Growing KFC: When exploiting markets may exploit farmers

Value Chains

Growing KFC: When exploiting markets may exploit farmers

By Anonymous (not verified), February 3, 2014
Kentucky Fried Chicken is expanding in Africa. That could benefit local farmers, if aid organizations tread carefully. Photo: Kyla Yeoman/Mercy Corps.

Kentucky Fried Chicken has 1,000 restaurants in Africa and more on the way. African chicken farmers and those who grow chicken feed could benefit greatly from this huge new buyer. But earlier this month, independent news magazine Mother Jones cautioned that the aid organizations connecting farmers to KFC may actually be setting them up for disaster.

The problem? KFC is easily the largest U.S. fast food chain in Africa and looking to source more of its ingredients locally, but their strong hand may not be in farmers' favor.

“Why would you want to be paying the cost of … shipping products, when you can actually source it locally?” said Keith Warren, managing director of KFC Africa in How We Made It In Africa. “Most of Africa is blessed with enormous agricultural wealth, so therefore it is a matter of unlocking that and developing the technology to meet our supply demands.”

But the fast food giant reports that the lack of high-quality local ingredients, especially chicken, hinders its expansion. To sell to KFC, commercial chicken producers in Africa need high-protein feed, especially soy, for chickens’ healthy growth and development.

Previously not a popular crop in Africa, soy is now in demand.

Recognizing a potential cash crop for local farmers who could sell to the chicken producers, USAID and the Gates Foundation decided to offer training in soy production and storage. They also connected farmers to major feed processing centers, in the hope of raising farmers’ incomes. The aid organizations are spending millions on these programs. The Gates Foundation is funding an $8 million project in Mozambique and Zambia. Also in Zambia, USAID is spending $24 million to introduce several new crops, including soy.

The programs are billed as a win-win solution, and the Gates Foundation reports that the incomes of participating farmers are rising.

Over time, however, KFC may benefit far more than the farmers themselves.

To produce for a fast food chain like KFC, farmers must commit their limited resources to meeting standardized measures of quality. Soy has few other buyers in Africa, so KFC will be able to set prices and control the buying market. As seen in the U.S., demand for single, standardized crops can put smallholder farmers out of business. The push for low prices and high and consistent output can lead to the consolidation of small parcels of land into big commercial farms.

Meanwhile, although farmers may earn more, it's unlikely they'll be able to afford the fried chicken they help produce. In sub-Saharan Africa, fast food like KFC is a status symbol. It's more expensive than local fare and not an affordable option for struggling farmers.

KFC’s effort to source more of its ingredients locally is great. But it illustrates the complexity of building new markets. Building a soy industry that provides stable income for African farmers, and a stable supply chain for multinationals, is not clear-cut.

Mother Jones’ critique puts aid organizations and donors in a double-bind: an underexploited market is a great opportunity for local farmers, but harnessing it may, in turn, exploit the farmers themselves.

So is there a better role aid organizations can play?

Ideally positioned to be facilitators, aid organizations can bring market players from across the supply chain--farm to restaurant--into the same room. They can provide a platform where farmers’ interests and voices are recognized and roadblocks in the market are resolved by the players themselves. This is essential to building a strong market that will benefit all long after the aid organization leaves the conversation.

For example, instead of injecting millions of aid money into training programs, an aid organization can encourage a major buyer like KFC to make the investment in farmers’ education, since the company will ultimately benefit from it. Likewise, farmers should have the opportunity to ask how long KFC plans to buy soy and negotiate fair prices. Will KFC stop buying after four years, for example, and leave farmers out in the cold?

While KFC and the emerging African soy industry is just one case study, KFC’s leading role in Africa’s growing fast food culture makes it a role model for how the global food industry develops relationships with smallholder farmers. Getting the relationship right would make KFC a true business leader and provide long-term financial growth for thousands of farming families.

Curated news and insights about innovative, market-driven solutions to poverty explored through news, commentary and discussion.

Learn more ยป

Global Envision newsletter