More than ever, consumers in the west are linked with producers in Africa through their product purchases. This trend is likely to increase as retailers in Europe and the United States look more to small scale farmers in developing nations as environmentally sustainable sources of food supply.
When they do, these retailers require high standards of quality, timely delivery and, in some cases, certified sustainability, such as the Rainforest Alliance seal. But small-scale farmers – the 500 million farmers who have less than two hectares of land – can struggle to meet these demands. They are often marginalised, both geographically and socio-economically. They tend not to have the seeds, fertiliser or capital they need to sell into more demanding retail markets.
Although both smallholders and retailers can benefit from trade with each other, their two different worlds can seem difficult to reconcile. For the past four years, my colleagues and I at the International Institute for Environment and Development have been trying to understand how innovations to business models could bridge this gap.
Our project – a collaboration with the Sustainable Food Laboratory, Catholic Relief Services, Rainforest Alliance and The International Center for Tropical Agriculture (CIAT) – was funded by the Bill and Melinda Gates Foundation. In the coming weeks, it will publish its final four reports, each focusing on a different value chain that links small-scale farmers in Africa to consumers in the west. First up, are flowers.
In the report we published today, we describe a new approach to sourcing flowers from Kenyan smallholders direct to UK retailers. We learnt many lessons from this value chain but two stand out.
Bridging the supply chain gap
First, the supply chain needs a good intermediary that can provide farmers with both a route to market and what they need for production. Second, it needs individuals who can act as bridges throughout the supply chain, closing the gaps in communications, standards and delivery to build new relationships between smallholders and retailers.
In our study, the intermediary company was Wilmar Agro Limited. Based in Thika, a two-hour drive from Kenya’s capital, Nairobi, Wilmar sells flowers from smallholder growers to European markets.
For many years, Wilmar has held contracts with over 2,000 smallholder farmers, from whom it buys flowers each week to sell at Dutch flower auctions. Wilmar has helped the growers set up bank accounts to receive their weekly earnings, and has provided them with low volume inputs and technical advice from trained extension agents in the field. One grower says that, as a result of all of this, he earns more from a quarter acre of flowers than his two acres of tea (another big smallholder crop in Kenya). But this was just a start.
By the time our project had begun in 2008, Wilmar’s success had made it keen to try new markets that might offer a higher and more stable income for its growers. Around the same time, in the UK, Walmart, which owns Asda, had pledged to source an additional £30m of fresh produce from African farmers by 2013. We saw that bringing these two players together could present a real opportunity to get smallholder produce on to the shelves of a leading UK retailer.
We were keen to see what lessons could be learnt from this pilot effort to develop a new commercially viable supply chain that was socially and environmentally sustainable. But we recognised that we didn’t have the required commercial expertise and relationships to do so. So we brought in two commercial consultants with years of experience in retail supply and an interest in more sustainable sourcing. They were able to build on their longstanding relationships and knowledge in the sector to create the necessary links between Asda and Wilmar. This meant establishing terms of trade beneficial to both parties. It meant developing the product to meet both Asda’s consumer demands and the farming systems of the growers. And it meant finding solutions for day to day problems that were appropriate to both commercial and development demands.
Supporting smallholder inclusion
Today, Wilmar supplies flowers to Sam’s Club, a US subsidiary of Walmart, and has interest from a number of UK retailers that want to source their products. Although there were many challenges – in communications, quality control and timely delivery – what made this project a success was the role of the intermediary (Wilmar) and the commercial consultants working together to provide a business model that was supportive of smallholder inclusion and responsive to the demands of retailers.
Many value chain projects have been set up to meet the development challenges of smallholder farmers and food security. Many of them struggle to find success – both commercially and developmentally.
Proving the development impacts of these projects can be difficult, and take years. Finding a committed retail partner that is willing to ride the ups and downs of a more variable supply base can be tricky. But having in place a strong intermediary and a consultant who can work together to take the noise out of the chain and build strong commercial relationships while guaranteeing benefits to smallholders is a pathway to success and more sustainable sourcing from developing countries.
This blog was originally posted on Guardian Sustainable Business website.