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GROWING BUSINESS OPPORTUNITIES IN THE ORGANIC VALUE CHAIN

This article appeared in AFRONET ISSUE NO 3 JANUARY TO JUNE 2020

 

Organic agriculture has the potential to generate significant incomes for households, thus potentially uplifting smallholder-farming households from poverty cycles and food/nutrition insecurity. Through various interventions, the number or farmer and land under organic cultivation has been constantly growing in Kenya. With land under organic cultivation increasing from 4,894 hectares in 2016 [1] to 172, 225 hectares under organic in 2019[2], the writing on the wall is clear, organic is the future of sustainable farming.

The commercial appeal of organic farming has led to a rising number of entrepreneurs eager to rake in the money, caution should be exercised, organic farming should not be viewed as a purely commercial interest, in fact most successful organic farmers started off as subsistence farmers growing only for their own consumption. Through initial struggles to get their processes and practices right, they eventually saw the business opportunity in supplying others with such products. They were able to persevere through the initial disappointments and change in mind-set required to transition into organic. They were able to understand their own farms and create harmonious balance. Any seasoned organic farmer will tell you, no two farms are alike; each has its own set of challenges and character, much like human beings.

[1]FIBl and IFOAM, The World of Organic Agriculture, The World of Organic Agriculture, 2016 <https://doi.org/10.4324/9781849775991>. [2] FiBL and IFOAM, The World of Organic Agriculture, ed. by Helga Willer and Julia Lernoud, The World of Organic Agriculture Statistic and Emerging Trends 2019, 2019 <https://doi.org/10.4324/9781849775991>.

For the few out of the many who successfully convert to organic production systems, commercialization of their agribusiness endeavors, pose considerable challenges. Without formal organic market access, most farmers are resigned to selling their produce to undifferentiated conventional markets, where premiums for organic produce are lost. Many organic farmer actually regress back to conventional farming habits due to lack of market access.

This is a paradox, many retailers would like to have organic produce as part of their grocery portfolio, but find it hard to source. The needs is there but there is a mismatch in capacity to fulfill those needs. On closer observation of the problem, the following is clear.

  1. Retailers are looking for organic produce to sell, the produce has to be of specific quality standards, and not just anything will go. The visual appeal has to be of equal or greater quality than conventional produce. They will be competing for the consumers’ attention and nobody wants to pay a premium for poor quality products. Yes, consumers can be fickle, even organic consumers.
  2. Consistent supply capacity has to be proven before a retailer takes the risk of opening up a new line of organic products. For retailers, especially big supermarkets, a new product line is a big investment. It involves the physical set up, the capacity building of staff ( all staff need to be sensitized on what is organic, nothing puts off a consumer faster than retail staff who don’t know what they are talking about), the branding and marketing. Going organic is as much a strategic choice for retailers as is the physical positioning of beverages and snack items. They are always looking for crowd pullers and with the increasing focus on healthy foods and lifestyles, organic food is high on the consumer and health totem pole. Therefore, a retailer requires assurances that the line of business is sustainable, in the retail business empty shelves drive away customers.
  3. Farmers may not necessarily have the requisite skills sets to meet retailers’ demands. Quantities of particular produce maybe available during certain seasons and then they disappear when the product is out of season. Same with quality, it is easy to have high quality produce in the beginning of the season, but maintaining such standards consistently may prove too much for unseasoned farmers.

 

Therefore, a stalemate of sorts persists, the farmers have the produce in plenty, but the retailers cannot take it and will not take it. Nobody gains anything and the masses are denied access to safe food.

 

Well, the Kenya Organic Agriculture Network (KOAN) has been working on the problem for a number of years. Attempting to bridge this market-supply gap. Through trial and error several things have been established but not limited to,

1) It is not enough to introduce farmers to retailers and vice versa, there has to be some added capacity for the farmers to be able to reach the quality standards of the retailers. Here issues of marketing and branding emerge. Gone are the days when just saying something is organic will sell. Consumers are looking for branded merchandise, something they can trace back to the source.

2) Retailers need assurance of regular and consistent supply. Farmers cannot operate as individuals; marketing collectives need to be established, farmers need to take control of the process.

3) It is not enough to have a marketing collective; a planting calendar needs to be established. To ensure consistency and reduce internal competition a system for growing what and when needs to be developed. This system needs to take into consideration what the market wants and in what volumes.

4) The prevailing agroecological conditions need to be observed, what can be grown with least effort should be grown, farmers need to avoid problem crops (pests and diseases, access to quality seed, etc.). Farming is an enterprise, if the costs of growing particular crops outweigh the market prices and leave little margins for profit, then they cease to be viable and should be abandoned until prevailing conditions change.

All viable lessons. KOAN’s latest attempt at streamlining the organic supply chain in Kenya currently involves farmers from Machakos and Murang’a counties. Murang’a supplies most of the vegetables while Machakos supplies the fruits creating a healthy balance. The project supported by the Swedish Society for Nature Conservation (SSNC) started in 2018 with 90 farmers, 45 from each county with 3 retailers interested. This number has since grown to 200 farmers and 6 retailers.

With the experience gained from previous attempts, KOAN first selected entrepreneurial and market ready farmers. The farmers were taken through the usual capacity building sessions with particular emphasis on managing expectations as well as conveying the importance of professional conduct in approaching business. Retailers were also involved in order to eliminate any casualness, the gravity of the whole system needed to be appreciated. This was not business as usual and everybody on board got the message. Initial meetings were organized between farmers and retailers. This was mainly to get the farmers to grow exactly what the market required. KOAN engaged field coordinators to assist the farmers in aggregating their products. The coordinators served as the nodes between farmers and retailers. The farmer marketing collectives would eventually absorb them.

 

Proof of the pudding is in the eating. Sales began in the month of November 2020. By December the volumes had considerably increased and February 2020 saw the highest volumes traded since. By this time two farmer cooperatives had been formally registered, i.e. the Murang’a Organic Growers Cooperatives Society and Machakos Organic Cooperative Society. With increase in confidence, retailers also started demanding for more, the current volumes were inadequate. This warranted the increase in farmer supply base.  More farmers recruited into the cooperative and supply volumes ramped up.  Projected volume for supply had the situation remained constant would have been northwards of 10 tonnes monthly since the volumes had been growing by 30%monthly.

 

As with any worthwhile endeavour, challenges will be encountered and for this particular system, the COVID 19 pandemic struck hard. With limited movements and reduced consumption, most households are keeping a firm grip on their expenditures. Hotels and restaurants closed their doors to clients, retailers reported significant dip in consumer spending. These were by far the biggest buyers and significantly reduced their demand. The situation might seem bleak but it has also revealed opportunities.

  • Nairobi cannot be the only market for organic produce, with increased sensitization more viable markets can be cultivated closer to home. This will also lead to increased profits for the farmers with transport cost reduced substantially.
  • Third party traders and retailers need not be the only outlets; the cooperatives can develop their outlets and market their products as organic. This is a reality in other sectors, Fresha Milk, a popular brand in Kenya is owned by Murang’a Dairy Cooperative Society.
  • Post harvest preparation and Value addition needs to be part of the system. Today there might not be a market, but the situation might change overnight.

The story is not at an end yet, with the support of KOAN, the cooperatives are exploring the above options. Although demand from Nairobi still exists, the COVID19 pandemic revealed how fragile the system is. A pivot is needed, to where and what?  Only time will tell. Watch this space for updates.

 

 

[1] FIBl and IFOAM, The World of Organic Agriculture, The World of Organic Agriculture, 2016 <https://doi.org/10.4324/9781849775991>.

[2] FiBL and IFOAM, The World of Organic Agriculture, ed. by Helga Willer and Julia Lernoud, The World of Organic Agriculture Statistic and Emerging Trends 2019, 2019 <https://doi.org/10.4324/9781849775991>.

 

The following article appeared in AFRONET ISSUE NO 3 JANUARY TO JUNE 2020

 

Organic Shift: Why We Should All Care

Organic food and fibre production safeguard the environment, protects consumers against non-communicable Diseases (NCDs) and creates just wealth and work. It is one of the fastest growing industries in the world estimated at 816 Billion USD in 2016.  During the same year the industry contributed 3 billion KES from exports and 439 Million KES in domestic consumption. East African Regional market is growing at 20% per annum, with the up-market outlets and the tourist industry as major consumers.

The Kenya Organic Agriculture sector is growing fast, currently with 150,479 Ha certified land with the main products for exports being vegetables, salad pre-packs, herbs, spices essential oils, nuts, coffee, tea, and cold pressed oils.

Organic adoption rates are responding to meet the growing domestic and export markets, overcoming scepticism, knowledge and technological challenges. Agricultural research institutions and universities are undertaking research to address most of the challenges that smallholders face and need a platform for sharing discovered solutions or to commercialize products or technologies. In addition, most of farmer innovations are not documented. The NGO/government extension systems have proved inadequate to meet farmers’ needs, lacking in organic competencies and diversity, often causing more confusion than help. This eventually drives farmers to farmer technology transfer which is a slow process, sometimes riddled with unnecessary failure, and in most cases confined only to those areas where the innovation was developed. Consequently leading to useful knowledge being scattered and fragmented among research institution departments and farms.

The need to collate all this data, information and knowledge into a farmer/end user accessible database has never been more urgent. So that useful practices can be validated to meet the different needs of stakeholders. As well, a forum for sharing technologies and knowledge in practice, word, song and dance will foster growth and exchange of ideas, experiences, expectations and views among farmers and stakeholders. Such a forum will also register and share success stories from organic production systems, moving it from kitchen gardening to commercial high dividend enterprises for wealth and food security.