BUYER'S VIEWPOINT

Company A wanted to export fresh pineapples from a West African country. The company decided to source the fruit from smallholders since it had no land of its own and little experience of growing the crop. However, many farmers in villages close to the packhouse were experienced pineapple growers but lacked a secure market for the product. The company offered to supply farmers with improved planting materials on credit, to provide technical advice on growing top quality fruit, and to buy the product at a price equivalent to the average open market price for pineapples in the area through the year.

Many farmers signed up to the scheme and accepted the company's planting materials and technical services, but the quality of the fruit they produced and the regularity of their deliveries were poor. Furthermore a large proportion of farmers sold their crop to other buyers to avoid Company A's costs being deducted from the price they received.

Company B, by contrast, has exported both fresh pineapple and pineapple juice from its own plantations in a neighbouring area for many years. It wanted to expand its activities and decided to contract small farmers to supply the additional fruit required. To persuade farmers to sell fruit to Company B rather than to other buyers, and to ensure maintenance of the quality standards that the market demands, the company offered its contracted farmers the same services as Company A but in addition paid a price 10% above the local market price (this was still lower than the company's commercial cost of production), a quality bonus, and access to the medical and educational facilities provided by the company to its employees.

Most farmers identified strongly with Company B, raised the quality of their products and the reliability of their supplies, and sold all their fruit to the company to the mutual benefit of both company and contracted growers.

Analysis:

The case study demonstrates that, while exporting companies which rely on smallholders for the supply of horticultural products take on risks, these risks can be greatly reduced if the company invests in smallholder production, pays a competitive price for the product, and builds a relationship of mutual understanding and loyalty between itself and its smallholder suppliers.