4. Executive Summary
Introduction
Emerging from nearly 30 years’ of conflict, post-tsunami
years post tsunami
Aceh presents vast untapped business opportunities in
resource-rich North Sumatra, Indonesia.
Leveraging the global shortfall in quality cocoa supply and
the production potential of Acehnese smallholder farmers,
we present a creative proposition of bringing together
various stakeholders through a corporate vehicle sourcing
cocoa directly from farmers in Pidie District, Aceh.
d ect y o a e s d e st ct, ce
Farmers, traders, exporters and buyers will share
ownership in a profit-driven yet socially-committed
enterprise, Alami Kado PT. Alami Kado aligns interests of
p , g
all parties by restructuring the existing supply chain and
improving farmer capabilities and consistency in cocoa
quality in the Pidie cocoa value chain.
4
5. Executive Summary
Alami Kado Key Success Factors:
Alami Kado achieves alignment of interests through:
• Providing market access and a clear price signal for farmers to upgrade their processes and cocoa
quality, thus improving livelihoods
• Providing technical training and assistance to farmers through strong and long-term
partnerships with NGOs and/or donor agencies
• Strategically positioning buyers to leverage on existing local networks and gaining direct
access to suppliers
• Maintaining a close relationship and obtaining support from local government
Being true to its roots in Aceh, Alami Kado will propel Pidie to the global cocoa supply scene.
Alami Kado Operations and Processes:
The focus is to streamline and simplify farmers’ activities. This is based on getting them to provide
consistent quantities of quality wet beans Wet beans are collected through a system based on existing
beans.
logistical networks for processing at 6 units conveniently situated close to Pidie cocoa farms. One
central warehouse will be strategically placed in Biruen (50 km from new port Krukuh) for packaging and
shipment. Through a tiered pricing system, and effective corporate governance, Alami Kado ensures
that value gain is channeled throughout the value chain. This will be supported by investing in training
the farmers.
5
6. Executive Summary
Alami Kado Key Facts:
Once initial f di of USD1 031 000 i obtained th
O i iti l funding f USD1,031,000 is bt i d through share capital,
h h it l
Alami Kado will work towards the following targets:
• Increase production levels from 450 tonnes/hectare at present to
825 tonnes/hectare in Year 5
• Train 4000 Pidie cocoa farmers by year 3
• Distribute profits to shareholders by year 4
• Achieve three-fold increase in farmers’ income by year 5
yy
8. Background to Aceh
Map of Aceh and General Information
• Located on the northern tip of
the island f Sumatra
th i l d of S t
• Strategically located within the
vibrant economic triangle of
Malaysia, Si
M l i Singapore and d
Indonesia
• 98.6% of population in Aceh is
Muslim
M li
• Aceh is rich in natural
resources especially oil, gas
and conducive f agriculture
d d i for i lt
• Rice, coffee and cocoa are the
main agriculture products in
Aceh
A h
8
9. Aceh
History and Demographics
The History
• 30 years of conflict ended in 2005 bringing peace
and economic development opportunities to Aceh
• Aceh was heavily damaged by the Tsunami in 2004
and the economic losses amounted to 97% of
Aceh’s GDP
• In the post tsunami era, Aceh s economic growth
era Aceh’s
has been primarily driven by reconstruction/
rehabilitation efforts supported by domestic and
international aid
• The future depends on a self-sustained economy
self sustained
Demographics
• Population (2005): 4,010,539
• Land Area: 57,365.57km2
• GDP Growth (without oil and gas,2006): 7.7%
• GDP Per capita (2006): US$1,962.75
• Net Export (% of GDP, 2007): 31.1%
(Source: Aceh Economic Update, 2007, The World Bank)
9
10. Cocoa Industry in Aceh
y
• Indonesia has been the world’s third largest
cocoa-producer since the 1980s.
• Despite high end chocolate fetching upwards of
US$200/kg among affluent consumers, the
average price paid to farmers in Indonesia for their
cocoa beans can be as low as US$2.00/kg
• Cocoa has been identified as the major priority
crop by the Aceh government for economic
development and has received support from
UNDP/APED
• Global demand for cocoa has been outstripping
supply to the extent that prices were up 30%
(Cadbury, 2008)
• All cocoa grown in Aceh is currently traded
through Medan and transported by road
• Cocoa is easily established within existing farm
The number of cocoa
systems as a cash crop and provides a quick and farmers in Aceh is
regular i
l income about 90 000
abo t 90,000
10
11. Challenges facing Cocoa Industry in
Aceh
Productivity Challenges Organizational Challenges
• Inconsistency in the supply of • Lack of effective organization
high quality cocoa and mobilisation amongst
cocoa farmers and others
• Yield losses due to poor crop
management, pests and
disease problems • Lack of effective infrastructure
in collection, processing and
• Low cocoa farming skills warehousing g
amongst farmers
• Ineffective coordination and
• Cocoa farmers lack adequate communication between major
working capital
ki it l supply chain stakeholders and
support groups
• Low farm gate prices and
lack of price differentiation for
quality cocoa
lit
11
12. Overall Scenario
• The aid assistance including funding from
donors is in decline hence threatening the
sustainability of Aceh’s economic recovery
unless self-reliant economic activity
commences
• Unstable supply from leading producer
countries such as Ghana, Ivory Coast and
Indonesia has motivated buyers to not only
secure cocoa bbeans early, b t also i
l but l invest it in
farmers to improve yields and quality.
• Consumer demand for organic fair trade and
organic,
specialty products has driven exporters such
as Armajaro, Olam and others to pay closer
attention to traceability and supply chain
issues
12
14. BUSINESS OPPORTUNITY:
Drivers and Conditions
• Chocolate consumption increasing with improving prosperity
worldwide.
• The supply of cocoa is also subject to volatility due to political
instability from years of conflict in the producing nations.
• Indonesia is one of the four regions in the world which p
g produces
significant volumes of cocoa.
• Aceh is a rich and diverse province which is located within the vibrant
economic triangle of Malaysia, Thailand and northern Sumatra. ACEH COCOA
• Post tsunami and conflict resolution has lead the people of Aceh to
commit to improving their standard of living and this includes reviving
the cocoa industry.
• Sustained economic activity is key to the alleviation of poverty and
raising the income of farmers.
• The building of a commercially well managed cocoa industry in Aceh
can be a key contributor to economic growth in Aceh.
14
15. BUSINESS OPPORTUNITY:
Market Opportunity
• There is significant potential to produce higher grade cocoa through
simple but well managed production process throughout the supply
chain.
chain
• Potential increases in productivity can be realized through a business
forum. Production in Aceh currently averages 400 kg per ha. as
opposed to the international benchmark of 1000 kg per ha There
ha.
exists great potential to increase production through a new business
model.
ACEH COCOA
• There is potential to increase the land areas for cocoa cultivation
p
through rehabilitation of land which has been neglected (24,739 ha –
Aceh).
• Organized domestic production and supply of good quality cocoa will
increase the confidence of buyers in Aceh cocoa.
• Through simple but creative training programmes and technical
assistance for the farmers, quality cocoa could be produced which will
lead to
l d t an iincrease i th opportunity f i t
in the t it for international t d
ti l trade.
15
16. BUSINESS OPPORTUNITY:
Investment
• Improvement in productivity and increasing in crop areas will boost
cocoa revenues in Aceh. This will both need and present
investment opportunities.
• A well structured b i
ll t t d business model and i l
d l d implementation plan will
t ti l ill
attract potential investors and help secure financial assistance from
donors thereby transforming the supply chain in the industry.
ACEH COCOA
• The high price for cocoa being traded in the commodity market is a
reflection of the sustained demand for the product. This should
ensure good returns for investors.
• Added benefit is the high social impact as per capita farmer income
is projected to increase by threefold in 5 years, presenting a win-
win situation.
16
17. BUSINESS OPPORTUNITY:
Profits with high social impact
Three-fold increase in farmer per capita income in five years
USD Farmer Income Per Capita
Farmer's Income Per Capita (USD)
1,000
800
600
989
400 792 865
626
200 460
302
-
Current Y1 Y2 Y3 Y4 Y5
17
18. PIDIE DISTRICT
• The Pidie District of Aceh lies on the
North Eastern area of the island
• Banda Aceh local government has
designated Pidie as a cocoa growth area
• Cocoa production in Pidie began in 1980
with local communities planting cocoa
plants with government assistance
• Cocoa can be considered as the main
perennial crop in Aceh involving
thousand of small holders
• The number of cocoa farmers in Pidie
district is approximately 8,500
The area under cocoa has gradually
increased over the years. The cocoa
growing area in Pidie District extends from
low altitude (close to sea) to the high lands
near the mountains.
18
19. Section 4:
BUSINESS MODEL
Aceh Cocoa Industry Constraints
Demand and Supply Constraints
D d dS l C t i t
Key Success Factor – Alignment of Stakeholders
Strategic Positioning in the Value Chain
Shareholding and Management Structure
g g
Proposed Structure
Proposed Solution - Operations
Rationale and Benefits of New Company
19
20. IV. Business Model
Aceh Cocoa Industry Constraints
Cocoa has grown into a major income
stream for smallholders in Pidie over recent
years.
However,
•Continued growth is affected by inconsistent
and poor quality bean production.
•Widespread pest infestation (e.g. from the
cocoa pod borer) is a major cause of poor
cocoa bean quantity and quality.
•Despite t i i i iti ti
D it training initiatives, th adoption of
the d ti f
improved farming and post-harvest methods
has been limited
•Farmers are poor and lack access to capital.
•The sector suffers from lack of alignment of
interests amongst various parties.
20
21. IV. Business Model
Demand and Supply Constraints
Demand Supply
pp y
Constraints Inertia
Demand Constraints Supply Inertia
Multi-national buyers, processors and Farmers would like to receive higher
manufacturers want to improve the quality prices for their crops via a direct
relationship with buyers – as opposed to
and consistency of their raw materials. traders.
To achieve this, they need to establish However:
closer and more efficient supplier •The market offers little price
relationships. However, they: Solution: differentiation for higher quality beans.
•lack incentives to move their procurement Therefore, smallholder farmers have little
operations closer t th f
ti l to the farmers without
ith t Create a incentive to upgrade their production and
any guarantee or influence over the company that post-harvest practices.
supply process. •At the same time cocoa bean collectors
•face resistance from entrenched local
aligns and traders have little incentives to
traders. interests upgrade their supply chain
21
22. IV. Business Model
Company s
Company’s Strategic Positioning
Domestic Production International Production
Local Local Regional
Collector Exporters Processors
Multinational
Manufacturers
Food
Markets
Multinational
Smallholder Processors
Farmers
Multinational
Processors
Local and
Multinational Manufacturers
Trader Cosmetic
Affiliate Multinational
Markets
Exporters Traders
22
Legend: Raw Product Processed
23. IV. Business Model
The Company
p y
The brand l
Th b d colours th t h
that have b
been
chosen have their own meaning
and representation.
•Light brown represents cocoa
•White emphasizes purity and
White
peace elements
In the Acehnese language, •Red represents the community’s
p y
Kado means ‘A gift’ and richness in culture.
Alami means ‘Natural’
23
24. Partnership Architecture:
Farmer Training and Stakeholder Dialogue
Buyers/
Investors Partnership
$
Buyer Price Signal
Donor /
Financing Agencies
g g
Buyer
FARMER
TRAINING
Technical
Partnership Assistance Partnership
24
25. IV. Business Model
Company’s Business Model: Alignment of Stakeholders
• Maintain close and effective interaction with local government.
• Gain development support for the local cocoa industry
• Anticipate and mitigate impact on the company arising from potential
government action or intervention.
Government
an Processors
• Convince key p y
y players that they will
y
nd
• Form effective partnerships with donor
NGO / Donor
benefit from moving procurement closer
agencies
agencies and NGOs.
Buyers
to the supply.
• Benefit from their expertise and
• Buyers leverage on existing local
resources in providing training to
networks while minimising opposition
smallholder farmers.
from local traders.
s
Local Farmers
& Traders
• Link farmers and collectors to a ready market, which requires consistency
in
i supply and quality.
l d lit
• Provide impetus for farmers to organise themselves at the local level and
upgrade their processes.
• Empower farmers with the capacity to access and adopt better practices
and also to be able to respond to market opportunities.
• Allow participation of farmers, collectors and traders at shareholder level.
25
26. IV. Business Model
Proposed Solution –
Shareholding & Management Structure
The formation of a for-profit company, Alami Kado PT brings all together key cocoa
stakeholders (farmers, traders, exporters and end buyers) as shareholders.
Alami Kado Proposed
Proposed Shareholding Structure Shareholding Structure
• Alami Kado PT will have four primary shareholders
• Exporters and Buyers/ Investors will provide cash for 30% Buyer(s)/
stake each Exporter Investors
30% 30%
• Co-op shareholding of 20% is contributed as sweat equity
• Collector / Trader shareholding is suggested at 10% cash, Trader,
Co-Op,
10% contributed via sweat equity 20% 20%
Alami Kado Management
Proposed Management Structure Structure
HQ
• Management Structure: Alami Kado PT will employ a CEO
g p y
who will manage the day-to-day operations (including field
officers and processing and warehouse). The company will
HQ Field Mgmt,
have a Board of Directors to advise management. Operations Warehouse
Field Mgmt,
Processing
Centres
26
27. IV. Business Model
Proposed Solution - Company Structure
Formation of Alami Kado PT: Aligning interests of all stakeholders
Shareholding
g Collector / Buyers /
y
Co-Op
C O Exporter
E t
Structure Trader Investors
Operating
Company
Business Farmer
Farmer Bean Storage and Transportation
Activities Training and
Loans Processing Packaging Services
Welfare
Aceh
Partners NGO Donor Agencies
Government
Stakeholder Objectives in Alami Kado PT
Farmer… Collector / Exporter… Buyers / NGO / Donor Aceh
Trader…
Trader Investors…
Investors Agencies…
Agencies Government…
Government
- Receives loans, - Operates buying - Plays key role in - Gains direct - Provides funding - Develop
training and units and QC providing access to and/or technical infrastructure for
processing cocoa technical suppliers training to processing unit
support to grow - Together co-op expertise in farmers, and warehouse
p
better crops and trader, leads g g
designing collectors or
and organizes processing units traders
farmers and warehouse
27
28. IV. Business Model
Proposed Solution – Operations
Alami Kado PT aims to boost the farmer’s capabilities and generate revenue via the following activities:
Company Function
p y Description
p
Processing, Storage and The company will operate:
Packaging - 6 Processing Units, serving approximately 300-400 farmers in the
surrounding vicinity with fermentation, drying and sorting services.
- 1 centralized Warehouse, to store cocoa beans and ensure the highest
quality before shipping th
lit b f hi i them t b to buyers.
Loans, Finance and Insurance To alleviate farmer’s capital constraints through microloans as well as crop
Services and personal insurance options.
Trade Facilitation and Marketing Support farmers to sell their goods and promote Aceh cocoa.
Technical Assistance and Training Focus training on farmers, collectors and traders in collaboration with key
partners. The company will facilitate the provision of these services with the
partners.
In support of its business aims, the company will operate facilities including:
• Processing and collection units
• Warehouse
• Transportation services
Alami Kado PT will establish partnerships with key interested parties including the UNDP, Swiss Contact,
the Aceh Government and NGO
th A h G t d NGOs.
28
29. IV. Business Model
Rationale and benefits of new company
1. The company provides a vehicle bringing together the
interests of all parties, with direct economic benefits to
farmers.
farmers
2. Farmers gain:
• Loans as working capital, critical to enabling their daily
cash flow needs.
• T h i lt i i
Technical training, enabling f
bli farmers t f
to focus th i efforts
their ff t
on boosting quality in their cocoa beans.
• Direct access to a ready market of international buyers
and exporters, providing understanding of their ultimate
buyers needs.
buyers’ needs
• Possible dividend payouts from the company.
3. Collectors and traders are acknowledged as crucial to Pidie district’s cocoa production
as they enable and can help organise the farmers.
4. International buyers and exporters b
4 I t ti lb d t benefit f
fi from:
• Direct links with their supply source, ensuring the desired quality in production
process.
• Consistent cocoa supply at pre-negotiated prices.
• Traceability of cocoa to the original supply source.
29
31. V. Governance Structure
To ensure consistent financial performance in
Indonesia s
Indonesia’s challenging business environment
environment,
transparent and effective corporate governance is
vital.
vital
31
32. V. Proposed Governance Structure:
Ensuring Competitive and Consistent Performance
Corporate Structure Legal Structure
Articles of
Association
Shareholders Ensures fair representation of
Shareholders and profit-sharing between all
Agreement
Transparent and
p shareholders
accountable
Management Ensure implementation of
Audit Board of Directors
Agreement best management practices
Management
Team
Partners
Memorandum of Ensure long-term active
Pidie District partnership in the Pidie
Understanding
Government cocoa value chain
Technical
Advisors (eg
UNDP, Swiss
Contact)
32
33. V. Governance Obligations and Actions:
Board of Directors
Obligations Actions
• Set
S t corporate values
t l • A t in b t i t
Act i best interests of Alami K d PT
t f Al i Kado
• Provide strategic direction and management • Attend regular and ad-hoc meetings
• Set corporate governance standards as required by the business
• Oversee financial reporting • Adhere to company procedures
• Ensure l
E legal compliance
l li • M i t i open flow of information
Maintain fl fi f ti
• Implement HR best practices • Provide full disclosure of personal
- Fair wages interests
- Health and safety standards • Maintain diligence and competence
- Employee training
• Implement risk management and internal
controls
- Operational
- Financial
- Environmental
- Social
• Implement environmental and social best
practices
33
34. V. Proposed Governance Structure:
Memoranda of Understanding
Partner
MOU ensures provision of:
• land for warehouse
Pidie District • road networks to speed up logistical process
Government
• other infrastructure
Memorandum
of Partner
Understanding MOU
• Provides funding framework
Donors provide
funding for technical • Defines precise role of technical
assistance
assistance (e.g.
UNDP, USAID, • Identifies opportunities for technological
Swiss Contact) improvement and logistical streamlining
• Governance oversight
34
35. Section 6:
PRODUCTION AND OPERATIONS
Farmers Operation and Process
Collector Activities
Processing Units
Warehouse
Summary of Transactions in the Supply Chain
Productivity Density of Pidie Cocoa Area
Numbering of Processing Units
Seasonal Distribution of Cocoa Harvest
Cocoa Harvest Analysis
Most Efficient Transportation Arrangement
35
36. Farmers Operation Process
p
Training
Wet Bean
Cocoa Pod Pod Open for Collectors pick
Waiting for
Collection Beans up Beans
Collection
1) Farmers collect pods daily in their respective areas.
2) After pods are collected, farmers then open pods to release beans.
3) Beans are then spread out for 2 hours or until collectors pick them up
up.
Total Time: 1 day
Final Output: Wet and Dry Beans
Wet Price Farmers get: 17,000 per kg
36
37. Collector Activities
Training
$ Beans transport
Collectors Farm Gate Farm Gate
to Processing
Gather Beans Quality Control Record Keeping
Units
-Size -Farmer ID (Basket Label)
-Mold -Weight (25 Kg minimum =
-Disease 300 Pods)
-Payment
1) C ll t
Collectors gather b
th beans (b th wet and d )
(both t d dry).
2) Quality Control for size, mold, and diseases.
3) Record keeping for traceability and weight. Transaction happens here if beans
pass quality control.
4) C ll t
Collectors th t
then transport the beans to processing units (PU )
t th b t i it (PUs).
Total Time: 1 day
Final Output: Beans and Records
37
38. Processing Units
Owned and Operated by Alami Kado PT
(5 – 7 days) (2 – 4 hrs) (5 – 6 days) (5 – 6 hrs)
Drying by
Purchase
Soaking in Solar Dryer Packing & Transport to
by Fermentation
Water and other Sorting warehouse
Company
methods
1) PU accepts the bean for quality control and the record for accountability Transaction happens here
accountability. here.
2) Workers place beans in fermentation boxes with identification tags. Ferment for 5 – 7 days with mixing of bean every 2
days.
3) Fermented beans are soaked in water for 2 – 4 hours.
4) Workers then place soaked beans on solar dryers and other dryers. Drying takes 5-6 days. Solar dryers help minimize
mold, maintain temperature, and can be operated in rainy season.
5) Workers then sort dry beans to sort for quality and pack them in bags ready to be transported to the warehouse.
6) Batches of beans with consistently low quality can be identified for accountability at the farmer level.
Total Time: 11 – 14 days
Number of Employee: 5
p y
Equipments: Fermentation, Drying, Sorting, Packing, Computer
38
39. Warehouse (One for Company)
Owned and Operated by Alami Kado PT
$$
Trucks collect dry Quality Control and
Storage Sale to Buyers
beans from PUs Record Keeping
1) Trucks sent to gather bags of dry beans from processing units and return to warehouse.
2) Bags unloaded from the trucks for quality control and record keeping (computerized).
3) Bags are put into storage facility/warehouse.
4) Bags are ready to be shipped to buyers locally and internationally. Transaction happens
here.
Total Time: 1 – 2 days plus storage time.
y p g
Number of Employee: 12
Equipments: Trucks, Storage Facility, Computer
39
40. Summary of Transactions in the Supply
Chain
Wet Wet Dry Packaged
Beans Beans Beans Beans
Processing
Farmers Collectors Warehouse Buyers
$$ $$
Units $$
Tiered - 19,500 – 24,000- 30,000 - 32,000 IDR
Price *assumes 9,500 IDR
20,000 25,000
conversion rate USD
IDR IDR
IDR*
Incremental Price
20 25%
20-25% 25 – 28%
Increase %
I
(Value Added)
*Price Quotes are subject to market fluctuation, cocoa availability, and other relevant factors that may not be captured in this example.
40
41. Traceability in the Supply Chain
Processing
Farmers Collectors Warehouse Buyers
Units
Buyers of the d cocoa b
B f th dry beans will b able t t
ill be bl to trace where th b
h the beans came f
from at each step
t h t
of the value chain all the way to the farmer level.
Traceability will be implemented through a simple system of:
-RRecord k
d keeping (
i (paper and computer)
d t )
- Farmer identification code
- Labeling of beans in batches at all levels
41
42. The Productivity Density of Cocoa Area
Blue shade is Pidie which is the focus( productivity is 2.3K tons /annually); white shade is Pidie
Jaya
43. Processing Unit Location
Bandar baru
Reubei
Glumpang tiga
Keumala
Tangse
Geumpang
There will be 6 P.U with capacity of 250 tonnes each. Two routes will be established; one from
p y ;
P.U 1 to P.U 4 (55km) and one from P.U 5 to P.U 6 (10km)
43
44. Warehouse Location
New Port
Krukuh
W
Pidie Area Bireun
The warehouse is strategically based in Bireun district which is 2 hours from Pidie and only 1
hour to the new port Krukuh. It is along the main road from Pidie to Medan.
p g
44
45. Dedicated multi-purpose ALAMI KADO
warehouse
• Only one hour to
Efficient new port Krukuh
transport
logistics • Two hours from
Pidie
Bridge
between • One stop service
Buyer,
B for B
f Buyers andd
Farmers traders
and Coop
• Cover Pidie at first
stage
Accommodate
expanding to • Expand to cover
other districts Pidie jaya, Bireuen ,
Aceh utara and
Lhoksumawe;
Cost
• Similar cost as
effective
Pidie
warehousingg
Office
space
45
46. Efficient Transportation Solution
Seasonal cocoa harvest distribution by
monthly percentage
thl t
20%
18%
16%
14%
12%
We need two
10%
trucks for the
8%
peak months
6%
4%
2%
0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Harvest season varies tremendously every month, Peak harvest (from Nov to Feb) contributes
to nearly 69% of annual productivity ;The peak 4 months is the focus of logistic;
46
48. Marketing Approach
Alami Kado PT
– Current landscape provides an optimal scenario for investment and
engagement of cocoa industry in Aceh
– Alami Kado Pt represents a coordinated approach to realizing the Aceh
cocoa market’s immense potential and connecting market participants
market s
– Value Proposition of Alami Kado
o Quality
o Consistency
o Dependability
o Traceability
o Sound Governance
o High Social Impact
48
49. Marketing Approach
•Align potential partner interests to achieve market growth
Potential Partners •Highlight relationships in the region to raise profile of the
cocoa industry
•Engage all parts of the value chain to promote superior
Penetrate product to ultimately benefit the end buyer
•Segment target market – local and international buyers
•Set the brand of Alami Kado apart as image of enhanced
Differentiation quality, consistency and deliverability
•Achieve market share growth
49
51. Human Resources – Management Team
Role Job Description
CEO The CEO acts as the public face of the company, and as such engages in PR activities.
Within the company structure he acts as a consensus builder between all shareholders.
He defines the strategic direction for the company He will give special attention to the
company.
company’s role in the positive social transformation at the farmer level. He will be
responsible for the day-to-day operations and logistics of company facilities.
Requirements: We are looking for a person with 5 years of project management
experience in Indonesia, preferably in Aceh. He will have had international exposure. The
qualified person will be business oriented, able to interact with all stakeholders, and speak
fluent Bahasa. The person shall adhere to strict ethical standards.
Initial salary: 35 000 USD/year
35,000 USD/year.
Finance Manager The finance manager is responsible for budgeting, financial reporting and forecasting. He
will ensure the long term financial viability (health) of the company. He will be in charge of
profit reinvestments and redistributions. He will help the cooperative with improved access
to working capital, recommending the latter to international agencies (e.g. UNDP, Swiss
Contact, USAID). He will explore new/other avenues for profit generation.
Initial salary: 15 000 USD/year
15,000 USD/year.
Field Facilitator/ The Acehnese field officer will act as the intermediary between farmers, collectors , NGO
Training Coordinator trainers and the Forestry and Plantations Department. He will deal with bottlenecks on the
ground and facilitate between stakeholders.
Initial Salary: 10,000 USD/year
HR / M k ti M
Marketing Manager The primary task of the HR Manager is the recruitment and the retention of Operations
staff. He will evaluate the needs for additional recruitment as production increases.
In addition, he will be in charge of brand building and the cocoa bean certification
process.
Finally, he will give back office and administrative support.
Requirements: A marketing degree.
Initial Salary: 10,000 USD/year.
We are an equal opportunity provider
51
52. Human Resources – Total Staff
Facility HR Resources No of Headcount Total Headcount Budget Required
Required Facilities Per Facility over all Facilities (per annum, USD)
• CEO
• Finance Manager
• Field Facilitator/ N/A 4 4 $70,000
Mgmt Team Training Coordinator
• HR / Marketing
Manager
• Account clerk: 1 (part
(part-
time)
• Processing: 5 (2 QC ($2,595/month for
Warehouse officers, 3 store 1 10 10 all 12 employees) x
keepers) 1 Warehouse =
• Drivers: 2 $31,140
• Guards: 2
• Processing: 3 (of which ($1,120/month for
Processing 1 store-keeper) 6 5 30 all 5 employees) x 6
Units • Guards: 2 (working in PUs =
shifts) $80,640
Total C
Company Resources Required 7 44 $181,780
$181 780
Additional • Part time Consultant $2,500 / 6 months =
assisting in cocoa 1 (Part-time) 1 (Part-time) $15,000
Resources branding
Total Budget Required 45 $196,780
52
*data source: Local Traders, YLP Analysis
53. Human Resources – Organizational Chart
(
(Total Headcount: 45 incl 1 part-time consultant)
p )
CEO (1)
Headquarters
(Total HC: 4)
Field Facilitator / HR &
Finance
Training Marketing
Manager (1)
Coordinator (1) Mgr (1)
Quality Processing
Warehouse Accounts
Control Storekeeper (1) Guards (2) Technician Drivers (2)
(Total HC: 10) Clerk (1)
Officer (2) (2)
Storekeeper
Processing
(1)
Units (5
resources per
unit x 6 Units Processing
= Total HC: 30) Technicians Guards (2)
(2)
53
54. Section 9:
COMMUNITY BENEFITS
Program Targets, Activities and Impact
Demonstration Plot - Concept
Implementation of Demonstration Plots
Best Practices
Communication
Farmer Field School
Training Schedule
Social Benefits
54
55. Programme Targets, Activities & Impacts
• The Community Programme is designed to
support p p
pp proposed Business Model with 3 key y
initiatives which are the demonstration plot,
farmer field school and communication
outreach
• The key 3 initiatives will bring the community
together so as to, increase the level of
productivity and awareness. Most
importantly,
importantly the increase in productivity will
also improve per capita farmer income by
more than 3 times over the period of 5 years
• To maintain a sustainable industry it is vital to
incentivise the farmers, the first link in the
chain. This is best achieved by ensuring
improved income per capita
55
56. Demonstration Plot - Concept
• A commitment to improved quality &
productivity through sustainable farming
practices
• A facility that demonstrates best practice and
invests in expanding the knowledge of local
farmers to realise greater revenue
• A training ground that can also be used for
research and analysis
• A concept that can be easily replicated to
complement/support the processing units
• The demonstration plot is also a place for
investors to visit and view the process
56
57. Demonstration Plot – Concept
– The location is an important consideration
– Our recommendation is to use an existing
farm which is 1 hectare
– In selecting the farm, a collective decision
from the community should be made to
y
avoid any negative sentiment issues
– The farmer will be given the necessary
training and assistance to develop his
land.
– The farmer will draw a minimum monthly
wage
– The demonstration plot will be funded
through the partners of Alami Kado
– Our partners will have the responsibility of
p p y
coordinating and monitoring the
demonstration plot as part of a planned
programme
57
58. Best Practice
• Farming Practices to be implemented
Studies show that majority of farms in the Pidie district don’t use basic farming techniques and the
demonstration plot will implement the following practices
-Frequent Harvesting -Prunning
-Sanitation of pod husk -Fertilization
-Bio-Control -Side Grafting g
• Cash Crops
– Farmers operating demonstration plots will be trained in the farming of additional crops
adding to resources for food, security and income stability
ddi t f f d it di t bilit
58
59. Best Practices
Improving the harvest cycle
• The weakness of harvest pattern in Pidie is due to the fact that peak harvest
takes l
t k place d i th wet season i N
during the t in November and D
b d December
b
• Good cocoa pruning techniques lead to a more conducive harvest pattern, with
regards to seasonality, thereby reducing the rate of mouldy beans
• Availability of cocoa bean dryers is important to the p
y y p process
• Ensuring the consistency in supply
Best practices lead to a positive change in harvest season
59
60. Demonstration Plots
Financial Requirements
The effectiveness of a demonstration plot leads to a potential of 400kg of
increased cocoa production per hectare per year
(based on a study that was done in Sulawesi by the Sustainable Cocoa Enterprise Solutions for Smallholders
(SUCCESS) Alliance – Indonesia)
60
61. Connectivity and Traceability
• Connecting the farmers through a visible
and disciplined process is key to
bringing the change in mindset required.
– Implement a registration system,
connecting farmers to the warehouse to
ensure traceability
– Each farmer receives an identification
card, capturing information on quality,
quantity
q antit and consistenc of prod ction
consistency production
– This system will also provide visibility to
the payment process, including payment
of training
– Regular communication updates via
SMS to farmers on initiatives such as
training dates, outcomes of training and
updates on pricing
61
62. Farmer Field School
Concept
• A 3-year Farmer Field Schools (FFS) programme to be implemented by
trainers from three sources:
– Farmers from the community of Pidie
– Employees of Dinas Perkebunan (DISBUN)
– Employees of local agencies
• The FFS co cep teaches farmers
e S concept eac es a e s
through practice, on-farm observation
and farmer led research.
• The Training of Trainers (TOT) approach
will be applied and each session will have
a class size of 50 trainees. The Trainers are then expected to train 20
farmers in a year.
y
• Farmer teachers are initially schooled on their own plot, then paid monthly
when they begin training others.
• Farmers will receive accreditation upon completion of training.
62
63. Implementation
Location:
To ensure engagement and connectivity, training locations will be identified
g g y, g
collectively by the Training Coordinator, farmers, community leaders and
staff from DISBUN.
The curriculum/modules:
The modules will prioritize areas of importance that would increase
productivity level in a consistent manner. Core to the module will be the
knowledge to combat the Cocoa Pod Borer (CPB) pest by using the PsPSP,
a low cost low input cultural method for controlling the CPB and other pests
cost,
as well as for increasing tree productivity.
Record:
Participants will receive one logbook to write all business activities. This is
an exercise in record keeping on a day-to-day basis that would enable
farmers to obtain actual data on their activities to provide a tool for
comparison, analysis, reflection and improvement of future business
activities.
acti ities
63
64. Training Schedule
Activity Duration Participants
Training coordinator community
coordinator,
Identification of location 1 day leader, farmers, staff from
DISBUN
programme socialization i.e problem and solution Training coordinator, farmers,
1 day
analysis staff from DISBUN
Implementation of FFS modules
a. Basic ecosystem & ecological farming
b. Cocoa Pod Bearer lifecycle
c.
c Fertilization
d. Sanitation
e. Pruning Training coordinator, farmers,
6 months
f. Side grafting staff from DISBUN
(12-16
g. Standardization & quality of beans
meetings)
h. Cash
h C h crops t generate i
to t income
i. Usage of logbook
Total number of trained / skilled farmers by Year 3 = about 4,000 farmers
64
65. Social Impacts
Improvements in Income and Livelihood
• Improvement of income level for farmers due
to productivity increase.
• Livelihoods increased with education and
training.
g
• Community model leads to further
communication and conflict resolution that
has impacted Aceh for some time.
• Encouragement of women to take leadership
roles as farmer teachers and students.
65
67. Section 10:
FINANCIAL ANALYSIS
Farmers’ Income (Pidie Area)
Company Operating Income
Company Operating Costs
Company Net Income
Working Capital and Investments
Balance Sheet
67
68. Growth in Farmer's Income Per Capita
(Pidie District)
Current Y1 Y2 Y3 Y4 Y5
Total Number of Hectares in Pidie Area 2,741 2,741 2,741 2,741 3,507 4,272
Total Production (kg) 2,362,000
2 362 000 2,755,667
2 755 667 3,149,333
3 149 333 3,543,000
3 543 000 4,596,320
4 596 320 5,796,231
5 796 231
Cost of Good Sold (mm Rupiah) 28,344 35,066 43,762 53,762 76,162 104,880
Sales (mm Rupiah) 39,579 52,169 67,045 83,236 117,306 162,197
Net Income (mm Rupiah) 11,235 17,103 23,283 29,474 41,144 57,317
Net Income per Capita (USD) 302 460 626 792 865 989
Farmer's Income Per Capita (USD)
1,000
800
600
989
400 792 865
626
200 460
302
-
Current Y1 Y2 Y3 Y4 Y5
Business with Direct Farmer Participation
68
69. Company Operating Income Projection
y g j
(Rupiah mm)
Y1 Y2 Y3 Y4 Y5
Commission Income from Sales 1,679 2,303 2,850 4,546 7,340
Interest Income from Loans to Farmers 303 473 629 928 1,277
Total Operating Income 1,982 2,776 3,479 5,473 8,618
Revenue (Rupiah mm)
10,000 Key Revenues for Company:
8,000
Processing
6,000
Trading
4,000
Co-financing
Co financing working capital
2,000
for farmers
-
Y1 Y2 Y3 Y4 Y5
Commission Income Interest Income
69
70. Company Operating Cost Projection
y g j
Rupiah mm
Y1 Y2 Y3 Y4 Y5
Salary and Wages
y g 1,727
, 1,886
, 2,059
, 2,249
, 2,456
,
Farmer training costs 342 6,840 6,840 - -
Legal fees 238 - - - -
Consultancy for brand building 143 285 285 - -
Miscellanous 257 280 306 334 365
Office
Offi expenses, including rental
i l di l 14 16 17 19 20
Cost of running demonstration centre 3 3 3 3 4
Total Operating Costs 2,722 9,309 9,510 2,605 2,844
Operating Costs (Rupiah mm)
10,000
10 000
8,000
6,000
4,000
2,000
-
Y1 Y2 Y3 Y4 Y5
Salary and Wages Farmer training costs Legal fees Others
70
71. Company Net Income Projection
y j
Y1 Y2 Y3 Y4 Y5
Net Income (mm Rupiah) -909 -6,726 -6,255 2,582 5,426
Net Income (USD '000) -96 -708 -658 272 571
Net Income (USD '000)
800
600
400
200
-
-200 Y1 Y2 Y3 Y4 Y5
-400
-600
-800
800
71
72. Funding Requirements and Structure
g
Funding Requirements
Rupiahs mm
Y1 Y2 Y3 Y4 Y5
Total Capital Expenditure 636 - - - -
Profit after tax -909 -6,726 -6,255 2,582 5,426
Depreciation 127 127 127 127 127
Net operating profit -782 -6,599 -6,128 2,709 5,553
Increased in working capital 1,130 577 618 1,383 2,279
Capital Adequacy for Working Cap Lending Business 1,262 707 3,113 6,317 6,031
Total Funds Required 3,810 7,883 9,858 4,991 2,757
Peak Funds Requirements (mm Rupiah) 21,552
Peak Funds Requirements (USD 000) 2,269
2 269
Proposed Funding Structure
USD Thousands Share
Grants (UNDP / Government / USAID / Other Agencies) 1,509 Capital
33%
Balance Share Capital 760
Buyers / Investors 30%
Exporters 30%
Farmers Coop 20%
Collectors 20% Grants
67%
73. Company Balance Sheet
y
Rupiahs mm
Y1 Y2 Y3 Y4 Y5
Cash 17,741 9,858 2,663 3,209 5,276
Inventory 507 774 1,064 1,698 2,741
Receivables 623 933 1,261 2,010 3,246
Short-term
Short term loans to farmers 4,208
4 208 6,564
6 564 9,677
9 677 15,994
15 994 22,025
22 025
Total Current Assets 23,079 18,130 14,665 22,911 33,289
PP&E, net 509 382 254 127 -
Total Assets 23,588 18,511 14,919 23,038 33,289
Share Capital 7,218 7,218 7,218 7,218 7,218
Grants 14,334 14,334 14,334 14,334 14,334
Short term debt for lending 2,946 4,595 7,258 12,795 17,620
Accummulated Reserve -909 -7,635 -13,890 -11,309 -5,883
Total Liabilities & Equity 23,588 18,511 14,919 23,038 33,289
73
74. EXIT STRATEGY
• The business is profitable in year 4 onwards
f
• A profitable and financially stable company is
likely to attract good valuation based on future
y g
cash flows
• Farmers, Cooperative, Traders and Buyers are
long term stakeholders, who could consider
stakeholders
buying out “exiting investors”
• New investors could replace “exiting investor”
Profits with Social Impact
74
76. Risk Mitigation
Risk Implication Mitigation Measures Risk
Level
Farmers’ lack of
F ’ l k f L
Low‐quality beans and
li b d •T i i
Training programs for farmers with financial
f f i h fi i l
education in proper unsecure supplies compensation for time opportunity cost
cultivation and harvesting • Cooperatives dividends used to invest in
techniques training, creating continuous improvement H
cycle of harvests
Production risk
Prod ction • Quality control and traceability through all
Quality control and traceability through all
levels (collectors’ level, process units and
warehouse)
Quality control in Loss of quality and • Strategic location of processing units close to
transportation and quantity, such as farmgate (10 kilometer radius)
M
storage beans going moldy
beans going moldy • Standardized warehouse management for
Standardized warehouse management for
quality control
Cocoa price volatility Fluctuation in profits • Alternative revenue streams through
Market risk complimentary agriculture practices taught M
through the training modules
Potential conflict of Inefficient decision • Clear decision making procedures in the
Governance interest between making Management and Shareholders’ Agreement to
risk stakeholders ensure open flow of information, transparency H
and efficiency
Non performing
Non‐performing loans Negatively impact on
Negatively impact on • Apply stringent approval process
Apply stringent approval process
Finance risk Profit & Loss account • Restructure loan to become performing L
loans
76
78. Mid-Long Term Implementation
Midterm Long Term
Year 2
Y Year 3
Y Year 4
Y Year 5
Y
Governance Independent financial auditing
Directors responsible for corporate governance
Human Continue to recruit people to address operational requirements as volume increases
Resource
Production/ Continue to Increase Development and expansion of processing units
coordinate with equipment at and collection centers
Operations farmers to plant Processing
seedlings to cover Facilities and
unused land Warehouse to
cover increased
productivity
Market Continue to enhance market presence
Work ith ffili t
W k with affiliates on continuous efforts to promote Aceh cocoa
ti ff t t t A h
Presence
Community Local Agencies to continue the training program
78
79. Short Term Implementation
Short Term
1-6 months 6-12 months
Governance Setup a company in Indonesia Directors responsible for corporate governance
Establish Board of Directors, which is
accountable to the shareholders.
Obtain government approval.
Prepare and sign legal documents
Human Resource Identify and employ management team (4)
Coordinate current field workers for operations
process (hire 16)
Recruit operations team
Production/ Setup processing units and collection centers Coordinate with farmers to plant seedlings to
Coordinate with collectors to guarantee supply cover unused land
Operations to the Processing Unit
Market Presence Build communication with local and Enhance market presence of high quality Aceh
international buyers cocoa
Community Set up the demonstration plots
Local Agencies to set up farmer schools and start the training program
79
81. Conclusion
• Aceh is open for business.
• We
W propose a unique corporate structure for the agricultural sector that is
i t t t f th i lt l t th t i
commercially focused, yet works in favor of improving farmer livelihoods.
• The key success factors are:
• The
Th creation of a business model th t b i
ti f b i d l that brings t
together f
th farmers and collectors
d ll t
with exporters and international buyers/investors.
• The share holder mix aligns the interests of all parties to build a financially
viable and socially responsible company.
• Improvements to ensure consistent supply and improved quantity th
I t t i t t l di d tit through:
h
- Strategic partnerships to ensure farmers acquire the skill-sets through training
and education,
- Access to working capital for farmers
- Al i K d Pt proactively strengthening th cocoa value chain.
Alami Kado Pt. ti l t th i the l h i
• The precondition for farmers to organize themselves, which will ensure
exporters and international buyers/investors closer procurement to the source of
supply (ie. Smallholder farmers).
• The model is replicable and modular, creating business opportunities for scaling up
operations, and including other districts.
81
83. Thank you
If you are interested in this investment opportunity, please contact Chandran Nair at GIFT at
(
(852) 3571 8103 or cnair@global-inst.com.
) @g
83
84. List of Participants
Marcella Cheung g Emilia Rahman
Noor Azmi Ibrahim Fazul Ikmar Som
Norshahzan Halin Bob Van Damme
Yanyang He
y g Siwat Vilassakdanont
Sanjay Jain Xiaojuan Wang
Jack Liu Becky Yang
Xinru Mo Amanda Yik
Cindy Rafanelli Anna Young
Chaow Chiun Ong Hong Zheng
84
