Value Addition Practices In Coffee Cooperative Societies and Sustainability Of The Coffee Industry In Kenya

Abstract

Coffee is the most traded agricultural commodities globally. It plays an important role in the livelihoods of an estimated 25 million small scale coffee farmers under rural settings across the developing world who produce over 70% of the world's coffee. Kenya is the 24th largest producer of one of the best known single origin finest Arabica coffee globally, being grown by more than half a million smallholders, producing over 75% and marketed through the coffee cooperative societies. Kenya has a history of selling raw green coffee with very limited value addition practices leading to low gross earnings which does not favor sustainable coffee business. Despite the many interventions carried out by the government to streamline the coffee subsector, major one being liberalization of the coffee market, the situation remains grim as the target beneficiaries of these reforms have not fully embraced them. The purpose of this study was to assess the effect of value addition practices in the coffee cooperative societies on the sustainability of the coffee industry in Kenya. The study was guided by the following specific objectives: an examination of the effect of each of the various aspects of value addition practices; primary processing practices, secondary processing practices, final processing practices and selling strategies and how they determine the sustainability of the coffee industry, as well as analyzing the moderating effect of the regulatory environment on the value addition practices and the sustainability of the Kenyan coffee industry. The study was anchored on: Value Chain Model, the Resource Based View Theory, the Stakeholder Theory and the Institutional Theory. Based on the positivism research philosophy, the study adopted descriptive research design. From a target population of 525 coffee cooperative societies in the East and West of the Rift valley, a sample size of 295 coffee cooperative societies was drawn using stratified random sampling where the response rate was 82. 71 percent. The secretary managers were the key respondents. A cross sectional survey was conducted where the self-administered questionnaire was the main data collection instrument and was subjected to both the reliability and validity tests. Collected data was analyzed using descriptive and inferential statistics. The five hypotheses were presented and tested using multiple regression analysis and accepted at the 95 percent confidence interval. The study findings established that value addition practices had a positive and significant effect on the sustainability of the coffee industry in Kenya. Further, the regulatory environment did have a statistically significant moderating effect on the value addition practices and the sustainability of the coffee industry in Kenya. The study concluded that if the coffee cooperative societies engage in value addition practices, they would eliminate the middlemen in the coffee value chain, hence improving and securing their own position within the coffee value chain. In this way, the increased gross margins would improve the livelihood of the small scale coffee farmers boosting the sustainability of the coffee industry. The study recommended the need to adopt the value addition practices and the enactment of the relevant policies that would encourage the adoption of the coffee value addition practices in the coffee cooperative societies. This was believed would make the coffee farming not only a viable venture but also a sustainable business as it recaptures its "black gold tag".