Identifying viable new markets and enabling vulnerable smallholder
farmers
to access them is one way to build their incomes and economic resilience. At the
Common Fund for Commodities (CFC), we
believe there is an opportunity to achieve this by harnessing the potential of
the nutraceuticals sector.
Nutraceuticals are food, drinks
and food-supplement products that are believed to have health-enhancing
properties. They include fortified cereals, multivitamins, fish-oil supplements
and ‘superfoods’ such as blueberries and spinach, alongside many more products —
that together form a rapidly expanding market.
In 2021, the global market for nutraceuticals was valued at US$454.55
billion;
and by 2030 that is expected to rise to US$636.6
billion.
At CFC, we believe there is an opportunity for even the poorest smallholder farmers
to benefit from this demand.
In particular, there is potential for landlocked least-developed countries
(LLDCs) to reduce their reliance on exporting raw commodities by developing
higher-value nutraceutical products. 81 percent
of
LLDCs are classed as
commodity-dependent,
which makes them vulnerable to economic volatility and climate
shocks.
Diversifying their exports is one part of the solution to a complex challenge.
As we identified in a joint report with
UNCTAD,
many of the commodities used to make nutraceutical products — such as tropical
fruits and berries, oils, cereals, nut and grains — are grown in LLDCs. The
right support could enable farmers and agribusinesses in those countries to tap
into this market.
The report highlights examples of the potential opportunities on offer. For
instance, teff is a grain rich in calcium, protein, vitamin C, iron and
fibre; it is also gluten free and is already used in many gluten-free products in the
US. Having been cultivated in Ethiopia for thousands of years, the grain is
used locally in foods such as injera — a traditional flatbread. But teff
producers in Ethiopia have been unable to break into higher-value, international
markets for several reasons — including inefficient manual-harvesting methods
and difficulties meeting required quality standards.
To the west, Burkina Faso grows the raw ingredients to benefit from trends
such as the increasing popularity of shea butter — which is derived from
shea nuts. Currently, shea butter’s use as a skincare product accounts for just
8 percent of the global shea market; but its share is growing — driven by
companies such as
L’Occitane,
Estée Lauder
Companies
and The Body
Shop.
They are developing direct relationships with farmers and paying a premium,
roughly double the local market price, in return for adherence to organic and
sustainability standards. The question is, how can this progress be accelerated
to make sure the country is first in line to benefit from shea butter growth?
Similarly, across the Atlantic in Bolivia, quinoa is a highly
nutritious protein that has long been a staple food. It is firmly established as
an alternative to wheat and other grains; and Bolivia and Peru are the world’s
two largest producers. But there is potential to expand its share of the export
market.
Each case is different and every LLDC has its own unique challenges. But the
report identifies several key steps they and other countries can take to benefit
from the potential of nutraceuticals, including:
-
Create a business-friendly environment – Encourage foreign companies to
invest and local entrepreneurs to grow their enterprises by reducing the
complexity of running a business and investing in local infrastructure. As
major brands are demonstrating in Burkino Faso, they have the skills and
links to help smallholder farmers access international markets. Small and
medium enterprises (SMEs) are the key drivers of an economy and need to be
nurtured.
-
Lean on technical assistance – Partner
with expertise that will work with agribusinesses and smallholder farmers to
enhance how they operate in areas such as crop management, diversification
and climate-smart growing
techniques.
This will strengthen their climate and economic resilience, and help them to
meet the sustainability demands of the nutraceutical sector.
-
Support traceability and certification – Consumers are increasingly
conscious about the provenance of the products they buy — particularly when
it comes to health foods. They expect them to be produced in an
environmentally and socially sustainable way, which means credentials such
as organic certification are vital if smallholders and the agribusinesses
they work with are to break into these lucrative
markets.
Many traditional smallholder farmers do not use chemicals, so they are
already technically organic. But proving this and gaining organic
certification is an intensive and time-consuming process. By investing in
systems and support that enables them to achieve crucial certifications, the
door to these markets opens.
-
Expand local processing capabilities – As we’ve noted, many LLDCs export
raw commodities — which means they fail to capture a greater share of the
value of the end product. In some cases, there is an opportunity to work
with local agribusiness to bring processing capabilities closer to where the
commodities are grown — which leads to higher and more secure incomes for
smallholders.
Similarly, investors and partner organisations can work with farmers to improve
their productivity — for example, by mechanising labour-intensive activities
such as teff harvesting.
These are just some of the steps that could be taken by brands, impact investors
and governments to help smallholder farmers in LLDCs benefit from the
nutraceuticals market. Implementing them takes long-term commitment from
investors, alongside private and public sector support to drive change on the
ground.
Overcoming commodity dependence is a complex challenge. But through our work
investing in agribusinesses that accelerate local development and boost
smallholder incomes, we have seen the benefits of supporting SMEs in LLDCs in
accessing higher-value markets.
For an in-depth look at the potential of the nutraceuticals market across six
LLDCs, read the full UNCTAD-CFC report
here.
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Sheikh Mohammed Belal is Managing Director at the Common Fund for Commodities — which offers a range of financial and technical instruments of support to meet specific needs of SMEs/enterprises, cooperatives and institutions along the entire commodity value chain in its member countries.
Published Oct 30, 2023 8am EDT / 5am PDT / 12pm GMT / 1pm CET