Sustainable Food Laboratory

February 14, 2008

The Sustainable Food Laboratory and partners have launched a $5 million, four-year project to innovate new business models that enable smallholders in Africa to participate in trading relationships with international businesses that support the long-term health and prosperity of their environments, farms and communities.

Rainforest Alliance, the International Institute for Environment and Development (IIED), Counterpart International, the International Center for Tropical Agriculture, Catholic Relief Services and the Sustainable Food Laboratory have joined together to launch the project, New Business Models for Sustainable Trading Relationships in Africa. The project is funded by Rainforest Alliance through its grant from the Bill and Melinda Gates Foundation.

“Millions of farmers in Africa, many of whom live on less than two dollars a day, depend on European export markets for their livelihoods,” said Hal Hamilton, Senior Project Director for the Sustainable Food Lab. “But recent market trends, including a proliferation of stringent standards, continued concentration in the retail sector, volatile prices and poor access to credit, have led to declining small farmer participation and income in these markets.”

The increased global demand for a wide range of higher-value food products has opened up new opportunities for farmers in sub-Saharan Africa, whose strengths include suitable soils and climate, low labor costs, and proximity to European markets.

In Kenya, for example, the private sector—including smallholders, supermarkets, and traders—along with donor and government investment, has created a strong green bean export.  Incomes among farmers growing green beans for UK supermarkets are $800-1,300 per year per 0.2 acre in areas where an annual household income of approximately $180 is more typical.

Many smallholders, even those with quite modest levels of output, can be at least as efficient as larger farms.  But the formalized markets require higher levels of capitalization, supply chain management around product scheduling, higher quality, and closer supply chain collaboration.  Helping farms access these opportunities requires early and active participation of buyers.  As one industry veteran observed, “Developing smallholder horticulture without a sustainable, stable marketplace and logistics partner is pointless.”

Rainforest Alliance, the Sustainable Food Lab and the other project partners are adopting a new approach to rural development that will enable small farmers to participate in sustainable trading relationships with multinational businesses looking to source sustainably grown and ethically traded products from Africa.

The New Business Models for Sustainable Trading Relationships Project is a collaboration among NGOs and private sector business to develop and implement new business models that enable small-scale farmers to participate in durable and stable tading relationships with food companies and thereby improve their livelihoods. The project is organized around four specific value chain products: cocoa, bananas, vegetables and dried beans. These provide immediate opportunities for business initiatives to reduce poverty at a significant scale. Each of these products requires the partners to develop specific business models to address different supply chain realities and lay the foundation for scaling up within each product cluster.

The initiating partners will work with local organizations to support farmers growing dried beans in Ethiopia; fresh vegetables in Kenya, Uganda and Ethiopia; bananas in Ghana and the Ivory coast and cacao (cocoa) in Ghana and the Ivory Coast.

“This team will be working from both ends of the supply chain,” said Don Seville of the Food Lab, managing director of the project. “At the farm level, we will help growers through training and better access to market information to select and grow the crop varieties that bring the best market price. At the same time, we will help large companies use the power of the purchase order to improve the lives of farmers and their families.

Dried Beans

In eastern Africa, the dried bean is second only to maize in commercial value. Ethiopia’s estimated 450,000 smallholder growers are supplying a growing domestic and export market but this market is volatile and insecure. Catholic Relief Services and ACOS, a major commodity wholesaler, will work with government and other local partners to increase incomes and stability for growers

Fresh Vegetables

In recent years, the competitive nature of the fresh produce industry has decreased market opportunities for small-scale growers. Our team, led by IIED, will focus on developing fresh vegetable markets in Kenya, Uganda and Ethiopia in partnership with companies including the Flamingo Group and its subsidiary, Homegrown. These companies, which supply Tesco and other major retailers, are committed to working with smallholders but are struggling with how to balance this commitment with current market pressures.

Cacao

Demand in the cocoa market is shifting toward chocolate with more intense, pure flavor. In addition, there is growing consumer concern about extreme poverty among cocoa growers. Our work, will be on two fronts: the development of a super-premium brand of cocoa in Ghana that will be recognized worldwide for its superior flavor characteristics and return much of its premium to the farmers with Scharffen Berger-Hershey, and expansion of Rainforest Alliance certified cocoa in Ghana Cote D’Ivoire that gives buyers confidence that social standards are being met.