eMKambo has been in African food markets long enough to notice some invisible patterns that should be known to farmers, financiers, development agencies and policy makers. The new generation of consumers’ tastes and preferences are increasingly defining the extent to which a commodity remains a luxury or becomes a necessity.
By CHARLES DHEWA
While tomatoes and leafy vegetables have always been necessities, soft drinks like Coke were a luxury. Mazoe orange crush was mainly for sick people, so that they regain strengths.
However, these are some of the commodities that have become necessities consumed together with fresh potato chips and chicken, almost daily.
The potato and how it has transitioned into a staple
In several African countries, the Irish potato has become a staple, with many consumers now demanding its consistent supply at affordable prices.
Consumers are also demanding opportunities to taste different varieties. For instance, Zimbabwe now has diverse potato varieties such as BP1, Mondial, Valor, Mnandi, Amatheyst and others.
The transition of potato from a luxury to a necessity has been driven first by consumer tastes and preferences.
An increase in demand, mostly from the new generation of consumers, who frequent fast food outlets, lured more farmers into producing the crop. The increase in demand also pushed up prices, which became an incentive for more farmers to join the bandwagon.
In the past five years, the price of a 15kg pocket of potatoes in Zimbabwe reached $13, with the lowest price being $6.
From special events to households
The potato has also moved from being a special events commodity to household consumption.
As more farmers are attracted to the potato, as a lucrative commodity, the knowledge around potato production has also increased.
However, as with any other commodity, demand does not always continue to increase, but reaches a ceiling before it starts to go down and eventually stabilise.
For instance, over the past season in Zimbabwe, there have been signs of the potato reaching a stagnant price (average of $3/pocket) while production has continued to increase.
As a result, there has been an outcry as farmers wanted to sell small grades at $5, medium grades $6 and large grades $7, prices, which the market was resisting.
Since the potato has become a staple necessity, consumers want to buy enough for a whole month and that means it has to have its own market, where it can be found all the time.
Farmers also expect prices to stabilise, so that almost everyone can afford it. This is compelling them to think of making profit on volume and consistent supply as opposed to increasing prices.
When the market sets demand and quantities required, farmers have to adjust and align their production and operational costs with demand trends.
Unfortunately, having acquired knowledge and invested in the entire system, farmers struggle to quickly adjust their costs of production.
The main advantage, when a commodity becomes a staple is that farmers are assured of a ready market that supports sustainable production. That means they have to focus on managing their costs and quality instead of continuing to chase high prices.
It becomes easy to plan. For instance, a farmer can aim for $2 profit per 15kg pocket. To remain in the game, farmers have to maintain a certain level of production in line with demand.
That is why data collection from the entire market is critical. Fortunately, the potato is not highly perishable and requires less intensive levels of knowledge, attention and work load.
With the right support, the sweet potato could go hand in hand with the potato with which it has almost the same benefits.
Unfortunately, its value addition options like chips, flour or drinks have not been developed.
African countries have not invested in the science that would enable profitable value adding of sweet potato into a profitable commodity.
African researchers have been trying to adopt chip-making technology from the West. Lack of value addition prospects means the sweet potato remains a seasonal commodity.
A broader market for other uses that would trigger demand all year round is yet to be cultivated.
When processed or value added, the sweet potato can offer more value and create employment, as well as ensure more income for the economy.
Where there is no value addition, government does not get value added tax, while raw consumption shortens the chain. A commodity should exhaust its full potential along the value chain, unlike removing it before it passes through all stages of the chain.
Luxuries like peas, pepper, carrots and others
A luxury like peas has a niche market and tries to maximise its profit through high prices, whereas, a staple like maize grain or potato maximises its profits through high volumes.
On the other hand, price elasticity is very high for luxuries.
When a box of peas is going for $10, a 50% price increase drives the price to $15/box, which can trigger a 50% reduction in demand.
However, for a pocket of potatoes costing $3, a 50% price increase pushes the cost to just $4/pocket, which may not induce a high reduction in demand.
Consumers may not mind a $1 increase. Farmers can also plan their production accordingly.
Most luxuries tend to be on the side plate, because their main role is to add flavour to food, whereas, a staple like potato is a whole meal and can constitute 90% of the meal.
Luxuries like cucumber, chilli pepper, ginger and garlic are additives bought in small quantities.
That is why farmers cannot do a lucrative business growing chilli pepper. A family can spend more than three months consuming 50 cents worth of chilli pepper.
In some households only the father or mother may consume ginger or garlic, while the whole household consumes potatoes and tomatoes.
Given the available land and other resources in African countries, it is uneconomic to specialise on luxuries like carrots, beetroot and pepper.
For sustainability, farmers have to consider green mealies, potatoes, cabbages, tomatoes, onions and other necessities that are demanded in large volumes.
Charles@knowledgetransafrica.com. eMkambo call centre: 0771859000-5/ 0716331140-5/ 0739866343-6