Determinants of firms' decisions to use public or private grades and standards: Preliminary evidence from fresh produce markets of Sao Paulo Brazil

The role of grades and standards (G&S) in agrifood markets has come into increasing focus in recent years. An important tendency that has been identified is firms' increasing reliance on private G&S regimes over public ones, generating concern over the exclusionary effects that private G&S, which are associated with tightly coordinated and investment-intensive supply chains, can have for the participation of diverse firms in the market. This paper reports preliminary results from ongoing research in the fresh produce markets of Sao Paulo Brazil to address two research questions: What are the determinants of firms' choices between public and private G&S? How are public and private G&S administered by firms? Supporting existing literature, the research finds that the institutional context, strategic purpose, and product and market characteristics are important general factors influencing the emergence of public and private G&S regimes. The empirical research also provides support for the hypothesis that non-mainstream product requirements, the importance of the product in the firm's activities or sales, market power, scale of operations, and investment in brand capital and reputation are key firm-specific factors encouraging the use of private G&S regimes over public ones. A range of formal and informal, private and public methods for administering G&S were found, and the implications of public versus private regimes for stakeholders in the marketing chain, in particular for suppliers who must make investments in order to comply with the specifications of the regimes, are discussed.