is applied to the farmers' produce when the transaction occurs at the local collectors' level. The reason is to compensate for the known risk of damage and losses during handling and transport. Weight deductions vary from about 5-10 per cent depending on the perishability of different vegetables. The same weight deduction is also applied when the farmers make transactions at local traditional retail markets or at the sub-district wholesale market to compensate for future losses.
In the fourth and fifth distribution channels, which are for more value-oriented markets/consumers, the farmers bring their products in accordance with established grades and volumes demanded by the suppliers of modern markets and/or institutional consumers. Weight deduction is not applied.
The loss of produce for suppliers is 2.5-5 per cent, which occurs due to trimming of the produce received from partner farmers. Suppliers are generally located near the site of production and transport supplies of the produce to the modern markets and/or institutional consumers in the early morning (5 a.m.) when air temperature is low. Transportation is through small pickup vehicles and the number of vehicles owned by a supplier varies depending on the number of modern markets and/or institutional buyers he/she serves. Normally, suppliers set their arrival time at the modern markets before 8 a.m., while for institutional customers it is set at no later than 9 a.m. Some suppliers use refrigerated pickup vehicles for traveling up until 9 a.m. As part of added services, especially for institutional buyers who need incidental or irregular supplies of vegetables beyond the typical morning arrival time, one of the suppliers had established a cold storage facility in the city of Denpasar. The quantity stored was limited to a maximum of 5 per cent of the total produce supplied per day to the supplier's institutional customers.
There is a distribution centre managed by Tiara Group Supermarkets which prepares retail units or consumer packages of many types of fresh produce for four Tiara Dewata Supermarkets located in different parts of the city of Denpasar. Suppliers bring produce to the centre in large bulk plastic crates in the morning by no later than 8 a.m. The fresh produce is then washed, trimmed and stored temporarily at 2-5oC before being prepared as consumer packs. The centre also provides cold rooms at different temperatures to store various types of fruit, vegetables and herbs. Losses of more than 10 per cent occur during retail preparation, storage and retail at the supermarkets. The losses are tracked and charged to the suppliers as 'return products'.
For other supermarkets that do not have a distribution centre, the preparation of produce for retail is generally carried out by suppliers in their own packing houses. A multinational supermarket in Denpasar charges the suppliers 8.3 per cent of the total fresh produce for offering regular discount (3.5 per cent) and tax rebates (1 per cent) on the products, promotion budget (1.5 per cent), anniversary support (1 per cent), Eid support (1 per cent) and packaging cost (0.3 per cent). The losses that occur at the level of institutional customers are much smaller, ranging from 2-3 per cent. The institutional customers normally order the fresh produce on a daily basis as required.
The losses at each level in the distribution channels are a financial burden on farmers and impact the farm gate price. The burden increases when farmers are involved in distribution channels first to third since an automatic weight deduction of 10 per cent is applied at local traditional retail markets, subdistrict wholesale market and by local collectors. For distribution channels fourth and fifth, which are oriented towards value with long-term cooperation between chains, the loss is lower. In addition, other benefits obtained from those value chains (in channels fourth and fifth) include the following: the farmer's cropping pattern can be planned/ controlled, there is certainty in sales and there is certainty in price based on monthly contracts between suppliers and modern markets and/or institutional buyers.
Based on the level of losses, which are typically 30-40 per cent but can sometimes reach as high as 75 per cent of production for channels first to third, small-scale agribusiness chain systems for vegetable marketing from the production area of Bedugul are not very efficient or effective, especially in terms of value creation and responding to dynamic markets/consumers. Similarly, in distribution channels fourth and fifth, despite being value oriented, the value chains still need to be strengthened, mainly with regard to the control system for value creation along the whole chain as well as in terms of internal control within each chain. Such strengthening is important for responding to dynamic consumer preferences or differing cultural values of consumers in the tourist island of Bali. The losses during production also need to be given serious attention because the proportion of unmarketable produce is still high. This produce is left on the farms to be composted, or sold at a lower price via channels first to third after being rejected by the suppliers for channels fourth and fifth. Therefore, in order to improve the efficiency and effectiveness of the agribusiness chain systems for vegetables grown in the production area of Bedugul, Udayana University through the Udayana Community Development Program (UCDP) and the Center for Research and Development on Horticultural Crops (CREDHOC) has been supporting and promoting value chain partnership programmes.
(List of references can be made available upon request)