The impact of Market Structure and competition on fish led pricing in Kenya

ARTICLE INFO ABSTRACT

Keywords: In Kenya, fish feed costs about 70% of production costs in aquaculture, but the price has
been on a gradual upward trend despite expansion and new firm entry. This study aims to examine
Market concentration whether market concentration and competition dynamics can explain fish feed pricing during the
2020-2025 period. With the help of the Structure-Conduct-Performance (SCP) paradigm and im-
Fish feed pricing
perfect competition theory, the following three testable hypotheses are derived. We conducted
Oligopoly qualitative interviews with fish farmers, government and research stakeholders and quantitative
price and brand information from 91 fish farmers in four major aquaculture counties using a mixed
Aquaculture -methods design. The Herfindahl-Hirschman Index (HHI) for the market is 2178 (moderate to high
concentration). The differences in the mean prices of starter feeds in the paired sample t-tests were
significant after the entry of a new producer in 2023 (t = 2.325, p = 0.023), contrary to the predic-
tion of the competitive market. Price-cost margins expanded as retail prices grew 25% from 2021
to 2025; estimated production costs rose just 20.1% during the same period. Under the counterfac-
tual scenario where Zambian input prices are used, there is a possible reduction in cost of 7.2%,
but the overall retail prices would not likely be lowered without competition from downstream
players. This result, product homogeneity (ANOVA for crude protein: F(2,9)=0.143, p=0.869), and
regional price uniformity across geographically distinct counties, is also in line with the oligopolis-
tic interdependence rather than with strong price competition. Although the study does not prove
collusion, it shows that the evidence is consistent with the SCP prediction that pricing outcomes in
concentrated markets are above competitive benchmarks. It is recommended that targeted competi-
tion authority monitoring is undertaken, that input markets are integrated in the regions, and that
support is provided for smaller producers to make markets more contestable.

The article relates to market concentration, fish feed pricing, oligopoly, structure-conduct-performance
and aquaculture in Kenya.

1. Introduction
Over the last decade, aquaculture has seen This is an oligopolistic structure, and the theory and
significant growth in Kenya, due to increasing experience have raised questions of whether concentration
demand for fish, decreasing capture fisheries, and leads to higher prices than competition. The Competition
government initiatives like the Aquaculture Authority of Kenya, voiced its concern on concentration and
Business Development Program (ABDP). The possible coordination in the wider animal feed market, while
sector accounts for about 0.5% of the gross there is limited evidence for the fish feed market. Previous
domestic product and supports over 700,000 research has been directed towards the quality of feeds,
livelihoods (Teplitz et al., 2026). But the feed cost nutrition and production technologies (Munguti et al., 2021)
of fish is the limiting factor in their growth in semi- but not the dynamics of competition and price-cost
intensive and intensive farming, where feed cost relationships
takes about 70% of production cost. The high feed
The puzzle that this study seeks to solve is very simple:
prices impact on farmer profitability and sector
although the products are very similar, the introduction of a
growth.
new producer (Samakgro) in early 2023, and input cost
There are three major players in the fish differences between regions, the retail price of fish feeds has
feed market in Kenya—namely Skretting (via the increased faster than the estimated production cost. If
Tunga Nutrition joint venture with the Unga competition were high, new firms would lower prices or at
Group), Sigma Feeds Limited and Samakgro, least slow the increase in prices. Efficient markets would mean
which together control about 77% of the market. that regional price differentials would reflect transport and
distribution costs. Neither pattern is seen.

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 2.3 Hypotheses
This study examines whether observed pricing Based on these theoretical underpinnings, we derive
behavior is in line with competitive market outcomes or three testable hypotheses:
the market outcome predicted by the theory of
imperfect competition and the Structure-Conduct- H1: Price-cost margin is positively related to market
Performance (SCP) paradigm of oligopolistic concentration (HHI>1,500) In the fish feed industry in
interdependence. Kenya, between 2020 and 2025.
H2: The appearance of a new producer in a
concentrated market does not significantly lower the price
2. Theoretical framework and hypotheses. of retail fish feed, contrary to the proposed predictions in a
2.1 Structure-Conduct-Performance paradigm competitive market.

SCP paradigm argues that firm behavior is influenced H3. Retail prices in the regions do not depend on
by market structure, which is characterized by the number, transport cost differentials, and this is in line with the
size of firms, entry barriers and product differentiation, and coordination of prices and not the competitive market
that market structure affects market performance (prices, integration.
profits, efficiency and consumer welfare)(Goga & Roberts,
The hypotheses are tested by concentration indices,
2025). In concentrated markets, companies understand how
dependent they are on each other and may choose not to paired t-tests and regional price comparisons
compete aggressively, so as not to jeopardize profits. The
SCP framework has been broadly applied in developing .3. Methodology
countries for the analysis of the agriculture and feed
industries (Omukoto, Nicholas A.J. Graham, & Hicks, 3.1 Research design and ethical approval
2024). This study adopted a mixed methods convergent
2.2 Theory of imperfect competition design, which combined quantitative data collected
from fish farmers using questionnaires with qualitative
Imperfect competition theory by Robinson, (1933) data collected from key informants through observation
sees firms in oligopolistic markets as being able to sustain and in-depth interviews. The University of
prices above marginal cost, resulting from strategic Johannesburg (2025SECO173) has granted ethical
interaction, product differentiation and barriers to entry
clearance. All participants gave informed consent, and
(Magondu et al., 2025) . Some of the important
characteristics of the Kenya's fish feed industry are few anonymity was maintained.
sellers, high capital requirement, reliance on inputs from 3.2 Sampling and data collection
outside Kenya, and low level of transparency in the pricing
and sourcing (Kyule et al., 2025). In this situation, tacit The target population were active fish farming
coordination (price coordination without an explicit households who have been using commercial fish feed.
agreement) may arise in the market, especially if products Based on Walakira et al., (2023) estimation of 24,000
are homogeneous and the market situation is stable. farming households and 10% margin of error, the
sample size was determined to be 100. A total of 91
In particular, three research questions are raised: usable responses were received (91% response rate).
Stratified sampling was applied across key aquaculture
1. How concentrated is the fish feed industry in Kenya,
counties: Siaya (30.8%, n=28), Kisumu (26.4%, n=24),
and how does the price of fish feed compare to Kirinyaga (20.9%, n=19), Kwale (15.4%, n=14), and
estimated production costs from 2020 to 2025? other counties (6.5%, n=6). The 5 key informants were
2. Was there any competitive price cut after the new selected using purposive sampling from county
fisheries departments, the Ministry of Fisheries and
producer (Samakgro) entered the market in 2023
KEMFRI.
3. Do the prices suggest evidence of regional price
Structured questionnaires were used to collect
dispersion in line with competitive integration of information on brand usage, price information for 2021
markets or uniformity of prices indicating strategic (before entry) and 2024/2025 (after entry), perceived
interdependence? price change, and switching behaviour. Competition
The study is a valuable addition to the literature on dynamics, distribution patterns and barriers to entry
were addressed through key informant interviews.
competition economics because it uses the tools of industrial
organisation analysis to a developing country aquaculture
value chain in a context where data is scarce but policy
implications are strong.

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 .
3.3 Market concentration measurement
3.5 Statistical tests
The market shares were estimated on the basis
Analysis of mean prices of starter, grower and finisher
of farmers' reported usage of brands in the last three
feeds before and after the entry of Samakgro was carried out using
years (2022-2025). The Herfindahl-Hirschman Index
paired sample t-tests (2021 vs 2024/2025). A one-way ANOVA
(HHI) was computed as the sum of the squares of the
was used to compare the homogeneity of crude protein in the three
market shares:
major brands. All of the analyses were conducted using SPSS 27
HHI=∑ (market share i)² with α = 0.05.
Benchmarks are based on guidelines set by the 3.6 Counterfactual analysis
U.S. Department of Justice: HHI < 1,500 =
unconcentrated; 1,500-2,500 = moderately Other costs were assumed to remain constant, and a
counterfactual scenario was created using Zambian input prices
concentrated; > 2,500 = highly concentrated.
for maize and soybean meal. The amount of potential cost savings
3.4 Price-cost analysis has been estimated and factored into the cost structure for 2025.

The production cost estimates for a 4. Results

representative product were gathered from an interview
4.1 Market concentration
with Tunga Nutrition (Fugo Tilapia Grower Pellets,
3mm) and supplemented with secondary data from the Table 1 shows the market shares of the various brands of
CAK animal Feed Market Inquiry Report. Costs fish feeds sold in Kenya from 2022 to 2025.
covered were fishmeal, soybean meal, maize, wheat
gluten, sunflower cake, rice bran, oils, premixes, B rand M arke t share (%
labour, electricity and packaging. The 2021 ingredient Skretting/Unga (Fugo) 32
costs are compared to those of 2025. Retail price data Samakgro 23
were obtained from the farmers' surveys conducted in Sigma Feeds 22
the three regions A ller Aqua 6
Aquarech 5
The below figure shows Maize prices, selected ESA Great Lakes 4
countries Other minor brands 8
Total 100

The three largest companies account for 77% of the market

share. The Herfindahl-Hirschman Index is:
HHI = 32² + 23² + 22² + 6² + 5² + 4² + 8² = 1,024 + 529 + 484 +
36 + 25 + 16 + 64 = 2,178
The HHI is 2,178, which is considered to be in the
moderately concentrated range but less than highly concentrated
(>2,500). This is consistent with H1: concentration is good.
The graph below shows the respondents view on signifi-
cance of feed to fish farming

Source: AMO based on price tracker data and CAK

inquiry (2024)

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4.2 Product homogeneity 4.4 Effect of a new entrant on prices.
The three brands were compared in three stages Paired sample t-tests were performed between the prices
of life for crude protein (CP). The ANOVA results for before (2021) and after (2024/2025) Samakgro's market entry in
starter/pre-grower feeds are summarised in Table 2. early 2023.
Table 2: ANOVA of CP content for the three major Table 4: Paired sample t-tests for feed prices before & after new
brands entry

Source Sum of squares df Mean square F p-value Feed type Mean before (KES)Mean after (KESMean difference t-value df p-value (2-
tailed)
Starter 3,114 3,618 396.82 2.325 73 0.023
Between groups 8.167 2 4.083 0.143 0.869
Grower 3,014 3,117 102.87 0.535 71 0.594
Within groups 256.75 9 28.528
Finisher 2,886 3,152 265.43 1.797 69 0.077
Total 264.917 11
The price of the starter feed significantly (p = 0.023) rose
According to the F-statistic (0.143; p = 0.869), after the appearance of an additional competitor. Grower and
there are no significant differences in crude protein finisher feeds also rose. There was no decrease in price in any
content between the Sigma, Skretting/Unga (Fugo) and category. This is opposite to the competitive market forecast that
Samakgro. The products are nutritionally uniform, and a new entry "puts downward pressure on prices (Munguti et al.,
under competitive conditions would further increase 2024). The finding supports H2.
competition over price (Reena Das Nair & Roberts, This is reflected in farmer perceptions, with 82.4% seeing
2024). prices rising in the last three years (50.6% "slightly" and 31.9%
4.3 Price-cost trends (H1) "significantly").

Estimated production costs for a 25kg bag of

Fugo Tilapia Grower Pellets (3mm) in 2021 and 2025
are presented in Table 3, using data on ingredient costs
from Tunga Nutrition and CAK (2024).
Table 3 shows the estimated components of production
cost (KES per 25kg bag).

Component 2021 2025 Change (%)

Fish meal 480 600 25
Soybean meal 468 855 82.7
Maize 145 190 31 4.5 Regional price uniformity (H3)
Other ingredients 248 302 21.8 Observed retail prices for a 25kg bag of grower feed in 3
Labour, electricity, packaging 106 125 17.9 counties are compared to estimated cost-based prices in Table 5.
Total estimated cost 1,447 2,072 43.2
Table 5 shows
Note: The percentage increase in text (20.1%) is a regional price
caused by the different formulation proportions (see
thesis Table 10) used for the various types of text.
Figure 1: Per-kg production cost increased from
KES 109.0 (2021) to KES 130.9 (2025), a 20.1% rise.
The trend of rising retail price per 25kg bag of sugar was
also observed, with an increase from about KES 3,050 to
KES 3,800 during the same period (25.0%). The price-
cost margin (PCM) (retail price minus the estimated
variable cost) increased to KES 528 per bag, up from comparison for 2025, which is expressed in KES per 25kg bag.
KES 325 per bag. This is consistent with H1:
concentrated market structure is correlated with R e gion E s timate dO bs e rve dM arkup (
increasing margins and not cost pass-through(Sambuo, K isumu 3,148 3,800 20.7
Kirama, & Malamsha, 2021) K irinyaga 3,148 3,850 22.3
Sia ya 3,148 3,750 19.1

The chart below shows the spread of the population among the
various counties, the county with by far the 30 highest number of
respondents is Siaya.

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 5. Discussion
5.1 Theoretical implications
The differences in transport distances between the two
(Siaya and Kisumu are further away from major feed The results confirm the central tenet of the SCP
production centres in Nairobi and Naivasha than Kirinyaga) do paradigm that the concentrated market structure (HHI =
not seem to drive a great variation in retail prices (KES 3,750- 2,178) is related to pricing behaviour (parallel movements,
3,850). The estimated cost based price (based on the input costs regional uniformity) and performance measures (margins
and competitive markup) is significantly more competitive at widening, weak competitive reaction to entry), which are not
KES 3,148. The uniformity of prices and the mark-ups of 19-
competitive. These patterns can be explained by the theory of
22% indicate that the prices are not competitively set according
to local supply conditions. This supports H3. imperfect competition and strategic interdependence, because
aggressive price competition would decrease profits of the
4.6 Counterfactual analysis: Zambia input prices industry and hence lead to tacit coordination among the 3
At the Zambian input prices compared to the effective dominant firms that produce homogeneous products(Munguti
input prices in Kenya (maize KES 38,250/MT against KES et al., 2023).
45,000/MT; soybeans KES 69,750/MT against KES 95,000/ Of particular interest is that the new entry did not
MT), the production cost/25kg bag would reduce by KES 226 reduce prices (H2 supported), which is a strong sign of a lack
(7.2%) to KES 2,922. The current retail price of KES 3,800, of contestability (Setiawan, 2023). Rents are lost as a result of
however, would see a 30.1% increase in the markup from the competition. In an oligopoly market, the market entrants can
20.7% it currently has. This means that even if input prices are adjust to the existing pricing situation, or they can become
brought down to Zambian levels, retail prices will probably not integrated into the coordinated equilibrium. The 2023 market
entry by Samakgro did not affect the market price of starter
drop in the absence of competition from the downstream.
feed but it did affect the market price of starter feed to a much
4.7 Qualitative findings higher extent (p = 0.023). This is the first study to report price
increases after entry in a developing country agri-food value
The three major producers were reported to have a chain(Emam et al., 2024).
strong influence on the price by key informants consistently.
One source commented: ―Farmers take what they can get – in The extent to which the findings of this study match
most counties, it's only one or two of the big brands.‖ Another previous research.
one noted: ―When one company hikes up the prices, others Our HHI of 2,178 is marginally lower than CAK's
follow in weeks”. These statements are not evidence of (2024) estimates for the animal feed industry (top three at
collusion but come to the same meaning as tacit 75%, HHI not calculated but assumed >2,500). There may be
interdependence. a difference due to a more competitive fish feed fringe (Aller
The chart below shows Fish feed brand used most often Aqua, Aquarech collectively at 15%). These smaller
companies, however, do not have the scale and reach,
restricting their competitive constraint.
The chart below shows price change over the past 3
years observed by consumers

in the last 3 years (2022–2025)

Exclusive contracting arrangements under the
Aquaculture Business Development Programme (ABDP) were
also noted as contributing to the advantages of incumbents, as
some counties secured their demand for aquaculture products
from specific suppliers.

5
 The counterfactual analysis is consistent with Aura et al.,
(2022), who identified input price distortions in Eastern and Longitudinal analyses, experimental market
Southern Africa regions. But our results suggest that, along with interventions and comparative cross-country analyses
trade integration, the competition policy in the downstream would be useful to strengthen causal inference for future
market is also crucial, as cost reductions do not necessarily lead research.
to retail price reductions. Credit authorship contribution statement:
5.3 Practical and policy implications. Author(s): Writing – original draft, Methodology,
The first step is a targeted fish feed market investigation Formal analysis, Conceptualization, Investigation, Data
by the Competition Authority of Kenya (CAK) that involves curation.
price-cost margins analysis, information-sharing analysis and Ethical statement
exclusive ABDP contracts evaluation. Second, being able to
The author declare that they have no competing
trade maize and soy products without non-tariff barriers in the
interests.
region would reduce production costs by an estimated 7.2%, due
to regional trade harmonization(Menzio, 2024). Third, the No competing financial or personal interests are
possibility of micro-producers benefiting from concessional known to the authors that could have influenced this work.
financing and aggregation of raw materials may help to make Acknowledgements
markets more contestable. Fourth, price transparency requires
that reporting prices and costs be required from time to time, The author would like to express their gratitude to
which would allow a check of the price pass-through. the fish farmers, county fisheries departments and key
informants who took part in this study. Regional price
5.4 Limitations information was supplied by the African Market
Observatory
There are a number of limitations to this study. First, cost
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