Going for the gap: making the most of market opportunities
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CTA. 1997. Going for the gap: making the most of market opportunities. Spore 70. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/48789
Liberalization offers greater opportunities for agricultural producers to market their products. But liberalization and changes in world trade regulations may also remove protection and support, leaving producers exposed to competition in an...
Liberalization offers greater opportunities for agricultural producers to market their products. But liberalization and changes in world trade regulations may also remove protection and support, leaving producers exposed to competition in an increasingly crowded, complex and changing market place. To survive, and hopefully thrive, farmers and processors will have to develop the will and the capacity to seek, recognize and exploit gaps in the market, which they are in a position to fill. This will require a change in perception, access to information and available resources to develop and market new products. Since Independence, most ACP countries have placed high priority on agricultural production for export. Export income has been seen as a major source of foreign exchange and, as a result, the number of countries that have become exporters of the major commodities (beverages, fibres, fruits, nuts, oils, rubber, timber) has more than doubled compared with the pre-Independence years. However, producer prices have suffered more often than not, because production has exceeded demand, quality has not been maintained and because government parastatals, responsible for collection, storing and exporting, have token substantial funds to maintain themselves, leaving reduced income for distribution to growers. Producers of the staple food crops have also been demoralized by centralized purchase at fixed prices and late payments. The new era of liberalization is welcomed by many but it also provides several challenges to ACP producers, many of whom have no experience of `free market' conditions. Simultaneously, the latest GATT Round of trade agreements increases the risk that overseas competition may overwhelm domestic production of many products: examples include low-cost soya oil undercutting coconut, groundnut and palm products; imported wheat displacing traditional cereals; and subsidized exports of dairy products and meat being landed at less than the cost of local production. In addition, ACP producers, who have enjoyed favoured access to the EU under the Lomé Convention, may lose their advantage for bananas and other products. A further cause for concern for ACP producers, particularly of fresh produce, is that consumers in the main importing countries (EU, Japan and US) are becoming more demanding of quality and more aware of pesticide residues and bacterial contamination in crops, fish and livestock products. Many importers are also implementing phytosanitary barriers to avoid the risk of introducing pests (e.g. fruit fly in citrus) and diseases (e.g. foot and mouth disease in cattle). Now, the good news The adages that 'necessity is the mother of invention' and that 'adversity is a greater teacher than prosperity' can be demonstrated in agricultural marketing. Competition among the supermarket chains in food importing countries has resulted in a veritable `explosion' in the number of food items on sale. A Sainsbury or Tesco superstore in the UK, or a Mono prix in France, may have ten kinds of sugar on offer, seven varieties of onions, between twenty and thirty spices, fifteen or more fresh herbs, twenty kinds of fresh tropical fruits and hundreds of different canned and bottled products ranging from soups to savoury sauces and juices to jams and other preserves. The raw materials for a very high proportion of these thousands of product lines originate in tropical countries and there remain more tastes to be met and greater choices to be offered. However, the producers of primary products will only win for themselves a bigger share of the ultimate sale price if they are prepared to be proactive, and not just reactive, in terms of supplying, anticipating and even helping to create demand for what they can produce. Producers, smallholder farmers in particular, may at first feel ill-prepared to tackle the tasks of mastering market research, export procedures, import regulations and growing a sufficient quantity of a crop of a preferred variety, of a given minimum quality, to be delivered during a very specific period of the year. Processors will have to meet many of the same challenges, though further down the food chain, and those operating at modest levels may again feel overwhelmed by the prospect of identifying, developing and servicing distant markets. In practice, only the largest farming companies can undertake the development of new niche markets without specialist advice and assistance. Most producers and processors will succeed only if they form groups and pool their resources in order to exploit modern market demands. Market opportunities are not limited to exports. There are at least two other options: supplying the domestic market and supplying resident and visiting expatriates with well grown and selected products of local and exotic origin. Many countries that are quite capable of feeding themselves have come to rely on imported foods; this may have been economic when tourism or commodity exports earned sufficient to pay for food imports but it makes little economic sense when, in the Caribbean for example, 40 cents of every dollar earned through cents of every dollar earned through tourism is then spent on importing a wide range of foods that could be grown and processed locally. Introducing tourists and business visitors to local cuisine is also the first step in creating an overseas demand for local produce and products when the visitor returns home. Lessons learned The classic cases of Tin ding or creating new markets for agricultural products include Israel's introduction of the avocado to the UK market in the 1960s, when consumers did not yet know whether it was a fruit, a vegetable or a salad adornment; the world-wide launch of the kiwi fruit by New Zealand; and, more recently, the introduction of `baby sweet corn' by Thailand. Carambola, litchi, long an, mango and rambutan are other tropical fruits unknown to the European mass market two decades ago, which are now common in season. And, because they are sourced from different countries, the season of availability to consumers is greater than before. This means that several supplying countries can enjoy a comparative advantage for the same product according to the season when they can harvest and ship, and so complement each other's growing periods. Production of temperate crops in the tropics to supply European and North American countries out-of-season has provided several ACP countries with niche opportunities: the Caribbean with sweet peppers for Canada and the US; Burkina Faso, Côte d'Ivoire, Kenya, Senegal, Zambia and Zimbabwe with green beans, mange tout peas, strawberries and cut flowers, such as chrysanthemum and roses, for EU destinations. Non-ACP countries, including Brazil, Malaysia, Thailand and the southern US states and Hawaii are well established and are major competitors in these and other products so all producers must be aware of, and ready to anticipate, changes in demand. A number of countries have been forced to diversify because farmer exports have lost their economic appeal. To replace sugarcane the Windward Islands switched to bananas and now, with the WTO ruling against EU preference overshadowing them, they are very actively developing a multi-strand strategy of further diversification. Accepting that they cannot compete on price alone with Central and South America's extensive, mechanized banana producers Dominica, Grenada, St Lucia and St Vincent are promoting their fruit as smaller, sweeter and more appealing to children. They are also stressing their low pesticide usage, since organically grown bananas can carry a premium. In addition, mangoes can be offered to importers as being free of fruit fly, as can litchi and rambutan. Hot peppers provide both fresh produce and a product for processing into a piquant sauce, and have the added attraction that they return a weekly, year-round income. Adding value has the advantage of keeping more of the final sale income in-country; it offers employment, often in rural communities, and it is an opportunity to package and brand products so that they are identified with the most favourable images associated with the country. Mauritius has token the route of distancing its own sugar from bulk sugar by offering a part-refined sugar as `golden grain sugar', packing it in clear plastic, and selling the product at a premium. Mauritius has also used two local products in combination to add value to both, for example vanilla-flavoured tea. Kenya is renowned world-wide for its wildlife, so offering `Safari' brand whisky, gin and vodka to tourists and others is a smart marketing move. The Bahamas Islands have, with FAO advice and assistance, developed a lemon liqueur for sale to tourists. The product is the outcome of adversity: while some of the Bahamas Islands are close to Florida and are popular tourist destinations or have fertile soils for agriculture, others suffer the twin disadvantages of remoteness and `soil that is little more than coral rock. The only worthwhile crop is lemons, but these cannot be exported competitively. An Italian FAO consultant, with experience of producing a lemon liqueur in his native Sicily, advised how imported alcohol could be flavoured by locally grown lemons and offered for sale in attractive triangular bottles. In Fiji mineral water has been packaged very attractively by printing a colour picture of the mountain and waterfall close to the source on the reverse side of the bottle label: the colour picture is thus viewed through the water in the bottle. Mineral waters are now to be found in a great many countries and imaginative packaging and presentation can help a `new' product to compete successfully in an already crowded market: the Fijian water is available throughout the country itself, which is a major tourist destination, and is exported to the United States. Fiji also packs and sells to tourists 'Fijian' sugar, tea, coffee, spices and kava, the dried root that is used to make the infusion which is central to Fijian ceremonies and hospitality. Tourism has also provided an excellent export market for Dominica's coconut soap production. For some years the product has been common in many hotels throughout the Eastern Caribbean and now is supplied to cruise ships. Island nations seem to have been particularly successful at developing niche markets for both food and non-food items. This may be because they generally have limited options for volume production of commodity crops and when they do (sugar, bananas, citrus) they cannot compete with large-scale, continental producers on price alone. They are therefore forced to look for alternative products or at advantageous ways of marketing existing products. Successful producers have identified and promoted what market gurus refer to as the `unique selling point' or USP of their merchandise. Non-island ACP countries have also been successful, and it could be argued that Kenya is an outstanding example. Kenya has long been a major exporter of coffee, tea, pyrethrum and sisal but in the last two decades has carved a very significant place for Kenyan horticultural products in the world market, particularly in the EU and in the Gulf region. Putting theory into practice To be successful all those involved, from producer to packer, processor or exporter, must want to, succeed and must recognize and respect their interdependent roles. This also includes the scientists and extensionists whose support is essential in researching and communicating new products and technologies. There is no longer room for the attitude that 'this is just a job' because success or failure will determine individual and national incomes and standards of living. Until a few years ago, the banana growers of the Windward Islands were able to earn a modest but secure income and could afford to adopt a fairly relaxed attitude to production. Now, with the prospect of competition from the giant fruit companies operating in Latin America, they have good reason to feel uneasy. However, according to Colin Bulley, Programme Manager of the Agricultural Diversification Programme for the Organization of Eastern Caribbean States (OECS), 'Our farmers are resolute. They recognize the need to improve farm management and to look to other farm enterprises, crops and livestock, in addition to bananas'. There is also a developing cottage industry in Dominica and in Grenada processing a range of fruits, vegetables and spices such as Grenadian nutmeg and Dominican ginger into jams, jellies, juices, pickles and relishes, says Mr Bulley. In Zambia a private company, BIMZI Ltd., provides an example of how smallholders are working with the company to produce a range of food and commercial crops, including paprika and marigold, for the food processing industry. BIMZI Managing Director Cathy Mwanumwamba describes how they select only the best and most reliable farmers to source from. BIMZI provides credit and advice from the Golden Valley Research Station. The farmers are charged for extension visits, because the advisory staff s time and travel must be paid for, but this is an overhead that is token into account when budgeting production. The system appears to work well but, to begin with, up to, 60% of farmers defaulted on their repayments. 'We have dropped those farmers who didn't pay', says Ms Mwanumwamba, 'and they no longer benefit. Our collection rate is now 95% and as time goes on the rate of default is decreasing. Where export markets are the target outlet air transport is invariably the preferred carrier, especially for perishable commodities. Not all countries are as well served as Barbados, Fiji, Kenya, Mauritius, St Lucia, Zambia and Zimbabwe, all of which are major tourist destinations with a choice of scheduled flights to, carry air freight on a regular and reliable basis. Côte d'Ivoire and Senegal are also airline route hubs and can provide a similar level of service. But other countries may have to depend on feeder services to international flights, which means that goods have to be double-handled; they risk being left to overheat on the tarmac or being left behind at the transit point if the onward flight is full. Can there be gaps or niches remaining in such a crowded and competitive market? The answer has to be an unequivocal 'Yes'. There are more consumers every year, and greater prosperity in many countries making them able to purchase unusual new products. Thailand recently started canning coconut water for export; Dominica is developing a fruit which locally is traditional, the golden apple, but is being sold abroad as the jordan plum; at HORTEC, the horticultural trade exhibition in Nairobi in Match, the FPEAK stand exhibited a range of Kenyan exports including kiwano or African honey melon, which has been exported to Germany and Switzerland for two years and may now be exported elsewhere. There can be no expectation that surviving in the open market situation of the future will be easy or free of competition and disappointments, but the demand for tropical produce will remain and will grow. The rewards will go to, those who act professionally and who have the imagination and determination to offer something original to consumers. In the words of Ms Mwanumwamba of BIMZI Ltd. in Zambia, 'This liberalized market is very good for everybody. I think that it will create a good primary agricultural base for everybody in this country - in this continent.' [caption to illustration] Cut and pot flowers have real export potential [caption to illustration] Processing local fruits and vegetables into preserves and condiments adds value [caption to illustration] Protective packaging ensures safe delivery