Why the online pressure on KFC and imported potatoes was unnecessary

It will take at least another decade before smallholder farmers in Africa are able to smoothly supply multinational food chains

BY David Thuita

Kenyans on social media platforms were at it again, and this time after food chain Kentucky Fried Chicken (KFC) ran out of potatoes. One perspective I completely missed in all the online posts I came across was the market share between the formal and informal markets for farm-sourced commodities. This comparison would have have brought in a whole new dose of information that would have quickly drenched out the fury.

Let me shock you, did you know that Nairobi’s Wakulima market, popular as “Marikiti”, moves more potatoes in one day than all upmarket groceries and eateries in a month? And, do you know that 15 years ago, when I was handling market access projects in East Africa, the share of the formal markets in the total farm-based commodities consumed in the city house holds was estimated to be less than 5%with the informal markets such as Marikiti, Gikomba, Kangemi, Githurai, Kawangware and the likes commanding a whopping 95%?

I had the privilege of working on projects that focused on informal markets where I would visit at least three leading informal markets in Kenya, Uganda, and Tanzania. Sometimes, I would follow the trucks ferrying the produce by night while armed with a camera and note book. The experience of  developing nations especially in Africa, Asia and Latin America, is that while upmarket food outlets might appear very inflluencial  to the fortunes of the small-holder farmers, the real super-channelof farm based commodities from the farms to the dining tables is the informal markets.

It is important to note that there is a direct (and strong) correlation between the growth of formal markets and the growth of the middle class. With a higher number on the middle-class segment and increased urbanization, the upmarket eateries and groceries increase in market share.

But for countries that are largely rural in their settlements, the informal markets dominate the food supplies across all commodities that households use daily. 

In the case of irish potatoes, a quick scan in some of the baselines showed that the informal markets took all sorts of healthy tubers from the farms regardless of colour, shape, size, or variety – they were bought by brokers and market intermediaries with very minimal rejects.

The market would then correct itself gradually based on consumer behaviour such that over time, the variety that is most preferred by the final consumer becomes the most highly sort for, and, interestingly, the most highly priced.

Informal markets are not transparent, and are the ultimate hub of market asymmetry. This is particularly because of the “cartel” factor.

Preferred Potato

A truck carrying a less (consumer) preferred potato will offload and sell faster if the cartels have a higher gain from it, than a good product where the cartels have little or no gain. Therefore, when we say the informal markets are ‘chaotic’, It is that in those markets, quality matters yes, but the quality is not everything!  

On the contrary, formal markets, like the upmarket groceries and the KFC’s, have very strict grading protocols which they follow to the letter. Yes, they pay better, but they look at the shape, color, size, texture, dry matter, and in some cases, they check out for traces of pesticides in the mature tuber. It is this kind of quality consciousness, that the middle and high income earners pay the extra dollar for. 

In view of this, if such market outlets were to source from a typical smallholder, the volumes of rejects would be very high, and such a market opportunity for a smallholder would not be viable at all.

In the case of informal markets, brokers sort, grade, pack and then pay as per the grades, they then determine where to place which grade in the market, perhaps that’s the intel that they charge the farmers for.

In my view, KFC suffered perception-driven fury. Otherwise, their communication was soft, concise, and really not arrogant. 

The most suitable market for your potato-farming kin or neighbour in Kinangop, Olkalou, Bomet, Londiani, and Mau Narok is certainly not KFC, Zuchini, Chicken Inn, Java or Jakoni.  

If today, KFC and other upmarket eateries and groceries decided to source locally, it would be a nice thing to hear and it would bring our outcry to an end. But believe me, none of the smallholders we are crying out for would benefit from such a market opportunity. It would be technically out of reach for them. 

In addition, no such brand would be willing to invest their own financial resources in developing a farm to fork supply chain with rural smallholder potato producers unless they are externally funded to build such a supply chain. It is difficult, expensive, and unrewarding and in the end, farmers can still sell on the side.

So, if upmarket groceries and eateries shifted their sourcing from imports to local, a new crop of farmers would quickly emerge to respond to that new market opportunity and that would not be your typical smallholder potato farmer. 

Thus new crop of farmers would be the financially well heeled professionals and owners of large arable lands, and those who will be willing to invest in the required quality controls, and also ready to suffer because of a ton of rejects per month without going into depression. 

The need for agricultural products is still there, and I am hopeful. But it will take at least another decade before smallholder farmers in Africa are able to smoothly supply multinational food chains, and we should begin to be happy that they can entertain sourcing locally in the first place.   

The writer is an Agribusiness expert and the head of business at Perfometer