The Alliance for Inclusive and Nutritious Food Processing (AINFP) works with food processors in Ethiopia, Kenya, Malawi, Tanzania, and Zambia to create a more competitive food-processing sector and in turn increase the availability of safe, affordable, and nutritious food.
The program implementation has been faced with global challenges that have greatly affected the food processors we work with in Sub-Saharan Africa. The current war in Ukraine is hitting the supply chain, changing manufacturers’ supply chain strategies, and greatly affecting the food processing industry.
According to the July 2022 Feed The Future fact sheet on the Ukraine/Russia crisis, in 2021, 193 million people already faced acute food insecurity. The Food and Agriculture Organization of the United Nations (FAO) reports that food prices are 23% higher than in the same period last year. The Russian invasion of Ukraine is exacerbating an already staggering global food security crisis, disrupting food and fertilizer supply chains and upcoming growing seasons. Russia and Ukraine export around 30% of the world’s traded wheat and barley, one-fifth of its maize, and over half of its sunflower oil. Russia is also a major supplier of exported fertilizers. Shortages of fertilizer, a key input for growing many of the world’s crops, are driving rising food prices. In the last year, global fertilizer prices have nearly doubled from already historical highs, representing a 200% increase since the start of the pandemic. With less ability to buy or grow nutritious food, families are forced to make tough decisions, prioritizing filling bellies with cheaper foods that do not provide adequate nutrition.
At the core of the food crisis, AINFP has supported processors to identify and implement solutions through customized technical assistance to build sustainability and resilience, ensuring their business survival and reducing the impacts on food purchasers.
Food processors in the AINFP program have highlighted the challenges that the effects of the Ukraine/Russia crisis have brought to their operations. AINFP has been working with food processors during this season, and several new approaches and lessons learned have emerged.
A brief overview of the impact from AINFP focus countries
Heavily relies on imports for most of its wheat and sunflower seed oil. The crisis has affected the supply of these commodities, causing the increased cost of edible oils to triple the normal price and double the cost of wheat grain, causing an overall increase in the cost of production.
Food prices, especially wheat-based and other staple crops, have risen by an average of 40%. Despite the Ethiopian government taking steps to enhance wheat production through irrigation during the dry season, Ethiopian flour millers are still unable to obtain raw materials and are operating at a lower capacity.
|Kenya||Kenya relies on imports for most of its wheat and sunflower seed oil. The Ukraine/Russia crisis has resulted in an increased cost of production for processors who use wheat flour as raw material, e.g., bakeries, and an increased cost of transportation due to an increase in the cost of fuel. The crisis has also affected the cost of storage for grain in the country, which is essential in the food processing supply chain. In March and April 2022, wheat millers were paying $570 for a tonne of imported wheat at the Port of Mombasa, up from $456 in January 2022, a 25% hike in price. As a result, the price of a 2kg packet of wheat flour has increased by 7% from $1.57 to $1.68 (Business Daily, March 14, 2022).|
|Malawi||Malawi has seen increased fertilizer prices as a direct result of the Ukraine crisis. It is anticipated that the coming agriculture season will result in a lower-than-usual yield due to the reduced use of fertilizers among farmers. In addition, the lack of fuel supply is rampant, and fuel prices have more than doubled, which has resulted in high costs of operations among AINFP clients.|
|Tanzania||In Tanzania, the effects of the Ukraine/Russia crisis has resulted in prices of raw materials like wheat and yellow maize increasing by more than 10%, which has impacted food production by the large millers AINFP supports. Raw material sourcing has also been affected by the scarcity of global supply, which has resulted in other countries sourcing from Tanzania’s local smallholder farmers, destabilizing local supply and production. Low farm yield has also been experienced due to the high cost of fertilizers which has hindered access to yield from small-scale farmers in Tanzania. The increase in fuel prices has also affected the cost of transport for both raw and processed foods.|
Zambia, also known as the food basket of the region, grows staples such as maize, soya beans, sunflower seeds, wheat, etc. The country is near self-sufficiency, producing about 80% of what is needed in the country. However, the food basket has not escaped the effects of the Ukraine/Russia crisis. The global crisis has shaken Zambia’s food industry due to the disruption of trade from the Black Sea region, which has resulted in an increase in fuel prices by over 34%. This subsequently adversely affected the prices of various commodities and services (e.g., transport), including agricultural commodities.
Despite Zambia growing high levels of wheat, the shortage of foreign wheat has also affected the local food industry. The type grown in Zambia is hard wheat, and like any other hard wheat, it is not easy to produce pasta products or biscuits without a blend with foreign wheat or corn flour. However, hard wheat is still sustainable, and millers use it to produce flour to make bread, buns, rollers, cakes, etc., using 100% Zambian wheat.
AINFP approaches to address these challenges:
- Supporting the purchase of locally available raw material
To increase the availability of the supply of staple crops and reduce the barriers in supply and demand through market linkages, AINFP supports processors to develop inclusive sourcing strategies and put these new practices into practices. Sourcing raw materials locally and internationally can support the ability of processors to “bounce back” after the initial shock of a new crisis. Examples of this include
- Direct Market Linkages: Maisha Millers, based in Arusha, Tanzania, is a supplier of Maize Flour, Corn Flour & Corn Flour Powder. Maisha Millers was trying to source 100% of maize grains locally with smallholder farmer groups. Through the AINFP-facilitated farmer linkages, Maisha Millers have been able to purchase 120 MT of maize grains. The high quality of maize received has resulted in the processor extending the purchasing deal in the coming season with the Tunduma farmers association.
- Business-to-Business (B2B) Forums: A B2B Forum held in Ethiopia allowed for new linkages between food processing companies and Farmer Cooperative unions growing raw Teff, Wheat, Maize, and Soya beans. Bringing together these farmer groups and processors to enhance market linkages aims to lower the cost of production and increase the availability of nutritious food to consumers in Ethiopia. The one-day forum, attended by 20 Food Processors and 28 Farmer Unions, gave a platform for the attendees to present their conditions which included production capacity, raw materials needed, supply capacity, challenges, and possible solutions. The forum resulted in Teff, Maize, Wheat, and Soybean direct purchases of 7,320 quintals/100kg of grain worth USD 580,168 and the signing of 26 contracts/MOUs to supply an additional 438,000 quintals/100kg of grain.
- Linkages between buyers, suppliers, input providers, and financial institutions: Sunkist is a large wheat processor in Arusha, Tanzania, that has been greatly affected by the high cost of wheat. Sunkist Bakery imports 10-50% of wheat from other countries, which due to the effects of the crisis, has resulted in a need to purchase 70-90% of the wheat locally. AINFP Tanzania is addressing the sourcing challenge by exploring alternative raw materials and designing a sourcing model with multiple local stakeholders such as the buyer, smallholder farmer groups, financial institutions, and input suppliers.
Creating a platform for Business-to-Business market linkages has the potential to yield higher results in terms of the number of linkages, volume, and value of transactions between market actors, than the direct one-to-one market linkage approach. The tripartite agreements and other more complex relationships can be highly successful but take more effort than both one-to-one and B2B approaches, and to be successful, the processor needs to be financially healthy, willing to invest time and resources, and part of a longer-term strategy.
A farmer in one of the maize fields supplying Yumi Millers, AINFP Client in Zambia
- Product Reformulation
Recognizing the constraints in importing certain grains, many processors sought to reformulate products with locally available raw materials. New recipes can accommodate the local variety of grains, pulses, or other products that can be made into flour – however, the recipes and formulations also need to be tested on the processing lines and with consumers.
- Reformulation that leads to a more nutritious product: In Kenya, AINFP has supported two wheat-based processors, seeking to substitute at least 10% of wheat with cassava flour, which has a double benefit in bringing down the cost of product and adding additional nutritional benefits. This also offers cassava-producing farmer groups in Busia, Migori, and Homabay Counties a new market. AINFP in Kenya is also offering technical expertise in formulating more nutritious bread varieties enriched with flour from locally produced grains, nuts, and tubers, including millet, peanut, cassava, orange-fleshed-sweet potatoes, and arrow roots, among others.
- Reformulation to address cost constraints: Java Foods in Zambia is a manufacturer of nutritious (fortified) food products using locally acquired raw materials. Among a range of food products, Java is known for its fortified instant noodles, which require wheat in their production. Through experts from Partners in Food Solutions, AINFP worked with Java Foods to test alternative non-wheat flour like corn or potato flour for noodle production. The new fortified noodle product is currently in the production and testing stages before rolling out to the market.
Developing new product recipes that do not rely on wheat can support the development of a more nutritious product. Moreover, this can also be geared toward companies interested in new market channels – targeting the growing gluten-free consumer market. Given the length of time reformulating products can take, it is recommended to consider starting this early on with processors rather than wait for the next crisis to hit.
Milk testing in a processing lab at Shambani Milk, AINFP Client in Tanzania
- Cost Management and Efficiency assessments
Many processors in the region face an increase in costs due to the rising prices of raw materials and fuel. In addition to conducting cost management assessments at the processing facility to address the rising transport costs, AINFP is working with processors in the following ways:
- Optimizing Transport Routes: Aspendos Dairy is a large-scale dairy processor in Kenya that has been affected by the increased cost of fuel which has subsequently increased the cost of production and transportation. This has been done by the identification of aggregation centers for harmonized milk collection points as opposed to door-to-door collection from every farmer, which has further optimized the transport routes. In Malawi, the program has also worked with processors such as Kwithu Kitchen to work towards the reduction of transport costs by coming up with an optimized transport schedule.
- Outsourcing Transportation: Aspendos Dairy has also outsourced the transport function to third-party entities that have taken full responsibility of fleet management, and the cost of fuel, which has resulted in overall cost savings. This has sustained business operations and reduced the effects of the Ukraine/Russia crisis.
- Decentralizing and smaller transport methods: The AINFP team in Tanzania is working with local processors to minimize the production cost by adapting to more cost-friendly practices in which the processors who used large vehicles for distribution are now using motorbikes and tricycles and sourcing the raw materials from nearby suppliers.
All processors can benefit from cost-management assessments at the processing plant. Transportation is not always reviewed in these assessments. Given the rise of fuel prices, tools can be developed to support processors in adopting the most cost-effective method for bringing aggregated raw material to their processing plant and for distributing products once finished. New technologies such as e-bikes and solar-cooling motorbikes could be explored.
Production inventory taking at Delish and Nutri, AINFP Client in Kenya