Inequality and poverty in the global agri value chain

Why does it exist?

It struck a chord with me, when a university professor from my time in the United States, mentioned how sad he felt that very little of the value of highly regarded Sri Lankan agri-products, such as Ceylon Tea and Ceylon Coconut products, went upstream to the farming and processing communities. As the only millennial, first-generation entrepreneur in the Sri Lankan coconut manufacturing and export industry, I can tell you that the number one reason for this uneven distristribution is that much of the value margin (sometimes in excess of 95%) of the retail price of agri-products are held overseas by the importing white label business owners where the market access, consumer power and the populous exist. The inequality is so high that I believe just a few percentage points shared upstream with the farming and the processing workers will double Sri Lanka’s per capita income levels, and uplift millions out of relative poverty.

Coconut Crushing by Coco House Workers at Ceylon Exports & Trading
Experienced coconut artisan preparing to dehusk the coconut

As a globalized individual, myself, having lived in several countries growing up and befriending people from around the world, I do not entirely blame the importers of the multinational world for maximizing shareholder value and perhaps unwillingly squeezing the workers at the origin. Sri Lankan exporters of these products are just about content to have made a fair return on their investment, but have very little flexibility to increase wages of their workers and pay top dollar for their farming and supplier communities. This approach has been myopic and self-serving. Instead of emphasizing on the provenance and innovative aspects of authentic Sri Lankan agri-products, creating global Sri Lankan owned brands and uplifting all our communities through shared value just like France has done with wine, Switzerland has done with cheese and New Zealand has done with Manuka honey, we have allowed our products to be commoditized. Whereas, the multinational business owners have earned the lion share of the margin of these products through brand marketing and controlling market access.

This problem has been exacerbated by having a segmented supply chain. In some Sri Lankan agri-products such as spices, there are generally six parties – the grower, the processor, the packer/exporter, the brand owner/importer, the distributor and the retailer (offline and online). Almost always, the ones closest to the consumer have demanded the higher share of the retail margin through low transparency and, at times, cut throat negotiation tactics. To put salt to the wounds, the ones at the front end have even requested those upstream – exporters, processors and growers – to prove their ethical sourcing practices by incurring the costs for certifications such as “fair trade,” whilst increasing buying prices marginally or doing so only when the competitive forces allow for it. By duping the social conscious consumer into believing that their products are ethically sourced because of a certification, the private label brand importers, distributors and retailers have managed to keep an even higher share of the profits, whilst allowing very little to trickle down to those working upstream.

If there is a harvest issue in any given year or if the local exporters do not bend to demands on price, the multinational brand owner/importer looks to leave to another origin or plays the local exporters against each other in a downward spiraling price war. This has evidently been the case for the Sri Lankan garment industry, tea industry, cinnamon industry and the desiccated coconut industry. For example, although more than 50% of black tea globally consisted of Ceylon Tea fifty years ago, the multinational brand owners continuously reduced the Ceylon Tea portion of the blend overtime (now to around 5%) and increased the portion of other origins in order to control prices at the expense of quality. This has led to stagnation in the value held locally, and consistent plantation worker strikes.

What is the solution to address this problem of inequality, unfairness and poverty?

Leading with authenticity, fairness and transparency

This system needs to desperately change. As a 20M population economy with a low per capita income, Sri Lanka cannot expect to change much by relying on the local consumer. Sri Lanka also cannot expect much change by pushing government-imposed wage hikes or other regulatory mechanisms on the local grower, processor and packer/exporter parties. The rebellion needs to start at the micro level with a global mindset. The global social consumer who enjoys authentic products directly from the root needs to be accessed.

 

Our company, Ceylon Exports & Trading, has embarked on that journey with the first and only trademarked  “tree-to-table” Sri Lankan global coconut brand – Coco House. Our trademark signifies our positioning as direct operators of estates and factories, providing unprecedented authenticity and transparency in the coconut sector.  More than 91% of our income goes to the farming, processing and supplier communities, and each of our workers earn at least 30% above the national median income. As we grow our brand, we strive to be a role model example by uplifting our farming and processing community wages to a minimum of 2x the national per capita income levels; whilst, delivering on our promise of authenticity.

Coco House authentic, transparent and fair approach on raising incomes across the coconut supply chain
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