The social enterprise Olivado Group, a major supplier of avocado and other edible oils, has recently joined the Business Call to Action (BctA) with a commitment to purchase avocados and other produce from 2,000 smallholder farmers by 2018, while providing them with training and support. This initiative is expected to increase each farming family’s income by an average of US$200.
Launched in 2008, the BCtA aims to accelerate progress towards the Sustainable Development Goals (SDGs) by challenging companies to develop inclusive business models that engage people with less than US$8 per day in purchasing power as consumers, producers, suppliers and distributors. It is supported by several international organizations and hosted by the United Nations Development Programme (UNDP).
Agriculture dominates Kenya’s economy and almost three quarters of the country’s workers make their living by farming. But nearly one half of its agricultural output is for the farmers’ own subsistence: Kenya’s small farmers have difficulty selling their products because there are few reliable markets. While in some years, brokers turn up with offers to buy smallholders’ produce, in others their crops simply fall on the ground and their trees wither. Without the ability to sustainably market their produce, many small farmers are trapped in a cycle of poverty.
New Zealand-based Olivado Group expanded into Kenya in 2007 in order to purchase avocados directly from small farmers to meet the fast-growing demand for its oil. In the process, the company created a unique inclusive business model involving a Fair Trade and Organic out-grower scheme of 1,500 Kenyan farmers – more than half of them women.
“Farmers in Kenya want a buyer to turn up every year and buy their produce while we need to ensure a consistent supply of Organic and Fair Trade avocado oil,” said Gary Hannam, CEO of Olivado Group. This initiative represents a ‘win-win’ for our company and small farmers, providing them certainty of income while guaranteeing us a high-quality product. And Because our product is organic, there is no pressure put on farmers to spend lots of money on chemical fertilizers or other agricultural inputs.”
Olivado establishes relationships with farmers by agreeing to buy at least 95 percent of their yearly avocado crop. It also provides agricultural training and support in obtaining Organic and Fair Trade certifications. While farmers are free to sell their products to other buyers, their consistent sale to Olivado increases the price they are paid for their fruit. As these farmers sell more of their produce to Olivado, they use their additional income to plant new avocado trees as well as purchase cows, new houses, electricity, wells and water tanks.
Increased demand for its products has indeed encouraged the company to scale up beyond Kenya and reach out to small farmers in Tanzania.
“Through its inclusive relationship with 1,500 Kenyan smallholder farmers, Olivado has made an impact on over 8,000 Kenyans,” said Paula Pelaez, Programme Manager of the Business Call to Action.” We are thrilled about the company’s pledge to expand its model across sub-Saharan Africa, providing a market to thousands more small farmers.”
By 2021, Olivado aims to work with over 7,000 smallholder producers in Kenya and Tanzania. There are also plans to sell fresh fruit, allowing the company to command higher premiums and pass them onto these farmers. In addition, the company plans to launch a 1.5 megawatt biogas production facility in the near future.
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