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Lead Firm Linkages Benefit Small and Medium Food Aggregators, Processors, and Small Farmers

Small and medium-sized aggregators (a market intermediary), and raw material processors face many challenges in establishing a market for their products. All too often, in a developing economy, these aggregators do not have the information nor the technical skills and financing to produce a product to meet the needs of food manufacturers, particularly for export markets. As food markets become more sophisticated with regulation and food safety issues, the problems of small and medium enterprises (SMEs) supplying distant countries have multiplied and become more complex.

Dexis and Agland Investment Services are helping the World Bank determine how leadership by large food processors and consumer product companies can create markets for SMEs in developing economies.

The Dexis study team found over 60 interesting examples of lead firm/agro-processing linkage projects worldwide. We used this sample to determine ways to stimulate opportunities and define tools and methods for improving the opportunities for lead firms to create the necessary linkages with agro-processors. Subsequently, we selected six projects for in-depth field research and preparations of illustrative case studies.

Two of the case studies took the team to Kenya. One focused on the lead firm, Intersnack—a large EU snack food processor/marketer seeking a supply of peanuts from a Kenya nut processor. The second case involved Marks & Spencer, an established UK supermarket chain seeking the direct procurement of high-quality packaged tea from the small Irianini Tea Factory in Kenya.

Outside of Kenya, other cases around the world focused on:

  • Specialized olive oil produced in the West Bank and exported to premium markets in the USA
  • A local Uganda brewery’s effort to organize small farmers to produce a new variety of grain sorghum that would be a local substitute for costly imported malted barley
  • The modernization of Cambodian rice millers to enlarge their facility to meet increased export demand from a program of duty-free exports to the EU

The Dexis team is currently working on a final report with Guidance Notes to help U.S. government officials, policy makers in developing economies, and project implementers understand the critical information to collect when designing programs to accelerate lead firm-SME linkage projects. The case studies highlight on-the-ground examples under a variety of circumstances, and indicate that while the concept is simple, the act of creating the environment and orchestrating the process is complex. Spearheading successful partnerships requires understanding and patience by all supply chain actors.

The World Bank, IFC, and other development institutions will use Dexis’ report to further crop production and improve supply chain efficiencies to create higher incomes for both the SMEs and small farmers, and stabilize raw material supplies for the lead firm.

Bill Mott is a Senior Technical Adviser at AgLand Investment Services, a subsidiary of Dexis Consulting Group.

The views expressed in this publication do not necessarily reflect the views of the World Bank Group or the United States Government.