Chatham House Presentation for Bill & Melinda Gates Foundation


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The procurement for development forum at Chatham house brings together UK retailers to discuss opportunities to invest more in Sub Sahran Africa supply chains

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Chatham House Presentation for Bill & Melinda Gates Foundation

  1. 1. Fruit Market Opportunities in Sub- Saharan Africa A “win-win” opportunity to improve the fruit supply chain Presentation for Procurement for Development Forum April 30th 2009
  2. 2. Bill & Melinda Gates Foundation and TechnoServe focus on value chain partnerships that reduce poverty in a scalable and sustainable way • Objective: Reducing number of hungry people Improved banana value chains in SSA by 146 million (~75%) from 2004 to in Kenya & Uganda 2025 through increasing farm income 40,000 smallholder fruit farmers directly linked to Approach to prioritize Investment urban wholesalers. MNCs partnership areas Farmer incomes more than doubled. Increasing productivity and product quality to further boost • Value chains prioritized • Export led income. by size and growth, stakeholder commitment cash crops Now looking to invest in expanding and and level of impact diversifying fruit production – farmers see fruit • Fruits and as a viable cash crop. • Geographic focus driven vegetables by investment readiness Business development for wholesalers and fruit index and greatest need • Staple crops process companies to ensure maximum utilisation of the farmers crop and maximum • Cost-benefit ratios income. • Degree of impact on the • Alternative greatest number of poor crops Trade volumes in banana alone now approaching 140,000Mt/yr and valued at over $11 million . • Size of current market demand and growth rate 1
  3. 3. There is growing interest and momentum in multi-party partnership focused on the fruit value chain 2
  4. 4. MNCs have a critical role to play in the partnership Value Chain Approach to Strategic Intervention Enabling Environment: •Policy / Regulation, Access to Finance, Infrastructure Production Processing Marketing Bill & Melinda Gates Foundation Multinational corporations (MNC) • Fund analysis to identify opportunities • Demand generation / down-stream promotion • Convene key stakeholders to collaborate on public • Demand guarantees to processors; bankable sector policy and investment pledges of future demand • Grant-making to implementing agencies • Financial and managerial support for the in-country juice processing sector • In-kind contributions of technical assistance in processing, warehousing, and distribution 3
  5. 5. Three strategies stand out for having the greatest potential to increase SSA smallholders’ participation in the fruit value chain Intervention strategies Complexity of interventions needed Medium 1 Domestic markets - processed Export to “Mature” 2 proximate markets - processed 6 3 Export to “New” Export to “Mature” proximate markets proximate markets - fresh – processed 4 Export to “mature” 5 proximate markets Domestic markets- - processed fresh High Low High Growth opportunity Processed Fresh for SSA 4 Source: Interviews; Euromonitor market intelligence: Fruit and Juice
  6. 6. Mango and passion fruit juice concentrate has been identified as an area of focus due to strong demand and opportunities to reduce costs Strong demand for fruit juice concentrate Switching to locally sourced concentrates – esp. mangoes and passion among could reduce costs by 15-20% and leading commercial players improve lead times Current demand for juice concentrate from commercial players Relative cost structures (Expressed in MT of fresh production) 100 20,000 18,000 100 80-85 -18% 15,000 80 60 Overhead 10,000 40 5,000 2,800 Packaging 20 0 Concentrate Mangoes Passion 0 Import model Local sourcing MT of 1200 185 model concentrate Note: *Major commercial players include Coke, Del Monte, and Britania ; assumes that concentrate is 3X the strength of fresh fruit for Mangoes and Passion; assumes that 5kg of fresh fruit (including stems and skin) is required to yield 1kg of fresh pulp; total production calculated for Uganda and Kenya only 5 Source: Coke; Britania; Del Monte; Milly processors; Ministry of agriculture, Kenya (2006); Ministry of agriculture, Uganda (2006)
  7. 7. Market growth rates in local demand for mango and passion juice concentrates could involve ~20-65K farmers by 2011 Potential number of smallholders impacted from increased local juice concentration production (in K’s) 70 66 60 50 49 40 36 High 30 27 High 22 20 16 High High 12 10 9 Low Low Low Low 0 2008 2009 2010 2011 Note: Assumes that farmers have an average of 1 hectare of land with a 55% wastage rate on fruit; assumes that farmers attain the average Kenyan yield for the two fruits; Low case is where a farmer dedicates 1/2 hectare to production, high cases assumes 1/6 of a hectare is dedicated 6 Source: Interviews; data from commercial players; Dalberg analysis; Ministry of Agriculture (Kenya)
  8. 8. Success story: Frigoken, a vegetable processing company in Kenya, grew annual exports to 1,300 containers and raise farmer income by up to 400% Impact Frigoken green bean production • Frigoken currently provides support (containers shipped) 1,400 1,300 to famers through: 1,200 1,000 • Subsidized inputs 800 600 +6,400% • Training from agronomists 400 • Maintain close contact throughout 200 20 0 production via field controllers 1989 2008 Smallholder farmers Frigoken works with • Frigoken’s model can be adapted and 70,000 65,000 60,000 applied to the fruit market 50,000 • Considering a move into high-value 40,000 30,000 +4,233% fruits such as passion fruit. 20,000 10,000 1,500 0 1995 2008 Source: Frigoken 7
  9. 9. Significant challenges in the supply chain constrain food transformation in SSA Consolidation / Production Processing Wholesale Retail Distribution Domestic / • Decentralization • Value capture • Lack of local • Insufficient • Difficult for farmers regional • High cost of through dis- processing market to access market markets inputs intermediation facilities information directly • Lack of of the value • Limited access • Farmers receive irrigation / use chain to “premium” low price for of technologies • Lack of cold- channels produce • Poor market storage information capacity • Low quality • High transport • Lack of fertilizer cost Export • Lack of • Cold-storage • Certification • Preference for • Product markets production for capacity Standards estate perishability export- • Lack of production of • Lack of oriented sufficient / cash crops sufficient port tastes / needs efficient port • Lack of infrastructure • Access to infrastructure production for export export-oriented • Tariff barriers markets • Tariff barriers tastes / needs Difficult to access finance across the value chain 8 Source: Interviews; Dalberg research
  10. 10. We are engaging relevant MNCs to partner with in the structuring and implementation of a multi-year intervention in SSA Stakeholder Intervention Research Implementation engagement structuring Research Identify Conduct TechnoServe BMGF to fund macro specific stakeholder to develop implementation opportunity in market workshop in plans for of multi-year fruit supply opportunities London multi-year intervention chain intervention Nov Feb May Sep 2008 2009 2010 – 2012 Today 9
  11. 11. Questions and comments? Our contact information UK US • Steve Harris • Richard Rogers ( ( TechnoServe Bill & Melinda Gates Foundation • Steve Homer • Simon Winter ( ( TechnoServe Bios Partners • Susan Bornstein ( TechnoServe • Thomas Carroll ( Dalberg Global Development Advisors 10
  12. 12. Background on TechnoServe: A global non-profit development organization Key facts • Founded in 1968 by businessman, Ed Bullard, who pioneered the private sector approach to solving poverty • $50M in projected revenues in 2009 from various public and private sector sources • Employs approximately 550 people, many of whom are former industry experts or management consultants • Operates in 19 countries; 7 countries in Latin America Current Work and 9 countries across Extensive past work Africa, and India Short term past work Affiliates 11
  13. 13. Our Approach – Building Businesses and Industries The core elements of our approach: Analyze the Identify the Develop the Refine and scale up business entrepreneur business to expand impact opportunity Identify a high-potential industry Find someone with business Provide the necessary technical Improve the business model that can support scaleable, aptitude and the drive and and business development based on experience and use it replicable businesses that determination necessary to support to help the business to launch or expand more benefit the rural poor, and the succeed reach its full potential businesses within the industry point(s) along the value chain where interventions can be most effective Improve the business environment Promote regulations and policies that improve the business climate 2007 Results: 706 businesses generating $149M in revenues, buying almost $50M in products from 255,000 rural producers