Ag & Development Library

Overview

Library

General Papers

Value Chain Case Studies

Tools and Methods

Healthy Value Chain Framework

Impact Analysis

Assessing the Impacts of Certification Systems on Rural Poverty

Why the Food Lab?

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Library

General Papers

Think Big. Go Small.

Adapting business models to incorporate smallholders into supply chains

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Think-big-Go-small-2x2 Food and beverage companies are facing a rapidly changing world. Consumers everywhere are growing more knowledgeable and concerned about the ethics of where and how their food and drink are produced. At the same time, development organizations are increasingly seeing the critical role of the private sector in creating sustainable economic opportunities for small scale farmers. Two-thirds of the worlds rural households - many of whom live in poverty - depend on smallholder agriculture for their food and incomes.

This briefing paper lays out the case for companies and development organizations to partner together to create more supply chains that are inclusive of smallholders. The paper further lays out principles and strategies for increasing the impact on development by adapting supply chain business models to the needs and context of smallholders and by public co-investment in farmers, farmer organizations, and needed infrastructure.

This paper is a New Business Model for Sustainable Trading Relationships publication and written for Oxfam's briefing for business series.

Authors: David Bright (Oxfam GB), Don Seville (Sustainable Food Lab) and Lea Borkenhagen (Oxfam GB). May 2010

Formal Value Chains and the Poor

Under What Conditions Are Value Chains Effective Tools for Pro Poor Development?

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Understanding the benefits, costs, and risks when connecting small scale producers to formal markets is critical to supporting informed decision making by companies, farmers, NGOs, and donors about investing in supply chain opportunities. Key questions include: Who are the rural poor? Under what conditions do they benefit? What are implications of these lessons for our strategies in setting up “pro-development” value chains? What do we most need to understand next? This Executive Summary, and the longer paper it reflects, seek to inform these questions from not only a review of literature, but also from experience with a cluster of value chain projects by development organizations and businesses in Africa and Latin America.

Author: Sustainable Food Lab.  January 2011

Linking Worlds

New Business Models for Sustainable Trading Relationships

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iStock_000002904280XSmall The development case (potential for reducing poverty) for including smallscale producers in global supply chains is clear. Companies are increasing willing to invest in incorporating smallholders into their supply chains -- to access new supplies, create product lines for ethical shoppers, and be part of achieving the millennium development goals.

But successfully including poorer smallscale producers into formal value chains in ways that supply consistent, quality production and stable terms of trade and help farmers build capacity over time isn't straightforward.

The linking worlds paper outlines a set of principles for businesses to consider when adapting their supply chain business model to the more effectively bridge the world of diverse smallscale producers and modern market requirements.

Authors: Bill Vorley (IIED), Shaun Ferris (CRS), Don Seville (SFL), and Mark Lundy (CIAT). February 2009

Public Interest in Private Label

How new relationships between NGOs and Retailers can help build trade to benefit the developing world's small scale farmers

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pubintinprivate NGO's know there’s a development case that improvement in small scale farming is directly associated with a reduction in poverty and hunger. For retail buyers there can be a business case about differentiation, managing reputational risk through engagement and securing new efficient sources of raw materials.

This paper is intended to support building successful relationships between NGOs and retailers with benefits for international development and for business. The NGO reader will find out how modern retailing works. There’s a range of commercial models that will be described and recommendations for good practice in relationships.

A New Business Model for Sustainable Trading Relationships publication.

Author: Chris Anstey, based on an MIT L-Lab Student Research Project, July 2010

Commodity Exchanges in Africa

Review of the role of commodity exchanges in supporting smallholder farmer market linkages and income benefits

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Gates-Africa1243_7 Recently the government of Ethiopia mandated that all of the navy bean trade is to done through the new commodity exchange. But the new business models for sustainable trading relationships team has been working on this crop in Ethiopia since 2008 to develop direct and transparent trading relationship to the final buyer. What are the implications? What is the potential for the commodity exchange to benefit small scale producers?

To gain insight into how the project might work with the new commodity exchange and still benefit small scale producers, the project commission a study of the 5 working country level exchanges in Africa. The results are provocative -- while commodity exchanges have the potential to benefit producers through clear prices signals and uniform and regulated warehousing and trading system, none of these exchanges to date have made the investments infrastructure that would allow the small scale producers to achieve the potential benefits.

A New Business Model for Sustainable Trading Relationships publication

Author: Peter Robbins July 2010.

Business models that are inclusive of small scale suppliers

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Guat-High-farmersfor-web Small-scale farmers, who form the bedrock for global agrifood supply, are faced with agrifood markets in an unprecedented state of flux. Domestic markets are undergoing rapid but uneven modernization, and higher value and export markets are increasingly the preserve of larger scale suppliers.

Inclusive business models as those which do not leave behind small- scale farmers and in which the voices and needs of those actors in rural areas in developing countries are recognised. This paper describes a range of business models for inclusive market development within the context of agrifood restructuring and modernization. It focuses specifically on models that improve the inclusiveness, fairness, durability and financial sustainability of trading relationships between small farmers on one hand and downstream agribusiness (processors, exporters and retailers) on the other. While the authors do address what producers need to do to compete in modern dynamic markets, and the role of facilitating public policy, the focus is more on the buyers and their role as partners in development.

A New Business Model for Sustainable Trading Relationships publication

Authors: Mark Lundy, Bill Vorley, and James MacGregor, July 2008.

Case Studies

Indicators of Poverty and Hunger in Coffee Supply Chains

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Green Mountain Coffee Roasters Confronts Los Meses Flacos

When Green Mountain Coffee Roasters decided to measure the impact of their CSR programs, they asked the Sustainable Food Lab and the International Center for Tropical Agriculture (CIAT) for help. Together, they went into producer communities to identify useful indicators (in partnership with the growers themselves) that would enable the company to assess the ability of coffee growers to make a living. What they didn’t expect was to confront los meses flacos, the thin months, the three or four months every year when many coffee growers and their families experience hunger. The case presents the approach the project team used to develop the indicators, and discusses the challenge of addressing poverty and hunger within something as large as the global coffee market.

Since the research project on indicators, GMCR has initiated a series of innovative projects with coffee growing communities to help address food security based on local priorities and strategies. For more on this project:

http://www.gmcr.com/en/csr/PartneringWithCoffeeGrowingCommunities/SustainableFoodLaboratory.aspx

The Juan Francisco Project

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Costco and CIAT’s Exploration of Guatemalan Green Beans

French-style green beans flow every day from remote farmers in Guatemala to Costco stores throughout North America. They pass through the Cuatro Pinos Cooperative and the Los Angeles Salad Company, who provide technical assistance to farmers and prepare the beans for sale to North American consumers. A Costco executive, through her participation in the Sustainable Food Lab, began to wonder whether farmers in value chains like this one were getting a fair price, and whether their families got the care and services they needed. Conducting this inquiry required transparency among all the players in the chain, in order to understand how profits from green bean sales were being distributed. Engaging with an external, non-profit research center, CIAT, was critical to building trust, thus providing a neutral observer of value chain activities. Through CIAT's extensive value chain analysis, and a skillfully conducted supply chain summit in Guatemala, it became possible for participants from each of the supply chain companies to see and feel the system of which they were a part. They made a decision to invest in sustaining and upgrading the existing commitments to alleviating rural poverty, through the establishment of a Foundation in Guatemala, funded by green bean revenues. The case study describes this process, and some of the challenges involved in institutionalizing the experiences and insights of the Project.

Tools and Methods

Innovations for Healthy Value Chains: Cases, Tools, & Methods

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Transforming value chains is a complex undertaking that begins with understanding the social and environmental contexts in which we are trying to create efficient supply chains for high quality products. The kind of understanding that leads to improvement is greatly enhanced by partnerships that enable us to work beyond our traditional boundaries by bringing together the perspectives of both civil society and business throughout the chain.

These partnerships, in turn, are most effective when we use strategies that enable us to see the system in ways that can reveal both current reality and opportunities to create economic, environmental, and social improvement. New insight allows us to implement improvements in the value chain and learn from that experience, so that we can eventually institutionalize the successful innovations as changes in infrastructure.

This toolkit is a beginning – an introduction to what some companies and NGOs have tried in order to achieve a variety of goals: to address poverty in producer communities, for example, as Green Mountain Coffee Roasters did, or re-build a brand based on third party certification of its product, as Unilever is attempting with its Lipton Tea.

We hope to build on this body of knowledge over time so that what we learn can benefit all of us doing business in an increasingly complex environment.

Editors: Jason Jay MIT Sloan School of Management, Hal Hamilton, Chris Landry, Daniella Malin, Don Seville, Susan Sweitzer, Sustainable Food Lab, Andrew Murphy WWF, May 2008

Impact Assessments

Assessing the Impacts of Certification Systems on Rural Poverty

A Case of Organic and Fair Trade Certified Coffee in Nicaragua

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In 2007 and 2008 CATIE led the development and testing of an assessment methodology appropriate for when changes in rural poverty are the major concern. The methodology presented in this paper focuses on identifying changes in livelihood asset endowments, which are made up of natural, human, social, physical and financial capitals, as a result of participation in value chains for certified products.

This case study applied this new methodology to evaluate the experiences of the second-tier coffee cooperative Soppexcca and its individual members in value chains for organic and fair trade certified coffee and how these experiences were shaped by long-term relations with civil society and buyers over the span of nearly seven years. Interventions by civil society and buyers have been critical both for Soppexcca, allowing it to build strong links with hundreds of smallholder coffee producers that has been critical for its long-term positioning in organic and fair trade coffee markets as well as for Soppexcca’s members, enabling them to expand production, convert to organic production and improve the overall productivity and quality of coffee production.

Author: Jason Donovan CATIE Turrialba, March 2010