Value chain analysis and Fairtrade coffee<br />Chris Coles<br />
Introduction<br />Brief introduction to value chain analysis<br />Key questions and themes<br />Examples from Ethiopia and...
I would like you to understand...<br />What value chain analysis is (and isn’t)?<br />?<br />?<br />?<br />?<br />How it m...
What is a value chain?<br />Definition<br />‘The value chain describes the full range of activities which are required to ...
What is a value chain?<br />Agriculture sector<br />Just an approach to understanding a complex reality<br />Tea: sub-sect...
Value chain analysis (VCA) is...<br />NOT an answer to all problems!<br />A way of looking at market systems...<br />
Features of value chains<br />
Key questions<br />What are the qualities and volumes of the products and how do they compare with market requirements?<br...
Key themes<br />
The market<br />
Demand pull, not producer push<br />
Market segmentation<br />A defined product and its market<br />
Routes to market<br />II<br />I<br />Cooperative<br />unions<br />Commercial<br />growers<br />Processing & export<br />Sm...
Examples – market maps form Oromia, Ethiopia and Kilimanjaro, Tanzania<br />
Profitability and competitiveness<br />
Gains from efforts<br />25% gross margin<br />+<br />-<br />=<br />PROFIT<br />COSTS<br />SALES<br />
Producer options...<br />Large<br />integrated company<br />Cooperative<br />Private<br />trader<br />80MT<br />20MT<br />...
Price and value capture, FOB, Kilimanjaro coffee<br />Processor<br />Farmer<br />Exporter<br />$1.27<br />$3.00<br />$2.60...
Coffee up to export, Tanzania<br />Production<br />Primary processing<br />Transport<br />Secondary processing<br />Packag...
Governance<br />
Setting and enforcing the rules<br />Commercial governance<br />Policies, institutions, initiatives <br />Support organisa...
How to do VCA...<br />
 A full process for value chain analysis<br />
What to do about it?<br />The concept of ‘upgrading’<br />
UPGRADING STRATEGIES<br />Enabling environment<br />Inter-chain<br />Functional<br />Process<br />Product<br />Vertical<br...
Governance in Ethiopia and Tanzania – case studies<br />FLO-cert, CAFE practices, Q Coffee, organic standards<br />Central...
Research questions<br />How do producers benefit (or not) from being connected to different market channels?<br />Fairtrad...
Producer income – costs and payments<br />Kilimanjaro – example of costs, US$/MT<br />
Value chain shares of value and profitability - examples<br />
What limits producer benefits?<br />Inefficiencies and high costs – licensing, transaction costs<br />Legislation and poli...
What limits producer benefits 2<br />Poor communication and a lack of transparency<br />Quality issues – buying posts, inc...
Exercise<br />Map a value chain that you are familiar with<br />List the constraints and opportunities using this format:<...
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Ft Producers Vc Basics 22 Jun 10

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Presentation of value chain basics to Fair Trade producers representatives

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Ft Producers Vc Basics 22 Jun 10

  1. 1. Value chain analysis and Fairtrade coffee<br />Chris Coles<br />
  2. 2. Introduction<br />Brief introduction to value chain analysis<br />Key questions and themes<br />Examples from Ethiopia and Tanzania<br />Mapping and basic analysis exercise<br />Question and answer session<br />
  3. 3. I would like you to understand...<br />What value chain analysis is (and isn’t)?<br />?<br />?<br />?<br />?<br />How it may be useful to you<br />
  4. 4. What is a value chain?<br />Definition<br />‘The value chain describes the full range of activities which are required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of various producer services), delivery to final consumers, and final disposal after use.’<br />Source: Kaplinsky & Morris 2004<br />
  5. 5. What is a value chain?<br />Agriculture sector<br />Just an approach to understanding a complex reality<br />Tea: sub-sector<br />Value chains<br />Small-scale cultivation<br />Small-scale processing<br />Domestic sales<br />Value chain 1<br />Factory<br />Plantation<br />Export<br />Value chain 2<br />Cluster<br />
  6. 6. Value chain analysis (VCA) is...<br />NOT an answer to all problems!<br />A way of looking at market systems...<br />
  7. 7. Features of value chains<br />
  8. 8. Key questions<br />What are the qualities and volumes of the products and how do they compare with market requirements?<br />Who participates? Primary participants and service providers<br />What are the constraints and opportunities? <br />What are the rules of the game?<br />
  9. 9. Key themes<br />
  10. 10. The market<br />
  11. 11. Demand pull, not producer push<br />
  12. 12. Market segmentation<br />A defined product and its market<br />
  13. 13. Routes to market<br />II<br />I<br />Cooperative<br />unions<br />Commercial<br />growers<br />Processing & export<br />Smallholders<br />Production<br />Retailers<br />Input supply<br />
  14. 14. Examples – market maps form Oromia, Ethiopia and Kilimanjaro, Tanzania<br />
  15. 15. Profitability and competitiveness<br />
  16. 16. Gains from efforts<br />25% gross margin<br />+<br />-<br />=<br />PROFIT<br />COSTS<br />SALES<br />
  17. 17. Producer options...<br />Large<br />integrated company<br />Cooperative<br />Private<br />trader<br />80MT<br />20MT<br />30%<br />55%<br />150MT<br />50%<br />Smallholder producers<br />
  18. 18. Price and value capture, FOB, Kilimanjaro coffee<br />Processor<br />Farmer<br />Exporter<br />$1.27<br />$3.00<br />$2.60<br />
  19. 19. Coffee up to export, Tanzania<br />Production<br />Primary processing<br />Transport<br />Secondary processing<br />Packaging<br />Transport<br />Wholesale<br />Transport<br />Storage<br />Export<br />Producers<br />Costs/kg<br />Labour, $0.42<br />Inputs, $0.26<br />Transport/processing, $0.32<br />Revenues<br />Price/kg parchment, $1.57<br />Gross margin, 36%<br />Sales, MT/season, 0.5<br />Gross profit/season, $285<br />Processors (curing)<br />Costs/kg<br />Local tax, $0.11<br />Transaction costs, $0.40<br />Packaging, $0.03<br />Processing, $0.06<br />Revenues<br />Price/kg green beans, $2.24<br />Gross margin, 3%<br />Sales, MT/season, 36,000<br />Gross profit/season, $2.52m<br />Exporters<br />Costs/kg<br />Transport, $0.09<br />Clearing & forwarding, $0.18<br />Warehousing, $0.03<br />Interest, $0.21<br />Revenues<br />Price/kg green beans, $2.85<br />Gross margin, 4%<br />Sales, MT/season, 7,200<br />Gross profit/season, $1m<br />
  20. 20. Governance<br />
  21. 21. Setting and enforcing the rules<br />Commercial governance<br />Policies, institutions, initiatives <br />Support organisations<br />
  22. 22. How to do VCA...<br />
  23. 23. A full process for value chain analysis<br />
  24. 24. What to do about it?<br />The concept of ‘upgrading’<br />
  25. 25. UPGRADING STRATEGIES<br />Enabling environment<br />Inter-chain<br />Functional<br />Process<br />Product<br />Vertical<br />Horizontal coordination<br />Functional<br />Process<br />Production<br />Processing<br />Wholesale<br />End markets<br />
  26. 26. Governance in Ethiopia and Tanzania – case studies<br />FLO-cert, CAFE practices, Q Coffee, organic standards<br />Central government licensing and export control<br />Auction systems – TCB and ECX: NY ‘C’ link<br />Direct export – ECX DST and TCB<br />Producers’ institutions – two-tier marketing structures<br />
  27. 27. Research questions<br />How do producers benefit (or not) from being connected to different market channels?<br />Fairtrade and organic certified<br />Open market<br />How do policies and institutions affect the extent to which producers recieve benefits?<br />Financial and non-financial<br />
  28. 28. Producer income – costs and payments<br />Kilimanjaro – example of costs, US$/MT<br />
  29. 29. Value chain shares of value and profitability - examples<br />
  30. 30. What limits producer benefits?<br />Inefficiencies and high costs – licensing, transaction costs<br />Legislation and policy limit access of non-cooperative members to alternative markets<br />Poor leadership; corrupt practices, low organisational capacity<br />
  31. 31. What limits producer benefits 2<br />Poor communication and a lack of transparency<br />Quality issues – buying posts, incentive structures (pricing and collection processes)<br />Traceability issues (related to low output)<br />Low output<br />Limited proportion of sales to premium markets<br />Low productivity<br />
  32. 32. Exercise<br />Map a value chain that you are familiar with<br />List the constraints and opportunities using this format:<br />What is the issue?<br />Who is it an issue for?<br />What are the actual or potential implications?<br />Suggest ‘upgrading strategies’ (both internal and external to the value chain) to address constraints<br />

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