Food Industry Value Chain

Food Industry Value Chain

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Food Industry Value Chain

August 9, 2020

A market study with potential COVID-19 impact analysis 

The food manufacturing industry is a crucial sector in the economy of every country. It is considered as one of the essential and important industries that contributes to secure food for humans and works to achieve greater self-sufficiency in food production. The sector provides opportunities for women who can leverage their gender norms to their advantage. The sector provides easy access for MSMEs to work and measure return with minimal risk. The overall economy suffers weak purchasing power. Food tends to take the highest share of people’s spending. Therefore, demand can be considered high for certain food products. The sector is mostly informal and can be described as resilient as it quickly adapts to market supply and demand challenges due to the low cost of entry and minimal required fixed cost. While this can be an opportunity for interventions in the sector, the fact that it is informal makes it difficult to estimate impact.

Yemen imports more than 90% of its food, including wheat, rice, sugar, dairy products, canned food, oil, among others. Yemeni people consume local vegetables and fruits. While many would process food at home, there are several processed products that can be purchased in the market at relatively low price. The Yemeni food includes several products such as Taizian cheese and yoghurt, cake, cookies, sweets, juice, bread and other food items that can be made at home and sold in the local market. Restaurant businesses tent to grow with community disposable income as well as commuters and travellers who have to dine outside their home.

The development of the food sector is related to the development of agriculture, as it is the primary source of raw materials for the food industry as well as the interface with branches of industry interest such as the packaging industry, paper and plastic and glass, as well as transport and communication. 

According to the study, 92% of both men and women who work in the food sector operate their own businesses, and 76% of them have not receive any training in their business. The market of food manufacturing is highly competitive as 41% of actors have 2-5 competitors in the same area. There is high potential for expanding the food manufacturing value chain, as 91% would like to expand their business in the next few years; however, there are some obstacles that prevent actors from expanding their business. 67% of the actors in the chain think that the lack of qualified labour is a limitation for growth. Lack of capital is another barrier faced by many actors. In addition, most of the actors do not have marketing strategies as 74% of them depend more on word-of-mouth to make customers aware of their products. There is a good opportunity for women to join food manufacturing as 78% of respondents think that working in the food sector can be considered an opportunity for income generation for vulnerable women, especially as producers and distributers.

Food manufacturing can be improved through training of the actors on management, marketing and customer relations in order to be able to produce and market products efficiently and effectively. Furthermore, coordination between the actors, MFI and BDS to facilitate taking loans and easily getting information about the market is needed. In addition, providing the market and the actors with modern machines and equipment to enable food production in a professional and healthy manner, for items such as cheese, cake and sweets.