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									    A Study of Competition in the Beef, Poultry and
           Dairy Retail Sectors in Zambia.

                  IDRC Grant Number: 103072-001

                  Zambia Competition Commission
                         Lusaka, Zambia

Principal Research Team:

Thula Kaira: Project Coordinator
Dr Samuel Bwalya: Lead Consultant
Florence Banda: Research assistant
Wesley S. Kalapula: Research assistant

             Presented to the IDRC on 22nd January 2008
A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

Table of contents                                                                 Page

List of Acronyms …………………………………………………………………...3

Synthesis…………………………………………………………………………… 4

Research problem……………………………………………………………………5

Research findings……………………………………………………………………7

Fulfilment of objectives…………………………………………………………….17

Project design and implementation………………………………………………....21

Project output and dissemination…………………………………………………. 23

Capacity building…………………………………………………………………. 23

Project management………………………………………………………………. 24


Overall assessment…………………………………………………………………26

Limitation of the Study…………………………………………………………….26


A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

List of Acronyms:

CFTA                Competition and Fair Trading Act
CSBZ                Cold Storage Board of Zambia
CSO                 Central Statistical Office
DPB                 Dairy Produce Board
GDP                 Gross Domestic Product
IMF                 International Monetary Fund
MACO                Ministry of Agriculture and Cooperatives
MCTI                Ministry of Commerce, Trade and Industry
NIEC                National Import and Export Corporation
PAZ                 Poultry Association of Zambia
RBPs                Restrictive Business Practices
ZCBC                Zambia Consumer Buying Corporation
ZCC                 Zambia Competition Commission
ZDPA                Zambia Dairy Producers Association
ZNFU                Zambia National Farmer’s Union

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

1.0       Synthesis:

Before Zambia attained independence from Britain in 1964, economic agents in the
retail sector were mainly multinational companies which supplied white settlers.
Following indigenous concerns over the ownership of the economy, the Zambian
Government nationalised in 1973 these national retail outlets throughout the country.
Thus, in the pre-reform period (before 1991), the Zambian retail sector (beef, dairy
and poultry) was mainly managed by government. In the early 1990s, the Zambian
Government embarked on economic reforms which were anchored on three principles
of liberalisation, deregulation and privatisation which formed the principal reform
package under the auspices of the IMF/World Bank. The reforms were undertaken to
curb the poor performance the country was going through.

This study was aimed at filling the gaps in knowledge about the operation of the
formal retail sector in Zambia by analyzing the structure, nature and the level of
competition. The key findings of the research were that the beef sector has
concentrated stock facilities in Zambeef which has a sustainable comparative
advantage over its rivals. This is because it is a public cooperation that has access to
financial capital which it uses to acquire core facilities such as abattoirs, which give it
the ability to match the bargaining power of large retailers such as Shoprite. On the
other hand, the poultry sector does exhibit some competitive traits and many small
scale farmers are able to compete favourably. The dairy sector is fragmented with a
number of firms exhibiting monopolistic traits in the different segments such as
Kaposhi Farms in the cheese segment and Parmalat in the fresh milk segment.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

2.0       Research Problem:

In 1991, some of the principal elements of market-oriented economic reforms
undertaken by the Zambian Government included; deregulation by removal of price
controls; privatization of previously state-owned enterprises including state-controlled
monopolies; and trade liberalization, including significant reductions in import
barriers, which resulted in a considerable opening of domestic markets. One sector
that has been dynamic since the liberalization of the economy has been the retail
sector1, resulting in variations in the interplay among economic agents in the sector.

Before independence in 1964, the Zambian retail sector was dominated by few
multinational companies that operated in an oligopolistic type of market structure.
However, after independence, government instituted nationalization programs
anchored on socialist principles of humanism. These policies led to nationalization or
take-over of foreign owned retail outlets by government creating a retail sector of
state-owned retail chains stores. These chain stores fell under the umbrella of two
government institutions, Zambia Consumer Buying Cooperation (ZCBC) or the
National Import and Export Corporation (NIEC). Only a few small-sized privately
owned retail and wholesale outlets were owned by private entrepreneurs of Asian
descent which existed concurrently with government owned shops. These formal
private outlets were not concentrated enough to provide significant competition in the
sector. The informal retail operators such as marketers, hawkers and street vendors
were largely opportunistic, but well positioned suppliers of retail products to the
lower end of the market.

Following the said economic reforms of the 1990s, the retail sector has undergone
significant transformation in Zambia, both in terms of its structure, conduct, market
concentration and performance. Foreign chain stores dominate the formal sector both
in terms of sales, product lines and capital outlay and possess significant market
power on both the supply and demand-sides of the market.

 The retail sector, by definition covers goods and services as defined by the General Agreement on Trade and
Services (GATS). However, this study being the first of its kind will undertake to consider only tangible consumer

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

It is an established economic concept that buyer power can have positive and/or
negative effects on efficiency and consumer welfare. For instance, a retailer with
considerable buyer power can obtain more favourable terms from a supplier than
otherwise would be available under perfect competition but whether these benefits
would trickledown down to consumers depends on the level of competition in the
sellers’ market. If the retailer has market power over suppliers but not on the seller
market, the benefits are likely to trickledown to consumers. However, if the retailer
has power in the seller and buyer markets, the consumer welfare losses are likely to be
large. If buyer power results in higher consumer prices (demand-side), then, buyer
power is likely to result in significant welfare losses to consumers. And if retailers
exert buying power on suppliers in ways that reduce efficiency in the supply-side
market, then buyer power would be associated with loss in economic efficiency. It is a
primary concern of the Zambia Competition Commission that economic effects of
market power is analyzed and understood so that appropriate measures could be
developed to regulate the conduct and monitor performance of the food sector in

One other important issue in retail sector relates to vertical and horizontal integration
and relations across the distribution chain and how procurement practices of foreign
retail outlets impact local producers. The later aspect brings in issues relevant to
international trade policy and transfer pricing. Foreign retail outlets that are vertically
integrated with producers locally and/or abroad will tend to source their merchandise
from their sister/subsidiary suppliers even when the products are available locally.
This distorts competition in the retail sector, forcing otherwise efficient local
producers to fail to recoup their average production costs and ultimately close down

Thus, retail outlets that source goods from their subsidiary companies have an
advantage over those who source from independent supplies. The former will have
competitive advantage over the later and may cut prices to drive rivals out of
business. Similarly, large chain stores with diversified product lines are able to out-
compete smaller stores because they enjoy economies of scale. In the Zambian
scenario, apart from foreign firms having superior technology over local firms, their
competitive advantage over local firms is further enhanced by the government

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

offering foreign firms with fiscal incentives such as tax holidays that are not available
to local firms.

Given the above scenarios, this study was aimed at analyzing competition and
performance of the retail sector in Zambia. This knowledge is relevant in formulating
policies to promote growth and effective competition as well as to safeguard
consumer interests and welfare in these sectors of the Zambian economy.

3.0        Research findings:

3.1       The beef sector:

The Zambian Beef Sector has large economic potential for the country. Not only has
it been a major source of employment in the formal context, but it has also been a
source of income for the informal sector. Growth has been observed in this sector
with new entrants such as Savannah Beef as the market has been growing with the
population. In Zambia, beef substitutes are not so popular or they are otherwise too
expensive for buyers; because they are not reared commercially.

Competitive rivals in this sector range from local, regional and national scales with
regional forces fierce in the southern parts. However the main players in this segment
include Zambeef, Galaun Holdings, Pama Meats, Best Beef Company, King Quality
Beef, and Savannah Beef. Most of these companies have a value chain that spans
from production to retailing and processing while other smaller companies have
ventured mostly into processing cooked cold meats and these include; Real meat
Company Kachema Meats and Majoru Investments.

Zambeef is the largest firm both in terms of capital and sales. This company is a huge
conglomerate that has resulted in a set of firms that produce a diversified range of
products. In this sector it has basically integrated vertically both downstream by
owning most of the refrigerator trucks that transport the carcasses, and upstream by
buying out five strategically located commercial abattoirs. All transfer of goods has
been internalized reducing their costs of supplying and distributing greatly. Economic

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

efficiency has increased with management synergy and legal contract cost reduction.
Most beef stock facilities have been concentrated with them and this has led to a
general perception that Zambeef have gained some monopoly power. However, if
Zambeef has set up a number of vertical lines then it is possible that the other players
could do the same to effectively compete against Zambeef if at all they desire to have
such a strategy. With relatively low interest rates (15-20%) for Zambia’s standards,
banks are more willing than ever to finance viable business projects and avail capital
to them.

     Table 1: Market Shares in the Beef Sector
      Beef Producer                     Brand Name            Ownership Status    Market
      Zambeef                           Zambeef               Publicly Owned        65%
      Galaun Holdings                   Luscold               Privately Owned       10%
      Northern Zambezi                  Pama                  Privately Owned        7%
      Dar Farms                         King Quality          Privately Owned        3%
      Best Beef Company                 Best Beef             Privately Owned        3%
      Savannah Beef                     Savannah              Privately Owned        2%
      Others                            Traditional           Privately Owned       10%
      Total                                                                        100%
Source: Figures estimated from Zambia Competition Commission Survey 2006 and from primary data

Beef products are mostly standardized and differentiation may be gained in
processing which requires some level of technology. Consequently urban consumers
are indifferent as to whether to buy from open air markets, shops, butcheries, street
vendors and or supermarkets. However, with the presence of livestock diseases there
is an increasing demand for quality food and safety standards. Most consumers have
resorted to buy their meat products from butcheries and supermarkets. While
butchery’s are able to supply beef to their customers at a lower price supermarkets are
more expensive as they tend to aim for the higher income consumers and strategically
locate themselves in the high income areas.

The price of beef has risen over the years with the most significant increase being
observed in the 2005 and 2006 period. This can be explained by the fact that there
were drastic cases of animal diseases almost wiping out the entire stock of herd, this
caused supply shortages which led to price increases.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

Figure 1: Prices of Selected Beef Products 1993 to 2007

                               Prices for Selected Beef Products 1993-2007



             20000                                                                Beef Sausages

             15000                                                                Fillet Steak
                                                                                  Minced Meat
             10000                                                                Mixed Cut































Source: Central Statistical Office

At the retail level there have been a number of issues that have deterred the flow of
competition. These include collaborative agreements and strategic alliances that have
thwarted the penetration of other firms into the beef markets. An example is Shoprite,
the only national retail chain store in which the buying teams follow the strategy of
buying directly from the farms or factory’s to ensure the lowest possible prices.
Shoprite tends to have a large bargaining power against the smaller producers as it
operates a chain of no-frills, cost efficient system (

In its collaboration with Zambeef, Shoprite has granted an exclusive arrangement to
Zambeef to operate its butchery’s wherever it has presence; this has allowed Zambeef
to spread out widely at a low marketing cost. Zambeef is thus enabled to practice
price discrimination tactics on beef products that it sells in Shoprite outlets, because it
has the monopoly on beef products in these convenient one stop shops it charges
higher prices in these butcheries as compared to its retail outlets and pull off price
discrimination in certain locations which is monopolistic in nature.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

The increased involvement of supermarkets such as Shoprite, Spar, Konkola
(Mazabuka), Melissa and Embassy has opened up opportunities for local small and
large scale farmers and processors. This market is accessible to those who are able to
adhere to specific standards set by supermarkets and also those who are able to enter
into contract arrangements with supermarkets. These and other conditions such as a
consistent supply and quality of fresh produce make it very difficult for individual
small-scale farmers to participate in these new and very demanding supply chains. For
example, Zambeef are said to have been awarded the contract to Shoprite as they were
the only company that showed willingness and capability to match Shoprite’s stated
specifications. As at now, there was no other company that matched Shoprite’s
standards in the sector.

3.1.1 Livestock Trade

The Zambian cattle herd currently stands at approximately 3.9 million animals. Cattle
are bred extensively under ranching systems (commercial producers), or on
communal grazing areas (traditional farmers). Raising cattle can be a risky business.
A whole range of diseases attacks the country’s herds with depressing regularity,
killing hundreds, if not thousands of cows with each outbreak. The cost of disease
weighs most heavily on the rural poor as cattle are a traditional store of value. In the
recent past, cases of Contagious Bovine Pleural Pneumonia (CBPP) and the infamous
Foot and Mouth Disease (FMD) have destroyed large herds and this has led to issues
of consumer confidence and food safety threats thus reducing demand.

Usually beef traders source live animals from the traditional livestock faction and
transport them for sale in butcheries, or to processing companies in urban areas. Since
there is a ban on livestock movement due to the outbreak of diseases, only traders
with access to refrigerated trucks are able to supply stocks to the urban markets. It has
been argued that the movement of carcasses is cheaper than that of livestock, yet most
small scale farmers do not own cold trucks neither do they have access to abattoirs.
With Zambeef having a competitive advantage in distribution and slaughtering houses
their market share has extensively increased over the years.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

3.2       Poultry and egg sector

The poultry industry is the largest livestock industry in Zambia; approximately 26

million broiler chicks are produced per annum and 1.7 Pullet layer chicks. (PAZ;

2007). The industry has benefited from rapid returns on investments and reasonably

low start-up costs - broiler production cycles are 6 to 7 weeks as opposed to several

years for cattle. Since the late nineties Zambia has upheld the ban on movement of

live birds within the country and stopped imports of poultry in a bid to keep out Bird

flu, Newcastle Disease and Avian Influenza, which if they entered the country would

result in huge Job losses and loss of income for may small scale farmers. This bid had

been followed strictly and maintained Zambia’s disease free status.

3.2.1 Broiler Segment

This segment has seen intensive investment on aggregate and has allowed for
generation of Income in the economy standing at K195.7 billion. Approximately 24.4
million broiler chickens are produced per annum – 23 million and 3 million in the
formal and informal sectors, respectively. Of the broilers sold at wet markets 65% are
dressed while 35% are live chickens (PAZ 2007). Large producers of chickens are
promoting broiler contracts in collaboration with small scale farmers to meet the
demand for processed chickens on the market, and these have helped this sector to
grow at an alarming rate with both formal and informal providers.

Over the years, the market was concentrated in the hands of Verino and Crest
Chickens. However, the entry of Zamchick has turned events around, as Zamchick’s
production scale has heightened to processing over 3.5 million Chickens per year.
Though Zamchick is able to compete favourably nationwide because of its retail
outlets, all players have refrigerated trucks that enable them to distribute their
products throughout the country.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

    Table 2: Poultry Sector - Market Shares for Processed Chicken Brands
      Producer                       Brand Name             Ownership                Market
                                                            Status                   share
      Zambeef                        Zamchick               Public                    25%
      Hybrid                         Verino                 Private                   20%
      Galaun Holdings                Crest                  Private                   15%
      Eureka Chickens                Eureka                 Private                   10%
      Savannah Chickens              Savannah               Private                    5%
      Zambezi Nkuku                  Zambezi                Private                    5%
      Informal Sector                Traditional            Informal                  20%
      Total                                                                          100%
Source: Figures estimated from Zambia Competition Commission Survey 2006, PAZ 2007 report
as well as findings from survey.

The demand for chicken meat is quite high and it is not only driven by the fact that
chicken meat is considered cheaper than red meat but also by the fact that consumers
have now become safety conscious and buy white meat for health as well as for
protection reasons. Since there are a lot of informal players in this sector it is easier to
access white meat as compared to red meat in this country due to a number of
backyard establishments. These have been a force to reckon with and as shown in the
table below consumers have been able to source processed chickens from traditional
farmers more cheaply than any other source.

Table 3: Broiler Chicken Retail Price by Town and Producer for January 2008
                   Crest         Eureka        Traditional Verino                 Zambezi Zamchick Average
 Choma                              12900              11500                                  12000   10977
 Kabwe                 14175                                        13400                     14900   14158
 Livingstone           11675        12460              13000        11226           15300     12000   12610
 Lusaka                14886        15044              14200        15380                     14350   14772
 Mazabuka              11680                           13000        12390                     10980   12012
 Ndola                                                                                        15050   15050
 Average               13104        13468              12925        13099           15300     13213
Source: Primary Data Collected from Survey
The prices of processed chickens have been rising over the years, this may be
attributed to low supply in the presence of rising demand, which can only be met if
prices are hiked but one would not rule out the inflation factor.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

Figure 2: Prices of Processed Chickens 2007

                                                                         Processed Chicken Prices





             8000                                                                                                                                  Processed Chicken Prices





Source: Central Statistical Office and Primary Data collected

3.2.2 Day old chicks segment

This segment is highly concentrated with only four players to supply the entire market
and no informal sector at all. Technical factors play a very large role, because setup
involves extensive sunk costs the informal faction would not stand up to demand.
However, this segment is very important for its forward channel allies who breed
broilers as well as layers of eggs as the final products. Though the market is
concentrated, there are suppliers all over the world for hatching eggs and day old
chicks, but the policy in Zambia has been to develop breeding populations to maintain
a sustainable and developing industry.

The biggest player is Ross breeders who are vertically integrated at three stages, they
import the Grand parents that produce the parents that produce the hatching eggs and
have their own hatcheries as well as a transport fleet that distributes their products to
their agents and customers to allow for control over death and loss of weight in
chicks. Their biggest customers are Zamchick and Crest Chickens with which they
have a standing arrangement of supply and recently they began to export hatching
eggs to neighboring countries on a surplus production situation. Hybrid on the other
hand, produces both chicks as well as processed chickens and was the dominant
market player before Ross entered the Zambian market from Zimbabwe in 2000.
Between 2005 and 2006 Hybrid scaled down its operations to expand their hatchery.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

This appears to have caused Ross to take advantage of the vacuum and capitalized to
overtake Hybrid as such they have interestingly resorted to supply to their sister
Hybrid companies in Tanzania and Kenya on a permanent basis. Though Bokomo
entered the market in 1995, after taking over Nulaid they have not made such a mark
as they are dependent on another player for supplies.

    Table 4: Market Shares for Day Old Chicks
      Producer                 Brand Name             Ownership            Market
                                                      Status               share
      Ross Breeders          Ross                     Foreign                 55%
      Hybrid                 Cobb/Bovans              Foreign                 30%
      Bokomo                 Ross/Lonhman             Foreign                 10%
      Panda                  Hubbarb                  Local                    5%
      Total                                                                  100%
Source: Figures estimated from Zambia Competition Commission Survey 2006, PAZ 2007 report
as well as findings from survey.

Factors affecting demand in this sector range from the price to most importantly the
Quality of the brand which are attributed to the breed and genetics, whether a chick
would stand the pressures of disease, the weather, its compatibility with feed brands
and the role the supplying firm plays in support services such as capacity building,
seminars and other advertising techniques such as marketing, promotions and

3.2.3 Eggs Segment

The demand for eggs has been growing and is extremely strong resulting in an upward
movement of the prices. The egg trade has generated K95 billion with production
standing at 1.1 million eggs per day or 387.2 million eggs per year. Exports in
hatching eggs have been on the rise and Zambia has been a major exporter to
neighboring countries. Since eggs do not have obvious disease implications, they have
a widespread market as long as they are transported efficiently as they are vulnerable
to breakages. Zamchick eggs alone produce about 20 million eggs per year.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

       Table 5: Market shares in the Eggs Segment
        Producer                Brand Name            Ownership                   Market
                                                      Status                      share

        Flamingo                Golden Lay            49% Foreign                  20%
        Mega Farms              Mega Eggs             Private                      15%
        Zambeef                 Zamchick              Publicly Owned               15%
        Cedrics Farm            Cedrics               Private Foreign              10%
        Simonga Farms           Simonga               Locally Owned                10%
        Collet                                                                     10%
        Bokomo                                                                      5%
        Sunrise                                                                     5%
        Others                                                                     10%
        Total                                                                     100%
Source: Figures estimated from Zambia Competition Commission Survey 2006, PAZ 2007 report
as well as findings from survey.

3.2.4 Dairy Sector

The sector has been experiencing growth as a result of the increased human
population, as well as higher consumption of dairy products. Three types of dairy
farmers characterize the industry and these include; the large commercial producer
with high production costs yet compensated by high yields and economies of scale,
and the traditional small-scale farmer with low yields and low production costs, and
the emergent or medium-sized dairy farmers who are only commercially viable if
market they their own produce. Small scale dairy farmers contribute about 40% of the
total annual marketed 190 million litres out of the required 253 million litres of milk.
(Mukumbutu and Sherchand in Regoverning Markets2).

The directory of dairy processors indicates that there are 19 processors many of which
are small to medium size. The biggest processors being Parmalat with installed
capacity of 120,000 litres per day but only utilizing 45% of it and Finta with equal
capacity but only utilizing 20% capacity per day. Zammilk has upgraded its
pasteurizer capacity from 3000 to 24000 litres per day, while producing at record
levels 28 litres per cow and daily production peaking at 27000 litres of milk per day.

    April 2007,

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

Table 6: Dairy Sector - Market Shares in the Fresh Milk.

      Producer             Brand Name                Status of firm               Market
      Parmalat             Parmalat                  71.5% Foreign                 50%
      Zambeef              Zammilk                   Publicly Owned                20%
      Galaun               Diamondale                Privately owned               12%
      Finta                Finta                     Locally Owned with            10%
                                                     Danish interests
      Others                                                                       8%
      Total                                                                       100%
Source: Figures estimated from Zambia Competition Commission Survey 2006, Zambia dairy
Producers Association as well as findings from survey.

In this industry producers of unprocessed milk have a huge role to play, because
without them, processing companies would not be able to meet the ever increasing
demand of dairy Products. Due to its perishability and critical health concerns, dairy,
and specifically milk production, presents a number of interesting challenges that
could potentially exclude any smallholder from accessing the changing retail market
in Zambia. An example includes the difficulty of setting up quality controlled
collection and distribution centres for the traditional farmers to the processors.

In this light there have been efforts to link small farmers to the formal market through
processors. Small-scale farmers supply between 2.5 litres and 80 litres per day. This
means that some of these farmers produce a lot of milk and their production can be
greatly improved if markets are assured. Of the total amount of milk collected by
large-scale processors such as Parmalat, 80% is from large-scale producers and 20 %
from small-scale producers.

To ensure its sustainability Parmalat instituted an exclusive distributorship along with
the supply of refrigerated containers/cold rooms on loan basis for its products. The
practice was found to be predominant in the sector as this exclusivity did not include
retail outlets that are free to carry competing products.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

Table 7: Dairy Sector Retail Price by Producer for January 2008
                                    Surprise Eastwood                                Zam-
                      Parmalat       Dairy       Farm       Kaposhi                  Milk     Finta        Galaun

Milk 250mls                      1750                                                  1500                   1125
Milk 500mls                      2588           2280           2650                    2217                   2300
Milk 1ltr                                       5950           5750                                           4800
Milk 2ltrs                      10145          10000           8680                    8531                   9000
Top life 250mls                  2447                                                         2100
Top life 500mls                  3382                                                         3150
Toplife1ltr                      7150
Sour Milk 250mls                 2850                                                                         1300
Sour Milk 500mls                 2913           2325                                   2508                   2333
Sour Milk 1ltr                                                                         6000                   4800
Sour Milk 2ltrs                 12948                                                  9700                   9500
Yoghurt                          4326            500                                   2160
175mls                           3706           3380                                   2094
Yoghurt 500mls                   8942           5350          10680                    5010
Yoghurt 1ltr                                                                           8125
Cream 500mls                    19262          15000          13480          16700    18000
Cheddar Cheese                  58185                                        69812    50000
Gouda Cheese                    51744                                        68122
Feta Cheese                     87950                                        67650
Strong Cheddar                  37950                                        67675
Mozzarella Cheese                                                            48273
Edam Cheese                     82500                                        78000
Margarine                                                                              2260
Choice Butter 250g               9200                                                  4000
Choice Butter 500g                                                                    10280
Source: Primary Data Collected from Survey

4.0       Fulfilment of objectives:

The principal objective of the study was to analyze the structure, nature and
competition in the retail sectors for beef, dairy and poultry. Below were specific
objectives of the study:

    (a) To analyze the structure of the retail sector (beef, dairy and poultry) before and
         after liberalization and to determine the contribution of the retail sector to
         employment and national income in Zambia;

    (b) To determine the level of competition and to identify anti-competitive
         behaviour among suppliers and retailers in the beef and poultry sectors; and

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

    (c) To analyze the existing competition policies and regulations and recommend
         reforms to promote efficiency and consumer welfare in the retail sector as
         whole and the beef and poultry sectors in particular.

Having stated the overall and specific objectives, an assessment of each would was
made to ascertain the extent to which the research has met each of the stated
objectives. It is worth noting that the principal objective has been operationalised
through the three specific objectives. The first specific objective states:

         To analyze the structure of the retail sector (beef, dairy and poultry)
          before and after liberalization and to determine the contribution of the
          retail sector to employment and national income in Zambia.

     The research results have shown that the structure of the beef, dairy and poultry
     sectors of the Zambian economy has not changed drastically in pre and post-
     reform periods. However, what has fundamentally changed is the number of
     smaller outlets and the improved quality of products that are sold to the consumer
     in the post reform period. The increased number of market players in this sector of
     the economy has afforded the consumer a broad choice from which they could
     choose from. This is synonymous to increased consumer welfare. Suffice to state
     that during the reform period, Government privatised such facilities as abattoirs
     and are now in the hands of the private sector which charge prices as dictated by
     the market conditions of supply and demand as opposed to the centrally
     administered prices by government. Thus, in the pre-reform period, government
     was not motivated and driven by the profit motive and this had distorted the
     market mechanism.

     The trend is similar in the dairy and poultry sub sectors. For instance, DPB was
     privatised and there new entrants in the dairy sector some of which are Finta in
     Livingstone, Southern Province of Zambia and Zambeef. In relation to how the
     beef, dairy and poultry sectors contribute to the GDP, the research has shown that
     the sector contributes about 2.0% to the National Income. However, given the
     high potential for expansion, the sector can contribute more to the national

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

     treasury. For instance, if government assumes a more proactive role in the
     prevention and treatment of animal diseases that have ravaged livestock in the
     country, then these sectors would contribute more to GDP.

             To determine the level of competition and to identify anti-competitive
              behaviour among suppliers and retailers in the beef and poultry

     In the beef sector private entrepreneurs that own butcheries get their cattle
     supplies from both traditional cattle owners and commercial farmers, however,
     companies like Zambeef that have a national wide distribution have their own
     cattle ranches that supply their retail outlets especially in distressed periods
     ensuring constant supply. Zambeef also purchases supplies from traditional
     farmers and commercial farmers. Given this scenario it would be observed that
     industry players, like Zambeef, that have their own ranches have a competitive
     advantage over those that depend on outsourced supplies.

     It has been established that Zambeef is a dominant player in the beef sector with
     65%3 market share. From the competition law point of view, Zambeef has the
     potential to abuse its market power. For example, the case of abuse of consumers
     has been established in one of the chain stores, Shoprite where the firm supplies
     both dressed chickens and beef products. It charges a higher price on beef
     products where it has exclusive rights and a lower price on chicken products
     which are compensated by the higher price on red meat.

     In the dairy sector, a potentially restrictive business practice (anti-competitive
     practice) was identified to have been practiced by Parmalat which is a dominant
     player in milk products with 50% market share. Parmalat has fridges given to its
     distributors and only Parmalat products are exhibited in those fridges. It has been
     argued that such behaviours by dominant players entrench their market positions
     to the detriment of smaller competitors.

 According to the CFTA a company is deemed to be dominant if it has 50% or above industry market

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

     In the poultry sector, the playing field of processed chickens is rather level, with
     informal players not so disadvantaged because there is an equal access to input
     factors, and the market is readily available due to a high demand for chicken meat
     and as such no malpractices were identified

    In the day chicks segment the market is highly concentrated and there is no room
     for informal players because of technical barriers, attributed to high sunk costs as
     well as technical know-how.

             To analyze the existing competition policies and regulations and
              recommend reforms to promote efficiency and consumer welfare in
              the retail sector as whole and the beef and poultry sectors in

Competition law is a subset of competition policy. In the Zambian scenario the
country has a competition law which was enacted in 1994 and led to the establishment
of the Zambia Competition Commission in 1997, however, the country does not have
a national competition policy.

Since competition law cuts across all economic sectors of the country in Zambia, it is
recommended that during the formulation process of the national competition policy
all relevant sector stakeholders are represented to ensure a comprehensive document
that addresses all pertinent competition issues in the economy are dealt with. This
would ensure that markets compete favourably for the benefit of the business
community, the consumer and the economy at large.

It should be observed that while the Competition Act exists there have been lacunae in
addressing certain anti-competitive trade practices perpetuated by the process of
globalisation due to increased cross border trade. In view of this the Commission is in
the process of amending the Competition and Fair Trading Act, Cap 417 of the Laws
of Zambia, to address anti-competitive trade practices and unfair trade practices by
traders that have an effect of depressing the performance of the economy and
reducing consumer welfare, respectively.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

With the imminent formulation of the National Competition Policy and the
amendment to the competition and fair trading Act by the MCTI and ZCC
respectively, it is envisaged that efficiency in production and distribution and
consumer welfare will be enhanced.

5.0       Project design and implementation

The study was aimed at analyzing the market structure, nature and competition in the
retail sector following economic liberalization in the early 1990s in Zambia. The
project and its subsequent implementation was designed in a manner that would allow
the attainment of the specific objectives.

         For example, the first specific objective sought to compare the structure and
          performance of the retail sector before and determine the contribution of the
          retail sector to employment and national income (GDP) in Zambia. To
          accomplish this objective, secondary data from various Government
          departments and agencies were collected and of more significance was
          information collected from the Central Statistical Office (CSO), which gave
          indications of the contribution of the retail sector’s contribution to
          employment in Zambia in the specified fields. Further, primary data from the
          field provided insight into the significance of the sector to employment
          creation in Zambia and the potential of the sector in providing further

         The second specific objective was aimed at determining the level of
          competition and to identify restrictive business practice (anti-competitive
          behaviour) among suppliers and retailers in the beef, poultry and dairy sectors.
          This objective required that an estimation of buyer (retail) power in the
          upstream and downstream markets be determined. It was also necessary to
          examine seller (manufacturers and wholesalers) power over retailers in the
          downstream market. The determination of seller and buyer powers was vital in
          the assessment and identification of the source of exploitative behaviour of

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

          traders on consumers in the downstream market usually through unjustifiably
          high prices of products.

          Dobson et al (1998), identified three measures of market power and these
          were, buyer concentration, elasticity of supply and performance measures.
          According to Dobson et al (1998), market concentration was commonly used
          in practice because it was easy to compute from more readily available data
          and in this study, market concentration was used to earmark those firms that
          had market power and had a potential of engaging in exploitative behaviours
          on consumers. While other measures of market power exist such as Herfindahl
          Hirschman Index (HHI), calculated using information on all the firms in the
          sector, this study computed buyer concentration ratio (CR) using information
          on few dominant firms in the sector. This was partly because information on
          small retail outlets and informal retail operators in the beef and poultry
          industries is unreliable and difficulty to obtain in Zambia. The significance of
          the informal retail outlets was interpreted as a residual market share taken by
          the formal sector. For example, it was assumed that if few large buyers
          account for 70% of the market share, which possibly an indication of
          significant buyer power, then the remainder (30%) was taken up by small
          retails shops and by those operating informally.4

         The third specific objective sought to analyze the existing competition policies
          and regulations and recommend reforms to promote efficiency and consumer
          welfare in the retail sector, in particular, the beef, poultry and dairy sectors. To
          achieve this objective, there was a need to collect necessary National Policies
          like the National Agricultural Policy (2004) that govern the performance of
          these sectors and also delved into other relevant legislative regulations such as
          the Competition and Fair Trading Act, Cap 417 of the Laws of Zambia.

It should however, be noted that secondary data was extensively used in
understanding the structure, nature and competition dynamics of the said sectors in
pre- liberalisation and privatisation stage of the Zambian economy. Primary data was

 There is anecdote evidence to suggest that informal “meat-mongers” buy from the same firms that supply large
retail chains such as shoprite, Melissa and Spar stores.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

principally collected by the use of questionnaires and also the use of price survey
worksheets. Data collection, both secondary information and primary data were
collected using trained research assistants from the University of Zambia and
Commission members of Staff. The research was, however, spearheaded by both the
Lead Consultant and Project Coordinator in ensuring that the project achieves the
objectives it was intended.

6.0         Project output and dissemination

For any particular project to have a significant impact especially on the relevant stake
holders there is a need to identify key project outputs and find formidable ways of
disseminating the findings and results of the study. In this particular study it is
envisaged that the report will be shared with relevant stakeholders that include; the
Government, through its line ministries and agencies, the relevant industry players
and trade association.

The Commission also intends to post the report on its website so that it could be
accessed by all interested parties and may be used for further research.

Recommendations will also be used for policy formulation and the economic agents
would use the information contained in the report to understand the structure, nature
and competition levels existing in the markets they operate in. and form strategic
commercial decisions.

7.0         Capacity building:

Most research works are aimed at building capacity that may be infrastructural,
human resource and enhancing organisation operational delivery. According to
UNCED5 (1992), 'Capacity building encompasses the country’s human, scientific,
technological, organizational, and institutional and resource capabilities. A

    Capacity Building - Agenda 21’s definition, Chapter 37, UNCED, 1992.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

fundamental goal of capacity building is to enhance the ability to evaluate and
address the crucial questions related to policy choices and modes of implementation
among development options, based on an understanding of environment potentials
and limits and of needs perceived by the people of the country concerned’.

At an organisational level, this study made substantive capacity building in the
human resource development among the Commission members of Staff that
participated in data collection and writing of the final report. The stakeholders from
which raw data was collected made ardent appeals to the Zambia Competition
Commission to send reports after the completion of the study. It is envisaged that
this study would contribute to helping these firms understand the structure, nature
and competition in the sectors they operate and be able to make wise business
decisions and therefore, laying a firm ground on which they could build their future
business plans.

It is clear that the results of this study would be very helpful to Government
especially the Ministry of Commerce, Trade and Industry (MCTI), Ministry of
Agricultural and Cooperatives (MACO), Zambia National Farmers Union (ZNFU),
Poultry Association of Zambia (PAZ), Dairy Producers’ Association of Zambia
(DPAZ) and prospective investors in the retail trade. The findings and results of the
study would be helpful to Government in policy formulation and would
undoubtedly benefit both the economic agents in sector, the consumer and the
economy at large.

8.0       Project management:

The study involved three economic sub-sectors in the retail sector: beef, dairy and
poultry. These are broad sub-sectors and have a broad geographic spread in Zambia.
The project was managed and implemented by the Zambia Competition Commission
as stipulated in the Memorandum of Grant Conditions. As for the implementation of
the project, the Commission co-opted an expert from the University of Zambia,
Economics Department, and engaged him as a Lead Consultant. The principal role of
the Consultant was to develop the research instrument and conduct a scientific data
analysis to feed into the project paper.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

The enthusiasm and determination of the Commission members of staff to carry out
the research was great despite the unforeseen and abrupt changes in personnel
responsibilities that had rocked the Commission. The administration of the
Commission was highly supportive in ensuring that all necessary logistics required to
implement the project was put in place on time.

During the data collection stage, key economic agents (industry players), Government
line ministries and the farmers’ association, were extremely supportive which to the
Commission was a reflection of the importance of the research to them. This is more
reason that they made appeals to the Commission to have copies of the final research

It goes without saying that the IDRC had been very supportive given the delays in
completing the project. The unparalleled understanding of the IDRC of the source of
the delay in delivery by the recipient (Zambia Competition Commission) is highly
appreciated and it is hoped that this cooperation would continue.

9.0       Impact:

This project will enhance the understanding of competition in the beef, poultry and
dairy products in the retail sector and the dynamics thereof. It may assist to excite new
or a review of existing policies and regulations to promote growth in these sectors and
enhance their contribution to national development. The study shall likely fill the gaps
in knowledge about the operation of the formal retail sector in Zambia through its
analysis of the level of structure, nature and competition and business practices firms
engage in to consolidate their market share/power and increase profits.

The study has also assisted to develop research capacity through transfer of skills and
knowledge. It is hoped that the Commission staff will be better poised to handle
future studies of this kind.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

10.0 Overall assessment

The value and importance of this project to the Commission, the relevant sectors
under study, and the country at large cannot be overemphasised. It goes without
saying that the knowledge that the study has imparted to the members of staff that
have actively participated in the project life cycle has been immense and will be used
in future projects that the commission would carry out. Further the commission is at
this time better placed to handle cases of RBPs and unfair trading practices since it
has a thorough understanding of the market dynamics in this sector of the economy.

As already indicated in this report, the industry players made ardent appeals to the
commission to have the final copy of the report sent to them. This is a true reflection
of the importance of this study in its value addition to these sectors.

Above all the study would be a valuable input in policy and decision making in
various Government departments especially MCTI and MACO as well as trade
associations such as ZNFU, PAZ and ZDPA.

The grant awarded to the ZCC by the IDRC to carry out the study could not have
come at a better time than this. This is because the competitive tide is rising in almost
all sectors of the economy and the commission needs to understand the structure,
nature and the competitive constraints faced by industry players. It has also come at a
time when the Zambian macro economic indicators have stabilised giving an
equitable access to capital at affordable rates to industry players which has
contributed to a more or less playing field in the sectors. This has thus given credence
to the research.

11.0 Limitations of the Study

A number of firms in all the sectors did not wish to divulge what they considered to
be confidential financial information to the Research Assistants because of their
suspicions that had filtered through the industry that Canadian investors, notably in
the poultry sector, were using institutions such as IDRC to spy on foreign markets and

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

to find ways of “dumping” their excess production. This had allegedly occurred in
West Africa.

Data collection is generally difficult to capture in less developed countries and
research may thus take longer periods than envisaged. We had underestimated the
time period for both secondary and primary data collection, both of which proved to
be difficult in sectors that were suspicious of the rationale and end-beneficiary of the
whole project. As a result, the anticipated “stakeholders” meeting failed to take place,

The active involvement of the Commission officers in the project other than for
supervisory purposes proved to have been a critical failure factor to the successful
completion of the study on previous deadlines. High staff turnover affected work
progress as new officers took time to grasp the content and spirit of the objectives of
the study and the direction thereof. However, the project still provided valuable
insights for the staff, especially in their interaction with the Consultant.

12.0 Recommendations

There may be need next time for an IDRC official to visit the local research team and
appraise them on the details of the project as opposed to face-less communication
channels that have been employed.

In order to allay the fears of the local beef, poultry and dairy farmers, care should be
taken that this report does not fall into the “wrong” hands of their perceived or would-
be competitors in Canada. In the event that this happens, it may seriously jeopardise
any future research studies involving the Commission.

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

Appendix 1
Table 1: Beef Sector Retail Prices by Producer for January 2008
              Zam-      Pama        Luscold King       Best                       Tradi-     Sava-   Comm-      Price
              beef                           Quality Beef                         tional     nnah    ercial     average
T-Bone          27649      23466      24950     31983    35965                       19285   28000     26116      25898
Shoulder        19011      16633      22950     21833    23200                       17071   17900     19900      19252
Shin            22350      16300      17950     20500    21200                        1600   17800     18934      19306
Chuck           21533                 20450     21833    23200                       16500   17900     23571      20984
Brisket         19927      16966      17450     21166    22950                       16166   17800     19254      19411
Rump            37500      26500      31450     34500    37950                        1940   26700     26883      28944
Fillet          40940      34950                40000    49500                       26800             34050      36400
Mixed Cut       17065      13000      13450   13833      21750                       16285   16800     17096      16277
Offals           7250       5250       9450              10000                       10700   10800      8066       9112
Liver           15000      17333      24450     28000    26500                       21333   23000     17940      19793
Kidneys         13000      25500      24450     28000                                20833             18925      19271
Tongue          11000      13500                25000                                17500             16940      16313
Lungs           15000                                                                10000                        11666
Heart            9000                                                                17000            18925       16125
Ox-Tail         37450      26000                25000    36500                       20000            21925       24493
Hooves           7000       3000                                                      7666             8500        6937
Bones              500      3000                 4000      3000                       5000             5625        4153
Mince Meat      23462      20700      30900     21666    24250                       18833            20925       21518
Borewores       23228      21300      22450     25000    35000                       20250            19095       22178
Beef Saus       22933      20500      21450     24000    25500                       19083            23100       21375
Bbq_Saus        18450      17200                24000    26950                       18500            17556       19674
Hungarian       20316      17200                28000    19500                       18000            18666       18977
Brkfst Saus     20450      23000                         26500                                                    18762
Silverside      37000                 29450     30000    26000                     18250              25833       25703
Topside         29921                 28450     30000    28000                     18250              21000       25149
Biltong        115000      80000                                                  120000              86350       97116
Head            23000                                                              16000                          19500
Short Ribs      21063                           21816    17500                     16000     17800    15500       19488
Drywors                    80000                                                  120000                         100000
Smokies         57000                                                              45000                          51000
Source: Primary Data Collected from Survey

Table 2: Processed Chicken Retail Price by Town, Producer and Store for January 2008
 Supermarket      Town         Crest       Eureka    Verino     Zambezi Zamchick
 Shoprite         Kabwe            14400                13400                   14900
                  Lusaka           13980     13980      11280                   14400
                  Livingstone      11675     11680      11226
                  Mazabuka         11680                11580                   10980

 Spar                Choma                               9433
                     Livingstone                        13280                        16500
                     Lusaka                             15330

 Konkola             Mazabuka                                         13200

 Mellisa             Lusaka               16000         15300         18000

 Embassy             Lusaka                             16500
Source: Primary Data Collected from Survey

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

                          ZAMBIA COMPETITION COMMISSION



Dear Respondent;

The Zambia Competition Commission has received a research grant from the International
Development Research Centre (IDRC), a Canadian based organization, to carry out an
empirical study of competition in the beef, poultry and dairy sectors. You may be aware that
the Commission has dealt with numerous cases involving these sectors and this research
project is, inter alia, aimed at assisting the Commission to have first hand information and
understanding of the nature and dynamics of competition in these three sectors.

We value your input and wish to assure you that the information you provide shall be used for
this research project only and shall be kept strictly confidential. You may otherwise mark as
"confidential" any other information that you would not desire to be contained in our final

Kind regards

Thula Kaira
Project Coordiantor
Tel: (0211) 222775/ 222787 (office)
Cel: 097-775-6147

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.


Name of company____________________ Sector___________________________

Location            _____________________                  Contact person_____________________

Date of start-up ___________________                       Date of acquisition_________________
Date of interview__________________                        Name ofInterviewer________________

Checked by

Nature of the firm

1) Is this firm a subsidiary of a domestic company?

         a) Yes

         b) No

2) Is this firm a subsidiary of a multinational company?

         a) Yes

         b) No

3) What is the ownership status of your company?

     a) Private (locally owned)

     b) Private (foreign owned)

     c) Jointly owned (foreign and local)

4) if jointly owned, indicate the percentage of shares that are foreign owned?                      %

5) Indicate your firm’s sales and total number of employees.

    Year                                              Sales                       Total number of
                           Beef                 Poultry             Diary         Employees


6) In which year was the following business lines set up in your company?

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.



7) What percentage of your sales in 2007 was accounted for by your top ten clients?

      Beef (%)                    Poultry (%)                       Diary (%)

8) What percentage of your total purchases (inputs) is sourced from your top ten
                                            Beef        Poultry Dairy
Retail      Total purchases
            % of imported purchases
Producer Purchase of raw materials
            % of imported raw material

9) Indicate the percentage of supplies obtained from the following sources

Suppliers                            Beef                     Poultry              Diary
Local firms
Sister company local
Sister company foreign
Total Imports

10) Do you receive any of the following services from your most important suppliers?
    Services              Beef              Poultry          Dairy
                                    Tick        % of         Tick        % of     Tick     % of
                                                price                    price             price
     credit facilities
     quantity discounts
     Free delivery
     quality guarantees
     Others specify

11) Indicate the importance of the following factors in setting prices for your goods
using the scale indicated below

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

                                                                   Beef              Poultry    Diary
      Cost of Finance
      Competition from locally produced goods
      Competition from imports
      Cost of labor
      Transportation cost
      Taxes (Company, VAT, Trade taxes)
      Others specify

          Not important………..1                                Somewhat important.................2
          Important…………….3                                   Very important………………..4

12) Compared to your own firm, how would you describe the features of your major
competitors (tick)

Features of your competitors                                  Beef                Poultry      Diary
                                                              (√)                 (√)          (√)
More diversified (Range of products)
Equally diversified
Less diversified

Predominantly informal
Predominantly formal

Smaller in terms of sales
Larger in terms of sales
Roughly the same size in terms of sales

Predominantly selling similar products
Predominantly imported products
Others specify
13). Indicate the period when you experienced most significant increase in
Competition                Beef products Poultry Products Dairy products
Year /period

14) How would you characterize the nature of competition in the industry?
                                   Beef products Poultry Products Dairy products
From new entrants in the market?

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

15) How did the increase in competition affect your company?

                                                  Beef products          Poultry Products      Dairy products
it reduced our market share
it forced us to reduce prices
other effects, please indicate
it forced us to reduce prices
it did not change anything

Other effects, please indicate……………………………………………………………

16) What was your average profit margin for each of the following products lines in
2007. (tick where applicable)
Products category           0-15%        16-30%         31-45%         46-60%      61-75%     76-85%   Above 85%


1a) Please list the major product lines and variety for each product produced by your
company? (Here we will specify the products: beef,

Name of Products                     Number           Price per            % contribution to
(produced/stocked)                   of               unit                 product sales
Mixed cut
Minced meat
Others specify here

1b) Poultry products
Name of Products                     Number of                  Units of          Price per      %
(produced/stocked)                   product                    packaging         unit           contribution
                                     Varieties                  (i.e. 1kg,                       to product
                                                                5kg, etc)                        sales
Day old chicks (broilers)
Day old chicks (Layers)

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

Broiler chickens
Layers chickens

Others specify

1c) Diary products
Name of Products                     Number of                  Units of          Price per unit   %
(produced/stocked)                   product                    packaging                          contribution
                                     Varieties                  (i.e. 1kg,                         to product
                                                                5kg, etc)                          sales
Fresh milk
Sour Milk
Skimmed Milk
Butter/ margarine
Other specify

2) For each of the major product varieties, please indicate stage in the production and
distribution chain that you are involved in and estimate the percentage of sales that
each product variety accounts for in total sale by product category.

Product        Primary    Processing Wholesale Retailing


A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

                                               Price Survey
Name of Retail Shop__________________________ Town ………………………………………

Location            _________________________

Date of Survey_____________________Name of Interviewer__________________

Checked by ……………………………………..

Table 1A: Beef and beef products
Name of Products                     Units of packaging Price per                 Producer
(produced/stocked)                   (i.e. 1kg, 5kg, etc) unit

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

Table 2A: Poultry and poultry products
Name of Products         Units of packaging Price per                             Producer
(produced/stocked)       (i.e. 1kg, 5kg, etc) unit

A Study of competition in the beef, poultry and dairy retail sectors in Zambia.

Table 3A: Diary and Diary products
Name of Products        Units of packaging Price per                              Producer
(produced/stocked)      (i.e. 1kg, 5kg, etc) unit


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