Factors Influencing Choice of Market Outlets for Unprocessed Tea by Small and Micro Tea Agri-Enterprises in Chesumei Sub -County, Kenya

Abstract

Formal market outlets are more profitable than informal ones. However, small tea agri-enterprises in Chesumei Sub County prefer selling their unprocessed tea to informal market outlets. Empirical evidence on what motivates these agri-enterprises to sell most of their tea to these outlets is scanty. The general objective of this study was to contribute to increased tea production and income through the choice of efficient and effective market outlets by small and micro tea agri-enterprises. Specific objectives of the study were to; characterize the market outlets available for small and micro tea agri-enterprises, socio-economic and institutional factors influencing the choice of market outlets for unprocessed tea, and comparing the profitability of formal market outlets with informal market outlets among small and micro tea agri-enterprises. A multistage sampling procedure was employed, and 384 respondents interviewed using a semi-structured questionnaire. Data were analyzed using descriptive statistics, the Multinomial logit model, and Gross margin analysis. Results show that tea agri-enterprises choose the market outlets based on services offered and institutional arrangements. On credit, payment had the highest frequency for farmers selling to Kenya Tea Development Agency (KTDA) and private companies (99% and 98%, respectively), contrary to agripreneurs, which had a high frequency on cash payment (100%). Household size, experience, group membership, and access to information significantly influenced the choice of market outlets for unprocessed tea. Formal market outlets are more beneficial because of a higher gross margin rate of 13% than informal market outlets having a gross margin rate of 1%. The study concludes that; on-credit payments attracted farmers who choose the formal market outlets, access to supply of input and credit access while cash payments and none strict plucking guidelines and standards mainly attracted those who decided the informal market outlets. Access to market and production information influenced formal and informal market outlets for unprocessed tea positively and negatively, respectively, and formal market outlets have higher gross margins than informal market outlets for unprocessed tea. This study recommends that KTDA and private companies have contractual arrangements where part of the sale proceeds are paid in cash mode to attract those selling to agripreneurs. It further suggested that the County Government of Nandi improve on extension services to reach all the farmers. The findings help guide smallholder tea farmers in information on the most profitable and efficient market outlets and informing policymakers on how to improve the efficiency of market outlets.