Context and background
Cargills Ceylon Ltd (Cargills) is a supermarket chain called Food City in Sri Lanka. It has improved the efficiency of its operations by purchasing directly from producers, increasing the efficiency in the chain, thereby increasing its own income as well as the price paid to smallholders. Its intervention in the passion fruit chain provides an example of how Cargills improved the efficiency of the chain resulting in considerable benefits to the producers and increased sales of passion fruit through its retail outlets.
In a normal fruit and vegetable chain in Sri Lanka (see Figure 1) there are many actors who usually tend to act in their best interests rather than operating as a coordinated chain, resulting in high operating costs. Some 30% of the market value accrues to the middlemen, post-harvest losses amount to about 40% and only around 30% of the final value accrues to the producer.
In the generic chain there are many problems. Usually low quality planting material is used. In addition, premature harvesting and poor post-harvest practices contribute to inferior product quality entering the markets. Fresh produce is traditionally transported to distant primary processing plants or markets, and the quality deteriorates en-route. Due to the inconsistencies and weaknesses in the supply chain the processing industry has been reluctant to invest in machinery, plant and equipment. In reverse, the weak linkages in the supply chain have also led to low on-farm productivity making farmers reluctant to invest on their farms (to improve quality). As a result the end product is not competitive in the open market.