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Agri11 workshop iv-sab miller
 

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  • Conference theme: One (one supply chain and collaboration as a team across that supply chain) During presentation hope to persuade you of the need for collaboration and one seamless supply chain to support our African dream

Agri11 workshop iv-sab miller Agri11 workshop iv-sab miller Presentation Transcript

  • xxx SABMiller Africa Enterprise Development: A Partnership in Innovation with Smallholder Farmers Driving value and competitive advantage through localisation of our supply chain AgriBusiness Forum 2011 Johannesburg, October 2011
  • So what’s new ?
    • New approach to the commercialisation of cassava: new mobile technology set to revolutionise the cassava industry in Africa and add substantially to economic and rural development
    • ” Hub & Spoke” farm model: allows inclusion of commercial and smallholder farming in a symbiotic relationship leading to sustainable development of smallholder farmers
    • Novel brewing technology to produce a clear good tasting lager beer using cassava as the main ingredient, allowing access to new beer growth markets
    • New-style 3-way public-private partnerships (Government-private enterprise-NGO/donor organisation) creating a real ”win-win-win” relationship driving agricultural development in Africa
    © SABMiller plc 2005
  • Presentation Outline
    • SABMiller introduction
    • Business imperative for enterprise development
    • The cassava story
    • The Mocambique cassava pilot project
    • Game changing innovations min)
    • Total: 20 min
    © SABMiller plc 2005
  • SABMiller in Africa (excl South Africa) Operations in 39 of 52 African countries © SABMiller plc 2005
    • Managed operations in 17 countries
    • Castel operations in 22 countries
    • SABMiller and Castel
      • Coca-Cola bottlers in 20 of their 36 countries
    Africa volumes (inc associates): 35.7m HL pa
  • Cost Breakdown of a Typical Bottle of Beer © SABMiller plc 2005 © SABMiller plc 2005 Crowns: 5 % Water: 2 % Labels: 8 % Malt: 46 % Hops: 16 % Adjuncts: 10 % Cost Breakdown On average 77% of all inputs by value are imported Glass: 13 % (RB) Our target is more than 55 % local by 2014 43% 0% 51% 80% 100% 55 % Imported % (av) 96% 77 % of cost of typical bottle of beer is imported
  • The Enterprise Development initiative rests on 3 strategic business pillars © SABMiller plc 2005
    • Taking costs out through collapsing our supply chain
    • Drive new growth markets in the affordability sector
    • Enhance our license to trade
  • Substantial growth potential Outside of South Africa, Beer consumption per capita is low © SABMiller plc 2005 0 10 20 30 40 50 60 Cameroon Litres p/capita 950m South Africa Namibia Botswana Zimbabwe Angola Tunisia Kenya Cote d’Ivoire Zambia Uganda Tanzania Mozambique Nigeria Ghana Madagascar DRC Morocco Ethiopia Malawi Algeria Egypt Niger Somalia Sudan Mali Guinea Senegal Chad Population Source: Plato, November 2007 and August 2010 Litres p/capita consumption
  • Licence to Trade Localising our supply chain © SABMiller plc 2005
    • ~80 % of raw materials historically imported
    • Driving costs savings through raw material substitution
    • Government support and new excise regimes
    Barley % Self Sufficiency From 18,000 to 45,000 farmers within the next 2 years
  • Driving New Growth Markets in the Affordability Sector Our target market: informal liquor © SABMiller plc 2005 Typical cost p/serve $0.50 – 0.75 $0.85 $1.00 $1.20 + $1.50 + $0.15 - 0.30
  • What is cassava ?
    • 3 min)
    • Total: 20 min
    © SABMiller plc 2005
    • Root crop with ~78 - 85% starch on dry basis (21 - 25% on wet basis)
    • Root stable in the ground, but starts to degrade as soon as it is harvested, challenging
    • handling logistics
    • Approx 9 – 12 months to maturity, but can then be harvested at any time (not seasonal)
    • Needs ambient temperatures of >30 ° C, ideal for warmer countries (north of RSA /
    • Namibia). Africa in top 3 global producers
    • 3rd largest source of carbohydrates / starch for human food in the world . In Africa
    • generally a subsistence crop.
  • The importance of cassava to Africans is epitomised in the Ewe name for the plant, Agble, meaning "there is life” © SABMiller plc 2005 © SABMiller plc 2005 Cassava accounts for a daily calorie intake of 30% in Ghana and is grown by nearly every farming family
  • Global Distribution of Cassava © SABMiller plc 2005
  • Using Cassava to Drive Growth in the Affordable Sector “Aligned to African agricultural agendas and Government priorities …” © SABMiller plc 2005
      • Great “yield headspace”
        • Subsistence farming yields average between 2 and 10 MT/Ha
        • Average commercial yields average between 25 and 35 MT/Ha
        • New cultivars are seeing yields of 60 to 80 MT/Ha lading to major reductions in production costs
        • Potential starch yield per ha typically 2-3 x average maize starch yield with lower inputs and lower risk
      • Can control the value chain: cost of product + “fair” return model vs. market pricing
      • Main subsistence crop in sub-Saharan Africa – key to smallholder farming development on the continent.
      • Government priority in terms of agricultural and rural development: top of government’s agenda
      • Commercialization opportunities and synergies following from that
      • Drive competitive advantage: supply chain and cassava technological “know-how”
      • Not in the mainstream food chain such as sugar and maize: commercialisation of cassava will aid food security
      • The perfect sustainable development crop
      • New brewing technology has resulted in an excellent tasting clear lager cassava beer
      • Cassava is a “known” raw material on the continent: largest crop grown, but least commercialised. Features in
      • country MDG’s
    10 great reasons why ...
  • Relative Extract Costs Cassava very competitive with other processed adjuncts © SABMiller plc 2005
      • Potential cassava starch yield 2-3 x equivalent maize yield with lower input costs and risks
      • Cassava derived starch very competitive with other adjunct derivatives – approx 15-20 % cheaper than the nearest competitors - further opportunities driven by yield productivity and ownership of the value chain.
    Cost of Producing Starch from Cassava* * 20 t per ha yield
      • Just under 60 % of cassava fair price influenced by cost
      • of growing
      • Remaining 40 % processing cost
  • CDM Cassava Beer Project (Brand “X”) Economics driven by lower material costs and new excise regime © SABMiller plc 2005
    • Based on success in other Sub-Saharan African countries, SABMiller, the parent Company of Cervejas de Mocambique (CDM), is engaged in a local sourcing initiative to stimulate agriculture in Mozambique.
    • The project utilises recent breakthroughs in brewing techniques to enable SABMiller to produce clear beer replacing traditionally imported malted barley with locally grown cassava.
    • The project is based on reducing the price of the beer produced from locally grown cassava to ensure that the product is affordable to a much wider section of society thereby creating a product with sufficient demand to commercialise the underlying crops .
    • CDM is investing in the development of a new commercial cassava industry in the country, in order to produce and market a new range of quality affordable lager beer products in a sustainable and financially viable manner.
    • Cassava is not generally used in lager beer brewing, but a prototype lager beer (Brand ‘X’) has been developed as a result of our own in-house product development program, in which it substitutes in part for imported barley malt to produce a quality product. This will be the first commercially produced cassava based lager beer in our African portfolio, and the learning’s will be used to roll out the product to our other African businesses.
  • CDM Cassava Beer Project (Brand “X”) Economics driven by lower material costs and new excise regime © SABMiller plc 2005
    • The Mocambique Government has indicated strong support for the initiative by levelling the playing field and approving a “favourable” excise regime for the new category at the 10 % ad valorem rate (25 % of mainstream beer excise @ 40 %) .
    • With this lower-than-beer excise rate the intention is to produce a more affordable clear lager in Moçambique from locally grown and processed cassava and is expected to retail at about 70 % of the price of a “mainstream” beer. At this price level it will appeal to consumers currently consuming various forms of “affordable alcohol” (including “cheap” liquor, illegal - and often non-excised - spirits and dubious quality home-brews), and will constitute an aspirational purchase.
    • As such the brand is expected to generate in excess of 660 000 hl pa of new beer volumes over the next 5 years (30 % of our brand portfolio).
  • Some dimensions of the project
    • Will create a demand for over 45 000 tpa cassava root
    • Will generate over 1700 new farming jobs
    • New income > $ 1125 per farmer per annum min)
    • Total: 20 min
    © SABMiller plc 2005
  • Some challenges in farming cassava © SABMiller plc 2005
    • Cyanide Content
    • Concentrated in skin – removed on peeling
    • No traces found in cassava flour or brewing process
    • SABMiller MD has done the taste test …….. and lived !
    • Cassava Process
    • Cassava needs to be processed as soon as it is harvested – logistics challenge
    • Purification / concentration / drying process relatively capital & energy intensive
    • Simplified mobile process critical to ensuring economic viability
    • Possibility of maltose manufacture
    • Cassava Growing
    • Challenge will be to convert subsistence farmers to cash crop farmers and ensure reliable and sustainable supply chain
    • Introduction of disease resistant, higher yielding cultivars
  • Conventional cassava starch processing plant © SABMiller plc 2005
  • Supply Partnership with DADTCO NV Outsourcing to third parties of non core activities © SABMiller plc 2005
    • Supply “partnership” has been formed between CDM and DADTCO
    • Mandioca (Shareholders: DADTCO NV and Mocambican partner
    • (still to be selected – preferred Farmer Co-op))
    • Scope of supply co will be:
      • Supply and implement cassava processing technology
      • Manage the farming programme: farming model based on “hub and spoke” and comprising commercial farmers
      • Cassava processing
      • Smallholder farmer development
      • Cassava development
  • DADTCO AMPU cassava processing unit (Autonomous Mobile Processing Unit) © SABMiller plc 2005
  •  
  • Concept of the AMPU Using mobility to overcome obstacles of high water content and perishability © SABMiller plc 2005
  • Farming Model: “Hub & Spoke” model combining commercial and smallholder farmers in a symbiotic relationship © SABMiller plc 2005
    • 2 or 3 commercial farmers in the Nampula area (radius max 100 km
    • from Nampula) with a smallholder development
    • Role of the commercial farmers will be to:
      • Manage the cassava supply from the smallholder units
      • Develop the agri skills of the smallholder farmer
      • Provide on the ground advice to the smallholder farmers and
      • overview the cassava production at critical stages
      • Assist with inputs as necessary
  • “ Hub & Spoke” Farming Model Using commercial farmers to drive smallholder development © SABMiller plc 2005 (approx 150) (approx 150) (approx 150) Cassava Cassava Root Cassava Root Cassava Root Cassava Cassava Cassava Processing Unit Cassava Cake CDM – DADTCO Cassava Processing AMPU
  • Establishing a “Win – Win -Win” Three-way Public-Private Partnership © SABMiller plc 2005 Benefits to SABMiller / CDM / Dadtco
      • Creates new employment to farmers and service providers – +1700 farmers + 30 000 indirect
      • New employment leads to growth in the economy through the “multiplier” effect
      • Knowledge / skills transfer
      • Additional excise receipts: $ 2.2 m and foreign Exchange savings: $ 1.4 m
      • Commercialization of cassava industry may lead to other agricultural commercialization (e.g. wood)
      • Contributes to Government Strategy:
      • - Food security
      • - Millennium Development Goals
      • - Beira corridor incentive
      • - Rural development
      • - Gender equality
      • - Water conservation
      • - Infrastructure development
      • - Agricultural Productivity + R&D
      • - Health
      • Opportunity to access “affordable beverage” market estimated to be at least equal in size to the formal beer market – game changing
      • New profit pool / new markets
      • Additional incremental contribution of new beer volumes
      • Sets up competitor barriers to entry
      • Brand “X” model for the rest of Africa
      • Protects / enhances our license to trade
      • Access to “best-in-class” technology
      • Decreased risk
      • Replicable in the rest of Africa
    Benefits to Mocambique Government SABMiller (CDM) DADTCO NV 3 rd Party Service Provide r IFDC Donor Funding Country Government (Mocambique) Public-Private Partnership
      • A successful partnership with Government will stand out as an excellent example of a value-adding public-private partnership adding to positive economic growth
  • So where is the innovation ?
    • New approach to the commercialisation of cassava: distributed raw cassava processing systems with centralised secondary processing.
      • Combines advantages of mobility and simplicity with economies of scale
    • New mobile containerised cassava processing technology: only requires a water source
    • „ Hub & Spoke” farm model: allows inclusion of commercial and smallholder farming in a symbiotic relationship leading to sustainable development of smallholder farmers
    • Novel brewing technology allowing access to new beer markets
    • New-style 3-way public-private partnership creating
    • a real ”win-win-win” relationship
    © SABMiller plc 2005
  • SABMiller Africa Winning in Africa Questions Thank You