Kenya is frequently cited as a “bright spot” in African agriculture. Conducive government policy, strong donor support and private-sector leadership have helped to create success stories in exports to the EU. Policy changes supporting this growth include the liberalization of the fertilizer market. Following the removal of price controls and subsidies, increased competition led to lower fertilizer end-prices, triggering a 14 percentage-point increase in adoption rates among smallholders. Today, agriculture amounts to half of Kenyan GDP and employs 75% of the Kenyan workforce. Kenyan policy-makers and agribusiness players continue to prioritize the growth of agricultural exports, both in green beans and other cash crops like avocados. be

Kenya is one of the world’s largest producers of avocados, with production of 200,000 tons in 2017.For comparison, the largest producer is Mexico with about 1 million tons produced annually. Local varieties dominate Kenyan production (about 70% of total), whereas Fuerte and Hass, the varieties suitable for export, make up approximately 20% and 10%, respectively.

 

Kenyan Avocado Export Supply Chain

 

An estimated 70% of Kenyan avocados – even those for export – are produced on smallholder farms. When not linked to exporters through an out-grower scheme, farmers market their avocados through middlemen, either legally government-certified agents or unofficial brokers. These middlemen typically harvest avocados themselves and organize transport to Nairobi packhorses. This initial leg of transport is usually done with small pickup trucks. Once at the factory, avocados are quality-checked, sorted, washed, waxed, pre-cooled and packed in cartons. Once packed, exporters stuff the cartons into refrigerated containers (“reefers”) outside the processing gate, and shipping companies then transport the reefers to the Mombasa port. There, the reefers, which are controlled-atmosphere-treated, are loaded onto a ship and later trans-shipped in Salalah, Oman. Finally, the reefer containers are unloaded in Europe and delivered to importers

Most often vertically integrated with exporters, packers procure and package a 4-kilogram (kg) carton of avocados at a cost of about US$ 4.10. An additional US$ 1.60/carton is required for shipping to Europe by sea in a reefer. With the import price fluctuating around US$ 7-8/carton, the supply chain overall is profitable. This situation was enabled by government-led infrastructure investments, followed by private-sector investment in reefers, which helped to reduce transport costs versus expensive air shipments. Once this tipping point of profitability was reached, investments started to naturally flow into the sector.

Impacts of Supply Chain Barriers and Potential Solutions

Successful initiatives to overcome supply chain barriers are presented, as well as some remaining opportunities to overcome challenges to future growth.

Transport and Communications Infrastructure

Mombasa is the pivotal port for East African countries and is accessed via the main corridor, the Nairobi-Mombasa highway. By the early 1990s, the quality of this road had deteriorated due to high traffic. The Kenyan government, with the help of the World Bank and the EU, decided to invest in rehabilitating the highway.  Investments were made over approximately a decade, ending in 2005. Travel time from Nairobi to Mombasa was reduced by 40%, from 12 to 7-8 hours, and costs decreased as well. Typically, road rehabilitation projects in East Africa drive operational cost reductions of 15%. Although this saving has a marginal impact on the Kenyan avocado industry – less than 1% of the European end price – the incremental benefit is applied to many different value chains. The overall benefit for Kenya and Kenyan agricultural export value chains is thereby important.

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Introduction of reefer container technology has made Europe accessible for Kenyan avocados.

One of the major challenges previously faced by this industry was the lack of suitable transport equipment. If not cooled, avocados ripen faster than the time it takes to ship them to Europe. Exports to Europe, therefore, were only possible through expensive air shipments. Alternatively, transporting by sea was only feasible for the more proximate Middle East, where avocados sell for much less than in Europe.

Recognizing this opportunity, exporters first engaged temperature-controlled, break-bulk vessels to replace expensive air freight. They then approached A.P. Moller-Maersk to present the business case for refrigerated container transport. Shipping companies consider a number of factors when evaluating a value chain for reefer investment. Most importantly, they look at the economics and growth potential of the value chain. In this case, if Kenyan avocados were able to be sold profitably when transported by air, there was a clear case for investment in sea freight, provided quality could be maintained during the journey. In addition, key enablers must be in place to ensure sustainable operations. Fortunately, the Kenyan government had invested in the Mombasa port and was able to provide the necessary infrastructure (e.g. specific plugs, berth capacity) to support reefers. Continuous investments are being made to accompany the growth of reefers in the Mombasa port, including a new berth to open this year.

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Early packing of containers ensures an uninterrupted cold chain. When dealing with perishable produce, maintaining an uninterrupted cold chain is critical for food quality and safety. When reefers were first introduced, exporters preferred to transport avocados to Mombasa in regular trucks and pack the reefers at the port. Over time, exporters realized that they could command a price premium in EU markets if a cold chain was begun as close to the farm as possible. This price premium outweighed the costs of bringing an empty reefer to Nairobi and loading it at the pack house gate. This extended cold-chain-arrangement also simplified logistics by eliminating one touch-point at the port, and is now common practice.

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