Collaborative selling – building better market access on the existing farmer organizations

Would collaborative purchasing provide better access to market for women farmers while making life easier for consumers in the busy capital of Kenya?

That was the questions we asked at the beginning of our SIANI Expert Group project.

Collaborative purchasing is an idea that customers will purchase food available for sale on a website together with others. It is built around a simple proposition: ‘If you can buy with a neighbour or people in your vicinity, then you can transport it together’, or in other words, purchase collaboratively.

However, quite early on we learned that this concept would be difficult to implement in Nairobi for a number of reasons. The biggest one is that smallholder farmers aren’t keen on focusing on individual household buyers because they typically make small purchases and the associated delivery costs make them less attractive.

Instead, smallholder women farmers are more interested in accessing large buyers who make regular medium to large orders – the consistency of these customers enables farmers to generate more income and plan their production and sales further ahead.

Also, during our field study many of the smallholder farmers indicated they would appreciate the opportunity to have a simple solution which would help them work with other farmers to sell their produce collaboratively in an easier more accessible way. So, that is how we arrived at the concept of collaborative selling vs collaborative purchasing.

Collaborative selling could provide smallholder farmers with the capacity to consistently meet required quantities and quality of orders, a key barrier standing between them and the large buyers.

In turn, the large buyers, such as exporters and restaurants who we interviewed during the study, felt they would need quality assurance of produce purchased from smallholder farmers, particularly when crops from different farmers were combined. They were also interested in a solution which would enable them to efficiently locate fresh produce they needed from smallholder farmers.

Working through farmer organisations and associations seems like an obvious connection between smallholders and larger buyers. However, while cooperatives and farmers associations are common in Kenya and have proven to be effective, it is mostly those working with established cash crops e.g. coffee, tea, flowers, and even dairy that are successful. Farmer associations focusing on fresh food crops are lagging behind. This is primarily because the majority of farmer associations are under-resourced and struggle with:

• The lack of the capacity to develop the infrastructure for collaborative selling (technology, logistics and funding)
• Lack of a sustainable business model to ensure the farmer association can sustain collaborative selling as service.

This situation is further complicated by the fact that the market game is increasingly dictated by the rules of globalisation and international value chains.

Integrating collaborative selling into the work of farmer associations can respond to these challenges while linking farmers with large buyers.

What is collaborative selling?

Collaborative selling refers to a form of collective selling where smallholder farmers jointly supply large orders by combining their produce. For this project, we have included a digital component where smallholder farmers can register the produce they have available for sale which is then matched with that of other farmers who have similar produce so they can together take part in orders by large buyers that exceed individual farmer output.

The conceptual model – how would a digital collaborative selling platform work?

Building up on the work of David Neven and “An Introduction to Collective Marketing by Smallholder Farmers” by Food and Agriculture Organization, FAO our Expert Group has developed a conceptual collaborative selling model. The model can be further be developed and adapted by women’s farmer associations to turn collaborative selling into an additional service members of an association can access to access large buyers of farm produce in Kenya. This collaborative selling model would comprise:

• A digital platform to manage sourcing, consolidation and marketing
• Logistics system and infrastructure e.g. warehouse and staff for quality control, physical consolidation and delivery of produce
• Training of farmers on standardization of produce required by formal markets.

The main difference between this model and other existing agricultural platforms is that farmer associations or cooperatives would have ownership of the solution and can adapt it to suit the local conditions and the needs of their members.

The process flow

Farmer associations can establish their own platform where members can register and upload information about the produce they have for sale. The platform ought to have the capability to consolidate produce from different farmers from farmer registrations.

On the ‘front-end’ large buyers should then be able to see produce available for sale which they could order directly from the farmers’ association. The association would physically consolidate and check the quality of the produce before delivery to buyers and collection of payment.

One of the main challenges of this model is how to manage the sourcing process from the smallholder farmers due to common issues such as poor compliance with delivery, and, securing the capital required for a warehouse and other infrastructure and operating costs.

However, the returns on these investment could be high. Market retail prices in shops and markets in Nairobi are usually more than 100% of prices at which farmers sell to middlemen. Farmer associations could significantly increase returns which farmers get through direct sales. For example, middlemen prices per kilo for Hass avocados are between 12-40 Kenya shillings, roughly 4-7 avocados, which go for as high as 50 Kenya shillings for each avocado in Nairobi’s retail markets. The situation is often the same with other produce, such as potatoes, macadamia and tomatoes. In one area middlemen have been paying smallholder farmers 30 Kenya shillings per 2kilos of maize, which they resell at 150 Kenya shillings.

The reason middlemen continue to have the upper hand, is that they have the capacity to consolidate large amounts of produce, transport it, hold it in storage facilities and have direct access to market information on retail prices and buyers. Collaborative buying will help farmers to go around the middlemen and collect the revenue directly at a better price.

This model should therefore first be tested on a pilot basis to validate the concept for the association and the farmers, and then further adapt the model to suit a specific context. To keep costs low during the pilot period, an association could for example consider renting a small space on a temporary basis.

In the final project summary, we will share our recommendations for how farmer associations can further develop a business model to offer this service.