The cold chain – consisting of pre-cooling, refrigerated storage, and refrigerated transport – is one of the pillars of the postharvest handling chain. Despite this, the cold chain system is still weak or nonexistent in some countries. According to the World Cold Chain Summit, only about 10 percent of perishable foods worldwide are refrigerated.
The growth of cold chain capacity in developing regions varies from one country to another. In most emerging markets, the cold chain growth is fragmented, usually concentrated in the urban centres and near transport terminals, such as airports, where exporters are based. Most of this cold storage capacity for fresh produce principally consists of large pack-houses with cold storage rooms. In rural areas most farmers in the first mile of distribution lack the infrastructure required for developing the cold chain.
Kenya’s cold chain emerged in this context. Traditionally, the key driver of the country’s cold chain has been the fresh cut flower export industry, where Kenya is positioned as one of the biggest exporters to the European Union (EU). The Kenyan flower industry has created a strong strategic sector with advanced cold chain systems. However, the cold chain for other temperature-controlled foods, such as fruit and vegetables, has not yet advanced to the same level.
Background of the fruit & vegetable sector
It is important to consider the fact that the growth of the Kenyan fruit and vegetable sector is recent and has not been a smooth, continuous process. According to the World Bank, the sector has expanded with ups and downs and numerous changes in the commodity mix, the role of the state, the types of marketing institutions involved, and the characteristics of the participating farmers.
The growth of the Kenyan fruit and vegetable sector is directly linked to the increasing involvement of smallholders in the sector. In the early 1970s, no more than a few hundred smallholders were producing for the fresh fruit and vegetable export market, accounting for just 10-20 percent of the total volume. Many out-growers continued to sell their crop to the local fresh market where they could fetch better prices, and not be discriminated against for the quality and quantity levels, which were not suited to export markets and multinational processors.
The fruit and vegetable sector started to take off in the late 1970s and 1980s, driven by the growth in exports of fresh vegetables and to a lesser extent, fresh fruit. The diversification into fruit and vegetables was partly motivated by the fall in world commodity prices, such as coffee and tea, and challenges with regards to flower production, forcing many farmers to look for alternative income-generating crops.
Most of the Kenyan consumers were used to buying fruit and vegetables on daily basis in open-air markets with no value-added (such temperature-control), where prices are affordable for local low-income consumers.
The cold chain configuration
The cold chain for the Kenyan fruit and vegetable sector started to develop as export demand increased. As a consequence, its cold chain infrastructure grew in the vicinity of exporter locations, principally around Nairobi airport. At the same time, export production has been concentrated in about two-dozen large-scale farms, which account for 75 percent of the industry.
As small-scale farmers´ participation in export markets has been historically low, with a relatively insignificant demand for temperature control from local markets, and additional challenges connected to infrastructure such as roads and electricity, the cold chain has barely arrived in rural areas, where production points are based.
The way forward
The growth of the cold chain in Kenya is facing an important inflection point, with significant opportunities and challenges for the future.
Kenya has become one of the fastest growing economies in Sub-Saharan Africa, with significant and rapid growth in the last five years. It has a stable macroeconomic environment, a growing middle class, and serves as the business, logistics and financial hub for the region. Agriculture remains the backbone of the economy and the major contributor to the GDP.
Participation of smallholders in fruit and vegetable exports has increased during the last decade, with an estimated contribution share of 55-60%. But at the same time, it has been argued that smallholders are being squeezed out of export production because of the difficulty in ensuring compliance with food safety and quality requirements imposed by foreign markets. These requirements are leading exporters to grow their own produce or purchase from large-scale commercial farms.
Kenya’s ability to maintain and strengthen its role in horticultural exports will depend in great extent to its ability to adapt and respond to those market requirements. Kenya’s competitiveness in export markets can be assured with the growth and consolidation of a cold chain that integrates the out-grower base, facilitating the country’s compliance with safety and quality requirements.
So what are the current challenges and opportunities of cold chain in the horticultural sector in Kenya?
- Horticulture continues as the fastest growing sub-sector among Kenyan exports with annual growth of more than 7%. Products include green beans, sugar snap peas, snow peas, okra, chili, eggplant, avocado, mango, pineapple, passion fruit, bananas, and strawberries.
- Smallholder farmers play important roles in fruit and vegetable production in a number of key value chains such as green beans, sugar snap peas, and increasingly in avocados.
- Kenya’s principal export markets are the UK, EU, as well as the Middle East. Direct flights to the USA starting in 2018 are expected to open up new channels.
- Kenya has more than 200 exporters of fruit and vegetables, most of them small and medium-size companies.
- A number of exporters are investing in processing facilities closer to the point of production, and not limiting them to urban areas and the locations of transport terminals.
- Demand for fresh produce is being driven by growing export opportunities and strong economic growth that has raised incomes for Kenya’s middle class.
- The formal local food retail sector (supermarkets) is growing, due to the rising household incomes. It is estimated that more than 40% of all Kenyans shop in supermarkets and is expected to increase.
- European consumers, like those in other industrialized countries, are demanding new forms of prepared fresh fruits and vegetables, which can include washing, peeling, cutting, and packaging in small units, such as pre-mixed vegetables. These activities are labor-intensive and they increase the opportunities for adding value to exports.
- Post-harvest losses are high, claiming on average 30-60% of produce in Kenya and East Africa, with an estimated 37% of losses occurring during handling and storage.
- Smallholder farmers bear the burden of these losses. High losses represent a serious challenge even for major exporters and their out-grower networks.
- Frequently, formal retailers struggle to stock sufficient high-quality raw produce that should be abundant in Kenya.
- Larger exporters are moving away from out-grower networks, due to the unreliability of quality and volume.
- There is limited access to finance for agribusinesses to acquire cold storage and processing machinery.
- Kenya largely lacks third-party logistics (3PL) providers for cold chain facilities and transport (key criteria of industry maturity for the GCCA).
- The most commonly used cooling solutions are brick and mortar facilities, that can present problems for obtaining food safety certifications. Most use inefficient energy systems that bring a number of hidden operational costs.
- There is a lack of infrastructure, such as roads and reliable electricity grids, which present significant challenges for investment in cold chain, especially in rural areas.
- There are still few technologies offering cooling solutions for smallholder farmers.
- Foreign supermarkets have become much more involved in imposing requirements on how food is produced throughout the commodity supply chain.
- There are relatively high transport costs that inhibit the ability to compete in the lower cost/average quality segments of the European market.