As far as corporate mascots go, Mr. Peanut is in his own league.

The emblem of the snack company Planters is one of the oldest and most beloved brands in the U.S, with a following of devoted fans and collectors.Just check out this Wall Street Journal article.

For good reason. Mr. Peanut is dapper, sporting a top hat and a monocle. Ever the elegant gentlemen, he twirls a cane. The anthropomorphized savory legume is even quirky, claiming on his Facebook page that he’s a decent racquetball player.

Mr. Peanut evokes fun, leisure, and whimsy — perfect for hawking a snack food — and generates millions of dollars in sales for parent company Kraft Foods.

But, the peanut, as a raw agricultural good, couldn’t be more different from its famous brand ambassador. The peanut isn’t quirky or fun; more than not, it’s described as humble, reflecting its inherent low-value.

Mr. Peanut is a sterling example of the severe lopsidedness in value of branded goods vs. raw agricultural goods.

Dependence on the humble peanut is a rough go. No country knows this conundrum better than Senegal, West Africa’s leading peanut producer.

Since the colonial period, Senegal has been trapped in a peanut monoculture. The country’s economy relies heavily on the peanut, as it creates hundreds of thousands of rural jobs and underpins local manufacturing.

But, Senegal’s earnings from the peanut are paltry, reflecting the crop’s low-value. In 2015, Senegal made only a tiny $119mn from raw peanut and peanut oil exports. Contrast this with its much poorer neighbor Burkina Faso that made $170mn from sesame exports. Despite only exporting raw seeds, Burkina Faso is raking in almost 50% more than Senegal, which is even exporting finished goods!

Therein lies the niggling problem.

Senegal is nowhere near approaching the value that a brand like the Planters mascot Mr. Peanut generates. In fact, its tiny processing industry – what it does manage to capture from its peanut crop – is struggling.

Senegal’s peanut oil sector, which is its highest value peanut-based product, has declined, with export revenues fluctuating wildly from a puny $18mn in 2006 to $70mn in 2015.

Suneor, the country’s largest mill, is the embodiment of the industry’s hard times.

Not a day goes by when the Senegalese papers aren’t spilling ink over the problems of the country’s once leading industrial champion.

Taken over by a savvy Senegal-born Lebanese businessman, the once government-owned Sonacos has seen nothing but difficulties since its privatization. High production costs, unfavorable government policy and a constant flow of cheap palm oil from Asia eating into its market share have undermined Suneor.

Struggling to turn a profit in a fiercely competitive market, Advens sought to team up with a strategic partner, France’s Avril, which would crush the peanuts and press them for oil.

The Senegalese government blocked the deal, suspecting that a spin-off would fragment the already struggling industry. After a year of negotiations, the two parties reached a settlement with the government buying out Advens’ shares as it looks for a new strategic investor.

That bodes the question: what type of investor will be keen to buy into Suneor, a struggling industrial asset with severe structural flaws?

In the meantime, Senegal’s raw peanuts flow non-stop to China, which is snapping up every last nut on the market. This is great for farmers, which are rubbing their hands as peanut prices climb to new heights on the back of Chinese demand.

But, this leaves Senegal relying on exports of a low-value commodity and earning scant dollars in the process.

Or, as the American expression goes, Senegal is left working for peanuts.

This article was first published on At Origin.

Published:25 October 2016

 

 

 

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