PROCUREMENT BEHAVIOR OF THE FRUIT AND VEGETABLE INDUSTRY IN SRI LANKA

Abstract

The fruit and vegetable industry is considered to have the potential to develop backward linkages towards small farmers and so accelerate crop diversification in the paddy dominated non-plantation agriculture in Sri Lanka. Therefore, it may be instrumental to have some understanding of the type of backward linkages used by the industry to procure raw materials, the associated constraints and the industry’s perception of small farmers as suppliers. This study utilized data collected from ten fruit and vegetable processors, seven exporters and one of the largest supermarket chains in Sri Lanka. Spot markets, contract suppliers and contract farmers were the three major procurement channels of the fruit and vegetable industry. The industry considered contract farmers as a reliable source of raw material supply. Moreover, the industry had a positive perception of small farmers’ ability to be contract-farming partners to supply industry requirements. However, lack of proper organization models to organize small farmers was seen as a major constraint resulting in high cost of establishing and managing linkages with small farmers.