Kenyan Supermarkets and Horticultural Farm Sector Development

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.supermarkets, development, hor ticulture, farm technology, Africa, Marketing,

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Research Papers in Economics

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Last time updated on 7/6/2012

This paper was published in Research Papers in Economics.

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