Market Survey Report
on
Market Opportunities for Fruits and Vegetables Processing in Ukambani, Eastern Kenya

Project Supported by
USAID funds through the FOODNET competitive grants scheme.

By
Frederick M. Kiilu (Kamumo Products), Lutta Muhammad (Kenya Agricultural Research Institute) and
Samuel M. Wambugu (Kenya Industrial Research and Development Institute).

Acknowledgements

We wish to record our debt of gratitude to the many individuals and institutions that contributed to successful planning and implementation of this study but are not mentioned here. At the FOODNET Co-ordinating office, we wish to thank Dr Shaun Ferris and John Jagwe for ensuring smooth flow of funds. We specifically mention the FOODNET Co-ordination Office (located in Kampala, Uganda) who provided the funds to meet the operational costs of the study. These funds were drawn from a USAID competitive grant administered by FOODNET.

Mr Kyalo Mulinge, Mr Thomas Katua, Mr David Mutinda, Mr Stephen Kituku, Mr Silas M’Ragwa and Mr Mutuku Nthuli conducted Field interviews with farmers and traders of fruits and vegetables as well as intermediate consumers of processed products. Ms Carol Wafula gave valuable assistance with data management. To the lady and the gentlemen, our gratitude.

We also wish to thank company officials who assisted us but remain anonymous. Last, but not least we thank all respondents who generously spent their time answering questions they sometimes thought were not important, and for the lessons learnt from them.

1. Introduction

The agriculture sector plays the leading role in the economy of Kenya. Agriculture fulfills this role by providing export earnings, internal self sufficiency in basic foods, employment supply of raw materials for the processing industry. Kenyan agricultural production is dominated by cereals, grain legumes, root crops and several industrial crops. Many of the horticultural crops have a dual subsistence as well as cash function. The importance of the horticulture sub-sector within the Kenyan agriculture sector has been widely acclaimed. Talking to journalists in Nairobi recently, the chairman of the Fresh Produce Exporters Association of Kenya said `Horticulture is the last bastion of growth in an economy which shrunk by 0.4 per cent during the year 2000. It is Kenya's second foreign exchange earner. In the year 2000, foreign exchange earnings from horticulture alone totaled KShs 14 bilion accruing from the sale of 99,000 tons, up from KShs 4 bilion from the sale of 70,000 tons in 1995 (Akumu 2001).' Ukambani area (Machakos, Kitui, Makueni and Mwingi Districts) is a major player in horticulture production for the export as well as the domestic consumers. Although impressive gains in numbers of farmers, hectarage, tonnage and value have been achieved, many factors still constrain exploitation of the development potential offered by the sub-sector. First, transport and communication, storage and processing infrastructure is not well developed in much of the area. Since production and marketing of fruits and vegetables are chacterised by seasonality, there are periods of surplus and scarcity during the year and ensuing wastage and low income. Increased capacity for processing could ease this constraint by utilizing surplus production by transforming these into high value shelf stable products. Following the liberalization of the economy a decade or so ago, some entrepreneurs have set up small to medium scale processing concerns. Such businesses need information about the markets for fresh produce and other raw materials, availability of skills and intermediate inputs as well as the market for final products. There is a need for a market study addressing this need.

2. The Agro-ecological, socio-economic, infrastructure and Institutional Environment in Ukambani

2.1       Agro-ecological Conditions

Rainfall patterns in the four Ukambani Districts exhibit distinct bimodal distributions. The first rains fall between mid-March and end of May and are locally known as the long rains (LR). The second rains, the short rains (SR), are received between mid-October and end of December. Average seasonal rainfall is between 250-400 mm. Inter-seasonal rainfall variation is large with a coefficient of variation ranging between 45-58 per cent. Temperature ranges between 17-24⁰c.  Evapo-transpiration rates are high and exceed the amount of rainfall, most of the year except the month of November. The main Agro-ecological Zones (AEZ) in the region are: Upper Midland (UM), Lower Highland (LH), Lower Midland (LM) and Lower Lowlands (IL). The LM zone is the most predominant. Based on rainfall criteria, the following main zones can be found: Sub-humid (2) Semi-humid (3), Transitional (4), Semi-arid (5) and Arid (6).  The  major soils of the dryland areas are developed on basement rocks (gneisses), quartzite and plio-pleistocene bay sediments. The most predominant soils include alfisols, acrisols, ferralsols, vertisols, and andasols (FAO classification).

2.2       Farming Systems and socio-economic conditions

The main food crops are maize, beans and cowpeas.  However, the growing conditions allow a wider range of food crops to be grown. The main on-farm cash generating activities revolve around coffee, horticulture, agro-forestry and cross-bred based dairy farming under the zero and semi-zero grazing systems. Population density within the region (see Table 1) is high and thus the average farm size is within the range 1‑7.5 ha.  Like in the rest of the country, the majority (about 60%) of the farmers in this region live below the poverty line and they can’t therefore meaningfully contribute to personal or national wealth creation.  Poverty and low production risk only permit some of them to use purchased inputs. Farm operations are generally based on hand labour. High value horticultural crops such as tomatoes, onions and Asian vegetables are the main crops and these are raised mainly in Matuu in Yatta division and Kibwezi. Virtually every smallholding has at least some horticultural crop. There may be a combination of tree types on the farm. There are smallholdings where distinct plots are dedicated to the production of one or more types of horticultural crops. This may be under rain-fed or irrigation. There are also medium to large-scale horticulture farms in the area. The main problems are that the quality is low, production constraints such as damage by pests and diseases, and lack of appropriate varieties. These crops exhibit seasonality. They are bulky and highly perishable. They come onto the market at short intervals and then the prices fall, then times of shortage prices increase.

2.3 Infrastructure and Institutional Environment

Machakos district is served by 1682 km of roads, out of which 75 per cent are only motorable during the dry season.  Makueni district has 1593 km of roads. Kitui and Mwingi districts have a combined 3373 km of roads (3 per cent are all weather). Telecommunication services are more developed in the major town centres such as Machakos and Kitui. Electrical power is supplied to major town centres by the Kenya Power and Lighting Company (KPLC). The government, NGOs and community self help groups have sponsored projects that provide wells, dams and piped water in main areas of human settlement. However, most of the water development ventures are for domestic use and not for agricultural production except in areas where high value crops are raised under irrigation. The area is served by a number of suppliers of seeds, fertilizers, pesticides and fungicides nationwide in the major town centres. A variety of tools and implements can be purchased at these outlets and maintained and serviced through networks of local artisans. The Kenya Industrial Estates (KIE), a public corporation established for the purpose of assisting  small‑scale industry also participates in the production and marketing of farm implements. Participation by KIE in the farm implements business is however, not extensive. There is considerable local market trade in farm produce, clothing, tools and implements. Loans for agricultural purposes can be obtained from sources such as the Agricultural Finance Corporation (AFC), the co‑operative movement and commercial banks. However due to various factors most small-scale subsistence farmers do not have access to the credit facilities.

Table 1. Population distribution in the four Ukambani region districts

3. Kamumo Products

Registered under the Business Act (Cap 499 s.14 of the Laws of Kenya) in 1987, Kamumo Products enterprise is located at Katoloni Market, about 4 km from the centre of Machakos Town along Konza Road.  It is about 70 Km south east of Nairobi.  The firm's vision is that of food insecurity in the third millenium. Accordingly, the mission of Kamumo Products is to promote global food security and good health through processing raw agricultural produce based on training and sound business management practices.

The goals behind the establishment of the enterprise were to:

The firm processes mangoes, citrus, papaws and passion fruits mainly from Machakos, Makueni, Kitui and Mwingi Districts. The firm is especially keen to buy excess fruit whenever there is surplus production and process these into products that can be used when shortages occur. These are transformed into fruit pulps, juices, jam and sauces.

3.1       Status of the firm

At inception, Kamumo Products employed one full time person. The number of employees has since risen to four. All the members of staff receive on-the job training and work under direct supervision of the proprietor. The enterprise has also witnessed significant changes in production technology used. The aluminium utencils which were used in the beginning have been replaced with those made of stainless steel. Small scale semi-automatic tools have largely replaced hand tools based manual procedures. This technical progress has facilitated improvement in product quality, and, at the same time, reduction in unit costs.

All these improvements have culminated into increased productivity as well as product diversification. Initially, the firm processed horticultural produce into a single product. The range of products has increased to six. Total production has increased from 50 kg/litres per week to 3,500 kg/litres per week. Annual turn-over rose from U$ 10,000 to 25,000.

3.2       Marketing

 Kamumo Products sells its finished products to wholesalers, supermarkets, hotels, cafes, hospitals and schools. The firm also reaches its market through participation in trade fairs, symposia, exhibitions, business net-works, some of the firm's products are on display at a recent International  Trade Fair in Nairobi.  

Like many Jua Kali enterprises, Kamumo Products faces a severe capital constraint. Conditions for accessing credit from either the business community or commercial banks in the Machakos area can not be met by many of the small enterprises. Thus the only realistic source of investible funds is the profits they make and these are, by any standards, meager. This has seriously impaired the firms capacity to undertake investment that should facilitate adoption of efficient technologies.

Availability of raw material for processing is constrained by a number of factors, among them, competition from exports, low quality produce from local farmers and the deplorable state of the transport, storage and communications infrastructure.

Kamumo Products suffers from adverse effects arising from lack of fruit processing infrastructure, inaccessibility to research findings, lack of training opportunities for staff, inadequate exposure to local as well as international markets and the impact of unpredictable climatic factors on both quality and quantity of fresh horticultural produce for processing.

Lack of market research information (international, regional and local) is a serious constraint. There is a general lack of regional and international standards and product specifications. Poor finishing and packaging also pause as serious threats to the marketing of Kamumo Products.

Figure 1. .Mr  Frederick Kiilu, Managing Director of Kamumo Products describes to H.E. the President some the products of the firm during a recent trade exhibition in Nairobi.

4.         Objectives

The goal of the study was to identify market opportunities (and constraints) for the fruit and vegetable processing industry in Machakos district. Objectives of the study were to:

1.      Identify the main players in the production, distribution, processing and marketing of fruits and vegetables in Ukambani.

2.       Assess the availability of raw materials (fresh produce), and intermediate inputs (fruit pulp, and concentrates).

3.       Assess the need for local production of semi-processed products (fruit pulps, pastes and concentrates).

4.       Identify volume, prices and revenue trends associated with the production and trade in intermediate as well as final products. 

5.         Methods

The strategy that was adopted for this study embraced five distinct sets of activities. The first set of activities entailed collection, collation and analysis of information about production, trade and processing of fruits and vegetables in the area from secondary sources and through discussions with the key persons in the area and in Nairobi. These were facilitated by visits to the libraries, the horticulture Division of the Ministry of Agriculture and Rural development, traders, processors, the Departments of Trade and Industry, the HCDA and many others. This yielded information which guided identification of gaps in information and the design of the surveys.

Following Rapid Rural Appraisal procedures, four surveys were carried out during the months of May and June 2001. These were, the survey of fruits and vegetable farmers, entities which trade in fruits and vegetables, intermediate consumers of processed fruit and vegetable products, and, small, medium and large scale processors of fruits and vegetables.

5.1       The survey of fruits and vegetables farmers

A survey of 35 fruits and vegetables farmers was carried out in Kitui, Machakos Makueni and Districts. Selection of participating farms was effected in two stages. In stage one, areas within the four districts where growing of fruits and vegetables is most intense, taking the variability in production as well as socio-economic conditions in the area and the need to represent this variation into consideration. The second stage involved the actual selection of farmers within the fruit and vegetable farming areas identified in stage one. In each of the areas selected, field interviewers identified rural access tracks branching off the main roads, and selected every third fruits or vegetable farm and interviewed the head of the household. Each field interviewer repeated this procedure until his quota of farmers to be interviewed was completed. A formal questionnaire had been drawn up and pre-tested before being used in the survey.

5.2       Survey of fruits and vegetables traders

The survey of fruits and vegetable traders was carried out during the months of May and June 2001. The survey involved the interviewing of 40 small and medium scale traders in Machakos, Nairobi, Kitui and Makueni areas. First, the main markets in which fruits and vegetables are traded in those areas were identified. Within each market, interviewers selected every third fruit or vegetable trader, requested an interview and if granted, applied the questionnaire.

5.3       Survey of intermediate consumers of the processed products of fruits and vegetables  

Various entities were classified as intermediate consumers of processed products of fruits and vegetables if they acquired these from identifiable sources for passing on to final or other intermediate consumers. These entities included shops, supermarkets and a variety of institutions. Trading centres in Nairobi, Machakos, Kathiani, Kibwezi, Kitui and Matuu areas were selected because they represent existing and potential loci of the market for goods processed by Kamumo Products. A total of 45 entities were selected. Interviewers obtained information about trade in processed fruits and vegetables products using a structured questionnaire. The survey of intermediate consumers of fruits and vegetables processed products took place during the months of May and June 2001.

5.4       Survey of small, medium and large-scale enterprises processing fruits and vegetables

In a recent study of the fruit processing sub-sector in Kenya (K-MAP 1994), 29 firms which process or otherwise use intermediate inputs derived from fruits and vegetables were identified. While more than half of the 29 firms are to be found in the city of Nairobi and its environs, the remainder are located far outside the catchment area of Kamumo products, in places such as Mombasa, Nakuru, Kisumu and Eldoret.

Largely because of the small numbers of firms that are involved in processing fruits and vegetables, no attempt was made to apply formal sampling procedures for this survey. In lieu of this, it was decided that the firms which are located in the vicinity of Nairobi and Machakos be approached and requested to supply the information that was needed for this study. Nine of the firms obliged and supplied information in varying degrees of completeness. Of the remainder, some declined to participate citing the potentially sensitive nature of information that was being sought, while others were not able to release the relevant officers due to time constraints. Respondents representing the nine firms which agreed to participate were interviewed during the months of May, June and July 2001. These interviews were guided by a structured questionnaire.

6.         Availability of Fruits and Vegetables for processing in Kenya and Ukambani

A reliable supply raw materials of acceptable quality is a major determinant of the viability of the processing industry. As noted in the preceding sections, Kenyan farmers have committed a sizeable hectarerage to production of fruits and vegetables. In 1999, for example, 134,000 ha of prime land were planted to fruits and 97,000 ha to vegetables. The leading commodities by hectarage, volume and value were bananas, mangoes, citrus, papaws and avocado (fruits) and kales, cabbage and tomatoes (vegetables). This hectarage yielded 3,276,000 tons of fresh produce. Out of this production, a small proportion (70,000 tons) was exported. The bulk the fruits and vegetables that did not find its way into the export market was used by farm families for subsistence. The remainder was sold to Kenyan consumers through direct purchases from farms, retail outlets or various other arrangements.  

The range of fruits and vegetables grown in the Ukambani area is wide. Citrus, papaws, bananas, avocado and mangoes (fruits) and tomatoes, cabbage and kales (vegetables) are the most important fruits and vegetables commodities in the Ukambani area. The hectarage of fruits and vegetables grown in four districts of Eastern Province (Ukambani region) is shown in Table 2a below.  The contribution of this region to the national fruit and vegetable production is shown in Table 2b. As shown in Table 2c, the average fruit and vegetable yields within the Ukambakani region is comparable and in some cases much higher than the national yields. Thus, it is evident that the Ukambani districts account for a significant proportion of the Kenyan fruit and vegetable production. These districts produce two thirds of guavas, half of papaws, two fifths of citrus and one tenth of mangoes, avocado and passion fruit. Machakos is the leading producer of fruits and vegetables. Neighboring Makueni and Kitui districts are important producers of papaws, bananas and mangoes. Some of the fruits and vegetables were used as raw materials for production of shelf stable products for the local as well as the export market. The need to tap this huge potential through promotion of local industries that add value to the farm produce is hereby strongly indicated.

Table 2a. Hectarage of fruits and vegetables in four districts of Eastern Province (Ukambani region)

Source: Ministry of Agriculture and Rural Development,  Nairobi.

Table 2b. Hectarage, volume, yield, value and prices of fruits and vegetables in Kenya

Source: Ministry of Agriculture and Rural Development,  Nairobi.

Table 2c. Production and yields of fruits and vegetables in four districts of Eastern Province (Ukambani region)