Choice of Marketing Channels in the Kenyan Domestic Organic Market

Murimi M. L^1, , Karantininis K² and Wahome R.G³

¹Department of Agricultural Economics, University of Nairobi, Nairobi, Kenya

²Department of Economics, Swedish University of Agricultural Sciences (SLU), Uppsala, Sweden

³Department of Animal Production, University of Nairobi, Kenya

Cite this paper:
Murimi M. L, Karantininis K and Wahome R.G. Choice of Marketing Channels in the Kenyan Domestic Organic Market. American Journal of Rural Development. 2017; 5(6):151-157. doi: 10.12691/ajrd-5-6-2

Abstract

The study was conducted to evaluate the factors influencing organic farmers’ participation in organic or conventional and direct or indirect market channels in the domestic market. These factors may include socio-economic, marketing or institutional factors. The study involved organic farmers in the peri-urban regions of Kajiado, Kiambu and Nairobi Counties. The data was collected between March and May 2014. Methodology: A questionnaire was administered to 117 organic farmers to establish the determinants of their choice of a market channel, in Kenya’s domestic organic market. This represented a census of the entire population of both certified and uncertified organic farmers serving the Nairobi market and affiliated to the umbrella body, Kenya Organic Agriculture Network (KOAN). Semi structured questionnaires were administered to the organic producers and the main buyers. A theoretical model of marketing channel choice, under random utility maximisation was used to test the effect of price, certification cost, requirements, group membership, and region (county) among other factors on the decision to choose a marketing channel. 56 per cent of the farmers sold through the available organic outlets. The other farmers (44 per cent) reported sales to the local conventional channels. 67.7 per cent sold directly to consumers either at the organic farmers markets or the conventional markets Different forms of transaction costs were observed to negatively impact on sales to the organic channels. Different approaches such as certification and information access may be employed to reduce transaction costs in the organic sector and encourage sales through indirect and organic channels. However, group formation alone may not enhance marketing of organic products hence more research is needed into group characteristics for effectiveness.

Keywords:
certification Kenya marketing channel multinomial logit organic transactioncosts

This work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

References:

[1]	Bouagnimbeck, H. 2011 In. Willer, H. and Kilcher, L. (Eds.): The World of Organic Agriculture. Statistics and Emerging Trends; IFOAM, Bonn, & FiBL, Frick.
[2]	Sahota, A. The Global Market for Organic Food & Drink; In Willer, H. and Kilcher, L. (Eds.): The World of Organic Agriculture; Statistics and Emerging Trends. IFOAM, Bonn, & FiBL, Frick. 2010.
[3]	Reardon, T., Swinnen, J.F. 2004. Agrifood Sector Liberalisation and the Rise of Supermarkets in Former State‐Controlled Economies: A Comparative Overview. Development Policy Review. (5): 515-23.
[4]	Dantsis, T., Loumou. A. and Giourga, C. Organic Agriculture’s Approach Towards Sustainability; Its Relationship With the Agro-Industrial Complex; A Case Study in Central Macedonia, Greee Journal of Agricultural and Environmental Ethics. (3): 2009, 197-216.
[5]	Reardon, T, P. Timmer, and J. Berdegue. “The Rapid Rise of Supermarkets in Developing Countries: Induced Organizational, Institutional, and Technological Change in Agrifood Systems.” Electronic Journal of Agricultural and Development Economics 1.2 (2004): 168-183.
[6]	Panda, R.K. and Sreekumar. Marketing Channel Choice and Marketing Efficiency Assessment in Agribusiness. Journal of International Food & Agribusiness Marketing. (3):2012. 213-30.
[7]	Dries, L., Reardon, T. and Swinnen, J.F. The Rapid Rise of Supermarkets in Central and Eastern Europe: Implications for the Agrifood Sector and Rural Development. Development Policy Review. (5): 2004. 525-56.
[8]	Williamson, O.E. The Economic Institutions of Capitalism. Free Press, New York. 1985.
[9]	Kledal, P. The Four Food Systems in Developing Countries and the Challenges of Modern Supply Chain Inclusion for Organic Small-Holders. Paper for the Internal Rural Network Conference in India, Udaipur 23-28 August 2009.
[10]	McInnis, B. Transaction Costs and Organic Marketing: Evidence from U.S. Organic Produce Farmers. Dept. of Agricultural and Resource Economics; University of California Berkeley, American Agricultural Economics Association Annual Meeting. Denver, Colorado.2005.
[11]	Hobbs, J.E. Measuring the Importance of Transaction Costs in Cattle Marketing. American Journal of Agricultural Economics. (4): 1997. 1083-95.
[12]	Barrett, C. B.. Smallholder Market Participation: Concepts and Evidence from Eastern and Southern Africa. Food Policy. (4): 2008.299-317
[13]	Holloway, G., Nicholson, C., Delgado, C., Staal, S. & Ehui, S. Agro-Industrialization through Institutional Innovation: Transaction Costs, Cooperatives and Milk-Market Development in East-African Highlands. Agricultural Economics. 23, 2000. 279-288.
[14]	Kledal, Paul Rye, Habwe Florence Oyiera, And J. W. Njororge. “Organic Food and Farming in Kenya.” The World of Organic Agriculture. Statistics and Emerging Trends 2009. FiBl, IFOAM, 2009. 127-133.
[15]	KOAN. Regional Survey of Business Enterprises. Enhancing the coordination of organic products access to markets in East Africa (ECOMEA); Survey report.2014.
[16]	Blandon, J., Henson, S. & Islam, T. Marketing Preferences of Small-Scale Farmers in the Context of New Agrifood Systems: A Stated Choice Model. Agribusiness (2), 2009. 251-267.
[17]	Jari, B. and Fraser, G.C. An Analysis of Institutional and Technical Factors Influencing Agricultural Marketing Amongst Smallholder Farmers in the Kat River Valley, Eastern Cape Province, South Africa. African Journal of Agricultural Research. (11): 2009. 1129-37.
[18]	Onya, S.C., Oriala, S.E., Ejiba, I.V. and Okoronkwo, F.C. Market Participation and Value Chain of Cassava Farmers in Abia State. 2016.
[19]	Fafchamps, M. and Hill, R. Selling at the Farm Gate or Travelling to Market. American Journal of Agricultural Economics. (87): 2005. 717-734.
[20]	Greene, W.H. Econometric analysis. Pearson Education. India. 2003.
[21]	Schipmann, C. and Qaim, M., Supply Chain Differentiation, Contract Agriculture, and Farmers’ Marketing Preferences: The Case of Sweet Pepper in Thailand. Food Policy. (5). 2011. 667-677.
[22]	Omiti, J., Otieno, D., Nyanamba, T. and McCullough, E. Factors Influencing the Intensity of Market Participation by Smallholder Farmers: A case study of Rural and Peri-Urban Areas of Kenya. African Journal of Agricultural and Resource Economics 1. 2009. 57-82.
[23]	Monson, J., Mainville, D. and Kuminoff, N. The Decision to Direct Market: An Analysis of Small Fruit and Specialty-Product Markets in Virginia. Journal of Food Distribution Research. (2), 2008. pp.1-11.
[24]	Jagwe, J., Machethe, C. & Ouma, E. 2010. Transaction Costs and Smallholder Farmers’ Participation in Banana Markets in the Great Lakes Region of Burundi, Rwanda and the Democratic Republic of Congo. AfJARE 6.
[25]	Oelofse, Myles, et al. “Certified organic agriculture in China and Brazil: Market accessibility and outcomes following adoption.” Ecological Economics 69.9 (2010): 1785-1793.
[26]	Wollni, M., Lee, D.R. and Thies, J.E. Conservation Agriculture, Organic Marketing, and Collective Action in the Honduran Hillsides. Agricultural Economics. (3‐4):2010. 373-84.
[27]	Gillespie, G., Hilchey, D.L., Hinrichs, C.C. and Feenstra, G. Farmers’ Markets as Keystones in Rebuilding Local and Regional Food Systems; Remaking the North American food system: Strategies for sustainability. 2007. 65-83.
[28]	Ostrom, E. Governing the Commons: The Evolution of Institutions for Collective Action. New York: Cambridge University Press.1990.
[29]	Mojaverian, S. M, Rasouli, F. and Hosseini-Yekani, S.A. Citrus Marketing Channel Strategy and Its Determinants in Mazandaran Province of Iran: An Application of Nested Logit Model. Journal of Agricultural Science and Technology. 16: 2014. 1469-79.
[30]	Rao, O. and Qaim, M. Supermarkets, Farm Household Income and Poverty: Insights from Kenya Courant Research Centre: Poverty, Equity and Growth – Discussion Papers, No.28. 2010.
[31]	Lee, J., Gereffi, G. and Beauvais, J. Global Value Chains and Agrifood Standards: Challenges and Possibilities for Smallholders in Developing Countries. Proceedings of the National Academy of Sciences. (31): 2012. 12326-31.
[32]	Totin, E., Van Mierlo, B., Saïdou, A., Mongbo, R., Agbossou, E., Stroosnijder, L. and Leeuwis, C. Barriers and Opportunities for Innovation in Rice Production in the Inland Valleys of Benin. NJAS-Wageningen Journal of Life Sciences. 60: 2012. 57-66.
[33]	Reardon, T., Timmer, C.P., Barrett, C.B. & Berdegué, J. The Rise of Supermarkets in Africa, Asia And Latin America. American Journal of Agricultural Economic. (5). 2003. 1140-1146.
[34]	Ayuya, O. I., Gido, E. O., Bett, H. K., Lagat, J. K., Kahi, A. K., & Bauer, S. Effect of Certified Organic Production Systems on Poverty Among Smallholder Farmers: Empirical Evidence from Kenya. World Development. 67. 2015. 27-37.
[35]	Katchova, A.L. and Miranda, M.J. Two-step Econometric Estimation of Farm Characteristics Affecting Marketing Contract Decisions. American Journal of Agricultural Economics. (1): 2004. 88-102.