Box 6: Developing a Market Through Personalized Trading Networks

For the past quarter century, one of the core components of Kenya's expanding horticultural has been the export of needy two dozen "Asian vegetables. (including chilies, karela, okra, dudhi, etc.) to the United Kingdom to serve that country's expanding Asian minority communities. development of this trade was built upon a series of highly personalized trading relationships, quite distinct from the mainstream U.K. fruit and vegetable marketing system.

Beginning in the 1960s and continuing through the 1970s, there was a rapid expansion in the UK's population of individuals of South Asian ethnic origin. Fueled by immigration as well as relatively high birth rates, this population reached 550,000 in 1971 and over one million by 1980. Exhibiting a preference for certain traditional foods and lacking acceptable local substitutes for many these foods, there developed a large tin-met demand for a wide range of fresh vegetables which, for agro-climatic reasons, could not be grown locally. An import trade in "Asian vegetables first emerged in the early 1960s when several small-scale Indian merchants began receiving produce consignments from India and selling this produce from the parking lot of Heathrow Airport. Within a few years, Kenya would replace India as the primary "Asian vegetable" supplier. Kenya's entry into this market was eased by the fact that most of that country's leading produce exporters were Asian owned family companies with experience in the production and trade of "Asian vegetables ".

By the early 1970s, some of the parking lot importers acquired vans and began making deliveries to London-based retailers; others developed wholesale distribution centers nearby to the primary mainstream wholesale markets. Still, the trade remained small and the market undeveloped, especially outside of London. This would change in 1973, when a senior partner in Kenya's largest fresh produce company emigrated to the U.K. anti established his own import/distribution company.

This firm would re-shape the 'Asian vegetable' market by developing a network of secondary wholesalers and retailers within London and distribution networks within the major cities id the Midlands. The firm's family-affiliated supplier in Kenya responded to the market opening by rapidly expanding supplies. This integrated export - U.K. distribution operation soon became the leading actor in this market, setting the standards for quality and strongly influencing the levels of import end wholesale prices.

By the late-1970s, Kenya's other leading produce exporters also developed highly personalized, long-term trading arrangements with selected importer/distributors in the U.K. In some cases, the trading firms were linked by family ties; otherwise, connections: were made through mutual friends and business associates. Both on the Kenyan and U.K. sides, the primary actors in this 'Asian vegetable' trade remained small-to-medium scale Asian-owned family operations. Whether or not there were family ties, the typical framework for trade was seasonal contracts specifying the range of products to be traded, required quantities and delivery days, negotiated fixed prices, and payment arrangements. Most Kenyan exporters developed and maintained trade links to buyers based in several . different cities so to achieve wider distribution and minimize direct competition among their buyers.

These personalized and long-term trading arrangements facilitated improved information flows, lowered exporter markets risks and buyer procurement risks, reduced the risks faced by - exporters of importer payment failure or false quality claims, enabled the: firms to bypass exchange controls and otherwise take advantage of currency fluctuations, and enabled the firms to undertake joint efforts to test and promote new commodities. Secure exporter-importer ties provided the confidence to exporters to expand their trade and diversify their product range and the confidence of importers to search out new distribution change, including those serving multiple-chain retailers.