Coordination in Channels of Distribution: the Case of the Orange Juice Industry

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  • Topic: Transaction cost, Contract, Orange Juice
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  • Published : April 20, 2012
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Coordination in Channels of Distribution: The Case of the Orange Juice Industry

Ana Maria do Val

University of São Paulo FEARP - School of Business and Economics PENSA - Agribusiness Program Av dos Bandeirantes 3900 14040-900 Ribeirão Preto - SP - Brazil Phone 0055-16-6023892 Email: amdoval@uol.com.br

Marcos Fava Neves

University of São Paulo FEARP - School of Business and Economics PENSA - Agribusiness Program Av dos Bandeirantes 3900 14040-900 Ribeirão Preto - SP - Brazil Phone 0055-16-6023892 Fax 0055-16-6334411 Email: mfaneves@usp.br Webpage: www.usp.br/fearp/fava

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Coordination in Channels of Distribution: The Case of the Orange Juice Industry Ana Maria do Val University of São Paulo FEARP - School of Business and Economics amdoval@uol.com.br Marcos Fava Neves University of São Paulo FEARP - School of Business and Economics mfaneves@usp.br

ABSTRACT This paper analyses the citrus agri-food system in Brazil based in the channels of distribution, transaction cost economics and contracts referential. Within this analysis a specific transaction was emphasized, between the industry that processes the juice and the beverage industry, with the purpose of identifying the relationships and the main characteristics that exist in the contracts involved. By the assets specificity’s analysis, it was expected that the relationships occurred via contracts or vertical integration. The personal interviews confirmed this hypothesis. Keywords: Distribution Channels, Contract Analysis, Orange Juice, Juice Brands

01 - INTRODUCTION It is known the importance of the citrus agri-food chain for the Brazilian economy and, mainly, for Sao Paulo State, where concentrates around 80% of the national production. Brazil responds for about 53% of the orange juice produced in the world and for 80% of the FCOJ (Frozen Concentrated Orange Juice) sold in the international market. It’s also important to consider the impact of the citrus sector in the job creation and in the job market: in the occupation of the agricultural area and land valuation; in the sustainability, environmental concern; in the income generation and regional value add; in the taxes that are due, distributed and applied on the States and cities; on the dynamics and regional development of others sectors in economy (e.g. the industry; transportation and trade services), among others. Recently it was identified a trend of increasing the internal consumption of juices in Brazil. The processing industry started to produce ready to drink orange juice joined with some dairy companies and now lots of brands can be found in the market. The consumption of pasteurized orange juice, which didn’t exist in Brazil in 1993, reached almost 160 millions liters in 1999. While the Americans consume 40 liters per capita per year, in Brazil, the orange juice consumption is 20 liters per capita and, from these, just one liter is pasteurized (the rest is made form the fruit in natura). In this scenery, the agri-food system coordination becomes essential in order to become competitive. The speedy of information, the system’s adequacy to new trends, the negotiation at the least cost and with minimum conflict are survival factors. So, beyond the good relationship with the producers and suppliers, the coordination with the other links in the chain becomes a critical success factor to the processing industry, and among them are the beverage and bottling industries.

02 - OBJETIVES AND METHODOLOGY The main objective of this article was to analyze a part of the transactions in the orange agri-food system, emphasizing the relationship between the processing industry and the beverage industry in Brazil

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(Figure 1). Identify the coordination forms chosen and the contract’s characteristics that emerge as a result of the existing characteristics in these transactions were also objectives. The study also tries to understand how the distribution of the refrigerated orange juice is...
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