Marketing the Products of Underutilised Crops – Challenges and ...

arketing the Products of Underutilised Crops –
Challenges and Opportunities for Pro-Poor
Economic Development
Workshop on Underutilised Crops during XXVII International Horticultural Congress, Seoul, S Korea
14 August 2006
Dr Hannah Jaenicke,
International Centre for Underutilised Crops, Colombo, Sri Lanka
Dr Ard Lengkeek
Royal Tropical Institute (KIT), Amsterdam, The Netherlands

Structure
• Introduction – potential of underutilised
crops
• The challenges for smallholder producers
• Which Markets ?
• Pro-poor value chain development
• Two case studies
• Conclusions

Introduction

Potential of underutilised crops
• UC: species with potential
• World relies on only 7-30 commercialised
species, 100 widely used
• Many 1,000s used by the poor
• For example: mangosteen, jack fruit,
pummelo, tamarind, ber, amla, nelli,…
• If the value chains were better understood,
more benefit could be reaped by poor
people

The challenges for smallholder producers
• Difficult to understand and react to market
forces.
– Demand driven, not supply driven
• Rapid changes in social /economic environment:
– Market liberalization and integration
– Rise in retail sector
– Decline of government support
• Thus, farmers need to be empowered:
– Capacity/skills building
– better coordination of chain actors
– Farmer organisation in groups

Benefit of group enterprises
• Market information
– Easier to obtain information, inputs
• Capital and skills
– Resources can be pooled
– Easier to take risk in a group
• Volume
–Larger volumes
– Harvesting by different people during different days to
ensure steady supply
• Quality
– Group can set and enforce standards
– Group certification schemes

Which markets ?

Domestic markets
• short distance
• fairly unregulated
• Informal
• ‘wet markets’
• transport by bicycle, cart, bus, train
• consumers familiar with product
• Fairly easy for small-scale producers to enter
• But increasingly: influence from international
standards (e.g. jatropha)

Regional markets
• medium distance
• fresh & processed produce
• transborder regulations
• transport by bus, train
• consumers fairly familiar with product
• More difficult than domestic market for smallscale
producers to enter

International markets
• long distance
• processed produce
• transport by train, boat, air
• Perishability a big issue (frozen, air transport)
• Regulated by international standards
• Consumers may not be familiar with product
• Difficult for small-scale producers to enter

EU Novel Food Crops Directive
(EU 258/97)
• Regulates the entry into the community of new
products and product ingredients.
• Between May 1997 and October 2004, 60
applications.
• Only one UC accepted: the juice of noni (Morinda
citrifolia, Haiti).
• Two UC refused: Stevia rebaudiana (China),
Canarium indicum (nangai nuts, Pacific).

Advantages of small-scale producers
Although it is difficult for small-scale producers to enter
the market they have significant advantages:
• More flexible in spotting and following a new
opportunity.
• Lower labour costs and thus can operate at
competitive prices.
• Can develop very short and effective supply chains
and link up directly with an importer.
• By entering a niche market, personal links to a loyal
consumer group may be used:
• Ethnic or expatriate market: Bangladesh (2003, of
total export): UK (28%), Saudi Arabia (23%), UAE
(14%), Kuwait (13%), Qatar and Bahrain (each 6%)
and Oman (5%).

Pro-poor value chain development

Value chains – Definitions
• Supply chain: A set of linkages between
actors where there are no binding or soughtafter
formal or informal relationships, except
when the goods, services and financial
agreements are actually transacted.
• Value chain: A specific type of supply chain -
one where the actors actively seek to support
each other so they can increase their efficiency
and competitiveness. They invest time, effort
and money, and build relationships with other
actors to reach a common goal of satisfying
consumer needs - so they can increase their
profits.

Pro-poor value chain development
• Interventions need to be targetted to avoid
benefitting (only) the better off in the
community.
• Criteria:
– Access to capital assets
– Level of social integration
– Stability of environment

Pro-poor value chain development (2)
• Designing supply chain interventions to
benefit vulnerable groups is a challenge.
• Needs a holistic approach.
• Opportunity to support small-scale
producers in less-developed areas.
• Impact beyond increase of income:
stronger social and organisational
capacity; more economic control.

Two examples

Fruit drinks from UC – Sri Lanka
• Dhammika Perera currently earns LKR 50,000 (USD
500) a month from his fruit processing enterprise – more
than half of the family income.
• He started his new enterprise after he attended an ICUC
group training course on processing and marketing of
underutilized fruits in 2004.
• 12 months later, he employed 10 staff to supply the
demand for his products.
• Because Dhammika’s business has increased the
demand for fresh beli, wood apple and soursop, local
producers have increased their household income too.
• On July 12, 2006, Dhammika received Sri Lanka
Standards certification for his fruit juice products, thus
further strengthening his position amongst the local
competitor.

Medicines instead of potatoes - India
• Kutki (Picrorhiza kurrooa) is a medicinal plant which is
used against fevers and cholera and as a laxative.
• Listed on Appendix II of CITES as well as Vulnerable on
the Red List of endangered species in India.
• Trade ban, but: cultivated kutki not banned from exports
- would fetch a large premium in the European market.
• Initiative started by Indian farmers, a Dutch buyer
(IHC/VanderStelt), the Indian Centre for Sustainable
Development, the buyer Himalayan Organics, and KIT.
• 50 farmers involved, first plants sown in 2004.
• IHC/VanderSteldt pays pre-fixed price and 20% of
purchase value into community social fund.
• Now that the project appears to be self-supporting KIT is
phasing out.

Conclusions
• UC marketing poses great opportunity for niche
markets and disadvantaged communities.
• Investing in UC development is a high risk
operation – esp. if value chains have not been
developed.
• Investment is justified, but not only for economic
reasons but also for the cultural and
environmental value these species have.

Contribution of underutilised species to household
incomes of rural communities depends on:
• Land tenure and possibility to expand area
under crop.
• Access to significant market & infrastructure.
• Ability of farmers to organise in sizeable
producer groups, obtain market information
and become chain partners.
• Political structures that recognise the value of
underutilised crops and facilitate their
marketing.

THANK YOU
FOR
YOUR ATTENTION
Hannah Jaenicke – h.jaenicke@cgiar.org
Ard Lengkeek – a.lengkeek@kit.nl