Determinants of sugar market performance under imperfect market conditions: Empirical evidence from Kenya

Abstract

This study investigates market (supply and demand) factors causing high pricing, which influences performance of the locally manufactured sugar from the six (n=6) manufacturing firms in Kenya. The study was based on Industry competitiveness model (Siggel, 1995, Markusen, 1992 and; Kasekende, 1994). Empirical results reveal that consumption of sugar in Kenya varies from an average rate of about 2.2% whereas sales of sugar registered an average of 2.1%. From this analysis the study unveils a market deficit of locally produced sugar that falls below market demand. Correlation analysis between sales and consumption of local sugar for the same period (1996-2006) shows a negligible 0.155 but with significance of 0.67. The study concludes that price related factors significantly contribute to poor performance of local sugar manufacturing firms under the prevailing imperfect market conditions in Kenya. The study recommends that diversifications are crucial for sugar subsector if the sugar firms have to maximize revenues and become more competitive both at local and regional markets.