Marketing and Distribution Practices and Arrangements of Squash in Cabuyao City

Date

6-2023

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Fitz D. Jimenez

Committee Member

Eliza C. Aquino, Glenn N. Baticados, Mar B. Cruz

Abstract

Squash, or Kalabasa, is one of the Philippines' high-value vegetable crops named by the Department of Agriculture for its high-yielding nature (DA, 2022). Squash is also one of the top vegetable commodities produced by Cabuyao City farmers and is preferred given it is low maintenance during production compared to other crops (CMAO, 2022). The Cabuyao City squash industry mainly focuses on the farm and retail levels. However, overlooking the marketing and distribution portions limits the industry problems being addressed and hinders maximizing productivity and higher profitability. Through understanding the marketing and distribution practices and arrangements, the study could provide supply chain efficiency, optimize prices, identify value addition, and increase market access to market players.

Understanding the marketing distribution practices and arrangements of squash in Cabuyao City can be achieved by: presenting the market players of the Cabuyao City squash industry; identifying the product flow, marketing channel system and its marketing functions; assessing the bargaining power among the squash industry players; determining the marketing margin of each market player; establishing the supply chain map of the squash industry; examining the challenges and issues; and formulating strategies based on the results of the study. These objectives were achieved by incorporating a descriptive quantitative approach. Before the research proper, the study conducted a pre-test among squash industry players. In gathering respondents, the research incorporated two methods, simple-random sampling for the squash farmers and snowball sampling for the assemblers, wholesalers, and retailers. A simple-random sampling was used among squash farmers since the population is definite, and it is a straightforward probability sampling method where each individual in the population has an equal chance of being chosen as a respondent.

Moreover, non-probability snowball sampling was utilized for the intermediaries given their indefinite population and was chosen through a referral system. The study utilized both physical and phone interviews with close-ended questionnaires. Through the referral system, the researcher identified all the players involved in the Cabuyao City squash industry: the input suppliers, squash farmers, brokers, assembler-wholesalers, wholesaler-retailers, and retailers.

In the Cabuyao City squash industry, there were three major commercial input suppliers that farmers bought seeds, fertilizers, and agrochemicals such as insecticides, herbicides, and fungicides; aside from buying input, the farmers also received subsidized seeds and sometimes fertilizers from the Municipal Agricultural Office. The squash farmers were dispersed into ten barangays: San Isidro, Gulod, Bigaa, Sala, Marinig, Banay-banay, Niugan, Butong, Mamatid, and Baclaran; the majority of the farmers only conducted pre-production and production practices as they relied on most of the post- harvesting practices to the assembler-wholesalers. However, farmers that sold squash to nearby retailers in Cabuyao/Calamba/Sta. Rosa conducted the hauling, packing, and transporting. Most assembler-wholesalers were from Tanauan; some were also from Balintawak and Quezon Province. Assemblers were primarily responsible for hauling, packing, and transporting. The assemblers then sold squash to wholesalers or retailers; the post-harvest practice conducted by wholesaler-retailers and retailers mainly involves sorting and transporting. The majority of the wholesaler-retailers and retailers involved were in central trading posts such as the Tanauan City Trading Post and the Balintawak Market. The brokers were only involved in the negotiation; 79.70% of farmers and assemblers relied on them in buying and selling squash; in return, the brokers received commissions from Assembler-wholesalers. As we now identified the players through the referral system, the study identified the relationship and channels among the respondents. Among the industry players involved in the buying and selling of squash, wholesaler-retailers earned the most with 33.33% earning PhP 30,000-PhP 39,999 and another 33.33% earning PhP 10,000-PhP 19,999; it was then followed by the assembler- wholesalers with 40.00% earning PhP 20,000-PhP 29,999. Retailers were earning a monthly income of less than PhP 10,000; 93.80% of farmers did not have monthly income as they only received profit during harvest season.

Based on the responses, there were six marketing channels identified: first was Cabuyao City squash farmers to Tanauan assembler-wholesalers to Tanauan wholesaler- retailers to Calamba wholesaler-retailer to Cabuyao retailers to Consumers; second was Cabuyao squash farmers to Tanauan assembler-wholesalers to Tanauan wholesaler- retailers to Cabuyao retailers to Consumers; third was Cabuyao squash farmers to Balintawak assembler-wholesalers to Balintawak retailers to Consumers; fourth was Cabuyao squash farmers to Cabuyao retailers to Consumers; fifth was Cabuyao squash farmers to Tanauan assembler-wholesalers to Tanauan wholesaler-retailers to Calamba wholesaler-retailer to Consumers; and sixth was Cabuyao squash farmers to Tanauan/Balintawak assembler-wholesalers to Tanauan/Balintawak wholesaler- retailers to Consumers.

Each player conducted marketing functions, including exchange, physical, and facilitating functions. The exchange function involved was the buying and selling of squash, that created a flow and transfer of ownership. Physical functions only involved transportation since the Cabuyao City squash industry did not store or process its commodities. The absence of other value-adding practices, such as processing, does not maximize the operations, implying that there is room for more innovation in the Cabuyao City squash industry to improve productivity and profitability. Moreover, the squash industry players also conducted indirect marketing functions, specifically facilitating functions to which they conducted standardizing, financing, risk-bearing, and market information.

In terms of their relations and bargaining power with one another, input suppliers had a strong bargaining power over squash farmers and so as their buyers, which majority were assembler-wholesalers, retailers, and sometimes wholesaler-retailers. In terms of threats, new entrants have a low possibility of emerging due to high barriers to entry and scarce resources needed for farming such as land. Furthermore, there are high threats in substitution due to a high number of squash farmers in neighboring cities which increases competition. The level of substitution and competition in the industry dictated their bargaining power. When there are more businesses, it widens the alternatives of buyers, thus weakening their bargaining power. Nevertheless, when there are limited options, it strengthens their market position, thus increasing their bargaining power in the industry.

Understanding their dynamics allows the study to have a background on how these players set their prices, to which we identify the marketing margins, which provides an understanding of the gap between the farmgate and retail prices. As price varies per market segment, so do the marketing margins. The channel which had the highest total marketing margin was also the channel with the most players involved which was the

Cabuyao squash farmers to Tanauan assembler-wholesalers to Tanauan wholesaler- retailers to Calamba wholesaler-retailer to Cabuyao retailers to Consumers with an

average marketing margin of PhP 37.30; in contrast, the marketing channel with the fewest players involved had the second highest margin: Cabuyao squash farmers to Cabuyao retailers to Consumers, this channel ranked third with an average of PhP 27.93 to which retailers had the highest contribution; among all the channels which had retailers, they were the industry players who contributed the highest markup in the marketing margins. The marketing channel with the lowest average marketing margin did not involve retailers: the Cabuyao squash farmers to Tanauan assembler-wholesalers to Tanauan wholesaler-retailers to Consumers, with an average marketing margin of only PhP 7.94. As we correlated the socio-demographic with their margins, despite high retail prices, retailers have lower monthly income than assemblers and wholesalers as they purchased less volume of squash than the two players; raising retail prices is necessary for them to cover costs, but at the same time, prices at retail level also affect end-consumers with its high prices.

Compared to when consumers directly buy from wholesaler-retailers where the price is lower. Assemblers and wholesalers did not put higher markups than retailers, as they purchased a higher volume of squash. Their high volume sales are enough to cover their costs and receive profits without doubling their selling price. Buying from wholesaler-retailers is better for end-consumers as it is relatively cheaper.

As we now understand the dynamics within each market segment, a supply chain map summarizes the gathered data into one chain system. Among the ten barangays in Cabuyao City, eight mainly bought their inputs from commercial input supplier 1. Still, the other two barangays had the most respondents and bought mainly from commercial input supplier 2. The majority of the farmers also received subsidies from the Municipal Agricultural Office. At the production level, most farmers were from Barangay San Isidro, with 48 farmers. The farmgate price ranged from PhP 20-PhP 30 with an average of PhP 26.20 across the ten barangays. Most farmers sold squash to viajeros in Tanauan; the average selling price in the trading level of Tanauan was PhP 28.30; the selling price in Balintawak was slightly higher at PhP 29.15. Some farmers also sold squash in Quezon Province and also to retailers in nearby cities such as Cabuyao/Calamba/Sta. Rosa with an average selling price of PhP 57.75. After trading in Tanauan, they sold squash to wholesalers and retailers from Cavite, Laguna, Batangas, and Southern parts of NCR, such as Alabang and Parañaque, with an average price of PhP 43.03. Moreover, traders in Balintawak then sold squash to supermarkets such as pure gold Balintawak and other retailers in NCR, Rizal, Bulacan, and Pampanga with an average selling price of PhP 43.10.

Understanding the marketing and distribution allowed the study to determine the issues involved in the Cabuyao City squash industry. Farmers experienced problems with limited capital, high input prices, the aftermath of calamities, irrigation, and oversupply; Assembler-wholesalers with issues with capital investment, pricing, and profitability dependent on high volume; similarly, the wholesaler-retailers experienced issues with pricing, and profitability dependent on high volume; while retailers experienced constraints on high retail prices but low returns. Generally, the Cabuyao City squash industry experienced problems with both productivity and profitability as the current industry functions need to be maximized. In analyzing the whole industry, the absence of processing functions limits the maximization of the industry. Through processing, it could address the Cabuyao City squash industry issues. However, before adaptation, training is recommended for the Cabuyao City squash industry. In collaboration with DOST and the Municipal Agricultural Office, they could provide training for industry players on creating the squash food technologies of DOST at either the small-scale level: rice-squash curls and fishball with squash; or household level: squash catsup, squash flour, squash halaya, squash kutsinta, kalcosuman, squash gulaman, jeweled squash rounds, squash maja, squash macaroon, squash flour supplemented pan de sal, and sweet rolls with squash flour (DOST-FNRI, 2016). DOST has multiple beneficiaries provided with training, assessments, and equipment. DOST also helps other localities develop their squash products derived from local delicacies. This could also be applied in the training of the Cabuyao City squash industry players to boost their competitive edge and also even local tourism. Creating opportunities that would allow the Cabuyao City squash industry to become a beneficiary in receiving training, assessments, and equipment could become a strategy for improving the industry's productivity and profitability.

Language

English

LC Subject

Squash industry, Marketing, Distribution (Economic theory)

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2023 M17 T39

Notes

Viewing access to electronic resources is restricted solely to UP Gmail accounts. Any access and share requests from external organizations and personal email accounts will be promptly declined.

Document Type

Thesis

Link to Full Text

Share

COinS