Growing KFC: When exploiting markets may exploit farmers

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 …

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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.

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Being frugal really isn’t that hard

This reader story comes to us from Bill Fay, who is a writer for Debt.org, where he is known as The Most Frugal Man in America. He spent 21 years in the newspaper business and eight more in television and radio, dealing with college and professional sports, then seven forgettable years writing speeches and marketing materials for a government agency.Some reader stories contain general advice; others are examples of how a GRS reader achieved financial success or failure. These stories feature folks with all levels of financial maturity and income. Want to submit your own reader story? Here’s how.I took my wife to a local diner the other night, and things got a little cranky on the ride home. She had a Cobb salad and …

via Get Rich Slowly – Personal Finance That Makes Sense.:

This reader story comes to us from Bill Fay, who is a writer for Debt.org , where he is known as The Most Frugal Man in America. He spent 21 years in the newspaper business and eight more in television and radio, dealing with college and professional sports, then seven forgettable years writing speeches and marketing materials for a government agency.

Some reader stories contain general advice; others are examples of how a GRS reader achieved financial success or failure. These stories feature folks with all levels of financial maturity and income. Want to submit your own reader story? Here’s how.

I took my wife to a local diner the other night, and things got a little cranky on the ride home. She had a Cobb salad and a Diet Coke. I had the Classic Chicken Sandwich and water. We split a dessert. The bill came to $11.51.

“I think they overcharged us,” I said as we got back in the car.

No response.

We don’t go out much, and complaints about how much it costs are the primary reason. I don’t like restaurant prices, and she doesn’t like hearing about it. As we pulled in the driveway, she glared at the recycle bins and garbage can she asked me to take in before we left, and decided she had heard enough.

“Who cares about the bill?’’ she asked, slamming the car door. “Just get that stuff in off the driveway.”

Translation: “You got off cheap. Again! Give it a rest.”

Frugality comes naturally

I do get off cheap and always have. It comes naturally. I’ve never taken a finance class. I don’t clip coupons. I have never – EVER! – made out a budget, but I am frugal. I get more with less than anybody I know.

I do it primarily with the barter system. I was a sportswriter in a previous life, which gave me access to tickets to a lot of events people were dying to see. When word spread that I could get someone in to see games all over the country, a bartering business was born.

I sat in the lower bowl at Super Bowls, Final Fours, national championship bowl games and NBA Finals – all without ever paying for a ticket.

I skied for a week in Colorado – airfare, boots, clothing, room, food and lift tickets included – for under $750. Three times!

When I would come home from a week-long fishing vacation at a beach-side condo in Florida that cost me under $300 – gas, food and bait included – my neighbors would scream: “YOU ARE SO CHEAP!”

My response? “Thank you!”

I provided a service that didn’t cost me anything and got rewards that would have cost me plenty. Calling me cheap was a compliment for what I was doing.

Unfortunately, most people don’t see it that way. They hate being called cheap. It is an insult to their financial standing, not to mention a stain on their social reputation. They like being in the race to keep up with the Joneses. They like bragging about it even more.

I have a neighbor who boasted about the five grand he spent on his last vacation and the $500 anniversary dinner he and the Mrs. had and the 800-square-foot addition he put on his house a year ago — and then a “For Sale” sign went up in his yard. He lost his job and the next thing you know, the bank was foreclosing.

Scrimping is my specialty

He was not alone. Keeping up with the Joneses can be costly. RealtyTrac, a company that tracks foreclosures and defaults, says there have been 14.4 million foreclosure filings since 2007 because people at all ends of the economic spectrum couldn’t make their mortgage payments. Since 2011, RealtyTrac says there have been 231,000 foreclosure filings for homes valued at more than $500,000.

Missing a few mortgage payments isn’t the only place in the economy where we’re still courting financial trouble. A survey by the American Payroll Association said that, in 2010, 72 percent of Americans report living paycheck to paycheck. Back then, the recession was the biggest factor. But now it seems that credit card debt and student loans are the primary reasons. We get by, until something unexpected comes along.

What happens then? You scrimp … or they take your home.

Scrimping is my specialty. I was so good at it in college, they nicknamed me “No-Pay Fay.” I’m a little older and more refined now, so I prefer being addressed as “Frugal Man.” In fact, my friends at dictionary.com identified me perfectly when they defined frugal as: “… prudently saving or sparing; not wasteful.”

I definitely am sparing and seldom waste anything. It’s how I can live in a neighborhood full of Joneses and smile when they make fun of my “sparing, not wasteful” ways. It’s also how I can take Mrs. Fay out to dinner for $11.51 and think I overpaid, which I did.

Food was half off at the neighborhood diner that night, but when I checked the receipt, they had charged me for a Coke. I never order anything but water when I eat out. That was $1.50 that shouldn’t have been there.

Normally, I get mad and go back to raise hell, but it was cold that night. And I still had to get those recycle bins and garbage can in, so I did as asked and gave it a rest. Sometimes it’s more prudent to make Mrs. Fay happy than try to win a frugal fight.

Reminder: This is a story from one of your fellow readers. Please be nice. It can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are. Unduly nasty comments on readers stories will be removed.

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