Producer-Processor Relationships: The Case of Dairy Supply Chain in Addis Ababa and Its Surroundings

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Addis Ababa University


This study is an exploratory research on the nature of the relationship existing between farmers and private processing companies operatingwithin the dairy supply chain of Addis Ababa and its surroundings.The objectives of the studywere: to give an insight into the nature of the relationship between the two supply chain actors;to identify the challenges they encountered during transactions; and to find out the strategies they used in order to cope with the challenges they faced.To achieve these, the study examined the individual issues of selected processors and farmers, and the effects of these relationship issues on the profitability of the dairy business sector for both actors.The approach of the study was qualitative. The method of data collection employed was a semi-structured interview with both open and closed-ended questions. The population of processors existing in Addis Ababa was first identified and then willing respondents were chosen from amongst them. Purposive sampling method was used in order to select the farmers that have abusiness relationship with the client processors. Content analysis of the interview transcript was used as a method of data analysis.The findings of the study show that both processors and farmers encountered problems related to lack of long-term written contract, market power imbalances, quality issues and lack of infrastructure. Processors adopted strategies of negotiation to tackle contract-related issues, training and awareness-raising to reduce quality-related issues, and allocation ofadditional fundsfor solving the infrastructure problems. On the other hand, producers usedmultiple-selling strategies;they also became members of a cooperative and formed a union in order to cope with price-related challenges.The study has concluded that despite the adoption of such strategies by the actors, the sector has not grown as much as it should have been during the last three decades. The study has also concluded that challenges related to land, infrastructure, production capacity, product quality, supply chain management, marketing, finance and poor policy environment were still hampering the rapid growth of the sector.The study recommends thataconcerted and comprehensive policy intervention is necessary to address the challenges beyond the control of the supply chain actors and to improve the performance of the dairy sub-sector. It also recommends that more in-depth studies need to be conducted to identify existing policy gaps, explore best practices in other countries for adoption in Ethiopia and identify more viable strategies and approaches that actors in the dairy supply chain can adopt to emerge as successful operators



Dairy business, supply chain, processors