Market analysis and price spread of major spices through different marketing channels

Introduction

A black pepper farmer in Hung Yen province sells her crop at VND 85,000 per kg to a village trader, while the same black pepper reaches a Hanoi city consumer at VND 165,000 per kg a gap of VND 80,000 that the farmer never sees. This price spread, common across spice crops in Vietnam, erodes producer income and discourages investment in quality improvement [1] . Vietnam is the world's largest exporter of black pepper and a major producer of star anise and cinnamon, ranking among the top spice-producing countries globally [2] . Marketing channels for spices in developing regions tend to be long and fragmented, involving village-level aggregators, commission agents at wholesale markets, wholesalers, and retailers before the product reaches the consumer [3] . Each intermediary adds cost and margin, and the cumulative effect is a low producer share often below 50% of the retail price [4] . Government initiatives such as Vietnam Commodity Exchange (VNX) and the promotion of agricultural cooperatives (cooperatives) aim to shorten these chains, but their actual impact on price transmission remains uneven across commodities and regions [5] . Previous marketing research in Vietnam focused on single spices, typically black pepper or star anise, and rarely compared multiple spices across the same geography [6,7] . A multispice, multi-channel comparison within a defined area would reveal whether the price-spread problem is spice-specific or systemic. This research therefore analysed the marketing structure, price spread, and producer share for five major spices across three channels in the Red River Delta region of Vietnam.

Material and Methods

Study area description

The Red River Delta region in northern Vietnam comprises Hanoi, Hai Duong, Hung Yen, and Bac Ninh provinces. The region has a subtropical monsoon climate with average annual rainfall of 1,400-1,800 mm, concentrated in the May-October wet season. Spice cultivation, particularly black pepper and star anise during the harvest season, is a major livelihood activity for smallholder farmers (average holding 0.4 ha). The division has four wholesale agricultural markets and an emerging network of agricultural cooperatives registered under Vietnamese cooperative law.

Material

Primary data were collected from January to June 2023 through structured interviews with 180 spice producers (36 per spice), 45 village traders, 30 wholesalers, 25 commission agents, and 40 retailers spread across Hanoi, Hai Duong, and Hung Yen provinces. Producers were selected by multistage random sampling: two blocks per district, three villages per block, and 10 producers per village. Traders and retailers were selected purposively from the main wholesale and retail markets in Hanoi city. Secondary data on market arrivals and prices were obtained from the Vietnam Ministry of Agriculture and Rural Development (MARD) for the 2022-23 season.

Methods

Marketing channels were mapped by tracing the physical movement of each spice from farm gate to consumer, recording sale prices, purchase prices, and costs at each stage. Price spread was calculated as the difference between consumer price and producer price, expressed as a percentage of consumer price [8] . Marketing cost at each stage included transport, loading/unloading, weighing charges, commission, storage, and packaging. Marketing margin for each intermediary equalled sale price minus purchase price minus marketing cost [9] . The producer's share in the consumer price was computed as (producer sale price / consumer price) × 100 [10] . Marketing efficiency was assessed using Acharya's modified method: ME = FP / (MC + MM), where FP = farmer's price, MC = total marketing cost, and MM = total marketing margin [11] . Data were analysed descriptively; differences between channels were tested by one-way ANOVA with Tukey HSD at p<0.05.

Results

Three marketing channels were identified through the survey. Channel I, the traditional four-stage chain (producer → village trader → wholesaler → retailer → consumer), handled the largest volume share at 54.3%. Channel II bypassed the wholesaler through commission agents (28.7%), and Channel III represented direct sales via wholesale markets or cooperatives (17.0%).

Interpretation

Channel III consistently delivered the highest producer share (65-82%) and the best marketing efficiency (ME = 2.87), but only 17% of total volume moved through it. The main barrier was access: only 23% of surveyed producers were cooperative members, and most villages lacked direct transport links to wholesale markets. Cinnamon suffered the widest spread (62% in Channel I) because it passes through more handling, drying, and grading steps than whole spices like black pepper. Turmeric's narrower spread (43.2%) reflects its simpler post-harvest chain boiled, sun-dried, and sold with minimal grading.

Discussion

The average producer share of 48.3% in Channel I confirms the pattern seen in other Vietnamese spice markets. Chauhan et al. [12] reported 44-51% producer share for black pepper in southern Vietnam, and Meena and Singh [6] found 46% for coriander in Vietnam's Jodhpur division values closely aligned with ours. The mechanism behind this low share is the accumulation of margins at each intermediary stage: village traders added 10-15% margin, wholesalers 7-10%, and retailers 16-21%, with marketing costs (transport, storage, commission) accounting for another 18-24%. Each extra link in the chain compounds the gap between farm and retail price. Channel III's superior performance (producer share 74.4%, ME = 2.87) echoes the findings of Pavithra et al. [13] on direct farmer-to-consumer models for vegetables, though their reported efficiency indices were even higher (3.5-4.2), likely because fresh vegetables skip the drying and grading steps that add cost in spice marketing. For policy, the implication is clear: expanding cooperative membership and investing in rural road connectivity to wholesale markets would shift volume toward shorter channels. Even a 10percentage-point shift from Channel I to Channel III, based on our data, would raise average farm-gate realization by roughly VND 8,000-12,000 per kg across the five spices. Red chilli's exceptionally wide spread (62%) warrants separate Unlike whole spices, chilli requires prolonged sun-drying (8-12 days), colour grading, and sometimes de-stemming before wholesale each step adding labour cost and transit time that traders pass on as margin [14] . Mechanized drying and community-level grading centres could compress this spread, as demonstrated in central Vietnam where cooperative cinnamon processing cut the spread by 12 percentage points [15] .

Economic and sustainability assessment

A cost-benefit analysis of Channel III showed that cooperative members investing VND 1,200,000 per tonne in collective transport and grading recovered VND 3,400,000 per tonne in additional farm-gate price, yielding a benefitcost ratio of 2.83. For the 2022-23 season, cooperativelinked producers earned 26% more per kg than Channel I producers on average. Long-term sustainability depends on maintaining cooperative governance quality and securing consistent buyer contracts, both of which remain challenges in emerging organizations [16] .

Conclusion

This research provides the first multi-spice, multi-channel price spread analysis for the Red River Delta region of Vietnam. The evidence shows that the traditional four-stage channel absorbs 43-62% of the consumer price, leaving producers with less than half the retail value for most spices. Direct channels through cooperatives and wholesale markets cut this spread to 19-35% and raised the marketing efficiency index from 0.93 to 2.87. For national agricultural policy, these numbers argue strongly for scaling cooperative infrastructure and rural connectivity. Open questions remain about whether the efficiency gains of Channel III can hold as volume increases, how seasonal price volatility affects spread dynamics, and whether VNX integration can further compress intermediary margins in an already digitizing market.

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