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Kenyan Supermarkets and Horticultural Farm Sector Development

Author

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  • Neven, David
  • Reardon, Thomas

Abstract

In Kenya, supermarkets have grown from a tiny n iche at the start of the 1990s to 20% of the urban food retail sector in 2003. Furthermore, Kenyan supermarket chains are increasingly sourcing from global markets and have started to expand their store network in the wider East Africa region. Within this context, this study focused on the farm-level response to the rise of supermarkets and the new challenges and opportun ities they create. The research found that the rise of supermarkets in Kenya has given rise to a new group of medium-sized farms managed by well-educated farmers. Focusing on kale, the research shows that nearly all supermarket-channel farmers have the capacity to supply larger volumes year round and have transportation vehicles, an irrigation system, a packing shed, a cellular phone, and so on, po inting to the existence of a threshold capital vector which farmers must have in order to access supermarkets. Kale suppliers to supermarkets use more capital intensive production technologies, leading to average labor and land productivities which are 60-70% higher than in the traditional channel. While most traditional-channel kale farmers sell to brokers and get a price that lets them break-even at best, supermarket-channel farmers have a 40% gross profit margin. These margins and lower market risks in the supermarket channel have resulted in a strong growth dynamic of supermarket-channel farmers which have doubled the size of their operations over the last five years.

Suggested Citation

  • Neven, David & Reardon, Thomas, 2006. "Kenyan Supermarkets and Horticultural Farm Sector Development," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25759, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaae06:25759
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    File URL: http://purl.umn.edu/25759
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    References listed on IDEAS

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    1. David Neven & Thomas Reardon, 2004. "The Rise of Kenyan Supermarkets and the Evolution of their Horticulture Product Procurement Systems," Development Policy Review, Overseas Development Institute, vol. 22(6), pages 669-699, November.
    2. Battese, George E., 1992. "Frontier production functions and technical efficiency: a survey of empirical applications in agricultural economics," Agricultural Economics, Blackwell, vol. 7(3-4), pages 185-208, October.
    3. C. Dolan & J. Humphrey, 2000. "Governance and Trade in Fresh Vegetables: The Impact of UK Supermarkets on the African Horticulture Industry," Journal of Development Studies, Taylor & Francis Journals, vol. 37(2), pages 147-176.
    4. Battese, George E., 1992. "Frontier production functions and technical efficiency: a survey of empirical applications in agricultural economics," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 7(3-4), October.
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    Citations

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    Cited by:

    1. Ochieng', Otieno Geoffrey, 2010. "Effect of Value Addition on Price: A Hedonic Analysis of Peanut in Retail Supermarkets in Nairobi, Kenya," Research Theses 134495, Collaborative Masters Program in Agricultural and Applied Economics.
    2. Fontaine, Damien & Gaspart, Frederic & Frahan, Bruno Henry de, 2008. "Modelling the impact of private quality standards on the fresh fruit and vegetable supply chains in developing countries," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44378, European Association of Agricultural Economists.
    3. Christin Schipmann & Matin Qaim, 2010. "Spillovers from modern supply chains to traditional markets: product innovation and adoption by smallholders," Agricultural Economics, International Association of Agricultural Economists, vol. 41(3-4), pages 361-371, May.

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