Sourcing from Small Andean Farmers  


Josefina F. Bruni-Celli EN

Manuela Plaza


IESA Business School Venezuela

Published in


Grupo Mazaplan, a Mexican giant, entered the Ecuadorian market at the end of 2000 by purchasing controlling interest in Supercompra, a large local retailing company. In 2001 Grupo Mazaplan appointed Juan Pedro Zapata as Supercompra’s CEO, and assigned him the task of optimizing the company’s supply chain. Zapata completely turned around Supercompra’s purchasing model. He discarded a model whereby a central company office purchased all produce from national distributors who then made direct deliveries to points of sale, and substituted it with another featuring decentralized company units called “proximity platforms” located in various parts of the country. The first platform was set up near the Andean town of Pallatanga (Chimborazo Province) in 2002.

Because most Andean farmers were smallholders, Supercompra found it necessary –in order to reduce transaction costs– to organize them into associations or co-ops before engaging in direct buy-sell relationships with them. However, for a variety of reasons the majority of small farmers’ associations that Supercompra had helped set up in Pallatanga soon stopped supplying the platform. This, along with the withdrawal of several direct suppliers, meant that in 2006 direct purchases from small farmers gradually declined at the Pallatanga platform, while purchases from middlemen or larger farmers began to increase.

The case looks upon difficulties faced by companies such as Supercompra when trying to develop commercial relations with low-income suppliers through market mechanisms; it also elaborates on how Supercompra handled these relationships. It is chronologically situated in March 2006, the moment when Supercompra must decide how to proceed regarding its relationship with its low income suppliers: 1) allow relations with small Pallatanga growers to dwindle away, discontinuing further efforts and resources invested in organizing them, and dedicating efforts entirely to building relationships with local middlemen and larger commercial farmers; 2) continue to work on the relationship with small growers, but reframe it as a social or CSR initiative; or, 3) allocate more efforts and financial resources to building stable and solid business relationships with small producers, which would imply making a major investment, and dedicating additional time and effort organizing and fostering small farmers with the hope of achieving profitable commercial relations with them within a few years.