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Despite this, the cold chain system is still weak or nonexistent in some countries. According to the World Cold Chain Summit, only about 10 percent of perishable foods worldwide are refrigerated.
The growth of cold chain capacity in developing regions varies from one country to another. In most emerging markets, the cold chain growth is fragmented, usually concentrated in the urban centres and near transport terminals, such as airports, where exporters are based.
Most of this cold storage capacity for fresh produce principally consists of large pack-houses with cold storage rooms. In rural areas most farmers in the first mile of distribution lack the infrastructure required for developing the cold chain. The Kenyan flower industry has created a strong strategic sector Fp120 current economic state advanced cold chain systems.
However, the cold chain for other temperature-controlled foods, such as fruit and vegetables, has not yet advanced to the same level . According to the World Bank, the sector has expanded with ups and downs and numerous changes in the commodity mix, the role of the state, the types of marketing institutions involved, and the characteristics of the participating farmers.
The growth of the Kenyan fruit and vegetable sector is directly linked to the increasing involvement of smallholders in the sector. In the early s, no more than a few hundred smallholders were producing for the fresh fruit and vegetable export market, accounting for just percent of the total volume.
Many out-growers continued to sell their crop to the local fresh market where they could fetch better prices, and not be discriminated against for the quality and quantity levels, which were not suited to export markets and multinational processors.
The fruit and vegetable sector started to take off in the late s and s, driven by the growth in exports of fresh vegetables and to a lesser extent, fresh fruit.
The diversification into fruit and vegetables was partly motivated by the fall in world commodity prices, such as coffee and tea, and challenges with regards to flower production, forcing many farmers to look for alternative income-generating crops .
Most of the Kenyan consumers were used to buying fruit and vegetables on daily basis in open-air markets with no value-added such temperature-controlwhere prices are affordable for local low-income consumers.
The cold chain configuration The cold chain for the Kenyan fruit and vegetable sector started to develop as export demand increased.
As a consequence, its cold chain infrastructure grew in the vicinity of exporter locations, principally around Nairobi airport.
At the same time, export production has been concentrated in about two-dozen large-scale farms, which account for 75 percent of the industry.
The way forward The growth of the cold chain in Kenya is facing an important inflection point, with significant opportunities and challenges for the future. Kenya has become one of the fastest growing economies in Sub-Saharan Africa, with significant and rapid growth in the last five years.
It has a stable macroeconomic environment, a growing middle class, and serves as the business, logistics and financial hub for the region. Agriculture remains the backbone of the economy and the major contributor to the GDP. But at the same time, it has been argued that smallholders are being squeezed out of export production because of the difficulty in ensuring compliance with food safety and quality requirements imposed by foreign markets.
These requirements are leading exporters to grow their own produce or purchase from large-scale commercial farms. So what are the current challenges and opportunities of cold chain in the horticultural sector in Kenya? Products include green beans, sugar snap peas, snow peas, okra, chili, eggplant, avocado, mango, pineapple, passion fruit, bananas, and strawberries.
Smallholder farmers play important roles in fruit and vegetable production in a number of key value chains such as green beans, sugar snap peas, and increasingly in avocados. Direct flights to the USA starting in are expected to open up new channels. Kenya has more than exporters of fruit and vegetables, most of them small and medium-size companies.
A number of exporters are investing in processing facilities closer to the point of productionand not limiting them to urban areas and the locations of transport terminals. The formal local food retail sector supermarkets is growing, due to the rising household incomes.
European consumers, like those in other industrialized countries, are demanding new forms of prepared fresh fruits and vegetables, which can include washing, peeling, cutting, and packaging in small units, such as pre-mixed vegetables.
These activities are labor-intensive and they increase the opportunities for adding value to exports.
Smallholder farmers bear the burden of these losses. High losses represent a serious challenge even for major exporters and their out-grower networks. Frequently, formal retailers struggle to stock sufficient high-quality raw produce that should be abundant in Kenya. Larger exporters are moving away from out-grower networks, due to the unreliability of quality and volume.
There is limited access to finance for agribusinesses to acquire cold storage and processing machinery. Kenya largely lacks third-party logistics 3PL providers for cold chain facilities and transport key criteria of industry maturity for the GCCA.
The most commonly used cooling solutions are brick and mortar facilities, that can present problems for obtaining food safety certifications. Most use inefficient energy systems that bring a number of hidden operational costs.
There is a lack of infrastructure, such as roads and reliable electricity grids, which present significant challenges for investment in cold chain, especially in rural areas.Second District Highlights is a regional supplement to Current Issues in Economics and Finance.
Articles have covered a range of topics pertaining to the economy of the Federal Reserve System's Second District, including fiscal conditions, housing and credit markets, growth and productivity, and employment.
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