Big business from small growers
Some of the world’s largest food companies are committing to development by opening their supply networks to small-scale producers. Through its Sustainable Living Plan, Unilever has pledged to trade with an extra 500,000 small-scale farmers by 2020. Walmart plans to triple sales to more than US$1 billion from a million small and medium farms in emerging economies. Both are looking beyond the fair trade niche or token corporate social responsibility projects, to align with mainstream business.
While such linkage to modern markets may not yet provide livelihood opportunities for most smallholders in developing economies, it warrants serious study to understand what underpins inclusive business.
As part of a project led by the Sustainable Food Lab, IIED has spent three years working in a chain that links up to 4,000 small-scale Kenyan farmers to export markets in Europe and North America via a highly innovative local intermediary. The product in question is flowers, grown as part of family farming systems. A half acre of flowers generates more income than four acres of the other main cash crop tea, with significantly less labour.
The Kenyan case study is marked by a shift from ‘pushing’ flowers at Dutch flower auctions to a ‘pull’ market, driven by demand from UK and US supermarkets. The supermarket business model is built on fixed procedures, uniformity and compliance with standards. It puts considerable strain even on the best smallholder-based model, and challenges the usual calls to cut out the middleman and build independent producer organisations.
Know-how and understanding in agricultural and business practices are the biggest hurdles to development. Understanding the end user helps them [smallholders] create a better matched product.
Setting a target for sourcing supplies from smallholders is just the start. In this case, the business models of the intermediary, the importer, the retailer and the certifier all have to change to link the worlds of smallholders and modern business. This should be backed up by regular health checks: IIED is now working with Kent Business School to develop practical tools for businesses to assess their trading relationships.
Photostory: Linking smallholders to export markets