Regional Value Chain Development and Promotion in Africa ECA-AUC-FAO
Value Chain and Business Model Approaches Improved Food Security through the Commercialization of...
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Transcript of Value Chain and Business Model Approaches Improved Food Security through the Commercialization of...
Value Chain and Business Model Approaches
Improved Food Security through the Commercialization of Agriculture
FAO contribution to Value Chains Methodology
--------------------------Heiko Bammann, Enterprise Development Officer, AGS
FAO Romecheck: http://www.fao.org/ag/ags/index_en.html
Sequence of presentation: Value Chains – basic
introduction Inclusive Business Models FAO support to VC development Activities and tools supported Initial lessons learned
Value Chain Approach
A value chain is the full range of activities which are required to bring a product or service from conception, through the different phases of production, transformations, and delivery to final consumers and final disposal after use
It is made up of a series of actors from inputs suppliers to producers and processors to exporters and buyers
Aim: to elevate the value chain to ” higher level” Improve profits
Critical Dimensions of a Value Chain
Inputs Production Processing Retailing
Product Flow
Financial Flow
Information Flow
Incentives and Governance
Five Typical Action Areas/Steps
1. Selection of sector or product, key issues and entry point
2. Value chain mapping
3. Participatory value chain analysis
4. Value chain action planning (draft upgrading strategy)
5. Stakeholder validation and planning workshops
=> Develop a VC upgrading strategy!
Producer-Buyer linkages in VC
Buyer Processor
Financial and Information flows
Physical flows
Inputs
Institutional environment (laws, regulations, etc.)
Production Distribution Consumption
Supporting services
Inclusive Business Models Small farmers are increasingly tied to markets and
agro-industries through business linkages and alliances with each other and with other value chain stakeholders.
There are many models of business linkages, but three are relevant for small farmers:
producer organisation model buyer driven model intermediary model
Typical organisation of smallholder production
Type Driver Objective
Producer driven
Small-scale producers themselves, through FO’s: ECTAD, CPGC
new markets higher market prices stabilize market position
Large farmers extra supply volumes
Buyer drivenProcessors (Hot Mama, BEL)Exporters (GUY)Retailers (Super J, SLU)
assure supply
Intermediary driven
Traders, wholesalers and other traditional market actors
supply more discerning customers
NGO’s and other support agencies
‘make markets work for the poor’
National and local Governments i.e. NAMDEVCO, GMC, NWC
regional development
Must Be a Business Case for Working with Small Farmers
Smallholders’ comparative advantage (premium quality)
Securing supply Access subsidized inputs Corporate responsibility Community goodwill Politics
Product quantity, quality, consistency, safety
Traceability & compliance with standards
Loyalty and fulfilment of commitments
Negotiation, coordination and communication
Business Reasons Costs and Risks
Foundations of Sustainable Models
Organized & empowered
farmers
Partnershipfacilitator
Facilitatingpolicysector
Receptivebusiness
sector
Rationale for supporting Business Models
Reduce over reliance on multi-stakeholder participatory approaches
Focus first on key VC problems Enhance reliability of raw material supply Enhance competitiveness of agribusiness buyer
Empower real development drivers Business managers know their markets SMAEs create value, buy products, generate jobs
Mainstream business thinking
FAO – AGS* supported projects
EU All ACP Agricultural Commodities Programme (EU AAACP) – (E)check:www.euacpcommodities.eu/en http://www.fao.org/ag/ags/ivc/en/
The Phase II of the CARICOM/CARIFORUM Programme for Food Security - (I)check: http://www.rlc.fao.org/progesp/pesa/caricom2/
* FAO Rural Infrastructure and Agri-Industries Division
For the Caribbean
Focus on one product (group) and improved value creation
Activities to achieve improved business linkages, production, post-harvest handling, value addition and marketing to local, regional or international markets
Focus on farmers and agribusiness organizations
Countries, Value Chains, and ‘Businesses’ supported
BAR – Onion VC – BAS (I) BEL – Hot Pepper – Hot Mama + (I) DOM – Pineapples – NIPPA (I) GRN – Roots and Tubers – NEFO (E) GUY – Eddoes – GAPA (E) JAM – Ackee – PO’s (I) JAM – R&T – CPGC (E) SLU – Fruits – BVFO, etc. (I) SVG – R&T – ECTAD (E) CARICOM – Services - CaFAN (E/I)
Overview of the business model approach
What are differences?
Business models for improved producer-buyer linkages (steps)
Identification of the key driver Analysis/Characterisation of the current
business model Identification of the critical success factors for
buyers Preparation of an upgrading business model
and financing plan Identify sub-set of activities that project can
support without distorting viability, unduly subsidizing, undermining sustainability
Characterization of Business Model
1. Product: products sold, differentiation
2. Product flow and distribution
3. Clients: clients, numbers, why buy
4. Resources and capacities base
5. Activities: production, transformation, etc.
6. Key partners and collaboration
7. Costs and revenue
8. Expectations
Activities and tools supported
1 - Business to Business Coordination
Addressing sources of uncertainty Implementing contractual
arrangements (formal and informal)
Promoting trust, transparency and collaboration
1 - Business to Business Coordination
Possible tools: Information mechanisms to improve
transparency Workshops to identify bottlenecks and
better understand on each other’s role Strategic plans for management of the
chains operations Training in negotiating skills and
developing contracts
2 - Respond to Customer Needs
Ensuring processes and products respond to customers’ needs
Synchronize product delivery and logistics
Improve information on customer requirements
Implement quality and safety standards
2 - Respond to Customer Needs
Possible tools: Market appraisal and surveys Train in good agriculture practices and
post-harvest and handling Train in agro-processing and value
addition Train in standards and certification
processes Develop product quality and safety
grading systems
3 - Add Value by Managing Processes
Identify and address logistics constraints Appraising business to business processes Developing organizational innovations that
improve delivery times Reducing waste and protect the
environment from harmful production and processing
3 - Add Value by Managing Processes Possible tools: Mapping exercises and workshops to
understand the flows Appraise financial institutions and
support loan applications Train in bulk buying and collective
marketing Introduce switch to re-usable items Training in business, financial
management and marketing skills
Relevance of this approach for the Caribbean?1. Comparative advantage in
production2. Import substitution3. Ability to absorb external price
shocks4. Receptive value chain actors-> contribution to Food Security through
the Commercialization of Agriculture
Initial lessons learned Change of mindset for agricultural
development required (define roles) Good management practices are critical!!! Transparency, accountability and trust
private sector vs public sector Business development services
rather new in the agriculture sector expensive for small number of beneficiaries
Time dimension business success requires time learn from failures look for successes and learn from champions
Involve regional partners from the start (CARDI, CaFAN, CABA, etc)
Thank You !