Developing agri-food industry in Nepal : a value chain management perspective

Abstract

In Nepal, the agri-food industry forms the backbone of the economy and is a source of livelihoods for the majority of people. Typical of an agriculture-based least developed country, the Nepalese government and its development partners have been the important stakeholders supporting agricultural development for decades. For most of this time, a production-focussed and farmercentred approach has been the dominant developmental paradigm, however poor performance of the Nepalese agricultural industry as a whole and subsequent poor returns to farmers have driven these stakeholders to explore alternate approaches to improving agricultural performance and incentivising actors of the agri-food industry. Since performance of the industry and returns to farmers are determined by the collective performance of those involved in production and delivery of agricultural products to final consumers, there is a growing realisation in both theory and practice that employing a whole-ofchain approach, such as a value chain (VC) approach, can be rewarding to consumers, chain actors and other stakeholders. Consequently, the Nepalese government and its development partners are embracing the VC approach to agri-food industry development in a number of donor-funded agricultural projects. The application of VC approaches in developing countries is challenging, as evident in the fact that there has been no uptake of the approach in the Nepalese government’s regular agricultural programs – even though donors are employing this approach. One of the key barriers is that chain actors operate independently with little or no integration beyond their boundaries. This mitigates against working together to realise the benefits of collaborative value creation - as VC theory would suggest is possible. This thesis addresses the problem of bringing actors and stakeholders together to develop competitive VCs in the Nepalese agri-food industry. Agri-food VCs operate under the complex and uncertain environment of agriculture and involve actors from different parts of the chain. Developing and managing VCs as collaborative structures involves achieving alignment of the multiple perspectives of chain actors. Thus, this study adopts an exploratory approach within a constructivist research paradigm. Based on case studies of existing fresh tomato chains, the research employs a VC methodology and uses mixed methods to gather and analyse both qualitative and quantitative data. Primary data is drawn from walking-the chain observations, five focus group discussions, surveys of 394 consumers, 110 semi-structured interviews and an interactive workshop. SPSS and NVivo software are used to analyse quantitative and qualitative data respectively. Segmentation analysis reveals four distinct segments of tomato consumers in Kathmandu, although tomatoes were marketed with little product differentiation. The largest (41%) and most valuable consumer segment placed greatest importance on credence attributes and least importance on price, suggesting that these consumers would pay a premium price for credence attributes. Consumers in the other three segments were price-centric and lower value consumers. Value chain analysis of a network of existing chains serving these consumers found that existing chain processes were not aligned to the value preferences of high-value consumers. Findings suggest that chain actors have opportunities to increase consumer value, and thus return, by integrating into VCs with strategies of value creation and cost reduction targeting high-value and low-value consumer segments respectively. The VC analysis also found poor levels of consumer orientation and weak VC capability among actors, suggesting that actors in existing chains were under-prepared for VC integration without stakeholder support. Despite having enabling policies and programs for VC development, key stakeholder support to these actors was neither chain-based nor helpful in developing consumer orientation and VC capabilities in actors. An evaluation of a pilot-scale VC development initiative employed as a part of the research found poor implementation of planned VC development activities, verifying that actors and stakeholders in case study chains were not yet ready for VC development. Thematic analysis of qualitative data from the evaluation found that VC understanding, compatibility, capability and championship are four key forces of VC development in the study context. Presence (or absence) of these forces were instrumental to the development (or lack of development) of VCs. The critical stumbling factor for VC development was a lack of VC understanding among government departments. A VC collaboration framework is suggested which could facilitate actors and stakeholders to remove constraints of VC development present in the research context. The contribution of this research is twofold. Firstly, it successfully employs a VC methodology which links consumer perceptions with VC analysis to design VC development strategies in a developing country setting. Secondly, it contributes to literature and practice by suggesting that developing VC understanding among stakeholders and actors is the primary intervention for developing VCs in Nepal. The VC collaboration framework developed in this study can be used and further tested in research to develop agri-food VCs in other developing country contexts.