The impact of supermarket supply chain governance on smallholder farmer cooperatives: the case of Walmart in Nicaragua

Abstract

Non-governmental organizations (NGOs) and governments are promoting cooperatives as key to linking smallholder farmers with modern markets to achieve inclusive development, yet the specifics of these supply relationships remain poorly understood. This article uses data from 51 interviews with supply chain stakeholders and a survey of 110 smallholder vegetable farmers in Nicaragua to investigate the impact of cooperative-supermarket supply chain relationships on cooperatives, and the role retailers and NGOs play in facilitating these relationships. The study found that in Nicaragua, cooperatives selling to Walmart became unstable, in contrast with the performance of cooperatives selling to local supermarket chain La Colonia. The results show that cooperative performance is impacted by an interaction between differences in the types of farmers reached by the two supermarket chains, in the performance of the NGOs involved in each supply chain, and in the supermarkets’ business practices. The findings suggest that NGOs should pay more attention to buyer sourcing strategies and farmer needs when designing development interventions to link cooperatives of resource-poor farmers to markets, so as not to increase the vulnerability of smallholder farmers.