Agroenterprise Guidebook

THE CLUSTERING APPROACH TO
AGROENTERPRISE DEVELOPMENT
FOR SMALL FARMERS:
The CRS-Philippines Experience
A Guidebook for Facilitators

About the cover
Organized clusters can be the key to successful agroenterprise
development. The illustration on the cover represents the eight-
step participatory process where clusters of small scale farmers
become active players gainfully engaging in the dynamic market.
Innovated by CRS-Philippines Agri/NRM Program from the CRS-
CIAT Learning Alliance on Agroenterprise Development, the
process continues and progresses towards the empowerment of
the clusters and the building of new ones.

THE CLUSTERING APPROACH TO
AGROENTERPRISE DEVELOPMENT
FOR SMALL FARMERS:
The CRS-Philippines Experience

A Guidebook for Facilitators

Correct Citation
CRS-Philippines. 2007. The Clustering Approach to Agroenterprise
Development for Small Farmers: The CRS-Philippines Experience.
A Guidebook for Facilitators. Davao City, Philippines.

Published by
Catholic Relief Services – USCCB
Philippine Program

ISBN 978-971-93973-0-4

For further information and feedback, please contact:
Catholic Relief Services – USCCB
Philippine Program
CBCP Building, 470 Gen. Luna Street
Intramuros, 1002 Manila
Philippines

Tel. (63 2) 527 8331 to 35
Fax (63 2) 527 4140
E-mail: crsphils@ph.seapro.crs.org
Website: www.crs.org

This Guidebook is considered as an international public
good. Any part of it may be quoted or reproduced provided
the source is acknowledged and the purpose is non-profit.

CRS-Philippines will appreciate receiving feedbacks on this
Guidebook and copies of any publication which draws on it.

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Guidebook Review and
Oversight Committee

Pedro Terry R.Tuason - Chair
Program Manager, CRS Ph Agriculture and Natural Resource Management
Program

Donato Romulo C. del Castillo – Vice Chair
Program Advisor, CRS Ph Agriculture and Natural Resource Management
Program

Jessan S. Catre - Member
Marketing Project Coordinator, CRS Ph Agriculture and Natural Resource
Management Program

Floro T. Israel - Member
Management Program

Lionel D. Mendoza - Member
Management Program

Joan Cua Uy - Member
Marketing Consultant, CRS Ph Agriculture and Natural Resource
Management Program
Vice President for Marketing, Northern Mindanao Vegetable Producers
Association, Inc. (NorminVeggies)

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Guidebook Writing Team

CRS-Philippines
Jessan S. Catre
Marketing Project Coordinator, Agriculture and Natural Resource
Management Program

Floro T. Israel
Management Program

Lionel D. Mendoza
Management Program

Joan Cua Uy
Marketing Consultant, Agriculture and Natural Resource Management
Program
Vice President for Marketing, Northern Mindanao Vegetable Producers
Association, Inc. (NorminVeggies)

External Writers
Dinah Q. Tabbada
Formerly Community and Institution Development and Extension Specialist
of the EU-GOP Upland Development Project in Southern Mindanao and
Development Communication Specialist of the World Agroforestry Centre
(ICRAF-Philippines).

Alexander U. Tabbada
Formerly Senior Programme Specialist and NRM Research Officer of the
World Agroforestry Centre (ICRAF-Philippines) and Agribusiness Specialist
of the USAID-Growth with Equity in Mindanao Program – Phase 1.

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Contents
Acronyms ix
Glossary of Terms xi
Preface xiv
Forewords xvi
Messages xix
About this Guidebook xxii
How to Use this Guidebook xxiv
Acknowledgements xxv
Part I Agroenterprise as a Strategy to 1
Improve Well Being
The Integral Human Development 2
Framework
The Agriculture/Natural Resource 3
Management Framework
The Agroenterprise Development 3
Approach
Part II The 8-step Clustering Approach to 5
Agroenterprise Development
Step 1 Site selection, partnership building and 13
formation of Working Group
Step 2 Product supply assessment and product 35
selection
Step 3 Market chain study 49
Step 4 Cluster formation 73
Step 5 Cluster plan formulation 89
Step 6 Test marketing 109
Step 7 Scaling up 119

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Step 8 Cluster strengthening 127
Part III Cluster Stories to Tell 141
Story 1 Reaping the fruits of improved timing and 144
quality of deliveries
Story 2 The cluster of hat makers in 151
Maguindanao
Story 3 Organizing and training for the strawberry 154
market
Story 4 Testing the waters with dried fish 157
Story 5 The cluster moves forest coffee (and 160
other farmers) to the market
Story 6 Missing the boat, missing the market 165
Story 7 Small, steady steps to build a marketing 169
enterprise for Maguindanao’s organically
grown, traditional rice
Story 8 Small Impasugong squash farmers 173
moving into the market with the vegetable
industry group in Northern Mindanao
Part IV Lessons Learned 177
References 184

List of Figures
Figure 1 The CRS framework for Integral Human 2
Development
Figure 2 The Agri-NRM Development Framework and 3
Processes of CRS-Philippines

Figure 3 An illustration of the 8-step process of the 8
clustering approach to agroenterprise
development, CRS-Philippines experience
Figure 4 Example of a sociogram used to identify 22
leaders among 10 pre-identified community
members

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Figure 5 A sample of market chain showing the 28
different stages and the corresponding
business support services
Figure 6 An example of a value chain for calamansi, 29
Siay, Zamboanga Sibugay
Figure 7 The ANSOFF Matrix used in assessing risks 43
when deciding for new products & markets
Figure 8 Sample of a market chain for green coffee 51
beans
Figure 9 Market chain map drawn from a corn market 58
chain study using the RMA
Figure 10 Market chain map drawn from a vegetable 58
market chain study using the RMA
Figure 11 Example of a value chain for dried coffee 59
beans
Figure 12 Another way of presenting the margins along 59
the chain
Figure 13 Matrix for Buyer Comparison summarized by 60
the farmers after market survey and visits
Figure 14 A graph of the Nestle Coffee Buying Price 62
over a 1 -year period
Figure 15 Projected Marketing Costs & Returns from 63
Various Buyers in the Coffee Market Chain
Figure 16 Basic structure of a group of clusters 79
Figure 17 Structure of Clusters covering 3 municipalities 84
in 3 provinces collaborating to supply one
market
Figure 18 Cluster Map of Saranga Coffee Farmers 88
Figure 19 Coffee harvest and product delivery calendar 88
of Saranga Cluster
Figure 20 The framework of Agroenterprise 91
Development
Figure 21 Illustration of a sample PQMP that each 95
cluster member must follow to ensure quality
of produce

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Figure 24 Activity Operational Plan five days before 107
delivery
Figure 25 Diagram showing the elements of 114
Figure 22 agroenterprise implementation
Example of a Cluster Map 105
Figure 26
23 An illustration of the Maragusan Coffee
Operational Plan of transformation process of 130
107
a cluster as an organization
Clusters
Figure 27
24 An illustration of the Plan five days of the
Activity Operational strengthening before 131
107
marketing position of a cluster
delivery
Figure 28
25 An illustration of the development of a stable
Diagram showing the elements of 133
114
product supply implementation
agroenterprise base within a cluster
26
Figure 29 transformation process of
An illustration of the improvement of the 130
135
business as an organization
a cluster management capacity of a cluster
27
Figure 30 An illustration of the strengthening of the
growth of a cluster from 131
137
assisted toposition of a cluster
marketing sustainable
Figure 28 An illustration of the development of a stable 133
List of Tables
product supply base within a cluster
Figure1
Table 29 An illustration of the improvement of the
The steps, features, and outputs of the 135
9
business management agroenterprise
clustering approach to capacity of a cluster
Figure 30 An illustrationas developed by a cluster from
development of the growth of CRS-Ph 137
Table 2 assisted to sustainable
Effect on profit of different levels of 26
production, prices, sales and costs
List of Tables
Table 3 Sample matrix used in comparing the values 61
Table 1 offered by buyers and outputs of the
The steps, features, 9
clustering approach to agroenterprise
development as developed by CRS-Ph
Table 2 Effect on profit of different levels of 26
production, prices, sales and costs

Table 3 Sample matrix used in comparing the values 61
offered by buyers

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Acronyms

AE Agroenterprise
AMAD Agricultural Marketing Assistance
Division
A/NRM Agriculture/Natural Resource
Management
BAS Bureau of Agricultural Statistics
BLGU Barangay Local Government Unit
CAG Cluster Advisory Group
CDO Cagayan de Oro City
CIAT Centro Internacional de Agricultura
Tropical (a.k.a. International Centre for
Tropical Agriculture)
COPAR Community Organizing through
Participatory Action Research
CRS-SEAPRO Catholic Relief Services – Southeast
Asia Pacific Regional Office
DA Department of Agriculture
DAR Department of Agrarian Reform
DTI Department of Trade and Industry
GEM-USAID Growth with Equity in Mindanao
Program - USAID
IHD Integral Human Development
Kasilak Kasilak Development Foundation, Inc.
Kaanib Kaanib Foundation, Inc.
Kadtuntaya Kadtuntaya Foundation, Inc.
KRA Key Result Area
LGU Local Government Unit

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MCS Market Chain Study
NFTS Natural Farming Technology System
NGO Non-Government Organization
NSO National Statistics Office
PCEEM People Collaborating for Environmental
and Economic Management in Davao
Foundation, Inc.
PME Participatory Monitoring and Evaluation
PSA Product Supply Assessment
PQMP Product Quality Management Plan
RMA Rapid Market Assessment
SFMP Small Farms Marketing Project
SWOT Strengths, Weaknesses, Opportunities
and Threats
USAID United States Agency for International
Development
USDA United States Department of Agriculture
WG Working Group
XAES Xavier Agricultural Extension Service

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Glossary of Terms

Agroenterprise - refers to a business venture, typically small-
scale, that can be undertaken either on-farm, or a service that
can be used to support other businesses (CIAT ERI Guide 2).
An agroenterprise operates in a defined territory which may be
a barangay (village), municipality, or group of municipalities.

Agroenterprise Plan – a business plan which contains the
Market, Supply, Management and Financial Plans of the
cluster. The AE Plan serves a guide for the cluster and its
members in their production and marketing activities.

Cluster – a group of 5-15 farmers who are committed to
establish a market-linked agroenterprise within a defined
territory.

Cluster Advisory Group - formerly the Working Group at
post cluster formation. The WG farmer-members who joined
the cluster are no longer included in the Cluster Advisory
Group.

Facilitator – refers to Community Organizer, Marketing
Facilitator, Marketing Officer, Agricultural Technologist,
Development Facilitator, and similar change agents charged
with the task of assisting farmers in the areas of organizing,
extension, technical assistance, marketing linkage, and AE
development.

Financial Plan – the component of the AE Plan which reflects
the capital requirements and the projected costs and returns
of the cluster’s business.

Management Plan – the component of the AE Plan which
indicates the management structure, tasks, responsibilities

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and compensations, and policies and procedures of the
cluster.

Market Plan – the component of the AE Plan which indicates
the product/s to produce and market, the sales targets, the
payment arrangements and procedures, and the promotion
strategies.

Marketing - the process of moving products from the point of
production to the point of consumption to satisfy the needs
and wants of customers or buyers at a profit.

Small-scale farmer – refers to a farmer who falls in any of the
following three types of poor as qualified by CRS-Philippines:

1. Resourceful poor - consistently able to sustain at
least a small margin above a minimum livelihood ,
have sufficient resources to fall back on when there
are extraordinary economic or environmental shocks
and to “grow” their livelihood options.

2. Poor - vulnerable to extraordinary economic or
environmental shocks but otherwise able to sustain a
livelihood that meets their basic needs and to
minimally improve their livelihoods.

3. Chronic or ultra poor - resources are at or below a
bare minimum for daily survival, they are extremely
vulnerable all or most of the time and have the
greatest difficulty of all three groups in improving their
situation.

For purposes of developing clusters that can initiate and
pump-prime more AEs, CRS-Philippines worked with
resourceful poor farmers.

Supply Plan – the component of the AE Plan which shows
the suppliers (of the products to be marketed), the estimated
volumes of supply, the quality management processes and

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requirements, the product operational flow, and the materials,
equipment and other needs.

Territorial Approach - a participatory and an area-defined
scheme in rural enterprise development developed by the
International Center for Tropical Agriculture. The territory may
be a barangay (village), municipality, or group of
municipalities.

Working Group – composed of farmers, NGOs, Local
Government Units, local business sector, and Peoples
Organizations. The Group is tasked to conduct Community-
Based Market Research and Product Selection and other
relevant activities. The WG may also be called the Local
Planning Team or the Local Research Team.

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Preface
Over the past several years, a new trend in the marketing of
agricultural produce has emerged driven by the increasing
population of urban consumers with higher incomes and
dynamic lifestyles. The increase in the demand for high quality
and safe produce, coupled with the want for leisure and
convenience, gave rise to the rapid growth of supermarkets,
quick service restaurants and food manufacturers/processors.
Globalization, which made it easier to move a variety of high
quality products across geographical areas, has fueled this
demand and contributed to this dramatic change in the
markets.

With funding support from the United States Department of
Agriculture – Food for Progress Act of 2004, Catholic Relief
Services (CRS) Philippines started implementing in mid 2004
the Small Farms Marketing Project (SFMP) in the following
provinces of Mindanao: Bukidnon, Compostela Valley,
Maguindanao, Zamboanga Sibugay and the upper watershed
of Davao City. All CRS agriculture and natural resource
management programs are guided by the following six
principles: [1] Work with farmers as partners; [2] Treat farming
as a family business, acknowledging that rural communities
are linked to markets and that farm families need income for
off-farm products and services; [3] Focus on farming systems,
supporting diverse production - crops, livestock, trees and
fish; [4] Promote agricultural practices that do not deplete or
damage resources, linking production to conservation; [5] Use
watershed approaches, fostering cross-community
collaboration for resource protection, natural disaster
mitigation, and upstream/downstream cooperation to meet
competing water needs; and [6] Ensure immediate benefits;
invest in long-term production.

CRS Philippines, through the Small Farms Marketing
Project, has organized small farmers into marketing clusters

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to enable them to equitably participate in the opportunities of
evolving dynamic markets. Through the clusters, farmers can
proactively plan their production in cooperation with the big
consolidators servicing these high value markets, manage
quality, and consolidate significant product supply. The
clustering strategy has enabled farmers to introduce reforms
in the marketplace, gradually replacing adversarial
relationship with some traders into collaborative arrangements
with product consolidators and institutional buyers. This has
resulted in innovative supply chains that cut layers towards
the dynamic markets and gave small farmers, acting
collectively, the benefits of more stable markets and/or higher
returns.

This guidebook, “The Clustering Approach to Agroenterprise
Development for Small Farmers, the CRS – Philippines
Experience,” has been designed for Field Facilitators who
have adequate field experience in community development
work. The production of this guidebook was also made in
response to the request of other development organizations to
assist them on how to adopt, adapt and implement
Agroenterprise Development in linking small farmers to
modern markets.

PEDRO TERRY R. TUASON
Program Manager
Agriculture and Natural Resource Management Program
Catholic Relief Services - Philippines

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Foreword

In recent years, CRS programs in Africa, Latin America and
Asia have promoted market driven strategies for poor,
marginalized small farmers. This manual, The Clustering
Approach to Agroenterprise Development for Small Farmers,
the CRS-Philippines Experience, is an exciting new addition to
the best practice guides being developed by CRS.

The manual is a Guidebook for Field Facilitators. It provides a
stepwise practical approach to understanding markets,
identifying market opportunities and then preparing farmers to
supply selected market types. The guide uses novel methods
for clustering farmers and linking them into higher value
market chains that would not have been open to individual
farmers.

This guidebook is valuable for all practitioners. It builds on
existing knowledge, is grounded in a local situation, and adds
new concepts on setting up farmer groups for marketing and
clustering groups to achieve high volume for sales. The
process of developing this guide comes through a strong
partnership between CRS, research, farmer associations and
traders. These partners are essential to make markets work
for the poor farming communities.

A critical part of CRS’ work is finding sustainable solutions for
the poor that provide livelihood pathways out of poverty. This
process includes engaging with markets and playing an active
and innovative role in market chains. This guide provides us
with the stepwise approach to that goal of sustainability. All of
this takes much time and effort but through these types of

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guides CRS staff and partners are better able to facilitate the
process of positive change.

We congratulate the CRS and partner agribusiness team in
The Philippines for the excellent guide. It’s important to
document our work and share it with the broader CRS
community and others engaged in similar work.

Agroenterprise approaches are proving successful
mechanism to lift poor farmers out of subsistence living and
into sustainable livelihoods. This manual is a significant
contribution to CRS’ work with the poor and marginalized.

MARY HODEM
Regional Director
CRS-Southeast Asia and Pacific Region Office (SEAPRO)

SUSAN HAHN
Deputy Regional Director, Program Quality
CRS-SEAPRO

SHAUN FERRIS
Senior Technical Advisor, Agriculture and Livelihood

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Republic of the Philippines
DEPARTMENT OF AGRICULTURE
Office of the Secretary
Elliptical Road, Diliman, Quezon City 1100

Foreword
The task of teaching small farmers and fishers modern and
sustainable technologies and convincing them to organize
themselves into associations or cooperatives so they could expand
into processing and marketing enterprises are enormous challenges
that the Department of Agriculture family cannot perform and
bankroll alone. Thus, we continuously seek the support of concerned
groups and institutions, here and abroad.

In this case, we wholeheartedly appreciate the initiatives of the
Catholic Relief Services and the United States Department of
Agriculture in the packaging and publication of this valuable
document.

Indeed, this guidebook will serve as a valuable reference for
community organizers and facilitators, agriculture technicians and
extension workers in helping organize small farmers into groups or
clusters, link them directly with the markets, and pave the way to
establishing their respective agro enterprises.

We therefore commend the men and women of CRS-Philippines, its
partner NGOs and farmer-leaders who shared their respective
experiences and spent painstaking hours to complete this book,
which we expect will serve its purpose well in transforming farmers
into market-oriented producers and entrepreneurs.

Mabuhay ang CRS at USDA!
Maraming salamat sa inyong patuloy na tulong!

ARTHUR C. YAP
Secretary

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Message
The production of “The Clustering Approach to Agroenterprise
Development for Small Farmers, the CRS –Philippines Experience”
is the result of years of experience and effort by CRS staff and
partners in Mindanao. It started over ten years ago with the idea of
assisting farmers in Mindanao to increase productivity through
improved environment-friendly farming techniques.

As the interaction grew between CRS, the farmers and the other
project stakeholders, the focus of the project evolved from “farmer-
to-farmer” training to “integrated pest management” to “landcare” to
“marketing” to the “clustering approach to marketing”. The current
program continues to incorporate all of these aspects but with an
emphasis on the “clustering approach”. The manual is an attempt to
share this learning process.

Many talented and dedicated people were involved in this effort
starting with the farmers groups and the local government units.
Archbishop Antonio Ledesma actively supported the first successful
“calamansi” projects in the Ipil Prelature. Paul Hicks and Terry
Tuason of CRS led the transformation of the idea into a concrete
proposal and initiative. Joan Uy provided the intellectual framework
for the “clustering” approach which was indispensable to the
program. Danny Ocampo provided steady management support
through rough periods. Our NGO partners - Kasilak, Kaanib,
Kadtuntaya, XAES, and PCEEM - were instrumental in leading the
process of inclusion of and consultation with government at the local
and provincial levels. Senator Ting Paterno and Bobby Ansaldo
helped promote the program among the business community.

Finally, the program could not have succeeded without the support
and encouragement of the Department of Agriculture of the Republic
of the Philippines and the United States Department of Agriculture.

Michael J. Frank
CRS Ph Country Representative

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Message
Philippine agricultural development is key in moving the country
forward and it is widely known that sustained expansion of the
national economy will likewise require sustained growth in the
agricultural sector. Various economic and sophisticated
developmental models have been designed for this although many
times, they remain as such, all theory and speculation.

Translating theory into reality is easier said than done and this is
usually the case in developing countries whose agricultural sectors
are predominantly in the hands of small-scale farmers. As the world
rapidly changes and the dynamics of rural social systems continue
to shift, identifying the appropriate mix of developmental
interventions require patience and innovation.

The Clustering Approach to AgroEnterprise Development for Small
Farmers: The CRS-Philippine Experience goes beyond identifying
the tools for change by integrating, among others, certain essential
management disciplines in the development process.

Drawing from proven and tested countryside developmental
experience, the guidebook is not only deliberate, determined and
instructional; it is also practical, realistic and concise. It is the
perfect companion for the field-extension worker and rural
development planner.

I would like to congratulate all those involved in the preparation of
this excellent guidebook and I assure you of my continued support

Emiko Purdy
Agricultural Counselor

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Office of the Archbishop
Archbishop’s House
P.O. Box 113
Cagayan de Oro City
9000 Misamis Oriental, Philippines
Tel. Nos. (08822) 72-63-04; 72-23-75 (088) 857-1357 • Fax No. (08822) 72-63-05
E-mail address: acdo_chancery@yahoo.com

Message

Throughout Mindanao, on a seasonal or even daily basis, countless
rural households sell their produce at the farmgate to middlemen for
immediate cash, but at relatively low prices. These products range
from the traditional crops of rice, corn, and coconuts to the more
diversified and location-specific commodities like vegetables, rubber,
seaweed, calamansi, coffee, and rural handicraft. At the end of the
day, the products of small farmers and fishermen reach the tables of
consumers through a multi-linked marketing chain that channels
most of the profits to middlemen rather than to the primary
producers.

It is this anomalous situation that the eight-step clustering approach
explained in this CRS guidebook tries to remedy. From actual
experience in pilot areas, this clustering approach has reaped
dividends for many small farmer households—helping them to
gradually transform their production areas into entrepreneurial and
self-reliant communities.

Much study, discipline, and self-organization, however, are required.
The eight steps focus on these prerequisites which can be viewed
more as guideposts for the planned and conscious development of
rural households—clustered together.

+ ANTONIO J. LEDESMA, S.J.
Archbishop of Cagayan de Oro

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About this Guidebook
This Guidebook is published by the Catholic Relief Services –
Philippines primarily, but not exclusively, for Facilitators who
are tasked in assisting small farmers interested to organize
themselves into marketing clusters and to develop their own
agroenterprises linked with the market. It provides the 8-step
process clustering approach that guides Facilitators in
equipping farmers with innovative methods so they become
market oriented in their farming and can actually engage the
markets.

This book has four parts. Part I provides an overview with the
discussion of the CRS Integral Human Development
framework that helps the reader understand the holistic
dimensions of an enabling development process for the poor.
Part II describes the clustering approach comprising a set of
eight activities within a stepwise process that provides
facilitators with knowledge and skills in participatory methods
that enable them to effectively assist farmers build
agroenterprises and engage the market. Tool kits are included
in Steps 1 to 6 to guide facilitation. Part III shares stories from
different clusters, and Part IV presents the lessons distilled
from program experiences and recommendations for future
course of action that can build on the current work.

The contents of this Guidebook are based mainly on the
experiences of CRS-Philippines in assisting farmers develop
markets for their produce and build their agroenterprises,
under its Agriculture/Natural Resource Management Program
with its partner non-governmental organizations (NGOs) and
Local Government Units (LGUs).

This Guidebook took shape in a span of two years during
which time CRS-Philippines and its partners gathered several
times in knowledge-sharing sessions called the learning
alliance. Through these joint learning activities, the steps in

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the clustering approach for agroenterprise development were
clarified and simplified under different situations.

The clustering approach to agroenterprise development for
small farmers is a work in progress. CRS-Philippines hopes
that this Guidebook can lead or contribute to the development
of approaches and strategies towards sustainable
agroenterprises, especially among the small farmers.

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How to Use this Guidebook

This Guidebook is for use by Facilitators of development
service providers such as government agencies, NGOs or
other private sector actors including businesses, cooperatives
and farmers associations that assist small farmers organize
themselves, assess their market opportunities, establish links
with markets, and build their own agroenterprises.
The steps in clustering for agroenterprise development are
presented with accompanying informational materials and
tools to guide Facilitators in the conduct of training and market
visits for farmers, and through the actual “learning by doing”
process in enterprise operations.
The approach is designed to be followed from Steps 1 to 8 in
a systematic process as the farmers go through the market
preparation and engagement for the first time. The sequence
of activities is planned so that the results of the previous step
lead to the next.
When farmers gain marketing experience and move to the
expansion stage (i.e. working with more producers, new
products or higher value markets), they may skip certain steps
and proceed to those appropriate to their immediate needs.
For instance, when an organized cluster decides to market a
new product, it can immediately proceed to Step 3, Market
Chain Study.
The scenarios presented and options taken emphasize the
realities of uncertainty and risk inherent in a business, and
therefore the user of this Guidebook should be flexible in
following the steps according to the needs, capacities and
resources of the farmers and the development service
provider.
The user of this Guidebook is encouraged to innovate.
Feedback on its use is welcome.

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Acknowledgements
The publication of this Guidebook has been made possible through the
generous sharing of resources, time and information by a number of
benefactors and partners, the encouragement from the business sector,
and the trust and confidence of the participants on the CRS process.
CRS-Philippines is especially grateful to the following:

International and National Partners
United States Department of Agriculture Food for Progress, benefactor
of the Small Farms Marketing Project; CRS-Southeast Asia Pacific
Regional Office; International Centre for Tropical Agriculture; The
Philippine Department of Agriculture and its Regional Field Units
Non-Government Organizations
Kaanib Foundation, Inc.; Kadtuntaya Foundation, Inc.; Kasilak
Development Foundation, Inc.; People Collaborating for Environmental
and Economic Management in Davao Foundation, Inc. and Xavier
Science Foundation – Xavier Agricultural Extension Service

Local Government Units
Davao City; Impasugong, Bukidnon; Maragusan, Compostela Valley
Province; Paglat and Gen. SK Pendatun, Maguindanao and Siay,
Zamboanga Sibugay

Business Sector
Northern Mindanao Vegetable Producers Association, Inc.; Vegetable
Industry Council of Southern Mindanao and the institutional buyers,
wholesalers/traders and supermarkets and business service providers
for believing in and supporting the capability of small farmers to do
business with them

The Working Groups and the Agroenterprise Clusters and their
Leaders who journeyed with the staff of the CRS-Agri/NRM and its
partners in evolving the 8-step process in the clustering approach for
agroenterprise development.

The Guidebook Committee and the Writing Team who put all the
significant experiences into this handy, practical and useful form.

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Part I. Agroenterprise Development as a Strategy to Improve Well Being

Part I

Agroenterprise Development as a
Strategy to Improve Well Being

Agroenterprise
Development
IMPROVED
WELL BEING
Agricultural
Extension

Good
Governance

ANRM
Framework

IHD
Framework

INTRODUCTION

Part I of this Guidebook presents the emergence of
Agroenterprise Development as a strategy to improve human
well being. It traces the anchorage of this strategy which was
adopted by CRS-Philippines through its Agriculture and
Natural Resource Management Program to the Integral
Human Development Framework of CRS.

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THE CLUSTERING APPROACH TO AGROENTERPRISE DEVELOPMENT FOR SMALL FARMERS : The CRS-Philippines Experience
THE CLUSTERING APPROACH TO AGROENTERPRISE DEVELOPMENT FOR SMALL FARMERS: The CRS-Philippines Experience


THE INTEGRAL HUMAN DEVELOPMENT
FRAMEWORK

The Catholic Relief Services or CRS is the official international
relief and development agency of the Catholic community of
the United States of America. As a general approach, it builds
capacities to improve integral human development and
people’s environment as it aims to: (1) alleviate human
suffering, (2) promote integral human development, (3)
change unjust structures, and (4) promote solidarity. (See
Figure 1 for the CRS IHD Framework.)

Figure 1. The CRS framework for Integral Human Development.

As a pro-poor organization, CRS seeks to enable people to
protect and expand the choices they have to improve their
lives, meet their basic human needs, free themselves from
oppression and realize their full human potential. As pro-
environment, it promotes responsible stewardship of the
resources through support for programs and activities that are
ecologically sustainable and are in harmony with the local
environment. These have guided the development of the
Agriculture/Natural Resource Management (Agri/NRM)
Program of CRS – Southeast Asia Pacific Regional Office.

22


THE AGRCULTURE/NATURAL RESOURCE
MANAGEMENT DEVELOPMENT FRAMEWORK

As a guide in implementing its program, CRS-Philippines
conceptualized an Agri/NRM Development Framework and
Process that is anchored on the IHD Framework. The goal of
the Framework is to improve the quality of life of farm families
through improved livelihood supported by (1) agricultural
development interventions, (2) good governance, and (3)
viable agroenterprise development services (Figure 2).

Policy
advocacy

Good Governance
& Peace
Creation Building Acquisition
of genuine & control of
POs and alliances critical resources

Crop & Improve the well-being
Community
livestock of farm families based Market
improvement (the people we Research
Agricultural Serve) Agroenterprise
Extension Cluster DevelopmentEnterprise
Participatory Participatory
Services Development Service Design and
Farm NRM
Planning Landcare Approach & strengthening Implementation

Figure 2. The Agri/NRM Development Framework and Process of
CRS-Philippines.

THE AGROENTERPRISE DEVELOPMENT
APPROACH

As defined by Chambers and Conway (1992), livelihood
comprises “people, their capabilities and their means of living,
including food, income and assets.” A livelihood is held to be

3
3


sustainable when “it can cope with and recover from stresses
and shocks and maintain or enhance its capabilities and
assets, both now and in the future, while not undermining the
natural resource base”. In line with this definition and
qualification, CRS adopted the Agroenterprise Development
(AED) Strategy to sustainable livelihood development.

Agroenterprise refers to a business venture, typically small-
scale, that can be undertaken either on-farm, or a service that
can be used to support other businesses (CIAT ERI Guide 2).
The AED Strategy brings small holder growers together and
guides their activities towards market-oriented and competitive
farm business operations without necessarily forming a formal
organization as a prerequisite. It combines good farming
practices and business skills for farmers to develop
sustainable production system that can respond to the need
for food security, increased income, and sustainable resource
base.

The CRS-Philippines experience in agroenterprise
development stemmed from the 10-year experience of the
International Centre for Tropical Agriculture (CIAT) in many
collaborative projects in Latin America, Africa and Asia. The
CIAT model which guided the first implementation stage of the
CRS-SFMP uses the “territorial approach” as it develops
community-based agroenterprises operating within defined
geographical areas.

In an analogy presented at the introduction of Part I,
agroenterprise development is one of the branches of the
Agri/NRM tree that is anchored on the IHD Framework. The
other branches of Agri/NRM are (1) agricultural extension,
with emphasis on sustainable farm practices, and (2) good
governance that promotes peoples’ participation in policies
and programs that directly affect their livelihood. These three
branches provide nourishment to the fruits, which represent
the improved well being of the poor.

44

Part II. The 8-Step Clustering Approach to Agroenterprise Development

Part II

The 8-Step Clustering Approach to

INTRODUCTION

Part II presents the eight steps in the clustering approach to
agroenterprise development that evolved in the course of the
implementation of the USDA-assisted Small Farms Marketing
Project (SFMP) that started in December 2004 and
implemented in five pilot sites in Mindanao by CRS-

5
5


Philippines in partnership with local NGOs and Local
Government Units (NGOs).

The sharing of experiences and the refinement of the
clustering approach were facilitated by the gatherings of CRS-
Philippines with its development partners and farmer leaders
for joint learning called the Mindanao Agroenterprise Learning
Alliance (MAELA). These interactions captured the rich
experiences of CRS-Philippines in developing agroenterprises
in the light of emerging and growing markets, and the
challenge to assist small farmers to become competitive and
significant market players.

CLUSTERING FOR SMALL FARMERS

The highlight of the CRS-Philippine agroenterprise
development strategy is the innovative method of organizing
farmers into small groups called “clusters” within a defined
territory or geographical coverage. This geographical focus
facilitates the partnership building work with local
development partners, like the LGUs, for sustainability. In a
defined territory, the planning and monitoring processes for a
particular farm production system are more focused and more
efficient.

The territory of a cluster can be a sitio (sub-village) barangay
(village), group of barangays, or the whole municipality. In
due time, clusters may expand in membership or coverage, or
may form a network or federation of clusters and cover more
barangays or municipalities, and so on.

Forming clusters signifies a new development in farmer
organizing and marketing set-up. The members in a cluster
agree to develop an agroenterprise and proactively plan farm
production according to a marketing objective. As product
supply units catering to specific quality and delivery
requirements of the buyers, the clusters offer a focus to
attract buyers.

66


Being small groups, clusters are better able to keep pace with
continuously changing market opportunities that require
constant innovations from them in production and postharvest
practices. Moreover, the chance for each member to actively
participate and be heard in meetings is greater than in large
groups.

The clustering method provides a concrete mechanism where
farmers can exercise ownership and control of their
agroenterprise, benefit from it, and thus facilitate the farmers’
empowerment process. The clusters provide the learning
ground for self and group management, a maturation process
that is necessary for farmers to transition successfully into
formal business entities and effectively relate with other
market players and partners.

The clustering approach for agroenterprise development is a
sequential process involving eight steps that prepares
farmers to link with the market, assist them to be effectively
organized into small groups or clusters, and guides them to

77


engage the market with favorable arrangements that improve
their incomes and livelihood.

The first five steps comprise the preparatory activities. This
emphasizes the need for farmers to learn new skills, access
new information, and adopt innovative methods to be able to
identify and respond to market demands and opportunities
given their capacities. Adequate preparation during this
critical business preparation and organizing stage ensures
that a higher degree of success is attained when their actual
marketing starts to take place in Step 6 (Test Marketing).

As shown in Figure 3, the process does not end with the
development and strengthening of the cluster. The cluster
may either return to cluster plan formulation (Step 5) and
review its agroenterprise plan, or initiate the formation of new
and additional cluster (Step 4). Table 1 presents the features
and outputs of the different step.

Figure 3. An illustration of the 8-step process of the clustering
approach to agroenterprise development, CRS-Philippines
experience.

8
8


Table 1. The steps, features, and outputs of the clustering approach
to agroenterprise development as developed by CRS-Philippines.

The
Farmers Step Dura- Activities/Tasks Outputs
“Journey” tion “The Work” “The Milestones”

Getting (1) 2 to 4 • Identify project site • Identified project site for
started weeks • Develop partnerships development support
Site with stakeholders • Established partnership
selection, (government, other with stakeholders with
partnership NGOs & development their representatives
building, organizations, local constituting a working
and business sector, group (WG)
formation farmers • WG provided with
of Working • Organize a working orientation on the
Group group (WG) development project,
(WG) • Convene orientation marketing basics,
sessions and planning participatory research
meetings • WG with a plan to
conduct research

Knowing our (2) 4 to 6 • Assist the WG to • WG/local research team
product weeks organize a local trained on PSA and the
supply Product research team use of the tools
capacity Supply • Provide training on • Research results (info
Assess- PSA on farm assets, skills,
ment • Conduct PSA products, production &
(PSA) and • Undertake a marketing conditions,
Product participatory analysis of problems, etc)
Selection research results, then • List of existing dominant
select product(s) products and farmers
producing them
• Selected products for
further research (i.e.
market chain study)

Understand- (3) 4 to 6 • Provide training to WG • WG trained on MCS and
ing our weeks on MCS the use of tools
market Market • Conduct market visits • Diagrams of market
opportunities chain study (in immediate chains for selected
(MCS) commercial areas) and products linking to
undertake MCS potential buyers with
• Undertake a costs and margins along
participatory analysis of the chain
research results and • Initial market negotiation
consolidate findings with potential buyers
into a report with • Research report
analysis of product
supply capacity
matched with market
opportunity

99


Table 1 continued…
The

Deciding to (4) 2 weeks • Invite farmers growing • Report presented
work the selected products • Identified farmers
together and Cluster for orientation meeting; interested to join the
to organize formation present research report cluster
for market • Provide orientation on • Cluster formed with
competitive- marketing basics and cluster leaders
ness clustering • Basic cluster agreement
• Initiate the formation of – to pool products and
clusters, identification collectively market
of cluster leaders, • Objectives set relative to
conduct organizational agroenterprise
planning

Preparing to (5) 2 weeks • Review commitment of • Cluster planting calendar
engage the cluster members or product harvest
market Cluster (product supply, etc) calendar
Plan • Discuss in detail • Product quality
Formula- production management plan
tion programming • A cluster agroenterprise
(technologies like plan consolidating
NFTS, support market, supply,
services, infra) management and
• Facilitate an interactive financial plans
process of • An operational plan for
agroenterprise planning test marketing
with operational
planning

Taking a leap (6) 4 weeks • Undertake test • At least 4 trial product
marketing activities deliveries
Test • Call cluster meetings to • Performance report to
Marketing assess performance the clusters of every
after every product delivery relative to
delivery, implement cluster plan
adjustments in the plan • Expanded cluster
for improvements agreements, as needed

Moving (7) Continu- • Revisit cluster plan for • Regular product
forward to ing (after scaling up deliveries to buyers
build up our Scaling Up test • Establish business • Innovations (product
business market- operating systems and/or market
ing) • Implement regular development)
product deliveries to • Written business policies
the established and systems
markets; pursue new • Monthly financial and
markets operational reports in
• Call monthly cluster the cluster meetings
meetings to assess
performance

10
10


Table 1 continued…
The

Making it (8) Continu- • Ensure that cluster • Knowledge and skills in
continue and ing (from leaders convene agroenterprise
grow. Cluster cluster regular cluster operations (in the fields
strengthen- formation meetings and of leadership and
ing to 2 undertake cluster organizational
years) assessment development, market
• Facilitate periodic strengthening, product
capability building supply and financial
support: trainings, management)
team building activities, • Clusters progressing in
cluster cross-visits, higher level of maturity
exposure trips, • Networking of clusters;
reflection sessions, etc. formalization
• Promote networking of • Networks in the business
clusters and business community
links
• Organize formal
business entity (e.g.
cooperative)

It is worth noting that the market environment of clusters is
dynamic and CRS experiences suggest that the best results
are attained when the key ideas in the approach and their
application is adjusted to the local circumstances, including
the resources of the farmers and the development service
providers.

The succeeding sections of this Guidebook describe the eight
steps in more detail.

Benefits of Clustering:

To the farmers

1. Better access to markets and better bargaining
power (as an effect of quality, volume, variety and
regularity)
2. Lower cost of doing business
3. Diversified and more predictable markets
4. Better income (as a result of higher price, reduced
losses and higher recovery, more stable markets)

11
11


5. Better relations among growers as a result of
working together and helping one another
6. Good image in the business community
7. Organized way of relating to resource providers
(government, non- government, business groups)

To the buyers

Buyers are always particular about quantity, quality and
delivery reliability. This is where transacting with clusters
can be beneficial due to these reasons:

1. Better compliance with quality agreements
through the cluster’s Product Quality Management
Plan it has formulated and must implement
2. Traceability of both cluster and grower through
product labeling procedures
3. Easier product consolidation work
4. Immediate rewards & sanctions (discipline)
5. Flexibility to provide product preferences
6. Quick response to market feedback/complaints
7. A cluster can give in advance notice of impending
changes in shortages of product to be delivered

To the donors and implementing agencies

1. Efficient use of resources (including services)
2. Wider coverage
3. Equity of participating communities
4. Enhanced production-oriented livelihood,
agriculture and NRM projects
5. Sustainability (post-project)

12
12

Step 1. Site Selection, Partnership Building and Working Group Formation

Site Selection, Partnership Building
and Working Group Formation

1.1 PROCESS OBJECTIVES

Through the help of the Facilitator, Step 1 aims to enable the
project to:

1. Determine the specific site for the agroenterprise;
2. Identify and engage institutional partners, such as
Local Government Units, Regional and National

13
13


Government Agencies, Non-Government
Organizations, and Peoples Organizations;
3. Form and orient a Working Group (WG); and
4. Assist the WG in formulating a plan for community-
based research.

1.2 INTRODUCTION

Site Selection, Partnership Building and Working Group
Formation is a community process where appropriate site or
sites and partners for the agroenterprise project are identified,
and a Working Group (WG) composed of producers, local
government units (LGU), non-governmental organizations
(NGO), business sector and other relevant representation is
constituted.

This is also the phase where potential farmer leaders are
identified through rapid appraisal. These leaders are invited to
be part of the Working Group (WG) and to participate in the
upcoming initial activities.

1.3 SELECTING THE SITE

Basis for selection

In many cases, sites for the agroenterprise endeavor can be
pre-identified from among existing project areas, or on the
basis of donor preferences.

Ideally, a potential site for the agroenterprise project should
have the following facilitating or enabling factors:

1. Responsive LGU
2. Presence of good extension services
3. Willing producers
4. Surplus farm products

THE CLUSTERING APPROACH TO AGROENTERPRISE DEVELOPMENT FOR SMALL FARMERS: The CRS-PhilippinesExperience
14
14


5. Favorable social conditions (peace and order,
community awareness)
6. Presence of potential partners or related projects such
as agriculture, natural resource management,
landcare, or community development

The presence of more of these factors would facilitate the
development of an agroenterprise.

At the minimum, willing farmers who have products that can
be marketed can let an agroenterprise endeavor begin.
However, this will require so much facilitation for clustering,
capacity building, operationalizing and networking.

Geographical Focus

The site can be a sitio (sub-village), barangay (village),
municipality, or a group/combination of each.

In a small area, like the sitio or barangay, the focus can be on
understanding the local marketing system and identifying
problems and bottlenecks that can be addressed through
interventions in the local economy.

Rapid Area Assessment

In order to have a good grasp of the current situation of the
site, a quick survey of the resources, institutions and their
predominant business and production activities will be of help
to the Facilitator. Knowing what and who are in the community
will help him/her in carrying out the assigned tasks.

The following information can serve as a starting point for the
Facilitator in making a rapid assessment of the area prior to a
more extensive information gathering and analysis:

1. Physical resources (land and its use, water
resources, soil, climate, rainfall patterns, cropping
seasons, vegetation)

15
15


2. Community profile (gender, age distribution, number
of farmers, other sectors, household size, social
groupings, educational level, history of collective
action)
3. Infrastructure (roads/accessibility of farm areas,
communications, electricity, water systems)
4. Business activities/services (business
establishments, markets, business service providers,
credit services both formal and informal)
5. Development assistance (NGOs, political structure,
government policies and programs for the agriculture
sector).

The above information can be generated by direct observation
or by reviewing secondary sources such as the barangay or
municipal profiles and development plans, LGU reports such
as those in the Municipal Planning & Development Office
(MPDO), the Municipal Agriculture Office (MAO), the
Municipal Economic Enterprise Development Office
(MEEDO), the Municipal Engineering Office (MEO), and other
relevant offices.

1.4 BUILDING PARTNERSHIPS

This is the continuing process of linking with and engaging
relevant institutions or organizations to support the
agroenterprise development undertakings. For example, the
Barangay Development Plan (BDPs) of Barangay Local
Government Units (BLGUs) can be the entry point for
agroenterprise projects especially when these are consistent
with, or part of the agricultural development component of the
BDP. Moreover, barangay officials, such as the Barangay
Chair and the Committee Chair on Agriculture, can provide for
the relevant local policy and program support.

At the level of the Municipal LGU, partnership can yield more
support and counterparts, such as human resources,
infrastructure, logistics (i.e., hand-held radios and
transportation services), and policies. These can be provided

16
16


by the office of the Local Chief Executive, the MAO, the
MEEDO, the MEO, the MPDO, and the offices of relevant
Sangguniang Bayan (Municipal Council) Committees.
Links with other institutions and organizations operating in the
barangay, municipal and provincial territories (such as
producers, business sector and church) can also be
established.

The process of building partnerships can be initiated through
courtesy calls and meetings leading towards a consultation
among identified partners. The active partnership begins with
the establishment of a Working Group (WG).

1.5 FORMING A WORKING GROUP

During the community consultation, the Facilitator draws out
the current situation related to farmers’ production and
marketing, available resources, and existing programs of
NGOs and LGUs. From the discussions, he/she leads the
participants to a consensus on issues pertaining to farm
productivity and incomes.

Addressing the above issues realistically needs a multi-
pronged approach which can be led by the WG.

Role and lifespan of the WG

The WG is an adhoc body organized to provide leadership in
the gathering of information that can help in product selection
(Step 2), in conducting market chain studies (Step 3), and in
forming cluster (or clusters) of farmers for agroenterprise
development (Step 4). Immediately after cluster formation, the
WG transforms itself into a Cluster Advisory Group (CAG) that
will provide assistance in formulating and implementing an
agroenterprise plan (Steps 5-7).

Beyond the above tasks, the WG (and eventually the CAG),
can take an active role in utilizing the partnership as a
mechanism to promote and develop the sharing, coordination

17
17


and complementation of local programs and resources
towards a common goal.

Composition of the WG

A WG may be composed of representatives from the MAO,
MEEDO, NGOs, business sectors, farmers and people’s
organization (PO). WG membership ranges from 10 to 15
individuals, at least two-thirds of which are farmers.

Members of the WG should meet at least once a month to
discuss updates and coordinate activities.

To ensure the representation of farmers in the WG, the
Facilitator must take extra effort to identify potential farmer-
leaders.

(Refer to Facilitator’s Tool Kit No. 1 for the standards used in
identifying farmer-leaders to be involved as members of the
WG.)

Identifying local leaders for the WG

The Sociogram method can be used to identify indigenous
leaders (male and female key persons and/ or opinion

18
18


leaders) in the community who can facilitate the change
process.

(Refer to Facilitator’s Tool Kit No.1 for a guide in using the
sociogram.)

1.6 ORIENTING THE WORKING GROUP ON
MARKETING

Immediately after its formation, the WG undergoes an
orientation on the basics of marketing. This includes the
definition and importance of marketing to the farmers, the
concept of supply and demand, marketing strategies/mix (the
4 Ps), types of market, and the market chain.

(Refer to Facilitator’s Tool Kit No. 1 for the Session Guide for
the Orientation on Marketing.)

After the orientation on marketing, the WG agrees on the
schedule of the training on product supply assessment that
will be undertaken in Step 2.

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19


Facilitator’s Tool Kit No. 1

A. IDENTIFYING LOCAL LEADERS

Standards used in selecting farmer-leaders

Selection standard for leaders, men and women, may include,
but not limited to the following:
1. Farmer producer
2. With experience in marketing farm products T
3. Respected
4. Aware and concerned about the community issues and
needs O
5. Believes in the stake and power of communities
through participation O
6. Good communicator: good listener, can express well
and open to ideas
L
Using the Sociogram Method in identifying local leaders

How to Use the Sociogram
K
The sociogram is especially useful in analyzing social or peer
relationships. It gives the Facilitator an idea of how a member
of a community or cluster is viewed by her/his peers in terms
I
of leadership, trustworthiness, approachability and in other
similar qualities. T
Spot potential leaders you can invite later to join the Working T
Group, following the basic steps below. You may revise these
steps depending on specific or bulk of information needed and
the number of respondents you can manage. Just make sure
you maintain gender inclusiveness.
1. Gather at least 20 respondents, 10 men and 10
women. Give each one two (2) small sheets of paper.
Make sure each has a pencil or ballpen.
2. Ask them to write their names on the topmost part of
each paper provided to them.

20
20


3. Ask them to discreetly write on one piece of paper the
names of one (1) man and one (1) woman from the
community whom they mostly approached for advice
or opinions. Please emphasize that their choices
should come only from their community.
4. Collect the answers and proceed to the next question.
5. Ask them to discreetly write on one piece of paper the
names of two people (one man and one woman) from
their community whom they trusted most. Emphasize
that their choices should come only from their
community.
T
6. Collect the answers and thank the respondents for
cooperating.
O
7. Classify the responses corresponding each of the two
questions asked.
O 8. Make a sociogram of the responses to show who
among the names were frequently most approached,
L or most trusted (and other qualities).
9. Make a sociogram of the results. (Refer to Figure 4 for
the example.)
K 10. Spot the two most approached men and women and
list down their names. Similarly, spot the two most
trusted men and women and list down their names.
I This gives you eight potential leaders.
In case a person is chosen as most approached and
T most trusted by a respondent, give him/her a point for
T each quality.
11. Develop a tool to further assess the above potential
leaders in terms of leadership behavior (may be a
matrix of leadership qualities or standard using a 3-
or 5-point-scale from poor to excellent.

21
21


Man Man
Mario Ramon

Woman
Woman
Bilma
Lisa Man
Armando
T
Man
Rolando O
Woman
Woman Teresa
Mila O

L
Man Woma
Woman
Nicasio Minerva
n
K

I
Most approached: Man – Armand; Woman – Bilma
Most trusted: Man – Ramon; Woman - Teresa T
T
Figure 4. Example of a sociogram used to identify leaders among 10
pre-identified community members.

THE CLUSTERING APPROACH TO AGROENTERPRISE DEVELOPMENT FOR SMALL FARMERS: TheCRS-Philippines Experience
22
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B. SESSION GUIDE FOR THE ORIENTATION ON
MARKETING

Session Objectives

At the end of the session, the members of WG will be able
to:

1. Define marketing;
T 2. Articulate the effects of market related factors on
farmer’s profit;
3. Explain the relationships of supply and demand and
O the factors affecting them;
4. Describe the market chain and the participants/actors
O involved;
5. Discuss value chain and how farmers earn from value
addition through participation in the chain;
L 6. Articulate the 4 P’s of marketing, competition and
market positioning; and
7. Demonstrate positive attitude towards marketing

K Time Duration

I 2.0 hours

Resources Needed
T
T Visual aids, marking pens, newsprint/manila paper,
cartolina (for meta cards), adhesives, session and activity
guide, and energizers

Session Procedure

1. Draw out participants’ understanding of Marketing.
Open participation with this statement:

“One enjoyed a cup of brewed coffee this morning
during breakfast because marketing made it

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23


possible to move coffee beans from the farmers
and transform it into brewed coffee for your
consumption.”

Ask participants to individually write on the meta cards
what comes into their mind on marketing based on the
statement. Then synthesize the answers into a
definition. (It will help to arrange the meta cards with
suppliers and buyers on opposite ends, then product,
actors and activities/functions in between).
T
2. Present a matrix for computation where farmers can
appreciate increase in income that is substantial from
market related factors such as price increase of O
product, more volume sold/reduced damage, etc.
(Refer to Table 1.) The red figures are the ones the
O
participants are asked to compute. Deepen
participants with discussion.
L
3. Give lecture and facilitate discussion on supply and
demand with the factors that affect them or are
affected by them.
K
4. Give lecture and facilitate discussion on Market Chain
and Value Chain. Present an example of a value
chain. (Refer to the example on page 29.) Draw out
from participants the ways in which product value
increases as it moves in the chain. Distribute meta T
cards for their individual answers, and synthesize by T
putting together the cards with similar ideas.

5. Give lecture and facilitate discussion on Marketing
Strategy. Draw out from participants what kinds of
questions will be helpful in strategizing using the
marketing mix of product, price, placement and
promotions. (Helpful questions as guide provided
under the topic on Marketing Strategy, pages 31-33.)

6. End the session with an input on competition and
product positioning.

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Session Content/Topics

1. What is Marketing
2. Farming Profitability by being Market Oriented
3. Supply and Demand
4. Market Chain, Value Chain, Value Addition
5. The Marketing Strategy (Target Market and the
Marketing Mix)
6. Competition and Market Positioning

O Topic: WHAT IS MARKETING?

Marketing is the set of activities in moving a product from the
O point of production to the point of consumption at a profit. It is
satisfying customers’ wants.

Given this definition, the work of marketing involves:

a. Understanding what the buyer wants in terms of
K products and the manner of supply to them;
b. Undertaking post-harvest activities such as packaging,
transport, storage, and sale that add value to the
product as it flows from the producer to the buyer
c. Establishing a production-market linkage and
managing communications in between for market
information and feedback

Topic: FARMING PROFITABLY BY BEING MARKET-
ORIENTED

Improving production and yields has positive effect on income.
But increases in price, being able to sell the product and
reducing costs have an even higher impact to farmers’
incomes than just increasing production yield. Farmers’
concern is to earn profits from their sales to be able to cover
the farm costs and to generate earnings for the household’s

2525


consumption needs. To be able to do this, farmers should
have a basic understanding of the market related factors that
influence profits: price, volumes sold and costs. Table 2
shows how changes in these factors affect a farmer’s profit.

Table 2. Effect on profit of different levels of production, prices, sales
and costs. (Adapted from FAO publication, Horticultural Marketing)

Mktg
Squash Base Yield Half Price Price Cost
Case (+10%) Sold (-10%) (+10%) (-20%)
Yield (kg) 1000 1100 1000 1000 1000 1000 T
Quantity sold (%) 80% 80% 50% 80% 80% 80%
Quantity sold (kg) 800 880 500 800 800 800
Price per kg 5 5 5 4.50 5.50 5.00 O
SALES 4000 4400 2500 3600 4400 4000
Production costs 1000 1100 1000 1000 1000 1000
Marketing costs 1600 1760 1000 1600 1600 1280 O
Total costs 2600 2860 2000 2600 2600 2280
MARGIN 1400 1540 500 1000 1800 1720
% of base case +10% -64% -29% +29% 23% L
Note: marketing cost reduction can also apply for production cost reduction.
Base case is farmer produces 1,000 kg of squash; 80% is sold, price is PhP
5/kg, production cost is estimated at PhP 1,000 and marketing cost
packaging, transport, marketing fees) estimated at PhP 1,600.
K

I
Topic: SUPPLY AND DEMAND

The quantity of produce that consumers want to purchase is T
affected by these main factors: price, tastes and preferences T
of the consumers, number of consumers, incomes of
consumers, prices of competing produce, range of products
available to the consumers.

The quantity of that producers supply is affected primarily by:
price of products, cost of production, technology available,
climate and post-harvest capacities.

The price of a produce is determined mainly by supply and
demand. The lower the price, the tendency is the higher will
be the demand. However, as the price goes down eventually

26
26


less will be supplied. Conversely, the higher the price, the
higher is the supply.

1. Supply – is what producers are prepared to sell at a
certain price

2. Demand – is how much buyers are prepared to buy at
the market price

The relationship between what is demanded and what farmers
T are prepared to produce leads to a balance between supply
and demand (referred to as the equilibrium). In practice, this
O point is difficult to attain because the workings of the market is
very dynamic. Many factors influence supply and demand.
Example, farmer’s supply is affected by climate, seasonality,
O road condition, etc. and not just the price.

L However challenging is the situation of farmers, it is important
for them to understand how the market works. And their
objective should be: to be market demand oriented. This
means: producing what they can sell instead of trying to sell
K what they have produced. This implies the importance of
farmers understanding demand, supply and price
movements/trends.
I

T Topic: THE MARKET CHAIN AND VALUE CHAIN
T A market chain refers to a set of linkages between actors
involved from production to the consumers. Actors are those
involved in various functions such as producing, processing,
trading or consuming a particular product, and including those
who provide various services. Figure 5 shows the functions
as the product moves in the market chains with the various
business support services.

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27


The Market Chain
(Adapted from CIAT ERI Guide 2) Consumption

Research
Retailing

Transportation
Trading

Government policy
& regulation
Processing
Communications

T
Trading Techical & business
training & assistance

Post-harvest Market information T
Handling & intelligence

Production Financial services
O
Production input supply

O
Figure 5. A sample of market chain showing the different stages
and the corresponding business support services. L
As the product moves from the production point to any point
along the chain towards the consumers, there is value
addition (i.e. an increase in worth). When various actors work K
together for value addition, the resulting relationship among
the actors is referred to as the value chain. I
Farmers as producers are part of the market chain but they
are not even aware of this crucial role they have. Helping T
them to understand market chains and value chains will open O
their minds that they can benefit by being active players in the
chain with other actors.

The Value Chain presents how the value of a product is
increased as it passes through different stages or links in the
chain by way of the example in Figure 6.

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28


Siay Growers’ Price Note: Trader ’s Buying Price is
Php370.00 php370 per Buriki @ 27kg content or
(23kg/crate or Php16.08/kg.) Php13.70/kg.

• Transport: Php40.00
• Misc.: Php5.00
• Mgt. Fee Php25.00
• Margin: Php60.00

Manila Wholesaler CDO Market Facilitator’s
Php500.00 Fee Php20.00/crate

T
•CDO Pier Loading: Php10.00
•Shipping Cost: Php50.00
•Manila Pier Unloading: Php10.00
•Trucking to Buyer: Php10.00

O
•Allow. for Losses: Php50.00
•Margin: Php120.00

O
Manila Wet Market Retailer
Php780.00

L
Figure 6. An example of a value chain for calamansi, Siay,
Zamboanga Sibugay.

K Farmers can gain from active participation in the market chain
and in being part of a value chain in two ways.
I • First, farmers can perform more value addition
functions beyond the farm such as the post-harvest
T functions of drying, sorting, grading, processing,
T transporting, packaging with labels. Undertaking these
activities is what is called vertical integration.

• Second, farmers can actively be involved in how
decisions are made affecting them in the exchange or
buy and sell function, such as pricing, terms of
payment, definition of quality standards, targeting of
preferred buyers and the like. In all these efforts for
value addition, farmers have to be organized to have
influence in the chain and the capacity to undertake
the activities.

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29


The farmers may choose a long or a short chain and how far
their participation in it. It depends on the type of product, the
capacity of the farmers as well as the risks involved.

Important Market Chain Actors

1. Barangay Traders – the small traders who visit the
barangays to buy either from agents or directly from
farmers.

2. Assembly Traders – the traders who buy from the
barangay traders, agents or directly from the farmers.
They are normally operating at the rural markets or T
towns.
O
3. Wholesalers – the traders who deal with bigger
volumes from the barangay and assembly traders.
They serve the needs of larger markets (like the O
processors and institutional buyers) or other bigger
wholesalers operating in the towns or cities. They also L
cater to the retailers.

4. Retailers – the ones who take care of the distribution
to the products to the consumers. Retailers can be the K
sellers operating in small shops, roadside market
outlet, and the high-end supermarkets.
I
5. Processors – the individuals or firms who transform
products into different forms. Examples are the T
processors for fruit juices or the rice millers. They can
either be small household businesses or large firms. T

Topic: MARKETING STRATEGY

A Marketing Strategy has two interrelated elements: the
Target Market and the Marketing Mix. The target market is
a person, group of people or a business organization that the
seller wishes to be the buyer of the product. This enables the

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seller to focus on a target for both the product and the
communication work.

The marketing mix which is commonly referred to as the 4 P’s
in marketing, is a set of controllable and interrelated variables
comprised of the product, place, price and promotions that the
seller puts together to be able to satisfy the target market(s)
better than its competitors. The marketing mix is the source of
much of the content of the marketing plan.

T The marketing mix variables are as follows:

1. Product – refers to the product offered for sale. The
O type and characteristics of the product will depend on
what the target market wants. These questions may
help:
O
• Who buys the product?
L • For what and how will it be used?
• What does the buyer look for in the product?
(quality, size, packaging, and other characteristics)
What is unique about the product offered?
K
•

The following trends in consumption may serve as
I additional guide in determining what products to
produce and market:

T • Preference for convenience products
T • Preference for natural, organically grown, healthful
and nutritious products – fruits, vegetables, low-
calorie products
• Interest in ethnic or regional products (niche /
nostalgia)
• Interest in exotic products
• Increase in meals outside of home (ready to cook
or ready to eat products)
• Concern for production conditions – social equity,
conservation, etc.

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2. Price – refers to the amount at which the product is
sold, the decision of which is influenced by what the
target market can afford and is willing to pay for the
kind of product that is being sold. Helpful questions:

• What is the price? What is the payment term and
arrangement?
• Is the price competitive?

Main considerations in determining the price offer:

Production cost
T
T
•
• Marketing cost
• Other costs
• Profit margin O

O

L

K

I

T

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32


3. Placement or distribution – refers to the channels of
distribution or the physical flow of the product from the
time it is produced until it is bought. Normal channels
include wholesalers, retailers, distributors, etc.

The choice of the channel is influenced by the buying
behaviour of the target market because the objective is
T to make the product conveniently available to the
target market consistent with their purchase
O preference. Helpful questions:

Where do the buyers normally buy? Why?
O
•
• Where do the competitors sell their products?
• Who can help in the transfer in the distribution of
L the product to the buyer?

Considerations in placement:

K • Area covered and supplied
• Transport
Storage (inventory)
I •
• Channel (players involved)

T 4. Promotions – refers to the ways and means to build
T awareness of the product and to improve the demand
of the target market. The use of promotion depends
on the target markets’ attitudes and behavior. Helpful
questions:

• What makes the customers buy the product?
• What makes the customers prefer the product to
the competitors?

Some means of promotion:

• Advertisement (informing and persuading)
• PR (good image of product/supplier)
• Sales promotion (discount or sample)

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33


• Direct marketing (bringing the product to the
potential buyer)

Product and Placement are considered the strategic Ps of the
marketing mix because they need long-term planning.
Promotions and price which can be changed easily are
considered the tactical Ps of the marketing mix.

Topic: COMPETITION AND MARKET POSITIONING
T
Competition is a “given” in marketing, especially when there T
are good and big markets. It usually happens when many
suppliers with the same product have a common market.
O
Market positioning is making the product offer unique or
different in the mind of the target market. This is attained O
through a good marketing mix, i.e. the best grouping of
marketing activities that a seller undertakes to make the
market buy the product and at a level where profit is
L
maximized.

K

I

T

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34

Step 2. Product Supply Assessment and Product Selection

Product Supply Assessment and
Product Selection


Through the help of the Facilitator, Step 2 aims to design and
implement Product Supply Assessment that will allow the
Working Group (WG) with the community to:

1. Gather information on resources, products, production
and marketing practices in the community; and

35
35 THE CLUSTERING APPROACH TO AGROENTERPRISE DEVELOPMENT FOR SMALL FARMERS: The CRS-Philippines Experience


2. Identify the main products for agroenterprise
development and analyze the farmers’ capacity to
supply them for the market.

2.2 INTRODUCTION

Engaging in an agroenterprise, or any enterprise for that
matter, requires careful analysis, plan and decisions based on
realistic, timely, comprehensive and reliable information about
the producers, their supply and the market environment. This
is where research is most useful.

The research process involves several activities with the
participation of farmers and other partners. Working with the
participation of the community is critical because the aim is to
empower them with the capacity to identify their resources
and their market opportunity, and for them to have ownership
of the agroenterprise plan which is based on the research
findings.

The Facilitator acts as a catalyst, making available the
participatory tools as a means for the community’s “learning
by doing” process. He/she assists the Working Group (WG)
plan the research work which starts at the community level
and extends beyond it where marketing-related activities
continue.

This Step largely covers two activities, namely: Product
Supply Assessment (PSA) and Product Selection for

2.3 UNDERSTANDING PSA

PSA is a participatory study done at the barangay level on the
community’s resources, products, production and marketing
practices that have a bearing on agroenterprise planning.

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36


PSA leads to the selection of product or products for
agroenterprise development.

As mentioned in the previous step, a WG is organized to
handle the PSA. In Step 2, the WG members undergo
training on PSA which culminates with planning for its
conduct.

Key elements studied in the PSA include:

1. Farm production (farm sizes, land tenure, farm
tools/equipment, labor utilization, products, yields,
production methods, problems)
2. Marketing practices (farmers’ and buyers’ practices,
problems)

The PSA starts with the collection of relevant secondary data,
and then proceeds with primary data gathering only as a
means to fill up important data gaps.

2.4 COLLECTING PRIMARY DATA

In collecting primary data mainly on production, Focus Group
Discussion (FGD) is the method that involves the shortest
time and the least cost. (Refer to Facilitator’s Tool Kit No. 2 for
tips in conducting FGD.)

FGD is complemented by interviews using a survey
questionnaire to collect farmer- or household-specific
information. (Refer to Facilitator’s Tool Kit No.2 for a sample
of a survey questionnaire.)

Date gathered has to be summarized so they can be easily
analyzed by the WG. Collating the information on production
and marketing practices can be facilitated by using simple
tables. If resources and time allow it, the WG may seek the
assistance of a research practitioner in data handling.

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FACILITATION GUIDE FOR PRIMARY DATA
GATHERING

Collecting Data on Farm Production

The main objective in the PSA is to come up with an analysis
on the farmers and their supply capacity. Therefore, it is
important to get in-depth knowledge on the farmers so that
information for agroenterprise planning will not be too general
or vague.

To gain a good understanding on the farmers’ current
production and marketing practices, including the problems or
constraints they perceive or have encountered, the WG
conducts a community consultation.

Basic Steps in Arranging and Conducting a Community
Consultation by the WG:

1. With the assistance of barangay officials and LGU staff
(e.g. the agricultural technicians assigned in the
particular barangay), arrange for a community
consultation.

2. Prior to the consultation, advise the Agricultural
Technologist of the LGU to prepare secondary
information on the main products in the barangay and
who are producing them. This will facilitate the pre-
identification of farmers who will be invited to the
consultation.

3. In the community consultation, the WG explains the
project’s objectives in terms of agroenterprise
development and the purpose of conducting the PSA.

4. Using the FGD method, the Facilitator and the other
WG members lead the participants to a discussion on
the following topics:

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38


• Farm management practices and crop/livestock
production performance
• Production costs and returns (KII with at least 5
farmers before FGD)
• Sources of information/advice related to farming and
marketing
• Sources of credit and credit arrangements
• The buyers and the marketing arrangements
• Problems in farm production and in marketing

(See Facilitator’s Tool Kit No. 2 for helpful questions during
the FGD.)

39


For farmer- and household- specific information, a survey is
administered among the consultation participants. This is
done by the WG or local enumerators (people to conduct the
survey) who are enlisted for assistance.
Important specific information includes the following:

• crops grown and expected harvest schedules
• areas planted or plant population
• expected yields based on past performance
• previous buyers

These above information are very useful in determining the
relevance of the crop during product selection and serve as
valuable input to the agroenterprise planning, particularly the
formulation of the product supply plan.

(Refer to Facilitator’s Tool Kit No. 2 for survey questionnaire.)

In addition, a Key Informant Interview with five (5) farmers
who are knowledgeable about the community and their
farming practices can be conducted. The data gathered will
provide a benchmark for the cost and returns with information
on break-even points (volume and price) that will guide the
farmers when they negotiate with the market for their
products. On the other hand, the data on cultural management
can help the Facilitator in identifying the good practices, gaps
and the appropriate interventions.

(Refer to Facilitator’s Tool Kit No. 2 for the sample of
questions for the KII and the table on cost & returns
summary.)

Collecting Data on Marketing Practices

During the consultations, as farmers relate about their present
buyers and marketing practices, they will be asked to draw the
market chain map showing how their products flow out from
their farms to their buyers.

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40


It is mainly a “telling a story” process with this graphic tool that
provide details of the buyers involved and their market
locations, the distances from the farms to the markets, the
packaging and transport means, the prices and the costs, and
more importantly, the major problems as they move their
products in the market chain.

In this exercise, farmers will expectedly be familiar only with a
part of the entire market chain since their products are
commonly sold locally. But this exercise is continued to fill in
the gaps in the market chain map (i.e. trace the products
beyond the community) when the WG can do the market visits
in the nearby commercial areas as will be explained in the
next step (Market Chain Study).

2.5 SELECTING THE PRODUCT FOR THE MARKET

From the products identified in the PSA through FGD and the
survey, the WG proceeds to select one to three among them
which are produced mainly for income and those that are
produced by the majority of the farmers.

Working with existing products at the start for new or
inexperienced groups offer these advantages:

1. The WG can delve on priority options in a relatively
shorter timeframe

2. Farmers are already familiar with the production
technology, thus, can focus more on marketing
aspects

When new products will be chosen, usually when they have
more capacity to venture into new enterprises, it is important
for the WG to set evaluation criteria. Important considerations
in choosing new products are as follows:

41


Area of Key Question
consideration
Is there a favorable market? (i.e., continuing
Market
and/or growing market demand)
Can we produce it? (i.e., agro-climatic conditions
Production
relative to the production requirements)
Do we have financial resources to produce it?
Financial
Will it be profitable relative to investment? Is the
level of risk appropriate to the farmers?

In selecting new products, it is important that the decision
making is participatory because the choice should be based
significantly on the participants’ own experiences, capacities
and risk assessment.

A tool to guide farmers to assess risk relative to their decision
on new products and markets is the Product-Market Growth
Matrix also known as the Ansoff Matrix (Figure 7).

In the Matrix, risk is shown to be lowest at Box 1 (Market
Penetration) and highest at Box 4 (Diversification). Evaluation
done above based on demand and profitability is often
associated also with high risk options. It is advisable for
farmers to start with existing products based on Market
Penetration strategies.

When they have more experiences and more resources, they
can proceed to higher risk options that bring the potentials of
higher returns.

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42


Existing
Existing New
New
products
Products products
Products

Existing
Existing 1
1 3
3
Low Risk
markets
Markets Low Risk
(Market Penetration)
(Product
(Product
Development)
Development)
(Market Penetration)

New
New 2
2 44
markets (Market
(Market High Risk
High Risk
Markets Development)
Development) (Diversification)
(Diversification)

ANSOFFMATRIX
ANSOFF MATRIX
(Source: CIAT, 2006)
(SOURCE: CIAT, 2006)

Figure 7. The ANSOFF Matrix used in assessing risks when
deciding for new products and markets.

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INFORMATION TO BE GATHERED BY FGD

1. What are the three (3) main products in the barangay?
(Note: Ranked according to the most number of
producers)
2. Where do you avail credit and what are the
arrangements in financing?
3. Who are the main buyers of the products mentioned? T
(Note: From within and outside the barangay)
4. Do you have problems with production?
5. Do you have problems with marketing? O
TIPS IN CONDUCTING FGD
O
1. For effective handling and documentation, the number
of participants should not exceed 15, if possible. L
2. Group the participants according to dominant products
in the community (i.e., the products that give the
highest economic values to the farmers). These focus
groups are referred to as the crop assemblies. The K
advantage of a crop assembly is that the discussions
are more focused on a particular product and analysis
is more easily facilitated. I

3. Using a prepared set of guide questions, facilitate T
discussions and keenly note and record responses.

4. Synthesize the proceedings focusing on their strengths
and their constraints (weaknesses) that will need to be
addressed for effective product supply in the joint
marketing in the future.

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INFORMATION TO BE GATHERED BY KII WITH SELECTED
FARMERS

Name of Farmer _________________
Location _________________
Product _________________
Area _________________
Crop Period _________________

1. Crop Management

T
1.1. Nutrient Management
Application
Quantity Frequency Per Schedule of

O
Kind of Fertilizers (unit/tree) Year Application
Chemical (Inorganic)
1.

O
2.
Organic/Natural Method
1.

L
2.

1.2. Crop Protection Against Pests and Diseases
Application
Quantity Frequency/ Schedule of
Kind Used (unit/tree) Year Application

K
Chemical
1.
2.

I
Organic/Natural Method
1.
2.

T 1.3 Soil and Water Conservation Practices
Technology/Practice Description
1.
2.
3.

1.4 Other Farm Technologies and Practices:
Kind of Technology/Practice Description
1.
2.
3.

2. Do you have problems with your product? ____1. Yes ___2.None

45


3. If yes, what are your problems?_____________________________

4. Summary of Cost and Returns per crop production cycle:

Item Amount (PhP)
Labor Hired
Family
Inputs
Equipment Rental
Marketing Costs Packaging
Transport T
Loan Interest
Other Expenses
TOTAL COSTS O
Yield
Sales (Yield x Price)
NET INCOME (Sales – Total O
Costs)

L

SAMPLE OF A SURVEY QUESTIONNAIRE

K
SURVEY AMONG COFFEE FARMERS
IMPASUGONG, BUKIDNON

I
1. Personal Information

1.1. Name of respondent_______________________ 1.2. Age_____
1.3. Name of spouse____________________ 1.4. Age_____ T
1.5. Residence (address)__________________________________
1.6. No. of years in residence: _____
1.7. Number of children______
1.8. Total number of household members (including farmer) _____
2. Information on Land, Tools and Farming

2.0 How many farmlots are you cultivating (owned, rented, leased, others)? ___ ___

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2.1. Information on Land
Land Status?
Dominant 1. Owned, 2. Rented (fixed
Lot Location Area (ha) Slope? payment), 3. Rented (Share
1. Flat, 2. of yield), 4. Borrowed; 5.
Gentle, 3.Steep Others (describe)
1
2

2.2. Farm Tools Owned:
T Kind Quantity Kind Quantity
1. Draft Animal 6. Weeder
2. Plow 7.
O 3. Harrow 8.
4. Cart 9.
5. Sprayer 10.
O
2.3. Number of years in farming? _____ years

L 2.4. Crops planted? Ranking: 1. __________ 2.___________ 3.____________

3. Coffee Information

3.1. Area planted to coffee? ___________ (hectare)

K 3.2. Total number of coffee trees? _______________

3.2.1. Number of coffee trees bearing?____________
I 3.2.2. Number of non-bearing coffee trees?______________

T
4.1.1.1 For bearing trees, what is the average yield (kg) per tree ? ____

4.1.1.2 How many times do you harvest in one cropping season? _____

4. Marketing

4.1 Over the past 12 months, what is the quantity of coffee sold?

4.2 Quantity of Coffee Beans Sold the Past Year
Month Quantity Sold Price
(In kg)
January
February
March
April
May
June

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July
August
September
October
November
December
TOTAL

4.3 Source of Capital

What is your capital source? How
Purpose of
Loan?
Terms of
Payment?
T
much?
1. Own
O
2. Financier (name: )
3. Trader (name: )
4. Bank (name: ) O
5. Others (specify: )

4.4. Buyer L
Who were Address? Place of Type of Reason for choosing
your buyers? delivery? buyer? the buyer? Indicate
Code*
1.
2.

* Code – reason for choosing the buyer:
K
1. High price 3. Usual buyer (suki) 5. Others (specify
2. No other buyer 4. Have loan with the buyer (pay to crop)
I
4.5. Method of Selling
4.6.1 Packaging
4.6.2. Mode of delivery (delivered or picked up)
T
4.6.3. If delivered, method of transportation
4.6.3.1. Point of delivery?
4.6.3.2. How much is the transport cost?
4.6.4 How much is the labor cost (loading/unloading)
4.6.5. Mode of payment (cash, installment, others)

5.0 Problems in Marketing

5.1. Do you have problems in marketing? ___ 1. Yes ____ 2. No

If yes, what are your problems? ________________________

____________________________ _____________________
Interviewer Date

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Step 3. Market Chain Study

Market Chain Study


Using the rapid market appraisal method, the Facilitator
together with the WG shall:

1. Conduct a market chain study for the products
selected during the PSA;
2. Identify several market chains for each product and
analyze the farmers’ position in them;
3. Select the best market chain(s) to work on and the
buyer(s) that offer the most benefits;

49


4. Come up with strategies to assist the farmers
participate in specific market chain(s) with the
attendant costs and margins in their participation, as
well as the development support they will need; and
5. Report the findings back to the farmers for goal
setting in agroenterprise development

3.2 INTRODUCTION

Having selected product(s) for agroenterprise development
(Step 2), the next activity is market chain analysis which is
done to get in-depth market-related information on the chosen
product(s). Some definitions will help simplify the
understanding on market chain analysis.

Market Chain

Market chain refers to a set of linkages between actors
involved from production through processing, distribution and
retailing to the consumers. Actors are those involved in
producing, processing, trading or consuming a particular
agricultural product, and including those who provide various
financial and non-financial support services such as the
truckers, suppliers (inputs, packaging materials, etc.), market
research groups, and others. See Figure 8 for an example of a
market chain.

Farmers produce and sell products but are not even aware
that in doing so they are a crucial part of the market chain.
This lack of understanding constrains them to recognize and
carry out their position in the chain (i.e., how they perform,
what their advantages and constraints are, and what their
opportunities are if they “engage” the market or work together
with other actors in the product movement).

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50


THEN NOW
FARMER FARMER

AGENT
CLUSTERS

TRADER

NESTLE TRADERS SERENITY
PHILS., INC. COFFEE CORP.
NESTLE PHILS., INC.

CONSUMERS CONSUMERS

Figure 8. Sample of a market chain for green coffee beans.

Value Chain

As a product moves from the production point to any point
along the chain towards the consumer, there is addition of
value or worth. Technically, this is known as value addition.

When the actors involved work together for value addition
(i.e., to increase efficiency and quality of product supply,
satisfy market needs, and as a result, earn more), the
resulting relationship is referred to as the value chain.

Helping farmers understand market chains will open their
minds to new knowledge that will empower them. It points at
the opportunities they can tap or constraints they can address
to strengthen their position in the market chain, and gain
stable markets and/or higher incomes.

The objective of market chain analysis is to understand the
actors, activities, costs and margins, constraints and

51


opportunities related to the movement of the product starting
with the farmers and ending with the buyers and/or
consumers. These information help in the identification of the
best market chain to work on, and the key buyers for the
farmers. Thus, market chain analysis is an activity for
strategic thinking in designing agroenterprises.

3.3 RAPID MARKET APPRAISAL

Rapid Market Appraisal or RMA is the most practical, popular
and preferred approach to market chain studies. Based on its
user-friendly qualities, RMA is defined as a quick, flexible and
effective market research method.

Advantages of RMA:

1. Quick (uses rapid appraisal methods: focus groups,
key informant interview, semi-structured interview)

2. Flexible (RMAs can be designed according to purpose
and resources)

3. Effective (can generate detailed understanding of
marketing systems, including constraints and
opportunities, leading to design of interventions)

Limitations of RMA:

As a quick process, the findings of RMA may apply only to its
defined purpose. Seasonality of relevant factors cannot be
captured owing to its very short time frame.

Relying on key informants, the results are largely dependent
on the openness and active participation of prospective
groups or participants. It will matter if there will be a good and
skillful facilitator and a good documenter for the activities.

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3.4 FACILITATION GUIDE FOR THE RAPID MARKET
APPRAISAL

Facilitate the following activities in the conduct of RMA by the
WG:

1. Design of the study
2. Implementation of the study
3. Analysis of data and information
4. Options for farmers and development support needed
5. Report writing

Activity 1. Design of RMA-Market Chain Study

In the PSA, most of the marketing-related information
gathered by the WG from the farmers are confined to the
immediate vicinity of the community. The Market Chain Study
links the market data in PSA with relevant industry and buyer
information beyond the community.

1. Create a RMA-Market Chain Study Team with
members coming from WG earlier formed in Step 1. A
good size is at least 10, two-thirds (6-7) of which are
farmers. Subdivide the Team into smaller groups of 3-
4 members each to share the market chain study
activities.

Depending on the complexity of the market chain
being studied or the extent of geographical coverage
of the study, the team may invite a marketing
practitioner who possesses the following:

• Exposure or experience in market research
• Technical knowledge (including production, post-
harvest and processing issues)
• Contacts in the trading community

53


Then the RMA Team will:

2. List down possible key issues for investigation in
RMA/Market Chain, such as but not limited to:

• Product characteristics (variety, grade, moisture,
and other quality specifications)
• Demand patterns (growth and seasonality)
• Supply situation (origin, production volume,
seasonality of supply)
• Price (trends)
• Actors in the chain (market channels) and their
activities
• Marketing infrastructure (roads, market places,
facilities, communication)

3. Review available literatures or get secondary data
to clearly identify gaps that need to be filled in by
primary data.

The following are the possible sources of secondary
information for the study:

Offices Materials
• LGUs (barangay, municipal & • Newspapers
provincial) • Reports
• DA (including BAS and AMAD) • E-publications
• DTI (internet)
• NSO • Socio-economic
• NGOs profiles
• Academe & research
institutions
• Industry associations

4. Select markets and key informants

For primary data gathering, the RMA / Market Chain
Study team must start with the five most mentioned
community traders in the PSA and trace their

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immediate buyers to be included as informants in the
individual interviews. Because of their influence in
their marketplace, make sure to include the top five
buyers in the nearest commercial center.

Augment the activity with interviews with the various
points in the chain of the products identified in the PSA
to capture information at different points of the market
chain. Get at least two informants at each point and
cross check answers.

5. Prepare a checklist of questions or process guides

Prepare appropriate set of questions or process guides
for key informants/interviewees to elicit respective
information outlined below:

Respondents/
Informants/ Data/Information
Actors In Market Chain
• Product requirements with the quality
• Wholesalers
specifications
• Retailers
• Supply sources
• Institutional buyers
• Destination of products
(processors,
• Experiences in demand & supply
supermarkets, food
movements
service
• Prices
establishments)
• Marketing practices
• Marketing costs
• Support services
• Support infrastructures
• Openness to buy directly from farmers

The information outlined above are presented in a more
detailed interview guide.

(Refer to Facilitator’s Tool Kit No. 3 for the interview guide in
English and in Filipino.)

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Activity 2. Implement the RMA - Market Chain Study

1. Prepare for data gathering

a) The RMA Team may break up into smaller teams
of 3 members each (1 of them is a farmer) for
efficiency.

b) Assign each member a role during the interview
process (main interviewer, assistant interviewer
who makes sure that all questions are covered,
and recorder of responses)

c) Check all tools: checklists or interview/discussion
guides, pen/pencil, notebook, tape recorder,
camera, registration or attendance sheet, and other
necessities.

d) Rehearse or familiarize with the interview
questions and the manner of recording the
responses before the actual market visit and data
gathering.

2. Gather the information
a) Semi-structured interviews with key informants
(traders/ retailers/ Institutional Buyers, processors,
supermarkets, food service establishments)

b) Trace the product flow from the farmers to the
intended buyers for information needed for the
Market Chain diagram.

The RMA team will get data on costs and margins
by direct observation and informal interview of key
informants (traders and the service providers like
the transporters) during the tracking of activities as
the product moves in the market chain.

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In the of product flow, the RMA takes note not only
of the market chain that gives the highest returns to
the farmers but also the work that the farmers need
to undertake with the additional costs involved as
well as the risks when they decide later to take a
more active participation in the chain.

3. Cross-checking data and information

To ensure the reliability of the data that the team is
gathering, the members should ask the same set of
questions to informants within and at different stages
of the market chain then check the consistency of
answers. The RMA team can also observe the
behavior or practices (such as post harvest handling,
sorting and grading and storage technologies) and
analyze the process as the product flows to the various
actors in the chain.

Activity 3. Facilitate the analysis of RMA data and
information by the RMA Team

Tools and Methods for Analysis

1. Illustration of the Market Chain Map

This gives a picture of the elements of the market
chain, such as the producers, post-harvest handlers,
consolidators, traders, buyers, processors, retailers
and consumers. See Figures 9 and 10 for examples.

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Figure 9. Market chain map drawn from a corn market chain study
using the RMA.

Figure 10. Market chain map drawn from a vegetable market chain
study using the RMA.

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2. Value chain (margins along chains)

As shown in Figure 11, expenses are incurred as the
product moves from one point to another along the chain.
These have to be considered so as to be able to
determine later the possible or actual margin like the one
reflected in Figure 12.

MaragusanPrice
Maragusan Price MillingFee
Milling Fee
PP44.00/kg
44.00/kg P2.50/kg
P 2.50/kg

Trucking Cost
Trucking Cost
P1.28/kg
P 1.28/kg

Labor-Hauling
Labor-Hauling
P0.06/kg
P 0.06/kg
Total Expenses
Total Expenses
P4.24/kg
P 4.24/kg
Labor-Drying
Labor-Drying
P0.11/kg
P 0.11/kg

Honorariumof Escort
Honorarium of Escort
P0.13/kg
P 0.13/kg

Other Expenses
Other Expenses Nestle BuyingPrice
Nestle Buying Price
P0.17/kg P62.00/kg
P 62.00/kg
P 0.17/kg

Figure 11. Example of a value chain for dried coffee beans.

Nestle's Grade 1 Price

Other Ex penses Farmer's
Farmer’s
Margin:
Margin:
P13.76/kg
Cluster Escort Honorarium P 13.76/kg

Labor-Dry ing

Labor-Hauling

Trucking

Milling Buying
Price:
Maragusan Price P44.00/kg

- 10.00 20.00 30.00 40.00 50.00 60.00 70.00

Figure 12. Another way of presenting the margins along the chain.

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3. Buyer comparison for market opportunity
assessment

A buyer comparison table provides information about
buyers and their conditions and requirements. It gives
the grower and idea on where to sell products for
maximum profit.

Market chain study must be designed well to really
include all relevant buyer information to guide
decisions and production plan of farmers.

A buyer comparison matrix like the one shown in
Figure 13 is used to guide the WG in deciding which
buyer can offer the best value. This can still be
improved or enriched to include information such as
quality index (like moisture content), frequency,
preferences for organic or inorganic products, and
prescribed packaging.

Figure 13. Matrix for Buyer Comparison summarized by the farmers
after market survey and visits.

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Table 3: Sample matrix used in comparing the values offered
by buyers. (Derived from Figure 13.)

Criteria Nestle Trader 1 Trader 2
Contact information Davao City Davao City Nabunturan
Growth in demand High High High
Time of year scarce May-Oct May-Oct May-Oct
G1 P54.00
Price/kg G2 P52.50 P48.00 P44.00
G3 P50.50
Less than 12%
Triage, Less than
Quality required All in All in
12% MC, acceptable
cup taste
Delivery Needs Delivery Delivery Delivery
Volume purchased/week No limit No limit No limit
Minimum Purchase Volume 1 kg 1 kg 1 kg
Packaging Required Sacks Sacks Sacks
Largest Buyer for this
Nestle Nestle Nestle
product
Frequency of Purchase Daily Daily Daily
Terms of Payment Claim from bank Cash Cash
Interested in buying from a
Yes Yes Yes
Farmers Group?

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4. Price trends

Price trends traced from and to a particular time can
be interestingly presented using graphs. This set of
information will guide farmers in preparing their
production plans as determined by expected or
projected price, and as affected by the agro-climatic
condition at a particular time.

Figure 14 presents a price trend for coffee in a 1.5
year period.

Nestle Coffee Buying Price Jan '06-Jun '07

100.00

90.00

80.00
70.00
60.00

50.00

40.00

30.00
20.00

10.00

-
1/10/2006

2/10/2006

3/10/2006

4/10/2006

5/10/2006

6/10/2006

7/10/2006

8/10/2006

9/10/2006

10/10/2006

11/10/2006

12/10/2006

1/10/2007

2/10/2007

3/10/2007

4/10/2007

5/10/2007

6/10/2007

Figure 14. A graph of the Nestle Coffee Buying Price over a 1 -
year period.

5. Projections on marketing costs & returns based on
buyer comparison

Based on the PSA and the Market Chain Study
information, the farmers are guided to make financial
projections if they undertake the marketing. This will
help the farmers choose the buyers they will connect

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to in the marketing, and what it means in terms of price
and net incomes for them in the marketing.

Figure 15 shows the projections made by a cluster on
the marketing costs and returns for coffee with a
number of identified buyers.

Figure 15. Projected Marketing Costs & Returns from Various
Buyers in the Coffee Market Chain.

Activity 4. Options for Farmers and Development Support
Needed

To facilitate the agroenterprise planning by the clusters of
farmers (refer to Steps 4 and 5), the RMA team with the WG
shall summarize the options that farmers can undertake to
strengthen their position in the market chain and increase
incomes.

Options for farmers to increase income can come from:

• Better price with the choice of a better market in the
supply chain
• Higher price with product quality management (i.e.
sorting, good packaging that will give the buyers less

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damage and higher recovery, thus warrants their
giving a higher price, etc
• Good organization of farmers and buyer’s trust in their
delivery and quality reliability
• Good management of production related activities
such as good product quality from the field, minimal
deterioration during harvest, more efficient use of
inputs and labor, thus lowering costs, etc.
• Good management of market related activities such as
procurement and distribution of packaging of materials,
better packaging, transport, receiving and invoicing,
etc.
• Favorable program and policies (e.g. infrastructure
development support from the local government)

These will be the basis for the development interventions to
be extended to them. These interventions can include:

• Technology innovations that strengthen improve
production yields and quality, lower production costs,
provide value added opportunities and specific points
in the market chain
• Enterprise design, implementation and management
assistance
• Organizational mobilization through cluster formation
• Various areas of business support such as market
information, extension services, market linkage, etc.

Activity 5. RMA- Market Chain Study Report

A concise report on the results of the PSA and the Market
Chain Study must be prepared and presented to the farmers
as input to agroenterprise planning (Step 5). The whole write-
up should not take more than 10 pages and should revolve on
the two main analyses of market opportunity and how the
farmers will take advantage of them given their product supply
capacity, assets and constraints.

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The RMA team leader spearheads the report writing work,
putting clear emphasis on the following minimum parts and
topics:

I. Background
A. The farmers’ project, objectives, the site and the
development partners
B. Rationale for the PSA and Market Chain Study

II. How the Study Was Conducted
A. PSA
B. Market Chain Study
C. Methods and Tools
• Direct observation
• Semi-structured interviews
• Focus groups
• Formal questionnaires (if applicable)

III. Results

A. Product
• Product features
B. Demand analysis
• Market types/size,
• Demand conditions and prospects
• Market opportunities by market type
• Volume Trends
C. Supply analysis
• Supply sources
• Principal supply channels and constraints
• Supply Trends
• Production conditions (technology, costs, etc)
D. Prices and margins
• Price trends
• Margin analysis (gross, net and break-even)
E. Principal Market Chain and the most promising buyers
F. Strengths, weaknesses, opportunities and threats
(SWOT) related to production and marketing
(See Facilitator’s Tool Kit No. 3 for a sample of SWOT
analysis.)

IV. Strategies for the farmers
V. Conclusions

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Facilitator’s Tool Kit No.3

A. CONDUCTING A KEY INFORMANT INTERVIEW (KII)

Information to be gathered by KII:

1. Demand-Supply conditions
• Seasonality and price responses

2. General Business Information
• Type of business, kinds of activities handled
(vertical integration done?) T

3. Pricing Mechanisms O
• Months of lowest price and highest price over the
past 12 months
• Months of lowest demand and highest demand O
over the past 12 months
• Months of lowest supply and highest supply over L
the past 12 months
• Quality /Grading
• Procurement Practices (terms, frequency, source)

4. Trading Information
• Products handled
K
• Purchase Data over the past 12 months, (purchase
frequency, volume/purchase, month of highest I
purchase, month of lowest purchase, highest
purchase price, lowest purchase price)
• Source of Products (suppliers, who is the preferred T
source and why)
• Procurement Practice (method of procurement –
suppliers come or go to source, Mode of purchase
– picked up or delivered? Manner of payment –
cash or terms)
• Basis of Buying Price (prevailing, quality specs,
time and season, credit obligation from supplier)

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• Market Outlets (who are the outlets for his/her
traded products, type of outlet, reason for choice of
outlet, location)
• Selling Practice (price, volumes,
grading/standardization done before selling)

5. Marketing Investments (Facility/Equipment and
Capacity)

6. Market Share Protection (provides financing,
T undertake own production, give price incentives,
months of lowest demand and highest demand over
O the past 12 months)

7. Openness to future supply/volume in the next 12
O months (what products and what estimated volume
requirements, frequency of supply)
L
8. Problems Perceived and/or encountered in his/her
marketing business

Tips on conducting KII:
K
1. Introduce yourself and your organization.
2. Be clear about the purpose and timing of the interview.
I 3. Stress confidentiality.
4. Be friendly and relaxed, use humor.
T 5. Ask simple and clear questions.
6. Follow a logical sequence.
7. Avoid leading questions.
8. Ask most sensitive questions last.
9. Be prepared to listen and learn.
10. Engage the respondent (don’t be afraid to challenge
the accuracy of the information provided, use diagrams
to assist discussions).
11. Investigate new areas of interest as they arise.
12. Avoid very lengthy interviews, follow up if necessary.
13. Use the information to improve the next interview.

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Sample of a Buyer Interview Guide

English Filipino
1. What is your name? 1. Ano ang inyong pangalan?

2. What is your complete 2. Ano ang inyong address?
address?
3. What is your cell phone and 3. Ano ang inyong cellphone at
landline number? landline number?
4. What quality do buyers look 4. Ano ang mga katangian o
for? kalidad na hinahanap ninyo sa
mga binibiling produkto?
5. How frequent do you buy? How 5. Gaano kadalas ka namimili?
much or what volume do you
buy?
Gaano karami ang inyong
binibili?
T
6. What container is appropriate? 6. Anong ang maayos na

7. How much is your buying price 7.
paglagyan ng produkto?
Magkano ang bili ninyo ngayon? O
at present? How much was the Magkano ang pinaka mataas na
highest and the lowest price
O
presyo na presyo ng nakaraang
you offered or gave in the past 12 na buwan? Ano naman ang
12 months? pinaka mababa?
8. What is the payment
L
8. Paano ang bayaran? Cash o
arrangement, cash or terms? If terms? Kung terms, gaano
“in terms”, how long? katagal (ilang araw, linggo,
buwan)
9. Do you pick up, or is the 9. Pick-up po ba o delivery?
product delivered to you?
10. What is the minimum and 10. Gaano karami and kaya ninyong
maximum volume that you buy bilhin? Gaano kakonti naman K
at a time? ang pwedeng ibenta sa inyo?

11. Where do you sell the product? 11. Saan ninyo ibinebenta and
produkto?
12. In the past 12 months, what 12. Anong buwan and pinaka
were the 3 months of highest maraming kailangan ang inyong T
demand from your buyer? buyer?
13. In the past 12 months, what are 13. Anong buwan and pinaka kaunti
the 3 months of lowest demand na kailangan ang inyong buyer?
from your buyer?
14. Where do you get the products 14. Saan galing ang mga produkto
you are selling? Who is/are na ibinebenta nyo? Sino ang
your preferred suppliers and paboritong ninyong supplier?
why? Bakit?
15. Would you be interested to buy 15. Interesado ka bang bumili mula
from us? sa amin?

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TO THE TEAM: Through direct observation, note down the
facilities, equipment other assets used by the buyer in
marketing, as well as the marketing set up and operations,
that can be indicative of the buyer’s capacity.

B. CONDUCTING SWOT ANALYSIS
T
Below is a portion of a report on a SWOT Analysis conducted
for the Coffee Clusters in Maragusan, Compostela Valley. The
O report shows the strengths, weaknesses, opportunities and
threats inside and outside of the enterprise. These served as
O bases in determining marketing strategies and the
development interventions.

L This sample report can serve as guide in conducting SWOT
Analysis

SWOT Analysis
K Coffee Cluster
Maragusan, Compostela Valley
I
Objective: Grade 1 Green Coffee Beans sold directly to
Nestle Philippines, Inc., Davao City Buying Station
T
Strengths

• Maragusan used to be a major coffee-producing area
in Southern Mindanao and farmers have been
growing coffee for several decades
• Coffee trees grow well in the municipality due to its
high elevation and cool climate
• Absence of typhoon
• Farmers are predominantly self-financed, they can
decide on their product independently because they
are not tied up with the traders

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Weaknesses

• Coffee is a seasonal crop- farmers neglect their coffee
trees and tend to it only when they are about to bear
fruits
• Poor quality as farmers seldom practice selective
harvesting of berries thus producing low-quality beans
• Coffee trees are old- most of them are more than 10
years and fruiting has started to decline
• Difficulty in drying beans due to high rainfall especially
during months of coffee harvesting
• Lack of drying facilities T
• Minimal agricultural extension services that can inform
the farmers on the proper management, harvesting
and processing of coffee
O

Opportunities O
Domestic consumption and local demand for coffee is
L
•
constantly increasing thus prompting the major instant
coffee producers to import from Vietnam & Indonesia
• There is an increasing demand for brewed coffee
which is spurred by the growing specialty coffee
shops and processors
• Farmers can be taught to harvest their berries K
selectively to improve the quality of their product and
thus fetching higher prices from their buyers, and to I
rejuvenate their ageing coffee trees
Opportunity for the farmers to plant the higher value
T
•
variety of coffee (Arabica) due to its high elevation
requirement
• The biggest coffee buyer in the Philippines is
providing free training on coffee production and
processing and has a multitude of coffee buying
stations nationwide
• There is a development project (CRS- assisted in
partnership with Kasilak Development Foundation,
Inc.) that currently assists the farmers in conservation
farming by way of proper land use.

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Threats

• Coffee farmers have begun to convert their coffee
areas into short-term crops such as corn,
rootcrops and vegetables to finance their daily
needs
• The recent price slump (early 2000s) of the global
coffee prices has discouraged traditional coffee
farmers and forced them to look for other
profitable crops.
Because it is the second most traded commodity
T •
in the world, coffee prices are subject to sudden
and dramatic price fluctuations in a short period of
O time
• Coffee trading in the municipality has been
handled by a handful of traders which have been
O buying ‘all-in’ at one price regardless of quality
and moisture content- which de-emphasizes the
L need for better quality

Marketing Strategies

1. Introduce and emphasize the need for value-adding
K activities such as selective harvesting, sorting and proper
drying to the farmers
2. Sell to Nestle through its Coffee Buying Station to earn
I bigger margins for the farmers.
3. Identify other buyers near the Nestle Coffee Buying
T Station which can absorb the coffee beans which may be
rejected
4. Identify other higher-value markets which may be
interested in procuring good quality beans directly from
the farmers

Suggested Development Interventions

1. Introduce the clustering strategy in marketing so that the
farmers can acquire capability to meet the requirements
of the market for quality deliveries

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2. Organize farmers into clusters so that they can be
grouped effectively to consolidate product volume and to
immediately address market feedback.

3. Extend trainings and exposure related to marketing.

4. Work on the quality management program starting at the
field and up to post-harvest, with the Agri-extension
component. Avail of the free training provided by Nestle
to enhance the cultural management and post-harvest
practices of the farmers;

5. Provide assistance in market opportunity identification, T
business planning and in the actual run of the first
marketing moves. O
6. Install basic operating systems (i.e. recordings, financial
management, delivery monitoring, etc). O

7. Provide assistance in market linkage to both the L
wholesalers and the processors market.

8. Extend business coaching especially in the first marketing
activities so that critical gaps are immediately addressed
and the marketing project can take off. K

I

T

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Step 4. Cluster Formation

Cluster Formation


Through competent facilitation, the Facilitator with the Working
Group can:

1. Present the findings of the PSA and Market Chain
Study;
2. Provide marketing basics and orientation on the
clustering method of business organizing to the
farmers;

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3. Provide farmers with informed choices by discussing
the benefits of clustering as a business group;
4. Facilitate the formation of agroenterprise clusters
and leader identification, as well as the cluster basic
agreements.

4.2 INTRODUCTION

Clustering is a general term that refers to the goal-oriented
cooperation of stakeholders in an industry. In 1999, the
government through the Department of Trade and Industry
(DTI) introduced industry clustering as a development
strategy to build industries at the sub-regional and regional
levels (e.g. food production industry in the province of
Bukidnon, fisheries and eco-tourism in the Panguil Bay area in
Region X). This strategy was conceived as a response to the
challenge of competition resulting from globalization that
allowed the open movement of products across geographical
boundaries.

Four years after, the vegetable industry association in Region
X called the Northern Mindanao Vegetable Producers
Association Inc. (NorminVeggies) adopted the clustering
strategy focusing on the cooperation among the small and
medium scale producers for a strategic move towards high
value markets like supermarkets and fastfoods. Thus,
NorminVeggies called its vegetable clusters as marketing
clusters. In this endeavor, NorminVeggies received
competence enhancing support from its partners: the DA, DTI
and the GEM-USAID.

In 2005, CRS-Philippines studied the NorminVeggies
experience on clustering. Its lessons on market and industry
moves were valuable but CRS project implementors saw the
importance to undertake the basic work first. This is the
adequate preparation of farmers so they will be ready to
engage the market in the first place. This has not been easy
given the farmers’ challenges: poor productivity, infrastructure

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gaps, poor logistical capabilities, a lack of understanding on
how markets work, fragmented locations and farming
activities. All these problems impede on the farmers’ ability to
effectively participate in the market and gain from the
clustering method of market organizing.

In undertaking the SFMP, CRS-Philippines tried out innovative
development interventions guided by the NorminVeggies
experience and by the informational materials drawn from the
CRS-SEAPRO and CIAT Learning Alliance. It achieved a
promising process in farmers organizing appropriate to their
circumstances for market preparedness and effective market
participation. And it called the farmer clusters formed as
agroenterprise clusters.

4.3 AGROENTERPRISE CLUSTERING

1. The Starting Point: Motivating Farmers for Collective
Action

Organizing farmers for collective marketing is a decision that
should result from a need felt by farmers to work together for a
common market. It should not be imposed on them. The
Facilitator’s task is to organize farmers into clusters and
empower them to carry out collective marketing, not to be the
one to undertake the marketing for them. The first step
towards this process is for them to understand the benefits of
working together in a joint marketing enterprise.

Participatory involvement through a consultation attended by
farmers producing the selected products is conducted. In the
consultation, the PSA and the market chain study results are
presented to them by the WG, highlighting the analysis and
options for improvements that bring income increase.

Discussion follows wherein the Facilitator points out how it is
not possible to take advantage of and benefit from the market

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opportunities if the farmers are not organized, and to explain
how the group needs to organize itself to carry out whatever
plan it will come up with.

This discussion sets the stage to introduce the approach of
organizing agroenterprise clusters that will be the vehicle of
farmers to strengthen their position in the market chain and
gainfully participate in marketing.

2. What is Clustering?

Farmers often help one another be it in farm activities like
planting and harvesting, or in the exchange of information
about how best to grow their crops and who their buyers are,
and also in social activities like the celebration of a feast day.
These are good starting points of cooperation but they need to
be carried further to bring them the advantages in the
markets.

The type of cooperation where farmers are organized into
small groups or clusters and actually consolidate their
products, coordinated with a common plan, and directed at the
agreed market(s) is what is referred to as agroenterprise
clustering.

An agroenterprise cluster is a small group of individual
farmers who, under a shared agroenterprise plan, commit to
work together for collective marketing.

This definition presupposes that the farmers in a cluster bring
not just their person into the group but also their products
because in a cluster, they are formed as a product supply unit
for an identified market(s). And they come together to
actualize their business potentials through collective action.

A cluster may come from a sitio (sub-village), barangay
(village), or municipality. At these levels, the clusters can
seek interventions in the local economy for problems and
bottlenecks in their production and marketing activities. When

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clusters join for linkage at the municipal or even provincial
level, they can impact not only on temporary or village based
agroenterprise related issues but also on policies and
programs that will have long term and encompassing benefits
in the environment where clusters undertake their business.

4. Types of Agroenterprise Clusters

One product cluster

As the name implies, this type of cluster commits to the
joint marketing of one product. An example is the Coffee
Cluster of Impasugong in Bukidnon.

Diversified product cluster

This type of agroenterprise cluster handles the marketing
of two or more commodities produced by the cluster
members and combined for the needs of buyers. One
good example is the Diversified Vegetable Cluster of
Maragusan, Compostela Valley that is a preferred supplier
of the assorted vegetable needs of a supermarket.

5. Cluster Size

Based on experience, successful collective marketing is
generally carried out by a cluster of five (5) to 15
members. For the collective marketing to succeed, all the
farmers should meet regularly to discuss their problems
and plan for the future. The bigger a group is in a
meeting, the more difficult it is to ensure that everyone’s
voice is heard.

The advantage of small groups is that the members can
be gathered more easily, and they can get to know the
group members well. It is recommended therefore that in
most cases, the membership of a cluster is kept at below
20.

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Farmers need to be able to talk regularly with each other
and to establish the essential trusting environment among
cluster members that have a big bearing on whether they
will also entrust their products into the joint marketing. In
the case of 30 farmers in a barangay for example who
want to form a cluster, it is recommended that the 30
farmers will be organized into two (2) clusters.

6. Features of an Agroenterprise Cluster

• A cluster can be composed of 5-15 members from the
same sitio or barangay.
• The cluster is product based and is a product supply
unit.
• A cluster is headed by a cluster leader. The cluster
can opt to choose also an assistant cluster leader, a
secretary and a treasurer.
• The cluster is guided by an agroenterprise plan with
each cluster member following common product
quality management procedures.
• The cluster adheres to the practice of market
facilitation in the marketing of the products so the
cluster members continue to own their products up to
the buyer’s end.
• There is strong emphasis for the core values of
sharing, discipline and joint responsibility to
consolidate the quality and quantity as negotiated with
the market
• A cluster may start as an informal organization and
later establish its formal structure as a business entity
such as a cooperative; or it may exist within a
cooperative or association as special structures for
product consolidation and marketing.

Figure 16 shows the basic structure of a group of clusters
operating as a small network in a barangay.

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Buyers

Cluster Advisory
Council of Group
Cluster Leaders (NGO/CRS/
Government)

Cluster Cluster Cluster Cluster
Leader Leader Leader Leader

Cluster Cluster Cluster Cluster
Members Members Members Members

Figure 16. Basic structure of a group of clusters.

6. Scope of Agroenterprise Cluster Agreements

On the minimum, cluster members agree to help one another
to:

1. Consolidate a particular product volume;
2. Attain agreed quality;
3. Deliver as promised or scheduled;
4. Follow the agreed product operational flow (from farm
to consolidation point and labeling for traceability of
supply source); and
5. Plan and implement group agreements such as regular
meetings, the payment of facilitation fees, particularly
management fee and marketing fee, and the
mobilization of savings

The above agreements are usually verbal when the clusters
are just new and they are still going through trial marketing
(refer to Step 6). But it is recommended that agreements be
written when the clusters undertake commercialization
operations (refer to Step 7).

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7. Clustering – Not for All Farmers

The Facilitator has to be prepared that there will be
farmers who will decide not to take part at all in the
clusters for a number of reasons:

• They are satisfied with their own local markets
such as a roadside market or the barangay market
day (also called tabo) giving them satisfactory
prices; or they have good relations with a trader.
• They are not comfortable working in a group.
• They are physically isolated that makes collective
marketing activity difficult to establish.
• Their production is just for basic needs that they
may not yet have surplus for marketing and other
types of development assistance are needed.

8. The Concept of Market Facilitation by the Cluster

In marketing through the clusters, a key concept is market
facilitation. This means that the cluster only acts as the
“bridge” to connect the farmers to the market as well as to
link them to the business service providers like the
truckers, package suppliers, etc. There is no “trader”
between the farmers and the buyers to whom the
ownership of the product changes hands.

The farmers in a cluster own the product up to the buyer’s
end and so they get the price offered by the buyer. With
the ownership of the product is also the corresponding
accountability for the product in terms of quantity, quality
and delivery reliability.

The mechanism to trace product supply to a farmer, and
accordingly impose discipline in following the cluster
agreement on product quality and delivery reliability, is
product labeling by cluster and by cluster member.

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As product owners, the farmers in a cluster, through
representation by the cluster leaders, interact with the
buyers face-to-face. The commitment to supply therefore
is given to the buyer by the clusters themselves, not the
Facilitator. From experience, this practice has made the
clusters directly responsible for problems that they
experience, which is expected in a fluid market
environment; and not to blame the Facilitator when a
problematic situation arises.

To operate a collective marketing successfully, the cluster
needs people devoting their time and efforts in the
activities such as the cluster leaders, the product
consolidators who may be assigned, and others. Their
expenses have to be compensated, hence the farmers
while they get the buyer’s price must also shoulder the
market facilitation cost by paying service fees based on
the products that they have marketed through the cluster.

9. Cluster Leadership and Management

Successful clusters need the basic skills of group
management and decision making to make them
functional. At the minimum, the cluster must have a
common goal for collective marketing. This is the reason
why clusters are formed from farmers who are ready to
bring in their products because this is the starting point of
a goal that is simple and that can be broken down into
responsibility or accountability each one in the cluster can
take up.

The cluster must use democratic methods to make
decisions in order to give every member a feeling of full
participation and ownership in the cluster’s marketing
venture. No one should be allowed to dominate the
cluster’s decision.

The focal person in the group management is the cluster
leader. The type of leadership required in an

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agroenterprise cluster needs to be elaborated. The cluster
leader need not be the biggest producer in the cluster.
What is important is he/she has the personality and the
skills to mobilize the members of the cluster. He/she is
tasked to convene and facilitate cluster meetings, and to
coordinate activities related to collective marketing.

The cluster may recognize one or more sub-leaders to
share the responsibilities. The cluster leader may take
responsibility for market related activities while a sub-
leader can handle the production related concerns. A
secretary writes down meeting proceedings and
agreements, while a treasurer ensures that a record and
report of the marketing transactions are made.

10. Communication – The Importance of Regular Cluster
Meetings

This Guidebook stresses the importance of holding regular
cluster meetings (i.e. once a week during trial marketing,
and every month subsequently). The meeting is the
venue to assess performance versus targets in the plan
made. Only by regularly reviewing activities, identifying
good practices and analyzing the bad ones can the cluster
develop the systems that work best.

With the opportunity that a meeting provides for each one
to be informed and involved, trust is built. This is of
utmost importance considering that marketing is a difficult
process, and not all transactions will turn out to be a
success. This high level of trust ensures that members
will persevere and work out the problems together.

At the start, the Facilitator convenes and facilitates the
cluster meetings until the cluster leaders are chosen and
they are phased in with guidance, and also when the
meeting schedules and basic cluster agreements are
tackled.

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The cluster meetings actually serve to ensure that the
development interventions are carried out in a
participatory manner; and that the farmers are not just
passive clients but are active participants of the whole
process, actually learning the business by doing it.

11. Collaboration of Clusters and Linkages

The farmers must be able to produce enough product
quantity at the right quality and time to interest the buyers
in the first place. This is the basis for the clustering
approach that brings together individual farmers to jointly
market their products.

More advantages of collective marketing are realized
when the clusters form a network among themselves and
marketing a significant quantity of products. For example,
barangay-based clusters working together as a municipal
level network can fill up a truckload of product for a bigger
market. The higher the level of networking, as in the case
of municipal level clusters working together, the more is
the bargaining influence towards higher value markets.

The cluster leaders acting together will become the prime
movers of the enterprise. Later when the clusters
transform into a formal organization like a cooperative,
representative leadership can be practiced with the cluster
leaders taking up the position of the board. Refer to Step
8 for cluster strengthening.

Clusters are more likely to succeed if they not only
cooperate among themselves but are also linked to other
organizations. These include national government
agencies, local government units, financing institutions,
transport groups, farm input suppliers, school/academe,
other farmer organizations and industry association. It
may take sometime to build these linkages but they
should be sought because the clusters will need many
kinds of support.

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Serenity Coffee Corp.

Coffee Task
Force

Impasugong, Bukidnon Maragusan, Davao City
Clusters ComVal Clusters Clusters

Council of Council of Council of
Leaders Leaders Leaders

Cluster Cluster Cluster
Cluster Cluster
Leader Leader Leaders Leaders
Leader

Cluster Cluster Cluster Cluster Cluster
Members Members Members Members Members

Figure 17. Structure of Clusters covering 3 municipalities in 3
provinces collaborating to supply one market.

Which groups to connect to? The Facilitator can assist in
the linkage building process by analyzing the needs of the
cluster. The most important connections needed by the
clusters are with the business sector (i.e. other suppliers
like them who have bigger production scale and have
influence in the market, and the buyers).

12. Cluster Strengthening

It is recognized that in working with farmers, there is a
maturation period required wherein they are gradually
trained and primed for agroenterprise operations. The
role of the Facilitator is to assist this maturation process
through training, coaching, facilitation of cluster activities
and group development, leadership development,
installation of business policies and system.

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Cluster development takes time. It is an investment in
group learning and doing. Cluster strengthening will be
elaborated in Step 8.

4.4 FACILITATION GUIDE FOR AGROENTERPRISE
CLUSTER FORMATION

1. Conduct a consultation in the barangay, inviting the
farmers growing the products selected for
agroenterprise development. This is done right after
the PSA and the market chain study, the WG has
analyzed the results and is ready to present them to
the farmers for validation in the consultation.

Emphasize the following information during the
consultation:

• Market opportunities as revealed in the market
chain study will remain beyond the reach of
farmers if they are not organized and cannot
consolidate a significant product quantity for the
market.
• Agroenterprise clustering is the tried strategy to
transform the farmers acting independently and
with fragmented farm areas into valued suppliers
with consolidated products.
• Important information for the farmers are:
definition of a cluster, types of cluster, structure,
key features, leadership and management,
advantages in forming clusters, networking of
clusters, and cluster strengthening, benefit of
clustering.
• Membership in the cluster will require farmers to
commit a certain quantity of their products into
the cluster for collective marketing. Also, the
cluster agreements bind the farmers in a cluster.

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2. At this stage, it is helpful if experiences and lessons
from organized clusters can be shared. (It is best
handled if the sharing comes directly from a local,
promising/successful agroenterprise cluster). Allow
the participants to freely interact with the resource
persons and with each other. And give time for
reflection. Then ask those who are interested in
clustering to group together.

3. Proceed to the formation of the agroenterprise
cluster/s.

• Gather expressions of interest to work together
for common marketing
• Facilitate listing of members and election of
cluster leader

• A participatory tool to facilitate cluster formation
is the cluster map that communicates the
components of the cluster (adaptation of the DTI
Industry Cluster Map). It identifies the farmers
and their planned product commitment, the
agreed markets, the supporting businesses on
which the farmers rely on, and the strategic
partnerships from the public and private sector
i.e. NGO, national government, and others.

(Refer to Facilitator’s Tool Kit No. 4 for an example of
a cluster map).

Use of meta cards or strips is recommended so that
during the process, if a farmer changes his/her mind in
joining the cluster, he/she can easily remove the card.
If a farmer wishes to add information, additional meta
cards can be pasted.

• Cluster members will then set a schedule for
enterprise planning. As an assignment, the
cluster members are ask to review their farm

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• activities and bring with them the information on
the quantity of the product they can commit into
the joint marketing and the schedule of delivery.
A tool to use for this information is the harvest
calendar, which the Facilitator introduces to the
newly-elected cluster leader and members. The
calendar contains an estimate of the total
production capacity of the cluster members.

a harvest and delivery calendar).

4. Before the next meeting of the newly formed clusters
for the clusters’ enterprise planning, it is recommended
that the chosen cluster leaders can be introduced to
the local officials/leaders. Each cluster leader will also
reach out to farmers who are interested but were
absent during the cluster orientation and formation.
They are advised to give time for farmers who joined
the consultation but were not immediately prepared to
join with the others and commit their products for the
joint marketing.

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T
T

O

O

L
Figure 18. Cluster Map of Saranga Coffee Farmers.

K

I

T
O

Figure 19. Coffee harvest and product delivery calendar of Saranga
Cluster.

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Step 5. Cluster Plan Formulation

Cluster Plan Formulation


With the help of the Facilitator and the Cluster Advisory Group
(CAG), Step 5 aims to enable the newly formed clusters to:

1. Appreciate the value of understanding markets in
making an agroenterprise plan;
2. Utilize the findings of the PSA (Step 2) and MCS
(Step 3) and validate the SWOT analysis, objective

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and strategy in agroenterprise development done by
the WG;
3. Translate the strategy into an agroenterprise plan
that will guide the clusters when they set up the
selected agroenterprise; and
4. Formulate an operational plan for the product
deliveries in the test marketing.

5.2 INTRODUCTION

An agroenterprise plan is a “road map” that guides the farmers
market their products, increase income and attain sustainable
livelihood. As a plan, it helps prepare the clusters before they
make that “leap,” their first product supply to the buyer.

A good agroenterprise plan depends on the following:

• The clusters’ understanding of how markets work and
on an informed choice on how they can possibly
participate in various market chains that offer them
opportunities for income

• Good data gathering in Steps 2 and 3 (i.e. PSA and
MCS) that provides the clusters with essential
information to analyze their strengths, weakness,
opportunities, threats, and which guides them towards
a good strategy to be able to match the market
opportunities with their product supply capacity.

Objective setting is an important activity in this Step. It is a
decision to undertake a specific agroenterprise in a selected
market chain. An example is the objective of the coffee
clusters in the municipality of Maragusan, Compostela to be
able to supply coffee beans to a chosen market chain which
will bring their product to the buyer, Nestle Philippines, Inc.

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5.3 FRAMEWORK OF AGROENTERPRISE
DEVELOPMENT

The development of an agroenterprise follows a basic
framework of identification and planning, implementation, and
performance evaluation (Figure 19).

The planning component involves stages of work as
discussed in Steps 1 to 4, the results of which are used in the
design of the agroenterprise plan (Step 5).

The implementation component operationalizes the
agroenterprise plan through the test marketing (Step 6) and
the scaling up of marketing operations (Step 7).

The third component, enterprise performance evaluation,
provides the feed backing that serves as the basis for
continuous improvements and innovations necessary for the
success of the agroenterprise.

Agroenterprise Agroenterprise
identification & Agroenterprise performance
planning implementation
evaluation

Feedback

THE AGROENTERPRISE DEVELOPMENT FRAMEWORK

Figure 20. The framework of Agroenterprise Development.

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5.4 THE AGROENTERPRISE PLAN

An agroenterprise plan has four basic components, namely:
the market plan, the supply plan, the management plan,
and the financial plan. The agroenterprise plan puts
substance into a desired objective through the integration of
the four component plans.

A framework containing basic information per component is
the guide to make an agroenterprise plan. These sets of
information are organized like a jigsaw puzzle. The absence of
any information will render the puzzle incomplete and may
make it hard for the player or players to appreciate and
articulate the picture in its completeness.

Below is a general guide for agroenterprise planning:

GUIDE FOR AGROENTERPRISE PLAN
• Buyer
Market Plan • Product
• Quality specifications
• Price
• Sales target
• Payment terms
• Promotion
• Suppliers
Supply Plan • Estimated supply volume
• Product Quality management
• Operational flow
• Materials/facilities needed
• Management set up/arrangement
Management Plan • Compensation
• Policies and procedures
• Financial requirements
Financial Plan • Estimated cost and returns

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A business begins and ends with a market, and so the first
plan to make is the market plan.

The MCS (Step 3) provides the basis for choosing a buyer(s)
for the market plan as well as the cost and returns projection
in the financial plan. The PSA (Step 2) with information on the
farmers, the harvest calendar that the clusters will make after
cluster formation (Step 4) supports the information needs to
draw up a product supply plan. The cluster formation with its
network and linkages (Step 4) can be a basis for the
management set-up.

Tools to Support the Agroenterprise Plan

These are the basic tools that guide each cluster member
effectively support the agroenterprise plan and its
implementation.

1. Cluster Map – To show the farmers who joined the
cluster with corresponding product volume
commitment, the buyer(s) agreed by the cluster, the
supporting businesses in their marketing activities and
the alliances (LGUs, NGOs, resource agencies, and
others.

Usually, several clusters help one another to pool a
considerable quantity of products for the market. A
cluster map can also be drawn for a network of
clusters.

a cluster map.)

2. Cluster Agreement - To guide the members on the
agreement that binds them in the supply of their
product and the performance of their functions. Its
form can be agreed upon by the cluster members.

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Basic content of a Cluster Agreement:

• Committed product volume and delivery
schedule
• Product quality
• Contingency supply (in case of deficiency)
• Operational flow (from farm to consolidation
point and labeling)
• Management fee
• Marketing fee
• Meetings

a Cluster Agreement form.)

3. Planting Calendar or Harvest Calendar - To guide
the cluster member in scheduling the planting activity
in respect to the target time to harvest and the
committed product quantity to be delivered to the
buyer.

a cluster harvest calendar.)

If several clusters work together to supply a particular
market with a consolidated product volume, a
summary of commitment per cluster is made to
guide all the clusters to aggregate the supply for the
buyer.

a cluster commitment form.)

4. Product Quality Management Plan (PQMP) – This is
agreed upon by the cluster members and distributed to
them as guide, together with the Operational Plan. In
the PQMP, the “must do” work in harvest and
postharvest to ensure the homogeneous quality from
the cluster. (See Figure 20 for an example of a
PQMP).

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Post-harvest Quality Management Plan

MARKET Consolidation area,
transport

TRANSPORT FOR
CONSOLIDATION
Sort defects from good
beans

SORTING

De-pulp, solar dryer,
milling facility
DRYING/
MILLING

HARVESTING Selective harvesting

CULTURAL
MANAGEMENT Pruning, weeding,
rejuvenation

Road Communications Financing
system

Figure 21. Illustration of a sample PQMP that each cluster member
must follow to ensure quality of produce.

5.5 OPERATIONAL PLANNING AND TASKING

After preparing the agroenterprise plan, the cluster proceeds
to undertake two more activities: (a) make an operational
plan, and (b) list the critical tasks leading to the test marketing.

An operational plan contains the logical moves and the tight
coordination needed as the product flows out from the farms
to the intended buyers. This product flow process shown in a
diagram is what guides each cluster member of the sequence
of activities and the things to prepare (e.g. packaging
materials, product labels, etc) in the joint marketing. The

95


following basic accompanying documentation will be needed
for tracking the product flows:

• Farm labels on packaging
• Cluster receiving form
• Buyer receiving form

(Refer to Facilitator’s Tool Kit No. 5 for a sample of an
operational plan.)

The list of the Critical Tasks Leading to the Test Marketing
spells out the tasks per components that are needed to be
done before the actual product delivery. An assignment of
tasks is done together with the timeframe. Examples of these
critical tasks are: (a) Confirmation of delivery to the buyers,
(b) Negotiation and confirmation with the transport service
provider, (c) Checking of shipping schedules and bookings,
and (d) Procurement of packaging materials.

An example of a Matrix for Critical Tasks Leading to Test
Marketing

Respon- Timeframe/
Component Task Remarks
sible Date
Quality & Cluster March 10
Quality Control
moisture Leader
check of
beans
Consoli- Cluster March 12
Consolidation
dation of Leaders
coffee
beans
Delivery Facilitator March 13
Marketing
to Nestle & Cluster
Leaders

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5.6 CONTINGENCY DECISIONS

After the plans with the tools are made, it is important to
emphasize to the clusters that plans at best can only
anticipate results. Marketing is a dynamic activity and caution
must be given to the cluster that no matter how much planning
is done to foresee activities ahead; allowance must be
provided for variances that can happen.

In the implementation of the plan, certain unexpected
outcomes with the challenges can arise which call for quick
decisions from their cluster leaders. Clusters must then
choose leaders that they highly trust so that their leaders,
together with the Facilitator or whoever is tasked to oversee
the whole marketing operations, can confidently make these
urgent “contingency” decisions that in many cases can spell
the success or failure of the marketing moves.

5.7 MONITORING AND ASSESSMENT

The test deliveries are a way to try out if the plans made are
appropriate or if they need adjustments. During the test
marketing, the performance is monitored right after each
product delivery so that the problems are immediately
corrected before the next delivery. To assist the clusters in the
monitoring is a delivery monitoring form.

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5.8 FACILITATION GUIDE FOR AGROENTERPRISE
PLANNING

1. Undertake several preliminary activities.

• Provide inputs on Marketing Basics. (Refer to
Facilitator’s Tool Kit No. 1, in Step 1.)

• Present the results of PSA and MCS. (Refer to
Facilitator’s Tool Kit No. 3, in Step 3, for the
format of the report.)

• Validate the result of SWOT analysis in the
same report. Get consensus from among the
cluster members.

• Provide input on the options in the same report.

• Facilitate objective setting and strategy
formulation by the cluster

2. Handle an interactive process of agroenterprise
planning.

• Begin with the following guide statement that
helps simplify understanding of agroenterprise
planning.

“An agroenterprise plan can be better understood
and appreciated by way of the following statement,
which when answered, actually constitute a simple
and doable agroenterprise plan.”

• Related to the Market: “We plan to sell 10 tons
of coffee beans to Nestle".

• Related to Supply: “We, 4 clusters with 40
members, will produce 10 tons of coffee beans
in 5 months (October to March)”.

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• Related to Management: “We shall organize
this way: Cluster Leaders coordinated by the
Marketing Facilitator and assisted by local
consolidators”.

• Related to Finance: “We target to earn a gross
income of Php 200,000 for distribution to cost
payment including management and marketing
fees and marketing income rebates to cluster
members”.

• Then, deepen this by presenting the framework
containing the essential information for each
component in the agroenterprise plan. Draw
out answers from the clusters by posing
questions for discussion per component
(marketing, production/supply, management
and finance). Use the framework as guide in
asking the questions.

• After the general planning of the enterprise,
facilitate the compilation by the cluster of the
basic tools that guide each member in the
delivery of his/her product and bind them in the
cluster activities, particularly in the preparation
of (a) cluster map, (b) cluster agreements, (c)
farm plan and budget, (d) planting or harvest
calendar, and (e) product quality management
plan.

(Refer to Facilitator’s Took Kit No. 5 for a
sample of a cluster agroenterprise plan with the
supporting tools.)

3. Discuss the importance of an operational plan for
the product deliveries. Guide the clusters to
formulate an operational plan detailing the
sequence of activities from the time of harvest until
the product reaches the intended buyer.

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(Refer to Facilitator’s Took Kit No. 5 for a sample of
an operational plan.)

4. Guide the clusters to fill up a checklist of critical
activities for the test market deliveries. It
enumerates the work per component (i.e.
marketing, production, management and finance)
that has to be done, together with the person
responsible and the timeframe.

(Refer to Facilitator’s Took Kit No. 5 for the matrix
to be filled up for the critical work to be done before
test delivery.)

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AGROENTERPRISE PLANNING
A. PLANNING WITH SWOT ANALYSIS

SWOT Analysis should be conducted only when cluster and
agroenterprise objectives are clearly stated. This is to enable
the cluster to make an effective analysis and identify
interventions or strategies in carrying out the plan.
T
T The cluster members are assisted by the other members of
the CAG in conducting a SWOT Analysis. (Refer to Tool Kit
No. 3 for a sample of the results of a SWOT Analysis,
O including the suggested interventions.)

O After conducting a SWOT Analysis, the cluster then proceeds
with the formulation of its agroenterprise plan with the
assistance of the CAG. Below is a sample of an AE Plan.
L

AGROENTERPRISE PLAN
K Coffee Cluster
Plan for the Third Delivery (February 24, 2006)
I
Basic PARTICULARS
T Element/
Information
O
A. Marketing Plan
• Nestle Philippines, Inc. and other coffee buyers
1. Target • Test deliveries for the first month then regular
Market deliveries in the succeeding months until the end of
the coffee season
• Product form – Green Coffee Beans
2. Product • Quality specs – moisture content (MC) not more
than 12%, sorted coffee beans with minimal defects

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and can be accepted either as Grade 1, Grade 2 or
Grade 3 by the Buying Station
• Packaging – clean synthetic sacks labeled with the
name of the farmer and cluster
• In case of rejects – deliver to other coffee buyers
identified in the market survey
• The staff of Nestle will gather samples from all the
sacks and conduct Quality Control inspection using
Cup Tasting, Triage and Moisture Content Analysis
• Target of 3,000kgs to be consolidated
3. Target Sales • Price per unit –Based on the prevailing Nestle T
Coffee Buying Price at the time the delivery arrives
at the Buying Station
• Projected sales – Based on price for the week O
(Refer to attached financial format for computation)
O
B. Production/Supply Plan
5 clusters (comprised of 28 farmers from 5
L
•
1. Supply barangays: Mahayahay, Parasanon, Saranga,
Source Magcagong & Tupas)
• Total committed volume of the 5 clusters: 2,590kgs
One week before the scheduled delivery, the
K
•
Cluster Leaders finalize their plan based on actual
capacity to supply. Those with less harvest than
their commitment shall be supplemented by the
other clusters I
Two weeks before delivery (Last week of February)
2. Operational • Start of harvesting of coffee berries T
Flow • Start of pulping & drying T
(from the
farm to the Five days before delivery (March 8, 2006)
buyer) • Start of milling of dried cherries
• Volume check by the Cluster Leaders
• Start of bean sorting/quality improvement
• Contact truck

Three days before delivery (March 10, 2006)
• Check if the coffee beans are dry
• Quality check by the Cluster Leaders

One day before delivery (March 12, 2006)
• Storage of coffee beans at the Kasilak Office

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• Loading in the afternoon (assisted by Cluster
representatives and Marketing Officer)
Delivery Day (March 13, 2006)
• Departure of truck at 3 o`clock in the morning
3. Materials, • Materials – synthetic sacks
Facilities & • Facilities/Equipment – truck with 5 metric tons
Equipment capacity
Needed
T
C. Management Plan
O • Farmers are organized into clusters. The cluster is
1. Organiza- a supply unit.
O tional & • Each cluster has a cluster head and an assistant
Manage- cluster head.
ment Set Up • Decisions are done with the 9 clusters heads
L constituting the leadership of the group guided by
the Marketing Officer of the implementing NGO.
• Cluster Leaders are responsible for checking their
members if their coffee is ready and to check the
K quality of their coffee
• Since the Tupas Cluster has no prior experience in
test delivery, the Cluster Leader who has
participated in the first two deliveries will
accompany the truck

T • Cluster leaders are responsible for supply
T 2. Operations consolidation, and product flow as well as the
quality management on field.
• Cluster leaders shall be supported by the project
staff
• The Cluster Leaders will be assisted by the
3. Finance & Marketing Officer in dividing the expenses as well
Admin as the net proceeds from the sales

• Policies and procedures – to be finalized after the
4. Recording & one month trial
Controls • Forms to be used:
• Estimated harvest for the whole coffee season
• Delivery Monitoring Form

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D. Financial Plan

Target volume (in kg) 3,000
Price offered by Nestle (PhP/kg) 46.00
Expected Total Gross (in PhP) 40,500.00
Operating costs (in PhP):
Trucking 6,000.00
Milling 7,500.00
Labor- Hauling 288.00
Labor-Drying 500.00
Wages (2 representatives) 600.00 T
Meals (4 persons including driver) 600.00
Miscellaneous 200.00
Total expenses 15,688.00 O
Gross Profit (in PhP) 24,812.00
O

B. TOOLS FOR ENSURING SUCCESSFUL PLAN L

In ensuring a successful implementation of an AE Plan, the
following tools can be used to guide the cluster members:
K
1. Cluster Map
2. Cluster Agreement I
3. Planting Calendar or Harvest Calendar (per cluster
and for all the clusters)
4. Product Quality Management Plan
T
T

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Cluster Map

Figure 22 shows the different stakeholders and their
responsibilities in the agroenterprise through a cluster map.

MARKETS Nestle JM Agro

Maragusan Coffee

T Clusters
Saranga Magcagong Tupas Mahayahay Parasanon

O A.Jacob
D. Regidor
E. Garcia
J. Dagundon
L. Cavanes
B. Silanova
To be
finalized
To be
finalized
C. Zamora D.Arriesgado D. Dumalagan by the by the

O
D. Haguhay R. Navarro R. Sambinigan Cluster Cluster
R. delaPena C. Nopal R. Mordan Leader Leader
J. Ventura G. Lebarios A. Dayo
R.Tonjoc A. Tude

L
D. Ducog L. Patnugot
F. Taunes L. Jucoy
J. Taran
R. Saromines
S. Lagura

K
SUPPORTING CMJ Trading MAVADECO MAVADECO
BUSINESS (Sacks) (Coffee Mill) (Trucking Services)

I
LGU Maragusan CRS & Kasilak MAO

T
PARTNERS (Consolidation (FMR, Trainings, (Training &
Area, Infra Organizing, Mgt Extension

T
support Support Services)

Figure 22. Example of a Cluster Map.

Agreement

Below is a basic form of Cluster Agreement used to document
the commitment of each member to deliver a specific volume
or quantity of a product in a specific frequency.

105


Cluster Agreement

I, (farmer’s name), of legal age and a resident of (address), am
willing to become part of the (cluster’s name) Cluster and commit
to:

1. Contribute (indicate volume) kilos/pieces of (product) to the
cluster every (indicate frequency);
2. Follow the production and marketing protocols of the cluster;
3. Pay the Management Fee (indicate %) and the Marketing
Fee (indicate %) based on Sale Value every delivery; T
4. Attend all the cluster meetings;
5. Provide more products to cover the deficiency of the other
members due to unforeseen reasons; and
O
6. Abide by the decisions and policies set forth by the cluster.
O
I have affixed my signature below as a sign of my commitment to
the cluster.
___________________
L
Member

___________________
Cluster Leader K

I
Operational Plan

A sample Operational Plan diagrammatically presented is T
shown in Figure 23. This supports the narrative operational T
plan in the agroenterprise plan.

1. Preparing Activity Operational Plans

Using the General Operational Plan as reference,
Activity Operational Plans are prepared. An activity
represents a time element before, during, or after
harvest.

106
106


2 weeks before delivery 5 days before delivery

Start of Start of Start of Volume Start of Contact
harvestin pulping & milling of check by quality truck
g of drying dried the improvem
coffee cherries Cluster ent
berries Leaders

Volume
Maragusan Coffee Clusters commitments per
member
Product Flow & Forms Used

Delivery Day 1 day before delivery 3 days before delivery

Storage Check if

T
8:00 AM 3:00 AM Labelling Check
& Loading of coffee quality of the coffee
of sacks beans at beans beans are
Arrival in Departure
into the dry

T
Nestle of truck
trucks Kasilak
Buying Office
Station

O
Delivery List of Farmers & Nestle Quality
Monitoring Form Volume Delivered Control Standard

O Figure 23. Operational Plan of Maragusan Coffee Clusters.

General Operational Plan for the Test Delivery of Coffee Beans
L
Day Activity
• Harvesting pulping, drying & milling of coffee berries
Before
Volume check
K
•
Delivery
• Quality improvement (appearance & moisture content)
Day
• Contact truck
Delivery Truck departs for Davao City at 3:00 am
I
•
Day • Arrives at Nestle Buying Station at 8:00am

T
T Start of milling Verify available
Start of bean
Contact
sorting/quality
of dried berries volume improvement truck

Farmer Farmer Cluster Leaders
members Cluster Leaders members assisted by
Marketing
• Milling Officer
facility

Figure 24. Activity Operational Plan five days before delivery.

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2. Getting the volume capacity and commitment of
each cluster and for all the clusters working
together for a delivery

Cluster Commitment Form
3rd delivery of coffee beans

No. of Commitment
Cluster/Cluster Leader
Members (in kg)
To be finalized by To be verified by the T
Mahayahay / R. Balucos the Cluster Leader
To be finalized by
Cluster Leader
To be verified by the T
Parasanon / A. Rosel the Cluster Leader Cluster Leader
Saranga / A. Jacob 7 800
Tupas / J. Banag 13 620 O
Magcagong / D. Arriesgado 9 1,170
Total 29 2,590 O

Magcagong Coffee Cluster L
Volume Committed (in kilograms)

Name of Member Nov Dec Jan Feb Mar Total
E. Garcia 50 100 200 100 50 500 K
J. Dagundon 20 40 80 40 20 200
D. Arriesgado 10 20 40 20 10 100 I
R. Navarro 5 10 20 10 5 50
C. Nopal 2 4 8 4 2 20 T
G. Lebarios 2 4 8 4 2 20
T
R. Tonjoc 3 6 12 6 3 30
J. D. Ducog 20 40 80 40 20 200
B. F. Taunes 5 10 20 10 5 50
Total 117 234 468 234 117 1,170

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108

Step 6. Test Marketing

Test Marketing

6.1. PROCESS OBJECTIVES

Through the help of the Facilitator and the Cluster Advisory
Group (CAG), Step 6 aims to enable the newly formed
clusters to:

1. Undertake the trial marketing moves;
2. Assess the performance of the trial product deliveries
and come up with contingency plans to address the

109


immediate needs for adjustments using the tools
prepared in Step 5; and
3. Review the clusters’ agroenterprise plan and revise as
needed for the scaling up of trial marketing into the
next step, the commercial marketing operations.

6.2. INTRODUCTION

In this Step, the cluster implements its agroenterprise plan
starting with test marketing undertaken in preparation for a
bigger scale. Included in this Step is Participatory Monitoring
and Evaluation (PME), a cross-cutting component of the 8-
Step process of clustering for AE development.

6.3. PREPARING FOR THE TRIAL DELIVERIES

At least four trial deliveries are usually conducted to enable
the cluster to have a good assessment of its capacity and the
market. The number of trial deliveries to be undertaken
depends much on the cluster’s capacities, resources, and
response of the market.

As indicated in Step 5, a number of preparatory activities
have to be done at least a week before the delivery. The
Facilitator convenes a meeting with the cluster leader and the
CAG to review the status of preparations based on the
checklist prepared in Step 5.

6.4. CONDUCTING AND DOCUMENTING THE
TRIAL DELIVERY

Guided by the general AE and activity operational plans, the
cluster conducts the trial delivery. Documentation of the
activities, outputs and outcomes related to the delivery should
be done as an aid to monitoring and assessment. Photo-
documentation may also be done if the cluster has the

110
110


facilities. During test marketing stage, a member of the CAG
is designated as responsible for the documentation in
preparation for post-delivery assessments.

Good practices:

• The cluster leaders, assisted by the Facilitator, directly
negotiate and enter into agreement with the buyer/s.
• Cluster leader and Facilitator are jointly responsible for
the delivery starting from the consolidation to the
acceptance of the product by the buyer
• Facilitator maintains close coordination/contact with
cluster leaders
• Cluster leaders take turns in accompanying the
deliveries (with the Facilitator) as part of the “learning
by doing” process
• If resources allow, photo-documentation is done and
shared with clusters members
• The minimum forms that support the transfer of
responsibility from the farmer to the cluster leader,
then to the buyer are implemented, in particular,
product label per cluster per grower and the
accompanying receiving forms.
• Right after each delivery and prior to the next one,
financial transactions are reported to the cluster
members and payments due to the members, as well
as the service providers, are completely settled. This
is part of the “learning by doing” process in setting the
standards of accountability and discipline essential to
the success of an agroenterpise.

6.5. EVALUATING THE TRIAL DELIVERY

Immediately after each trial delivery, an assessment is done
to determine whether the cluster has to proceed with the
succeeding deliveries or stop for a while and make some
adjustments or changes. The assessment is done by

111


comparing the outcomes vis-à-vis the plan and using tools
such as the SWOT Analysis (see Step 5).

Monitoring of the trial deliveries is focused more, but not
exclusive, on the market and supply relationship which is
critical in terms of trust and confidence building.

A basic requirement in monitoring is information on product
delivered by the clusters and received by the buyers. To
gather this information, forms are prepared which can be
simple or very detailed depending on the type of product and
the requirements of the buyer. (See Facilitator’s Tool Kit No. 6
for samples of monitoring forms.)

6.6. ASSESSING AGROENTERPRISE
PERFORMANCE

Aside from assessing the performance of each delivery,
assessing or evaluating the overall performance of an
agroenterprise should also be done in order to know whether
business is doing well as planned or otherwise. The cluster
may design its own tools basing on the components of the
enterprise plan, namely: market, supply, management and
finances. See example of plan in Step 5.

As shown in Figure 20, monitoring the activities of an
enterprise for the purpose of assessing its performance
follows the following stages:

1. Reporting

Documentation of activities and the corresponding
costs and gains involved is very critical. Reporting the
results of documentation is equally critical particularly
in respect of accuracy and timeliness.

Reports have to be prepared and submitted
immediately after completion of each delivery to

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112


enable the cluster to compare actual against planned
results.

2. Comparing actual against planned results

Results obtained from monitoring forms are compared
with the relevant components (market, supply,
management, financial) of the enterprise plan.
Differences between actual and planned results of
deliveries indicate how an enterprise is performing.

3. Determining possible adjustments in the plan and
the possibility of preparing a contingency plan

Results may reflect the areas where the enterprise is weak
and/or strong. They may also indicate threats and
opportunities for growth. In short, results of monitoring serve
as guides in making changes in targets and strategies, or in
preparing a contingency plan if there is a need. These must
be agreed upon by the members before translating them into
changes in the agroenterprise plan.

Planned vs.
Periodic Actual
reporting results

ENTERPRISE Adjustments/
PLAN Contingency
Planning

THE PROCESS OF ENTERPRISE PERFORMANCE
MONITORING AND ASSESSMENT

Figure 25. Diagram showing the elements of agroenterpris
implementation.

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4. Revising the enterprise plan/preparing a
contingency plan

The members of the cluster (or the Working Group
during the initial steps) meet to make the necessary
revisions in the plan as identified and agreed upon. If
necessary, a contingency plan may be formulated to
serve as an alternative.

Participatory Monitoring and Evaluation (PME) should be
done regularly in order for the cluster to be able to respond to
problems and opportunities in a prompt and systematic
manner. Until ready with minimum or no assistance at all, the
members should be aided by project staff or the Facilitator.

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114


Facilitator’s Tool Kit No. ___

CONDUCTING AND DOCUMENTING
TRIAL DELIVERIES

A. DOCUMENTING THE TRIAL DELIVERY

Part of the pre-delivery activities is the preparation of the
T
forms that will be used to document the delivery.
O
Below is a sample of a simple Delivery and Receiving Forms
that is used to document the supplier, the quantity and the
acknowledgement of buyer with the remarks. O

Cluster Delivery and Receiving Form L
Cluster:_____________

Name of Member No. of Remarks Other
boxes Comments
1. K
2.
3.
4. I
5.
6.
7. T
8.
9.
10.

Prepared by: Received by:
____________________ __________________
Cluster Leader Truck Driver

Received by: Received by:
______________________ __________________
Partner NGO Finance Staff Market/Port Facilitator

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Below is an example of another delivery form that is used in
documenting the vegetables from the cluster to the market. It
includes quantities, values and sales, and costs and returns.

MARAGUSAN VEGETABLE CLUSTER
DELIVERY MONITORING FORM

Delivery No.:_____ Market: _________________ Date: __________

Total Value Total
Maragusan (PhP) CDO Sales
Vegetable Quantity Price/kg Quantity x Price (PhP)
(PhP) Maragusan (PhP) Quantity x
Price CDO Price

O String Beans (kg)
Bitter Gourd (kg)

O Sweet Pepper (kg)
Chayote (sack)
Eggplant (kg)
Squash (kg)
Tomato (crate)

Sweet Potato (kg)
TOTAL
K
Costs and Returns Amount (PhP)
Sales (Total Quantity x CDO Price)

Cost of Goods (Total Quantity x Maragusan Price)
Gross Income (Sales – Cost of Goods)
Expenses
Trucking
Fuel

Management Fee (__% of Gross Income)
Packaging Materials (sako, crates, twine, etc.)
Other Expenses
Net Income (Gross Income – Total Expenses)
Cost per Kilogram (Total Expenses / Total Quantity)

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116


Below is an example of a more detailed receiving report form
based on the buyer’s requirement for product quality data and
traceability as to origin or source.
Delivery COFFEE GREEN BEANS
No. RECEIVING REPORT Date

Supplier: Address:
No. of Gross Sack weight Net Weight

T
bags Weight (No. of bags x (Gross wt – Variety: Robusta Arabica
0.2) sack wt)

Type : Dry Wet

O
DEFECT BEAN COUNT Coefficient Equivalent

O
Black beans ÷ 5.0

Moldy beans ÷ 5.0

Dried cherry ÷ 5.0

Broken ÷ 15.0 L
Immature ÷ 25.0

Insect-damaged ÷ 35.0

Admixture ÷ 5.0

Foreign matter ÷ 5.0 K
GOOD BEANS ÷ TOTAL DEFECTS

TOTAL BEANS ÷ 8.0
I
Triage: Grade 1 (0-8), Grade 2 (9-12) Moisture: More than 12% - Reject

T
Triage (A / B) Grade Total Amt. (Price/kg x Net wt) Balance (Total amt – Partial payment)

% Moisture Price/kg Farm gate price Expenses (transport, labor, fees)

Partial payment (Farm gate Final Payment (Balance – Expenses)
price x Net wt.)

Remarks Partial payment received by Full payment received by / Date
/ Date

The above forms may be modified to include more information
which the cluster thinks need to be documented also.

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B. MONITORING DELIVERIES

Following is a form for monitoring trial deliveries as used by
the calamansi clusters. It provides for a comparison of the
actual vis-à-vis the planned, and for suggested corrective
measures in case some things went wrong.

Delivery Monitoring Form
Calamansi Cluster
T Siay, Zamboanga Sibugay

O Enterprise
Planned Actual
Corrective
Tasking
Component Measures

O
st
1 delivery Arrival at Truck Clockwork in Cluster
the port at 6 arrived late consolidation Leader to
SUPPLY AM (10 AM), the to be do
PLAN boat already followed; clockwork
L • Operational left new truck check; Hire
Flow has to be truck
hired
nd
2 delivery 23 kg/crate Buyer Weighing NGO
complained scale to be Marketing
MARKET of varied used during Staff to
K PLAN weights of packaging procure
• Market product (21- weighing
(quality) 25 kg/crate) scale;
I SUPPLY
Cluster
Leaders to
PLAN explain to

T
• Materials, members
equipment the use of
& facilities scales

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118

Step 7. Scaling Up

Scaling Up


With the help of the Facilitator and the Cluster Advisory
Group, Step 7 aims to enable the clusters to:

1. Assess the performance of the test marketing
activities in preparation for scaling up;
2. Document scaling up marketing activities and
periodically assess their operations;

119

Step 7. Scaling Up

3. Review the Cluster Agroenterprise Plan, and make
the needed adjustments; and
4. Determine the support systems needed for the
success of the scaled up marketing operations.

7.2 PREPARING FOR SCALING UP

After several test marketing when the clusters will have
learned lessons from experience, made appropriate
adjustments in their plan, and built confidence, they may be
ready for scaling up.

The Facilitator reviews the performance of the first four test
product deliveries before discussion with the clusters on their
next moves. It will help if a matrix is used to summarize the
main problems addressed in the first four product deliveries,
with the corrective measures.

(Refer to Facilitator’s Tool Kit No. 6 in Step 6 for Summary of
Problems with Corrective Measures in the Test Marketing)

At this point, the clusters are asked to reflect on their
experiences and then to decide if they want to go on with their
agroenterprise. They can either stop or continue it. And if
they decide to continue, they will be asked if they want to
continue with more test marketing or are confident to move to
the next stage of agroenterprise planning and implementation,
the scaling up.

Scaling up means bigger resources being invested in an
agroenterprise resulting from:

•
o Higher product supply to match the increasing
demand of existing buyers (example: more coffee
supply to Nestle from additional clusters)

•
o Higher product supply to respond to a more,
diversified market (example: a supermarket buyer in

120
120

Step 7. Scaling Up

addition to the wholesaler buying vegetables from
the clusters)

•
o Same products, same markets but more market
chain activities being performed (example: rice
farmers undertaking forward integration moves and
selling milled rice instead of just wet palay)

•
o New products handled in addition to the existing
ones (example: an additional variety of coffee for
the same market).

Success in marketing that builds confidence on both the
buyers and the clusters propels the farmers into scaling up.
The potentials for higher income however come with the
higher risks. And so, it is prudent to proceed carefully with
scaling up, assessing first the preparedness of the clusters.

7.3 ASSESSING THE PREPAREDNESS OF
CLUSTERS FOR SCALING UP

More income potentials with bigger resources in a scaled up
agroenterprise also bring with it certain risks. Entering this
next stage of business operations require that plans are
reviewed for existing products; and a market chain study is
done for new products before agroenterprise planning.

How fast test marketing can progress to scaling up stage is
influenced by these factors: (a) past enterprise performance
in the test marketing, (b) the supply base of the clusters to
come up with more and/or new products, (c) resources for
investments needed, and (d) access to business support
services.

There is no point of scaling up unless the clusters are
confident to do it, and there are gains from the trial deliveries
that are worth scaling up. A framework to ascertain
preparedness that includes other considerations will guide the

121

Step 7. Scaling Up

reflection process that the Facilitator will handle with the
clusters prior to scaling up.

Reflection tool for self-assessment of the cluster’s
preparedness for scaling up

Key Element Guide Question
Cluster Members wiling to proceed from test marketing
to scaled-up operations?
Supply Is the product supply considerable? Is this
coming from an increasing number of farmers?

Can delivery reliability be assured?
Market Is the current market regular and growing?

Are there new market opportunities?
Management Can cluster leaders and members perform tasks
as expected?

Are cluster meetings done regularly? Are
policies and procedures written and followed?
Financial Did the test deliveries yield increasing levels of
net incomes or decreasing levels of losses?

Is there a reducing trend in subsidies extended
by the service providers during the test
marketing?

For clusters that are ready for scaling up, the process they
follow in planning is the same provided in Step 5. They
integrate their market, production or supply, management and
financial plans, formulate their operational plans and list the
critical activities to marketing of their product(s). What will
matter in scaling up success is how integrated are the plans
and how tightly coordinated are the needs and activities.

122
122

Step 7. Scaling Up

The critical factor is the supply capacity of the farmers. At
production stage, technologies to be followed should be in
place and verified. Very detailed operational planning is
necessary putting together specific tasks, with dates, names
and areas as well as back up documentation.

Roles and responsibilities should be clear. Particular
attention needs to be given that the management set up is in
place, backed up with written business policies and operating
systems refined from the previous test marketing, and
imposed by the clusters with a signed agreement.

In the financial projections, assumptions and calculations
regarding yield, sales, costs and margins should be very
conservative. They should also factor in when making
harvest calendars the fluctuations in product supply due to
climatic factors or some cluster members not performing as
expected.

With the higher financial investments needed in scaled up
marketing operations, it is important for the clusters to
determine their capital sources, particularly: what can be
done with existing sources of funding, what is possible with
cluster savings, what can be tapped from business partners,
and what else needs to be generated from external sources.

At this stage, the clusters should be able to mobilize
resources and should depend less from the financial support
given by development projects during the test marketing
stage. Project funds may still be provided at scaled up stage
to support experimentations, verify innovations, undertake
market related studies, and assist clusters in training and
capability building activities. Continuing financial assistance
depends on the available resources of the development
service provider.

123

Step 7. Scaling Up

7.4 ASSESSING AGROENTERPRISE
PERFORMANCE

A key role of the Facilitator is to guide the clusters to set up a
monitoring system so that the cluster can periodically review
progress, and know whether the business is doing well as
planned or otherwise. During the test marketing (Step 6),
monitoring is done after every product delivery and is
reported immediately, and this is before the next product
delivery. In the scaled up agroenterprise stage, results of
continuing monitoring can be reported periodically during the
monthly cluster meetings.

Much of the business learnings by the clusters result from the
monitoring process which shows them the progress of their
agroenterprise as well as the problems that need their action.
Monitoring can be done best if there are records on the
following:

• Production performance per cluster member
• Product supply of the cluster members through the
cluster relative to commitment
• Financial transactions (sales, costs, returns, service
fees, savings, loans, capital, etc)
• Loan records (if the cluster borrows or lends)
• Marketing, production, financial and management
outputs relative to targets (i.e. the agroenterprise
plan revisited)
• Problems encountered and solutions done
• Minutes of meetings

These records will help enormously the clusters in assessing
their agroenterprise performance. Clusters that have no
records on their product supply, market deliveries, and
finances will not be able to objectively study their decisions
and actions. The information in their records is what is
organized in the reports given to the cluster members every
month.

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124

Step 7. Scaling Up

7.5 RISK MANAGEMENT

Despite all the preparations with good planning and
monitoring systems, it should be recognized that every
business has a certain degree of risk because not all factors
affecting the business can be controlled, especially those that
are external to the cluster. However, clusters can devise
ways and strategies to reduce risk.

When the clusters are asked to produce new varieties of the
same crop, it is prudent to thoroughly test its production
management in several sites to determine the best way of
producing it for the market.

This practice of experimentation is good to develop especially
when the clusters plan to move into diversified production in
response to the expanding needs of the growing market.
Experimentation, not just in production but also in the
marketing, opens the clusters to the opportunities for
innovations which make them competitive in the marketplace.
It also opens options, thus reducing risks and uncertainties.

When new products are to be handled in the scaling up, the
Facilitator guides the clusters to undertake market chain study
(Step 3), and conduct a new round of cluster planning (Step
5) and test marketing (Step 6). This will test the business
decision made with reduced risks. The best lessons will
come from the actual producers, so the clusters should
explore ways to get first hand, reliable information on how a
particular product is being produced and/or processed by
visiting existing producers.

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Step 7. Scaling Up

7.6 GOOD PRACTICES FOR SCALING UP

Below are some tips for clusters that intend to scale up their
operations:

1. Form a network of clusters to build economies of scale
(i.e., coffee)
2. Link network of clusters with apex organizations (like
industry associations)
3. Work with partners to draw support from government
and other sources (initially through and with the WG)
4. Establish linkages for market information
5. Link with institutions engages in research for
technology development (i.e., fish product
development)
6. Develop business linkages (markets that can be part
of the market chain)

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126

Step 8. Cluster Strengthening

Cluster Strengthening


Through competent facilitation, Step 8 aims to enable the
cluster members to:

1. Appreciate the importance of self-assessment of the
strength of their cluster and their agroenterprise;
and
2. Determine the level of maturity of their cluster in a
combination of key areas for improvement.

127 THE CLUSTERING APPROACH TO AGROENTERPRISE DEVELOPMENT FOR SMALL FARMERS



8.2 INTRODUCTION

The Facilitator is a catalyst in building agroenterprise
capacities in the clusters. In this role, he/she is called to
guide them through participatory processes that provide the
“learning by doing” opportunities for farmers. This task is not
easy because there is a maturation period needed for farmers
to take in new knowledge, new skills, new values and new
organizing methods through the clusters.

In the context of an agroenterprise project, the level of
maturity of a cluster is determined by increasing levels of
experiences and a gain of capacities in key areas. From CRS
experiences, learnings built in a combination of five areas will
move the clusters forward to viability and sustainability.

It is in these five areas that the Facilitator guides the learning
process, and implements capacity building interventions.

8.3 KEY AREAS FOR CAPACITY BUILDING IN
CLUSTER STRENGTHENING

The Facilitator guides the learning process and implements
capacity building interventions (i.e. trainings, reflection
sessions, hands-on learning activities, observation visits, etc)
in five key areas:

1. Organizational Development
2. Market Position
3. Supply Capacity
4. Financial Resources
5. Management Capacity

These key areas are interrelated. CRS experiences point to
the observation that effectiveness in the cluster’s engagement
to the market and the establishment of its agroenterprise

THE CLUSTERING APPROACH TO AGROENTERPRISE DEVELOPMENT FOR SMALL FARMERS 128
128


requires a combination of capacities, or a balanced
maturation process.

8.4 GUIDE FOR SELF-ASSESSMENT OF LEVEL OF
CLUSTER MATURITY

As part of the cluster’s learning process, its level of maturity is
assessed in a participatory way in a continuing monitoring
program. The clusters periodically assess themselves and
their collective effects in the agroenterprise. To assist them, a
set of indicators describe the stages of maturity that they
aspire for. A scale of 1 to 5 enables the cluster to appreciate
their progression.

Organizational Development

In an agroenterprise, a cluster is envisioned to transform from
a dependent to an enabled, and finally, to an empowered
entity as illustrated in Figure 26.




ENABLED EMPOWERED
DEPENDENT

Figure 26. An illustration of the transformation process of a cluster
as an organization.

The level of maturity in this key area can be determined using
the following matrix as guide:

Indicators of the maturity level of a cluster in terms of
organizational development

Maturity Indicator
Level
1 Core group of 5 producers with at least 1 lead
producer. NGO staff primarily organizing group
activities.
2 Cluster formed with cluster leader (s). Cluster has:
a) Meetings
b) Common production and market plans
c) Verbal agreements
3 Cluster has regular meetings called by its cluster
leaders, with written agreements, and written policies
4 The cluster is functioning independently; able to:
a) Implement enterprise plans (marketing and
supply)
b) Have regular assessments
c) Have written financial reports
5 The cluster is in a network with other clusters; able to
work with other clusters as part of a common business
entity.

130


Suggested Interventions in the form of trainings, reflection
sessions, meetings, exposure visits, and observations should
lead to the following:

• Leaders can facilitate meetings where members can
express their views and decisions are arrived at with
consensus
• The cluster can formulate its objectives and strategies
• The cluster can review their performance relative to
their plans; can tackle and resolve problems
• There is transparency (clusters have records and
reports)
• There is mutual trust and respect among the members
• Clusters recognize their interdependence with other
clusters and partners in their agroenterprise

Market Position

An agroenterprise is desired to have a market position
graduating from small sized market to big-sized, from low to
high bargaining influence, and from random/spot to
arranged/negotiated buyer as illustrated in Figure 27.

SMALL MARKET SIZE BIG

LOW BARGAINING HIGH
INFLUENCE

ARRANGED/
RANDOM / SPOT BUYER NEGOTIATED

Figure 27. An illustration of the strengthening of the marketing
position of a cluster.





Indicators of the maturity level of a cluster in terms of market
position

Maturity Indicator
Level
1 Market penetration with trial deliveries
a) At least 50% of market plan accomplished in
target product volume.
b) Getting to know stage with the buyer(s)
2 Market is strengthened
a) Markets are maintained and product volume is
scaled up.
b) There is build up of buyer relations.
3 Market is developed with more buyers who can offer
stable arrangements.
a) More buyers tapped.
b) Markets entered into are for longer term
agreements.
c) Special pricing negotiations done.
4 Markets are diversified
a) New products (value added)
b) Clusters pursue market research for higher value
markets
5 Network of support is established (business services in
the chain).

Suggested interventions should lead to:

• Awareness on the role of the cluster in the market
chain and how it can increase participation
• Understanding of market opportunities that come with
stable supply base, value addition with quality
management or new products, improvements in

132


postharvest activities, links to various market types
and partners
• Skills in market negotiation and market development
towards higher value buyers

Supply Capacity

The capacity of a cluster to supply its markets should move
from quantity to quality (form), and eventually to value
orientation; from sustainable production system to distinct
preferred products; and from quality supply to quality supplier.
This process of development is illustrated in Figure 28.

QUANTITY QUALITY VALUE SALES
(FORM)

SUSTAINABLE DISTINCT PREFERRED
PRODUCTION SYSTEM PRODUCTS

QUALITY SUPPLY QUALITY SUPPLIER

Figure 28. An illustration of the development of a stable product
supply base within a cluster.

The level of maturity in this KRA can be determined using the
following matrix as guide:




Indicators of the maturity level of a cluster in terms of supply
capacity

Maturity Indicator
Level
1 Product supply coming out from the cluster for the joint
marketing
a) At least 50% of planned supply is accomplished
b) Production calendar
2 • Regular product supply coming out based on the
enterprise supply plan.
• Cluster members can supplement each other’s
supply in times of deficit. (coordination for back-up
supply, farm records)
3 • Production technologies are in place for reliable
quantity and quality standards of at least 80% of
the cluster members
• Production protocols (best practices), supply
delivery monitoring system
4 Value addition in the supply:
a) Value added existing products (packaging,
labelling)
b) New products, new markets
c) Value addition measures implemented; better
logistics in place
5 Distinct products
a) Preferred products with the buyers
b) Products carry the name of the supplier
c) “Quality is in our growers”


• Cost effective production technologies that ensure
stable product supply
• Quality management practices that will address the
market demand
• Production programming for continuous supply

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• Experimentation for continuous innovations in
production method (reduction of costs, soil and water
conservation, natural farming methods like NFTS, etc).

Business Management Capacity

The capacity of the cluster to manage its agroenterprise must
progress from being assisted to co-managed, and finally to
independent, as illustrated in Figure 29.

CO-MANAGED INDEPENDENT
ASSISTED

Figure 29. An illustration of the improvement of the business
management capacity of a cluster.





Indicators of the maturity level of a cluster in terms of
management capacity

Maturity Indicator
Level
1 Enterprise plan and operation plan are formulated.
(80%)
a) NGO facilitated the process.
b) Product consolidation & market facilitation
procedures tried out.
2 Cluster leaders and assigned management people are
functioning. (60%)
a) Roles and responsibilities spelled out.
b) Task related trainings done.
c) Agreed scheme of remuneration tried out.
3 Operational plan review is routinely done. (40%)
a) Agreed scheme of remuneration established.
b) Business operating systems in place.
4 • Enterprise plan enhanced to address new
opportunities. (20%)
• Performance based incentives
• Institutionalization
5
• Structure, management set up, policies and
systems to ensure high performance of business
activities

Suggested Interventions should lead to:

• Understanding the functions of enterprise
management comprised of: planning, organizing,
implementation, monitoring and evaluation
• Installed policies and system in enterprise operation
including incentives and sanctions

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• Clear roles and responsibilities of the cluster members
and officer

Financial Resources

The resources of a cluster in operating its agroenterprise,
particularly financial, should evolve from assisted to earning,
then to sustainable as illustrated in Figure 30.

ASSISTED EARNING SUSTAINABLE

Figure 30. An illustration of the growth of a cluster from assisted to
sustainable.





Indicators of the maturity level of a cluster in terms of financial
resources

Maturity Indicator
Level
1 With external financial support
a) Trainings, capability building
b) Market operating funds
2 Cluster start to experience marketing earnings (not
regular yet).
a) Enterprise transactions are recorded.
b) Service fees (management and/or marketing are
initially paid)
3 Marketing earnings are more predictable (and regular).
a) Financial reports are done and discussed in the
cluster meetings.
b) Service fees pay part of the marketing &
management costs.
c) Financial systems are in place.
4 Capital build-up scheme from joint marketing is
established.
a) Individual
b) Organizational
c) Service fees are used to pay in full the marketing
and management costs.
5 Clusters have generated funds for business investment.


• Understanding the need for transparency and
accountability
• Installation of policies and procedures related to cash
management, internal controls, financial recording and
reporting (i.e., accounting reports,

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• Increase in responsibility to pay for services provide
by the cluster (i.e., management and marketing fees)
• Generation of individual and organization savings

8.5 THE OBJECTIVE FOR BALANCED MATURITY

Assessing the level of cluster maturity may be done every six
(6) months to coincide with the assembly of cluster members
for agroenterprise evaluation and planning activity.

The levels of maturity may vary among the key areas
depending on internal and external assets of the enterprise,
and the performance of the cluster members. This means
that interventions should be directed more on the less mature
key area so that the growth and development of the cluster
and its agroenterprise is balanced.

Using the Summary Matrix of Key Areas, Levels and
Indicators of Maturity, the Facilitator provides a holistic view of
the maturation process to the clusters. The Facilitator
familiarizes the clusters on the tool, and then leads them to
self-assess their level of maturity. Assessment is a continuing
activity because clusters can progress or retrogress across
the levels. And it will help them to be always critical of their
performance and progress.



SUMMARY MATRIX OF KEY AREAS, LEVELS OF MATURITY, AND INDICATORS OF AGROENTERPRISE MATURITY

Maturity Organizational Business Management
Market Position Supply Capacity Financial Resources
Level Development Capacity

Core group of 5 producers with Market penetration with trial Product supply coming out Enterprise plan and operation With external financial support:
at least 1 lead producer. NGO deliveries: a.) At least 50% of from the cluster for the joint plan are formulated. (80%): a.) a.) Trainings, capability building
1 staff primarily organizing group market plan accomplished in marketing: a.) At least 50% of NGO facilitated the process. b.) b.) Market operating funds
activities. target product volume. b.) Getting planned supply is accomplished Product consolidation & market
to know stage with the buyer(s) b.) Production calendar facilitation procedures tried out.
Cluster formed with cluster Market is strengthened: a.) Mar- Regular product supply coming Cluster leaders and assigned Cluster start to experience
leader/s. Cluster has: a.) Meet- kets are maintained and product out based on the enterprise management people are func- marketing earnings (not regular
ings b.) Common production and volume is scaled up. b.) There is supply plan. Cluster members tioning. (60%): a.) Roles and yet): a.) Enterprise transactions
2 market plans c.) Verbal agree- build up of buyer relations. can supplement each other’s responsibilities spelled out. Task are recorded. b.) Service fees
ments supply in times of deficit. (coor- related trainings done. b.) Agreed (management and/or marketing
dination for back-up supply, farm scheme of remuneration tried out. are initially paid)
records)
Cluster has regular meetings Market is developed with more Production technologies are in Operational plan review is rou- Marketing earnings are more
called by its cluster leaders, buyers who can offer stable place for reliable quantity and tinely done. (40%): a.) Agreed predictable (and regular): a.)
with written agreements, and arrangements.: a.) More buyers quality standards of at least scheme of remuneration estab- Financial reports are done and
3 written policies tapped. b.) Markets entered into 80% of the cluster members. lished. b.) Business operating discussed in the cluster meetings.
are for longer term agreements. Production protocols (best prac- systems in place. b.) Service fees pay part of the
c.) Special pricing negotiations tices), supply delivery monitoring marketing & management costs.
done. system. c.) Financial systems are in place.
The cluster is functioning inde- Markets are diversified: a.) Value addition in the supply: Enterprise plan enhanced to Capital build-up scheme from
pendently; able to: a.) Implement New products (value added) b.) a.) Value added existing products address new opportunities. joint marketing is established:
enterprise plans (marketing and Clusters pursue market research (packaging, labelling) b.) New (20%): a.) Performance based a.) Individual b.) Organizational;
4
supply) b.) Have regular assess- for higher value markets products, new markets c.) Value incentives c.) Service fees are used to pay
ments c.) Have written financial addition measures implemented; in full the marketing and manage-
reports better logistics in place ment costs.

THE CLUSTERING APPROACH TO AGROENTERPRISE DEVELOPMENT FOR SMALL FARMERS
The cluster is in a network with Network of support is estab- Distinct products: a.) Preferred Institutionalization: Structure, Clusters have generated funds
other clusters; able to work with lished (business services in products with the buyers b.) management set up, policies and for business investment.
5 other clusters as part of a com- the chain). Products carry the name of the systems to ensure high perfor-
mon business entity. supplier c.) “Quality is in our mance of business activities
growers”

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Part III. Cluster Stories to Share

Part III

Cluster Stories to Tell

Part III compiles and shares the experiences of the different
clusters through stories of the good and bad events that
occurred especially during their infancy. Their experiences
served as worthwhile lessons to the members as these made
them more responsible and more forward-looking
agroentrepreneurs.

It is hoped that these Cluster Stories can give some insights
to those who intend to adopt the clustering approach to
agroenterprise development. A story may find importance in
one or more of the eight steps in the process.

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The reality of developing an agroenterprise is complex but
they can be grasped by way of the stories that highlight the
experiences of the different clusters as their members work
together to prepare for a market, access and develop it under
different situations. Part III presents some cluster stories that
tell not only of the opportunities but also the challenges to
eliminate the roadblocks to farmers’ access and hold on the
market.

The initiative of the Maguindanao local traders of sayap
(native hat) to link with the weavers show how two actors in a
market chain can work together. The efforts in tilapia fish
processing is to develop more attractive products so the
farmers can access a higher value market as they take
advantage of seasonal, abundant fish supply from the
Ligawasan Marsh.

The Farmers Field School for Maguindanao rice farmers
shows a first step in market development by improving
farming skills in natural farming methods and reducing
production costs. This will enable farmers to produce and
supply organically grown rice that will be an attractive product
to consumers. In a short market chain wherein the clusters
link directly to the consumers, they can bypass the
entrenched local traders and avoid a situation of conflict in an
already volatile peace and order environment.

The Strawberry Clusters’ story in Sitio Epol (in Davao City)
highlights the experience of farmers working on their existing
market at the roadside for travelers, but confronting the
challenge to come up with more strawberry products available
in regular supply, and without which, their marketing
enterprise will not take off.

The Maragusan Clusters’ story (in Compostela Valley) relate
the perseverance of the farmers to consolidate vegetables per
truckload to make it an economical move given the distance
and the difficult infrastructure constraints. But this learning
from the challenges experience has also given them the

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confidence to scale up by gradually moving into an additional
market under a partnership arrangement with a supermarket.

In the Siay Calamansi Cluster story (in Zamboanga Sibugay),
we see the example of clusters that have formalized into a
cooperative after a build up of organizational fund from
marketing. It also presents the reality that success in product
consolidation for markets brings with it its own challenges one
of which is the resistance of the traders who see their hold
threatened if farmers start to participate actively in marketing.

The Impasugong Coffee Cluster story (in Bukidnon) provides
a glimpse of how a cluster is managed for a high value market
like Nestle and Serenity Coffee Corporation, types of markets
that require high discipline because quality, traceability and
delivery reliability are demanded in exchange for high price.
An interesting story is that of the Impasugong Squash
Clusters that demonstrate that through the support of bigger
producers and the influence of an industry group like the
vegetable association, farmers can immediately secure a hold
on the markets that otherwise are reluctant to take in supply
from small farmers.

In all the above stories, we can picture how dynamic is a
market condition, what innovations are called for from the
farmers so that they can respond and cope with the market
situations, and what development interventions from
intermediary organizations can be provided to support
farmers’ needs in their agroenterprise development.

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Cluster Story No. 1

REAPING THE FRUITS OF IMPROVED TIMING
AND QUALITY OF DELIVERIES

On June 27, 2007, 133 farmer-members from six communities
in Maragusan, Compostela Valley Province gathered once again
to assess the performance of their vegetable clusters. By that
time, the clusters have already sold more than 150 tons of
assorted vegetable worth about PhP 800,000. The members
discussed the milestones, the good relations with their buyers in
Cagayan de Oro, then planned how they could supply a new
market opportunity that opened for them: a major supermarket
in Tagum City located some 90 kilometers away.

A year earlier, six cluster leaders together with the staff from
Kasilak Development Foundation, Inc., CRS and the Municipal
Agriculture Office went to Tacloban City on May 20 to 23, 2006

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to verify the prospective vegetable markets. This market was
considered first because it was the place where most of the
local market agents sent their vegetables. Accompanying them
in the trip was a vegetable market facilitator based in Cagayan
de Oro City but who has market contacts in Sogod, Southern
Leyte. The facilitator was interested in establishing a market in
Sogod as a dropping point of vegetables on the way to Tacloban
City.

In the analysis done after the Tacloban trip, the group saw the
big potential of the Sogod-Tacloban markets in terms of price
margins and volume capacity given that the region is not a
vegetable producing area. However, they were concerned
about the high risk of this particular market given its distance.
The group, instead, decided to undertake trial runs to Cagayan
de Oro to enable them to go through the experience of actual
consolidation and delivery in a wet market. The choice of
Cagayan de Oro was made considering the presence of
NorminVeggies, a potential support system from the vegetable
industry group that could be tapped.

Over the next four weeks after the Tacloban trip, the cluster
leaders with the Kasilak marketing officer met weekly to discuss
the preparations for the test delivery. The plan was a delivery
scheduled to arrive in Cagayan de Oro in the morning of June
28. This date of arrival was targeted because it coincided with
the peak market day in the City when majority of the “viajeros”
from Visayas, Luzon, and the provinces of Butuan, Surigao and
Zamboanga would procure the highest volume for the weekend
market in their respective areas. Plans were made and reviewed
by the group including the logistics, pricing, operational flow and
financial analysis. The test delivery involved clusters from six
barangays, namely: Magcagong, Saranga, Mahayahay,
Parasanon, Tupas and New Albay.

During the consolidation

On the day of consolidation, the leaders confronted several
daunting challenges. The wooden tomato crates that were

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supposed to be delivered to the members were sold by the
manufacturer to another buyer. So the leaders had to look for
other sources of crates.

The road leading to the upper barangays of Mahayahay and
Parasanon were rendered impassable due to continuous rains
for the past several days. The truck driver recommended that all
vegetables be consolidated at the roadside in barangay
Saranga, several kilometers away from the source of the
vegetables. The implication was that instead of the truck
passing by the different barangays to pick up the vegetables,
the growers had to bring their products from their areas to the
suggested consolidation site by way of motorcycles or carabaos
and horses.

Then there was a heavy downpour starting at 1 o’clock in the
afternoon which continued throughout the evening. So instead
of the truck departing for the other three barangays at 11 o’clock
in the morning as originally scheduled, it left the roadside
consolidation area for these barangays at 6 o’clock in the
evening. Thirty minutes after, the truck got stuck in the muddy
road and it took volunteers five hours to get it out. In effect, the
truck arrived at Magcagong, the next barangay, around 11
o’clock in the evening to pick up the vegetables from the
clusters. By this time, based on the plan, the truck should have
traveled half the distance to Cagayan de Oro.

At dawn, the truck proceeded to the two remaining barangays,
New Albay and Tupas. Unfortunately, the squash at New Albay
were not yet packed in sacks and weighed. So the leaders had
to work together to facilitate so that it could be done fast.

By the time the group got to Barangay Tupas, the last barangay,
it was already 4 o’clock of June 28 and there was another delay
as the cluster leader had left after waiting for the truck the whole
night. He was located and arrived at the meeting place after
about an hour. It should be noted that by this time, the
vegetables should have already arrived in Cagayan de Oro.

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Finally, at 6 o’clock in the morning, the group finally departed for
Cagayan de Oro with the consolidated vegetables.

Along the road in Montevista, Compostela Valley, the inner rear
tire of the truck got flat. The driver and his crew took about an
hour to get the truck on its way. This was followed by another
breakdown in Rosario, Agusan de Sur, caused by the damage
of the rim of the outer rear tire. Altogether, this was a delay of
another four hours.

At the buyer’s stall in the wholesale market

The group finally arrived in Cagayan de Oro at midnight on June
28. The contracted buyers had waited from 6 in the morning to
12 noon. By the time the delivery arrived, the buyers had
procured from other sources because the vegetables were to be
“outshipped” to other provinces as there was a cut-off time. The
vegetables could be marketed only the next day, June 29, or a
24-hour delay from the negotiated delivery time. So the market
facilitator in Cagayan de Oro had to look for new buyers in the
local spot market.

Other buyers came but the price was subjected to the supply-
demand conditions in the spot market for the day. By this time,
tomatoes from the other supply sites in Bukidnon and Misamis
Oriental were arriving and the price was reduced from PhP
180.00 in the morning to only PhP 110.00 per crate later in the
day. A buyer negotiated for the price of PhP 140.00 but upon
close inspection, he did not pursue the transaction as he noticed
mixed sizes, ripened fruits, and presence of fruit damage.

This was the same case with the squash - several buyers had
already negotiated at PhP 7.00 per kilo but upon close
inspection when some sacks were opened, they did not
continue with the purchase. For squash, the problems were:
mixture of small with the big-medium sizes, mechanical damage
with some having molds, and over maturity. In all, reduction of
value was about half of the original intended price.

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On the other hand, the five other vegetables, Baguio beans,
ampalaya, sweet pepper, sayote and eggplant, were easily sold
in the spot market at good prices mainly because they were of
good quality.

Assessment

The necessary plans were made by the clusters and the
arrangements with the outshipment buyers were done by a
market facilitator two days before the vegetable delivery in the
Agora wet market of Cagayan de Oro. For this reason, the
market facilitator already gave a price to the Kasilak Marketing
Officer on the basis of her negotiated sale to the outshipment
buyers.

There are two kinds of buyers in the Agora wet market. One is
the group of outshipment buyers who are the “viajeros” from the
other provinces in Mindanao, Visayas and Manila. They
negotiate a price through an Agora-based market facilitator
based on an agreed time of delivery, quality and volume. The
other one represents the spot buyers - the local buyers who
distribute in the neighboring provinces and whose price is
dependent on the prevailing conditions of supply and demand
for the day.

It was unfortunate that the vegetables did not arrive on time.
The outshipment buyers stretched their waiting time from
morning to noontime just to accommodate the request of the
market facilitator. But during the cut-off time at noon in June 28,
there was no way the clusters could deliver the promised
vegetables as they were still in San Francisco, Agusan del Sur,
about halfway to Cagayan de Oro. The outshipment buyers
procured from other sources and when the clusters’ vegetables
were finally unloaded the next day, the market facilitator had to
look for new buyers and had no option but to undertake spot
selling where the prices would fluctuate depending on the actual
supply and demand situation.

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The Baguio beans, ampalaya, sweet pepper, sayote, and
eggplant were of good quality so they were immediately sold
within the day but at a slightly lower than negotiated
outshipment price because the prices had to be pegged on the
spot wet market price already. But it was a different case with
the squash and the tomato. Several buyers (both outshipment
and spot) were interested to purchase but because of quality
issues, they did not pursue the transaction. In one case, the
buyer had already paid but called off the deal when the she
found out about the extent of the quality problem in the squash.

Eventually, the clusters had to settle at a price that the buyers
would be willing to pay for all the remaining stocks or risk not
getting any sale at all because the marketing time may catch up
with the deteriorating vegetables. Also, fresh stocks were
coming in every five to ten minutes.

On analysis, the problems can be grouped into two: timing and
quality. Had the vegetables arrived on the agreed time, the
clusters could have gotten the price agreed with the
outshipment buyers. More importantly, had the quality been
good, there would have been bargaining power during
negotiations to sell in the wet market despite a spot market
condition. There were several buyers who had wanted to buy
the squash and tomato to add to their volume of procurement
but their common feedback was the poor quality of the squash
and tomato.

The participating cluster members were immediately convened
to discuss the results of the test marketing where the
circumstances and results were presented objectively. It was
pointed out that most of the challenges like quality control,
timing of harvesting, consolidation and coordination with
suppliers and service providers can be addressed. The rest of
the assessment was devoted to a planning session for the next
delivery where all the improvements and adjustments in the
operational plan were made. It was emphasized to the
members that while agri-marketing is particularly challenging,
they were able to bring a truckload of vegetable out of their

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farms to a major trading hub in Mindanao – not a small feat for
small farmers in the uplands.

If the clusters had stopped after the first market delivery given
the challenges they had to go through, they would not have
celebrated their first year of anniversary with 150 tons of
vegetables unloaded to the market. They would not be able to
even consider a new market avenue, the supermarket. A year
after their first market move, they started to enter J.S. Gaisano
Supermarket and are into their 16th weekly delivery to this higher
value market.

Contributed by: Lionel Mendoza, Vicente Gualberto, Ronnie
Fruto, Danylle Ann Pascual, Lily Naldoza and Albert Ventura

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Cluster Story No. 2

THE CLUSTER OF HAT MAKERS IN MAGUINDANAO

Keting Acob is a Maguindanaon trader who lives in SK
Pendatun in Maguindanao Province. For almost two years, he
has been buying sayap, the native hat produced by his
Maguindanaon neighbors, and then selling them in the
neighboring city of Tacurong every Wednesday and Sunday,
the designated market days in this capital city.

For each market day, Keting buys 200 pieces of sayap at PhP
5.00 each and then sells them at PhP 6.00. He and his fellow
sayap buyers organized an informal group of their own, and
they connect to the various sayap makers to whom they
supply the raw material needs. Each trader has a group of
sayap makers. As an agreement, the indebted sayap makers
can sell their sayap only to the traders who financed their

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respective raw material requirements. The former sets the
buying price.

One day in December 2006 Keting learned that a respected
Community Organizer of the Kadtuntaya Foundation, Inc was
organizing the sayap makers into a cluster under a project
supported by CRS. Keting decided to attend the first meeting.
He saw this as an opportunity for him and his fellow buyers to
be better linked with the suppliers’ end.

The Magungaya sa Ligawasan Multi Purpose Farmers
Association (MALIMU) was formed with Keting and the other
traders joining the sayap makers. With more women
members, MALIMU is composed of clusters, each of which is
led by a trader-member.

Now, Keting and the other trader-members buy sayap at PhP
6.00 a piece, thus, increasing the income of the other
members by PhP 1.00. With this development, the makers of
sayap are increasing in number as children and other
community members are joining the trade. This may not be a
big income but the other benefits are as important: how the
small producers can start to get their acts together and relate
with other market actors such as Keting in the local trade.

CRS and KFI are trying to build on this local initiative. As part
of product support, they have explored the possibility of the
raw material of sayap, which is the leaf of the romblon plant,
to be semi-processed for the needs of the exporters in the
furniture industry capital of the country in the Visayas island of
Cebu. Also, they are studying how Keting’s and other sayap
buyers’ role can be transformed from a trader into a business
service provider, organizing the product supply consolidation
and the quality control for a service fee which could be
generated from the addition earnings from a higher value
market.

Short term objectives have to be secured with long term
concerns. Thus, the project assistance also includes as part

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of the Natural Resource Management, the continued planting
of the romblon plant for the sustainable supply of raw
materials for the budding handicraft business in the
community. This effort was foreseen by MALIMU to be a key
in the sustained business. Full of hopes, the sayap clusters
sent their first sample of dried romblon leaves to a Cebu
furniture exporter for product development and designing.
And the effort to plant more romblon is also ongoing.

Contributed by: Marynisa S. Paglala, MALIMU Marketing
Officer, Hai Arap and Floro Israel

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Cluster Story No. 3

ORGANIZING AND TRAINING FOR THE
STRAWBERRY MARKET

Baganihan is an upland Barangay of Davao City near the
boundary with Bukidnon Province. Its cool climate supports
the growing of semi-temperate crops which puts this area and
its neighboring barangays in a competitive advantage. Some
of the crops grown are strawberry, potato, crucifers, tomato,
sweet pepper and cutflowers. The asphalting of the national
highway that passes by Baganihan some seven years ago
greatly enhanced the marketing of farm products.

One of the sitios or sub-villages of Baganihan is Epol which is
home to farmers belonging to the B’laan and Matigsalog
tribes. Bilma Fuertes, a Matigsalog, and an elected member
of the Barangay Council, is one of the farmers. Her
membership in the Council gave her the name as Kagawad
Bilma.

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With her strong leadership, Bilma paved the way for the
organization a group of women-farmers producing
strawberries in Epol. The group expanded its farming
activities and eventually became the Baganihan Agri-Eco
Venture Cooperative or BAVC. The members decided to
produce and market vegetables, strawberries and ornamental
plants. Through the leadership of Bilma, BAVC received
assistance from different projects.

One of the crops that benefited from external assistance was
strawberry. The trainings provided by the projects initiated a
small strawberry jam processing endeavor.

In 2005, the People Collaborating for Environmental and
Economic Management in Davao (PCEEM) Foundation and
the Catholic Relief Services (CRS) – Philippines through the
Timely Intervention and Natural Approaches to Watershed
(TIN-AW) Management Project provided production
assistance to BAVC and formed clusters among the
members. Upon the approval of the cooperative's Board of
Directors, three clusters were developed representing three
farm commodities to be produced and marketed, namely:
vegetables, cut flowers and strawberries. BAVC also
benefited from institutional development assistance and has
signed a Memorandum of Agreement with PCEEM for a grant
for strawberry production. Thirty one members were able to
avail of the production assistance.

PCEEM and CRS-Philippines also provided training to BAVC
on Biodynamic and Natural Farming Technology Systems or
NFTS. The members also underwent a series of lectures that
gave them helpful tips including study of different types and
climatic requirements of strawberries. They were also taught
the basics of land preparation, strawberry runner segregation,
establishment of nurseries, planting, fertilization, irrigation,
mulching, pruning and disease and pest control, proper
harvest and post-harvest practices, and farm record
management.

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Prior to the trainings provided by PCEEM and CRS, the
members were trained by SDC-Asia on the clean and
acceptable ways of processing jams, marmalades and syrups
through a special training on Good Manufacturing Practices or
GMP. They were also given processing equipment for group
use.

With the integration of NFTS in their production practices,
Bilma observed marked improvements in the fruiting patterns
of the strawberry plants even during days of heavy rains.

”Our trainings have made a great difference for our group
from planting to processing. Our products are fast gaining
popularity after they have been introduced in trade fairs.
Motorists plying Davao-Bukidnon route now make it a habit to
stop by and buy strawberry jam, marmalade, syrup, or fresh
strawberries." Bilma proudly said.

Currently, fresh and processed strawberries are in demand at
the roadside in Epol. These products are also becoming
popular during festivals and other celebrations such as
Kadayawan and Araw ng Davao. Other institutional markets
like hotels, restaurants and supermarkets are also lining up at
BAVC’s door asking for consistent supply.

Kagawad Bilma shares that finding a market for strawberry is
not a problem, but rather a challenge to produce it in a
continuous manner in order to respond to the needs of their
buyers not only along the highway but in the expanding and
more stable institutional markets.

Contributed by: Bilma Fuertes, Linus Miranda and Lionel
Mendoza

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Cluster Story No. 4

TESTING THE WATERS WITH DRIED FISH

At certain months of the year (May to August), tilapia fish
supply from the Ligwasan Marsh in the Province of
Maguindanao is abundant. Prices would drop, and the small
producers would have to take in whatever prices were given to
them by the local traders. If only tilapia fish could be
processed at the peak supply months. During the community
based research activities conducted as part of the
development support of Catholic Relief Service (CRS) with its
partner, Kadtuntaya Foundation, Inc. (KFI), tilapia fish in
processed form surfaced as a product with an untapped
opportunity.

Twenty (20) small producers decided to pursue this window of
opportunity for processed dried tilapia, tapping an available
product from its natural resource, the Ligwasan Marsh. They
formed a cluster after which the members agreed to

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consolidate a portion of their tilapia catch to be dried as their
new product for the market.

CRS and KFI facilitated that appropriate skills and knowledge
in fish drying through hands-on demonstration could be
extended to the cluster from the Department of Agriculture
through its Agricultural Training Institute (ATI) and the Bureau
of Fish and Aquatic Resources). Specific improvements
introduced were the manner of cleaning the fish and the
hygienic handling during processing. It was emphasized
during the training that for processed products, it is extremely
important to assure the customers with food safety.

The first test market was the Kadtuntaya Foundation, Inc.
(KFI) staff and their friends. In the test marketing done, KFI
helped assess the quality of the product in terms of palatability
and pricing. From the assessments done, it was determined
from customer feedback that the visual quality of the dried
product was well received. But the dried fish was found to be
too salty, which necessitated adjustments in the brine solution
(i.e. salt in water) used. Also, the price that the product was
offered at PhP 150/kg was rated by customers as too high
relative to competition.

A careful review led the cluster members to make adjustments
in their fish procurement practice and in the processing
activities to bring down the selling price to only PhP 125/kg.
Then an innovation was discussed to come up with a
diversified product that would be higher value for the high end
market: marinated-deboned-dried tilapia fish and for which
product development assistance was requested from the Food
Technology Center of the Xavier University College of
Agriculture in Cagayan de Oro City. The new product was
also well received during the food tasting activity done.

In anticipation of the abundant tilapia coming up in a few
months, these two directions for dried fish, one that would be
affordable and the other a special, niche product for the high
end market will be pursued. In the meantime, CRS and KFI

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have been assisting the community in building awareness of
the ways to protect the ecology of the Ligwasan Marsh for
sustainable supply of fish and other products.

Contributed by: Hai Arap, Jim Dalgan and Floro Israel

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Cluster Story No. 5

THE CLUSTER MOVES FOREST COFFEE
(AND OTHER FARMERS) TO THE
MARKET STREAM

Dumalaguing is a highland barangay in Impasugong town,
Province of Bukidnon. It is where Romeo Saplian lives.
Popularly known as Mimi, Romeo is one of the Higaonon tribe
farmers who are growing coffee in the forest.

The hilly terrain and poor roads of Dumalaguing, as well as
the Tagoloan River that divides the barangay from Poblacion,
or the center of the town, make transport of goods into and
out of the community difficult and expensive.

Given this situation, Mimi and over 100 other coffee farmers
in his barangay opted to just sell unsorted coffee beans to the
barangay traders at whatever price is given to them. These

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traders in turn transport the coffee across the river on a raft
and bring them to the nearby Poblacion trader. The coffee is
then sorted and re-dried to meet the requirements of Nestle
Philippines located in the nearest commercial center of
Cagayan de Oro City, about 80 kilometers away from
Impasugong. This has been the market chain until the
Catholic Relief Services, or CRS, in partnership with Kaanib
Foundation, Inc., or KFI, and the Local Government Unit
extended development support for these producers and linked
them directly to high value markets.

Mimi is now a coffee cluster leader of Dumalaguing where 25
farmers formed two clusters. Their clusters, together with
those of the neighboring barangays of Guihean and Sayawan,
consolidated 6,600 kilograms of coffee beans during the
recent harvest season, December 2006 to March 2007. The
coffee delivered were all of Grade 1 quality, earning for the
cluster members an additional price per kilogram as incentive.

As cluster leader, Mimi makes sure that his members have a
cluster plan for an agreed market and volume each harvest
season, and that each member has filled up a product
commitment form which he summarizes into a matrix called
the harvest calendar. He convenes several meetings before
the first harvest for the cluster’s agreements on quality,
pricing and payment procedures. He makes them understand
that joining the cluster is a voluntary decision but once a
member; they must abide by their agreements. He makes
sure that they can have regular meetings to discuss their
activities.

The high price that Serenity Coffee Corporation offered in the
recent coffee season, December 2006 to March 2007, was 28
percent higher than the barangay trader. The offer came with
stringent quality standards and procedures for coffee
traceability per farmer. To ensure quality coffee delivery, a
Coffee Consolidator was assigned in each barangay. He/she
is tasked to accept only Grades 1 and 2 coffee, and manage
the physical consolidation and the payments. For marketing

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capital, KFI got a PhP 500, 000 short term loan from the
Federation of People’s Sustainable Development Cooperative
of which it is a member. The marketing is operated like a
business, with the Consolidator getting paid with a
management fee equivalent to five percent of the net sale
value.

Given his long experience in coffee and the high trust in him,
Mimi was chosen by the cluster as the barangay’s Coffee
Consolidator. His residence became the collection area and
housed the weighing scale, sacks, needles and twine,
marking pens for labeling and coding, and the receiving forms
that contain information on the quality and sale computation.

Having reached Grade 4 only of formal education, Mimi found
it difficult to compute using the calculator and coefficients for
quality determination. Fortunately, his family can help him.
His daughter who reached high school does the
computations, while his wife acts as the cashier. Mimi focuses
on segregating a sample from each farmer’s delivery and
subjecting it to quality evaluation as he, together with the
Consolidators of other barangays, was trained to do.

Mimi and all the other cluster leaders for coffee, abaca and
vegetables in the municipality are assisted by KFI’s project
staff, the CRS Agroenterprise Coordinator and the Agricultural
Technologists of the local government. Their role in the
project is clear to Mimi. They are just facilitators helping the
clusters do the actual marketing themselves. And this is why
the cluster leaders had to meet the buyers and directly
transact with them.

After assessing their coffee agroenterprise, Mimi reported to
the members their combined sales, costs covering transport,
labor, consolidator’s fee, management fee, and the resulting
net income. Of the net income, 80 percent was returned to
the clusters while the remaining 20 percent was retained as
the cluster fund. Reflects Mimi, “When we think of our total

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sales at over half million pesos, then we begin to feel that our
clusters can be as big as the trader.”

Compared to unorganized farmers, Mimi and all the other
farmers in the coffee cluster enjoy more benefits because
they actively participate in the market chain. They are
involved not only in producing coffee but also in value adding
activities like drying, grading, sorting, and labeling before
selling their product. In addition, they are taking more control
over the management of the chain itself by seeking new
markets, controlling product quality, negotiating for a better
price, and building trust through a good track record in
product supply.

The results are encouraging. During the first coffee season,
November 2005 to March 2006, 25 farmers organized in three
clusters in three barangays and agreed to test joint marketing.
Altogether they delivered two tons of Grade 1 quality coffee to
Nestle. In the next season, November 2006 to March 2007,
they increased their membership to75 with a corresponding
three-fold increase in product volume consolidated. These
were of Grade 1 quality and delivered to Serenity Coffee
Corporation. In the coming coffee season, more farmers are
expected to join the clusters with estimated volume of no less
than 15 tons.

It is a long journey of possibilities as the clusters feel
confident to engage in more economic activities. They are
now studying their market moves with new products, namely:
semi-processed non-timber forest products for the Cebu
furniture exporters, and vegetables for the supermarkets.
According to them, this will further diversify and strengthen
their income base. Moreover, they hope that their stories will
echo to other farmers who are still unorganized and realize
that they need not feel so helpless with their “smallness” and
their constraints because clustering can simply make them
big.

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Contributed by: Dennis Pace, KFI Project Coordinator; Lou
Ann Gomez, KFI Marketing Officer; and Juanito Barsomo,
CRS Agroenterprise Coordinator for Bukidnon

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Cluster Story No. 6

MISSING THE BOAT, MISSING THE MARKET

Calamansi (Citrofortunella microcarpa) is a popular economic
crop in the municipality of Siay in Zamboanga Sibugay
Province. Located in Western Philippines, Sibugay has the
climate favorable for year round production of calamansi.
Sometime in October 2005, a group of 94 calamansi growers
formed themselves into seven clusters distributed in three
barangays. Their objective was to find access to the buyers in
the demand center of Manila market that could absorb their
substantial production from the area. From the clusters,
calamansi volume was as much as 15 tons weekly which they
intended to consolidate for the Manila buyers through a
Cagayan de Oro-based Market Facilitator.

The formation of clusters for common calamansi marketing
was assisted by the Xavier Agricultural Extension Service of

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the College of Agriculture Complex of Xavier University and
the Catholic Relief Services - Philippines. Majority of the
cluster members are Visayan growers, predominantly women.
But about 20 percent of the cluster membership was
comprised of an indigenous group, the Subanens.

Despite the extensive planning done, the first four product
deliveries to Cagayan de Oro City, a 10 to 12-hour travel
from Siay, were challenged by problems. During the first
delivery, the truck that the cluster hired was not able to catch
the boat at the Cagayan de Oro port. So discouraged were
the clusters because their calamansi arrived at the port just as
the ship for Manila was departing. The clusters were
compelled to unload the calamansi at the local wholesale
market at only 60 percent of the agreed price with the market
facilitator.

The Facilitators made sure to immediately convene an
assessment because the clusters had doubts they could
make it. A few weeks before their first test marketing, the
local agents and assemblers of the long established trader in
the community had told them it would be too complicated for
the farmers to undertake it. The cluster leaders realized from
the assessment that the main problem was the operational
flow, i.e. the agreed time for the truck departure from Siay at
eight o’clock in the evening was not followed. And this was
traced that not all the clusters could comply with the agreed
consolidation time of six in the evening. The clusters made
improvements in their operational flow that is part of their
clusters’ supply plan.

While the operational flow was improved, the second delivery
a week after was confronted by another problem. The buyers
complained that not all the calamansi sent to them was not
standardized at 25 kg/wooden crate as agreed. This was
costly on their part because they were the ones who paid for
the ship freight from Cagayan de Oro to Manila. Again, the
clusters addressed the problem by ensuring that all cluster
members use a weighing scale to standardize wooden crate

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content, and that a label traceable to each grower and cluster
should be implemented to impose discipline because an
agreement with the buyer is a promise to deliver on a
commitment.

On the third delivery, another problem surfaced. The truck
hired broke down in transit. A rescue truck had to be
immediately hired. While the calamansi still arrived in time at
the Cagayan de Oro port, the trucking cost was 50 percent
higher which affected significantly the net returns of the
growers. So in the assessment before the next delivery, a
cluster leader was assigned to survey the different truckers
and ensure that the truck hired would be in good condition.

By the time the clusters made the fourth delivery, most of the
problems were resolved. But a different one came up. The
local trader had reacted with a price war. By this time, the
clusters had already become confident to confront the new
problem. The regular assessments had taught the clusters
that marketing is such a dynamic activity and they would
succeed if their management would be that of constant
improvements. Their early experiences made the cluster more
forward-looking and proactive in its agroenterprise activities.

About two years after the first delivery, the clusters had
delivered a total of 482 tons of calamansi and accumulated a
total of PhP 278,700 organizational funds from the
management fees and the savings. The growers organized a
formal cooperative called Zamboanga Sibugay High Value
Crop Marketing Cooperative (ZASHIVAC) to be able to enter
into business agreements with the institutional market, the
processors. In the course of their marketing experiences over
the past two years, the clusters realized that the wholesalers’
market is not stable because it was always determined by the
market forces of demand and supply. The institutional market
would be a predictable market and they are willing to come up
with two annual “lock in” prices (for the dry and the wet
seasons) as well as commit to a regular supply by adjusting
their farm activities to be able to address the need of this type

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of market. And they are hopeful that their organization, the
systems they have installed and their track record of supply
would convince the institutional buyers that they need not
worry in having to deal with small growers.

Contributed by: Earl Villota, Bert Sabar, Mirza Rivas, Analiza
Digdigan and Floro Israel

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Cluster Story No. 7

SMALL, STEADY STEPS TO BUILD A MARKETING
ENTERPRISE FOR MAGUINDANAO’S
ORGANICALLY GROWN, TRADITIONAL RICE

The rice farmers of Maguindanao have been growing their
traditional rice varieties, mostly the Kawilan and Tibi-tibi
varieties but have depended entirely on rains as their source
of water. In this condition, they have been so disadvantaged
in the market. Traditional rice varieties are not considered
“premium rice” compared to the new so-called “high yielding”
varieties. Although better tasting, they are assigned a lower
price by the traders compared to the new “high yielding”
varieties. Also, rice millers say that the palay (i.e. the rice in
raw form) from rainfed farms yield low milling recovery
compared to those from the irrigated fields when converted to
milled rice.

Exacerbated by other limitations such as lack of adequate
postharvest facilities like solar dryers, storage building and
transportation, and being unorganized, the farmers are forced

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to sell their wet palay during the peak harvest times when the
prices are at their lowest. Without good returns, farmers have
had little incentive to improve production.

In Year 2005, with the support of the Catholic Relief Services
(CRS), Kadtuntaya Foundation, Inc. through the Peace and
Agricultural Development for Sustainable Livelihood in Central
Mindanao (PADSLCM) extended production improvement
and marketing assistance to the rice farmers. The farmers
from 6 barangays (Bulod, Damalusay, Adsoy, Damakling,
Poblacion and U. Idtig), all in 2 municipalities (Paglat and SK
Pendatun) of predominant Muslim Maguindanao Province
were organized into clusters. In this small group, farmers
went through the learning process of understanding their
production and marketing conditions, and then proceeded to
establish improvements in their production practices. This
was a basic important step recognized before the actual joint
marketing is to be done.

The Farmers’ Field School (FFS) was set up using a 1
hectare demo farm. Twenty five farmers representing the
clusters in the 6 barangays involved in the project got
practical knowledge and skills on the Natural Farming
Technology System (NFTS) approach. They were guided by
the CRS Agri Extension Staff from land preparation to post
harvest activities, incorporating the formulation & applications
of organic concoctions as fertilizer, insecticides & pesticides
for crop care and protection.

The learnings in the FFS were applied by the participants in
their own family rice fields that in effect became also the
demonstration sites for other farmers in the community. So
far, of the 34 clusters formed involving 444 rice farmers
distributed in 6 barangays, close to 65 percent have already
adopted NFTS technologies. For the NFTS adoptors, their
production costs have reduced dramatically and they have
also reduced their dependence on outside financing for
inorganic inputs from the traders/financiers. This core of
independently producing rice farmers was envisioned to pave

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the way for a collective marketing effort to have more chances
of success.

While the NFTS technology adoption was fast, the marketing
activities were done with much caution. Maguindanao is an
area with well-entrenched traders and it was difficult for a
project to introduce a situation of tension in an area that was
already experiencing a volatile peace and order situation.
Thus, the marketing chain favored in the strategizing was to
work with existing “friendly” traders and market chain actors to
be able to sell the bulk of the wet palay produced by the
clusters, but to also gradually build the market chain of
processing the palay into milled organically grown rice
directed at consumers so that Maguindanao rice as premium
product could be communicated to the consumers.

In the first harvest season of joint marketing last September to
October 2006, only 11,500 kilos (230 sacks) of palay was
consolidated as majority of the farmers are still tied up with
the traders that provided them inorganic inputs. This quantity
of rice was facilitated by KFI to be processed into milled rice
marketed, and were then sold under test marketing to in
Cotabato City where KFI holds its office. The financial
performance of this first marketing venture was however a
loss. CRS staff then assisted that a value chain analysis
could be done to pinpoint the bottlenecks in the marketing
activities that needed to be addressed, as well as to
understand the cost and returns in every product move from
the farms to the consumers.

With the confidence gained from the lessons of the earlier
marketing experience, the cluster leaders for the current
harvest season (September to October 2007) set a higher
target of 2,000 sacks of consolidated palay (with a modest
contribution of about 5 sacks from each cluster member into
the joint marketing venture). This volume targeted would be
10% of the member’s potential harvest but it was a good
target in terms of working out a transition for marketing in a
community long dominated by traders.

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Operationally, the 30 clusters are organized into 6 Peoples
Organizations or POs who carried out the purchasing and
consolidation of fresh palay in their respective barangays.
The palay is picked-up by KFI for postharvest processing
utilizing the facility available in the nearby city of Tacurong.
For now, the well-milled rice marketing activity is principally
managed by KFI but along the process, as efficiency levels
are established, the PO Marketing Officer from the barangay
of Adsoy, Marynisa Paglala, is learning the business together
with the KFI staff in preparation for the eventual transfer of
functions to the POs.

In the future, federating the six POs is the logical step to take
to consolidate and market with efficiency, invest economically
in joint postharvest facilities, as well as cater to the demand of
buyers for quality and delivery reliability. On the part of KFI
facilitating market outlets, it has developed its own market
strategy for the fast turn-over of the milled rice. CRS has also
provided small infrastructure support such as solar dryers,
shallow tube wells for water supply, modest storage buildings,
and trailers.

In the midst of challenges, the assessment and reflection
activities on the various activities have been helpful in KFI
staff with the cluster leaders being able to come up with the
necessary improvements. Indeed, teamwork is at work and
this is one of the strengths recognized in the partnership. It
is half way the harvest season, and the clusters have so far
consolidated 30,077 kg (601 sacks), looking ahead that they
can reach their 2000 sack target level of marketable palay.
Small gains but moving towards a clear positive direction in
bringing the farmers actively involved in the market up to the
consumers’ end.

Contributed by: Hai Arap, Nonita Alim, Jim Dalgan and Floro
Israel

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Cluster Story No. 8

SMALL IMPASUGONG SQUASH FARMERS
MOVING INTO THE MARKET WITH THE
VEGETABLE INDUSTRY GROUP IN NORTHERN
MINDANAO

The Municipality of Impasugong in Bukidnon is a highland
blessed with cool temperature suitable for vegetable
production. Twenty five (25) small farmers in the municipality
have organized 4 squash clusters in 4 barangays. The
cluster members take turns planting squash beside their corn
plants. Each cluster member is assigned a particular week
when to plant based on a planting calendar so that there is a
weekly harvest. So that the farmer has his farm requirements
at the time of planting, he can borrow production capital for
farm inputs from the local cooperative, the Kauyagan Savers
Cooperative (KSC).

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The Catholic Relief Services (CRS) in partnership with Kaanib
Foundation, Inc.(KFI) and the local government through its
Municipal Economic Enterprise Development Office (MEEDO)
has collaborated to assist small farmers in production and
marketing support. CRS provided a fund deposit in KSC
which is used as leverage fund, and KSC directly lends
production capital to the farmers equivalent to two times the
leverage fund.

Every Wednesday morning, a cluster member harvests
squash. This is brought to the nearby City of Cagayan de Oro,
about 2 hours drive from Impasugong. The squash is
unloaded at the consolidation center of the Northern
Mindanao Vegetable Producers Association, Inc. (NVCC).
KFI is a member of the NorminVeggies that owns the facility
established with counterpart support from the vegetable
association’s development partners, particularly the
Department of Agriculture (DA) and the Growth with Equity in
Mindanao Program (GEM-USAID). As member, KFI gets an
allocation of NorminVeggies market for its assisted farmers
not only for squash but for 4 other vegetables, namely: sweet
pea, eggplant, ampalaya and spring onions and for which
clusters have been formed.

Every Thursday, the cluster member’s squash is marketed by
NorminCorp (the marketing group for NorminVeggies’
members) together with 10 other items to a supermarket in
the neighboring island of Cebu. It is loaded in the boat and
upon arrival in Cebu, the supermarket representative
withdraws the vegetables from the port and brings them to the
supermarket’s warehouse where Normincorp’s representative
will have them received, and then will issue a charge invoice
that is the basis for the admin staff to work on the payment
transfers by bank a week after the vegetables are received.
Normincorp forwards all payments to KFI that facilitates that
KSC’s loans are paid and net payments are given to the
cluster members.

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For its marketing service, Normincorp charges a service fee
at the rate of 5 percent of the sale value. With the marketing
fee, the cluster member is also charged another 5 percent of
the sale value for the management fee provided by the cluster
in consolidating the product. Based on experience, the
cluster members are willing to pay the fees as long as they
can be covered by the additional earnings generated from
organized marketing to targeted buyers. Normincorp uses its
bargaining influence in handling high volumes of assorted
vegetables to get the best price possible for the supermarket
and wholesale market where price is pegged weekly and
daily, respectively.

On October 11, 2007 when the price of squash negotiated
with the Cebu supermarket reached PhP 9.50 per kilo, the
price of the Cagayan de Oro spot market traders was only at
PhP 5.00 per kilo Deducting Cebu shipping and handling
costs at PhP1.50 per kilo plus the Normincorp marketing fee
(5 percent of sale value) at PhP 0.48 per kilo, as well as that
of the cluster’s management fee at PhP 0.48 per kilo, the
cluster member still has a net price of PhP 7.04 per kilo which
is way above the trader’s price of PhP 5.00 per kilo at the
Cagayan de Oro wholesale point.

Only 2 tons of squash with weight of a minimum of 2 kilos are
sent to the Cebu supermarket. The rest are sold by
Normincorp to its network of 30 wholesaler/buyers from the
neighboring provinces in Mindanao that are not vegetable
producing. At times when the clusters cannot deliver due to
weather problems, Normincorp taps from other
NorminVeggies’ members so that its market supply
agreements to the supermarket can be complied. This back-
up support has been very helpful that the Impasugong
clusters can sustain and hold the markets.

Only about a year ago, the cluster members were individual
producers with no bargaining influence relative to the
markets. Lacking information on market players, and an
understanding of how markets can work to their advantage,

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they just involved themselves up to production and sold their
vegetables to the local assemblers or agents of the
wholesaler/traders in the nearby Agora wholesale market in
Cagayan de Oro City.

With the CRS program support where farmers could be
organized into clusters and could undertake production
programs, they have become a part of a value chain. But
while there is benefit in being part of the value chain, there is
also the work, the problems and the risks. And it has not
been easy complying with the supply commitments when
some farmers got affected with the white fly problem that
reduced the yields and when there was too much rain in
September that affected production. These challenges
encountered made it necessary that the clusters work within a
vegetable association where back-up supply could be
provided as the farmers were still learning about their
production systems and when uncontrollable factors like the
climate adversely affected yields.

As part of the chain moving to the supermarket with other
suppliers in NorminVeggies, the Impasugong cluster farmers
could undertake various activities (planting, crop
management, harvesting, sorting, grading, packaging,
shipping, selling to choiced markets) that give them higher
earnings which individually would be difficult for them all to
do. And the more the value chain is studied and discussed
with them, the more incentive is for them to work together to
earn more through joint marketing.

Contributed by Denis Pace, KFI Project Coordinator; Lou Ann
Gomez, KFI Marketing Officer and Juanito Barsomo, CRS
Agroenterprise Coordinator for Bukidnon

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Part III. Lessons Learned
IV.

Part IV

Lessons Learned

The clustering strategy for agroenterprise development is a
simple approach to assist small farmers to be organized and
produce based on market demands and opportunities. It can
be adopted by development service providers such as NGOs
and government agencies interested to undertake projects
that build the entrepreneurial capacities of farmers. It can also
be used to enhance projects focused on farmers.

Here are some valuable lessons of CRS-Philippines in its
SFMP pilot project experiences. It is hoped that they can help
development service providers reflect on roles and

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IV.

competencies in the complex and dynamic work of enabling
farmers to undertake marketing as a group enterprise.

1. Initial benefits are attained without too much risk if
projects start with what the farmers have and build on
available opportunities.

For farmers engaging in marketing for the first time, it is
less risky to improve existing products and enter new
markets, rather than to work with new products with new
markets. New products can bring higher earnings but
they also carry high risks. In the design of projects, new
products can be part of the expansion phase.

2. Securing the product supply base of a core of farmers is
the prerequisite for engaging the market.

Farmers’ capability to produce and to supply the
products the buyers want, even in small quantities at the
start but in a reliable and sustainable manner, is what
determines if the marketing venture is ready to scale up
commercially, remain at pilot/testing stage, or fold up.
Effective and timely extension services facilitate the
development of a core of farmers who serve as models
to other farmers on improved farm management
practices and sustainable production technologies.

3. Understanding marketing and market opportunities is
the key to a market-oriented, profitable farming.

The challenge for development organizations is to assist
farmers not only to increase farm yields but also to farm
profitably. This calls for a shift in development
interventions from just production-focused to a market-
oriented approach that emphasizes production
according to market opportunities and for income.

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Part IV. Lessons Learned

4. Helping farmers analyze market opportunities and their
product supply capacity relative to opportunities opens
their minds to new knowledge that empower them.

Tools in participatory research that lead farmers to
arrive at this type of analysis enable them to realize that
they are a crucial part of the market chain. They also let
them think of what they can do to gainfully participate in
it. This analysis relates directly to a practical challenge
and objective for them: “How to supply their product to
the buyer that interests them?”

5. Clustering is the new mode of organizing where farmers
can be competitive in the market, become attractive to
the buyers, and exercise ownership of their
agroenterprise.

The clusters are product supply units, proactively
planning production for the intended market. Being small
groups, they can keep pace with continuously changing
market conditions that require innovations from them.
The cluster is also the mechanism where each farmer’s
voice is heard and he/she can actively participate in
decision making as owner of the agroenterprise.

6. Guiding the clusters to go through an interactive
enterprise planning is a powerful process that starts
farmers to think in an entrepreneurial way.

This process “demystifies” business and guides farmers
to break up plans into pragmatic “doables” in marketing,
supply, management and finance. When farmers make
their financial plan, they will go through profitability
analysis and will recognize that they must pay costs and
service fees. Involving farmers will make them feel
ownership of the plan and widen their opportunity to
readjust them based on need.

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IV.

7. Cost payments, savings and organizational fund build-
up should already be integrated even at an early stage.

This will enable the farmers to have a realistic view of
business operations to make it succeed. This will also
emphasize to the farmers the importance to maintain
financial records and methods of financial management
which are basic skills needed in operating a business.

8. Development facilitators should only initiate the market
linkage. A market commitment which is a promise to
supply to a buyer must be made by the clusters
themselves.

Commitments are made by farmers because they are
the ones to weigh the opportunities with the risks on the
basis of their experiences, circumstances and
resources. In so deciding, they will own whatever is the
result and not blame the development providers for any
problem.

9. The clusters’ relationship is direct to the buyer. There
should be no layer in between them and the buyer.

This implies that the farmers in the cluster will get the
buyer’s price for the product that is promised to the
buyer. Marketing is through facilitation services and for
which they pay marketing service fees. This practice of
market facilitation ensures that farmers own the product
and will take responsibility for product quality and
delivery reliability up to the buyer’s end.

10. Test marketing will put a severe test on the clusters. It
is a period of steepest learning curve. At the heart of
viability is an assessment after every market transaction
and fast corrective measures.

Problems are expected. It does not matter what
problem will arise; what is important is that the clusters

180
180


understand the problem and they can make the decision
to correct it fast. Documentation of activities and
assessment of every product delivery is essential;
otherwise the farmers can get discouraged and lose
confidence.

11. It is alright for small failures and setbacks to happen,
and development organizations must not readily
subsidize the losses or costs.

In business, every product delivery is not necessarily
profitable. Computations are done across a period of
time and what matters is that the resulting income is
positive. Interventions become necessary though when
the survival of the enterprise is at stake. But clusters
can more likely cope with the rigors of business if they
have gone through adequate preparation before
marketing.

12. “Enabling” subsidies or grants may be required for the
clusters to undertake innovative practices or address
certain bottlenecks especially during the test marketing
stage.

But farmers have to be informed that these are only
short term support during the incubation stage of their
enterprise. It is important for the clusters to generate
organizational capital for investments in continuous
innovations.

13. When credit is needed, it is better to provide them
through organizations that have the expertise for credit
management.

The development organization’s role is just to reduce
risks through ensuring that technologies for productivity
are in place, the loan is used for its intended purpose,
field monitoring with technical advice is provided, and

181

IV.

built-in schemes of loan payment from product sales can
be installed.

14. Good monitoring, assessment and documentation guide
the clusters towards the needed innovations and provide
progress of clusters from test marketing towards scaling
up.

Business is unforgiving of inefficiencies. At scaled up
operations, enterprise operating policies and systems
have to be written. Records and reports have to be
regularly done. The advantage of scaled up operations
is that the clusters can move with lower costs which
allow farmers to feel the real benefit of their marketing
enterprise.

15. Linkages and partnerships will matter. The wider the
network, the more the support.

Involving the private sector, especially the business
sector, and the government translates into faster results
and practical solutions to challenges. Government
partnerships ensure that development support is
mainstreamed. In market linkage, considerable benefits
are attained if clusters can work alongside with bigger
producers or in partnerships with buyers.

16. Development service providers play an important role in
the initial stage of establishing the sound foundation for
agroenterprise.

Development investments are required in trainings,
capacity building (in the areas of production
improvement, business planning and management,
cluster organizing and strengthening), value addition
technologies, market research, partnership and linkage
building, and management support from business
practitioners or specialists.

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182


Agroenterprise development should not be rushed. At least a
2-year timeframe is needed for farmers to go through a
maturation process. It takes time for farmers to learn new
knowledge, new skills, new values, and to build their
organization and enterprise. It is largely a learning-by-doing
process for both the farmers and the development facilitators.

CRS-Philippine experiences demonstrate that the clustering
approach is a promising participatory, integrated capacity
building assistance to prepare small farmers for market
engagement. The development facilitator starts with a certain
number of farmers formed into a cluster. Then the market
“drives” its expansion as the farmers try to come up with more
supply of a given product for the market demand. At this
stage, the clusters take up their own dynamics for growth as
they pass on their experiences and skills to a bigger group
and then network for more advantages in the market.

What lies ahead for the clusters? Cluster development should
lead to formal business organizing. The cooperative may still
be the best business type. It is owned by members who
control and benefit from it. Unfortunately, their advantages
have been outweighed by financial losses due to
mismanagement that have made farmers wary of them.

Clusters linked with one another in a network, able to work
with markets and finances, generate savings and organization
funds, keep records and practice transparency, accountability,
and participatory decision making, can serve as good building
blocks for a strong farmers’ cooperatives or other types of
business entities, or even movements that can advocate for
development changes that bring lasting improvements: good
governance with policies and programs that favor sustainable
development of the farming sector.

183

References
References

References
Research Report

Digal, L.; Concepcion, S.; Cua Uy, J. Keys to the Inclusion of Small
Farmers in the Dynamic Vegetable Market: The Case of
NorminVeggies in the Philippines. Regoverning Markets Program.
Philippines. 2006.

Books

Catholic Relief Services. Preparing Farmer Groups to Engage
Successfully With Markets. A field guide for five key skill sets. A
product of the CRS and RII-CIAT Agroenterprise Study Tour Group:
Catholic Relief Services, Baltimore, USA and The Rural Innovation
Institute, CIAT, Cali, Colombia. July 2007.

Department of Trade and Industry. Industry Clustering: Inspiring Ways
to Competitiveness. A documentation project done by C.L. Follosco,
J.P. Tabbada, M.C. Garcia, A.M. Maghirang, G.T, Mirasol and G.S.
Recio. Export Development Council. Philippines. June 2007.

Food and Agriculture Organization of the United Nations. Horticultural
Marketing. Rome. 2005.

Ferris, S.; Best, R.; Ostertag, C.; Lundy, M.; Gottret, M. A Participatory
and Area-Based Approach to Rural Agroenterprise Development.
Centro Internacional de Agricultura Tropical. Colombia. 2006.

Ferris, S.; Kaganzi, E.; Best, R.; Ostertag, C.; Lundy, M.;
Wandschneider, T. A Market Facilitator’s Guide to Participatory
Agroenterprise Development. Centro Internacional de Agricultura
Tropical. Colombia. 2006.

Robins, P.; Bikande, F.; Ferris, S.; Kleih, U.; Okoboi, G.;
Wandschneider, T. Guide to Collective Marketing for Small-Scale
Farmers. Undated.

Wandschneider, T.; Ferris, S.; Lundy, M.; Ostertag, C. A Guide to Rapid
Participatory Methods for Analysing Markets. CIAT Rural Agro-
enterprise Project. 2006.

CRS Presentations and Workshop Proceedings

Catre, J. Community Processes. Paper presented during the
Agroenterprise Development Training and Workshop. Malaybalay,
Bukidnon, Philippines. May 21-26, 2007.

184
184

References

CRS Philppines. Proceedings of the Agroenterprise and Marketing
Manualization Workshop. Talomo, Davao City, Philippines. June 19-
23, 2006.

CRS Philppines. Proceedings of the 1st Agroenterprise Mindanao
Agroenterprise Learning Alliance (MAeLA) . Malaybalay, Bukidnon,
Philippines. 2005.

CRS Philppines. Proceedings of the 2nd Agroenterprise Mindanao
Agroenterprise Learning Alliance (MAeLA) . Maragusan,
Compostela Valley, Philippines. 2006.

Israel, F. Cluster Formation and Enterprise Planning. Paper presented
during the Agroenterprise Development Training and Workshop.
Malaybalay, Bukidnon, Philippines. May 21-26, 2007.

Mendoza, L. Coffee Quality Control Procedures. Paper presented
during the Coffee Buying Training and Workshop. Malaybalay,
Bukidnon, Philippines. January 15-19, 2007.

__________. The Territorial Approach & CRS Innovations. Paper
presented during the Agroenterprise Development Training and
Workshop. Malaybalay, Bukidnon, Philippines. May 21-26, 2007.

__________. Rapid Market Appraisal. Paper presented during the
Agroenterprise Development Training and Workshop. Malaybalay,
Bukidnon, Philippines. May 21-26, 2007.

__________. The Experience of CRS in Clustering Small Farmers.
Paper presented during the 3rd Mindanao Vegetable Congress.
Cagayan de Oro City, Philippines. October 25-27, 2006.

Uy, J. Marketing Concepts. Paper presented during the Agroenterprise
Development Training and Workshop. Malaybalay, Bukidnon,
Philippines. May 21-26, 2007.

__________. Cluster Formation and Enterprise Planning. Paper

__________. Cluster Enterprise Performance Monitoring &
Development. Paper presented during the Agroenterprise
Development Training and Workshop. Malaybalay, Bukidnon,
Philippines. May 21-26, 2007.

__________. Cluster Formation and Enterprise Planning. Paper

185

Credits
Design and layout:
Dinah Q. Tabbada, Alexander U. Tabbada and Lionel D. Mendoza

Front cover and computer graphics:
Xavier Aurelio Q. Tabbada and Linus T. Miranda

Artworks:
Joselito T. Jimenez

Photos:
CRS-Philippines Agriculture/NRM Program

186

SFMP

The Small Farms Marketing Project (SFMP) is a three-year program
(2004-2007) funded through the USDA Food for Progress Program
monetization. The SFMP aims to improve the livelihoods of 3,500 resource-
poor upland farmers in Mindanao by increasing the productivity of
marketable horticultural crops in small farms and by improving the efficiency
of domestic market chains for these products. CRS will support farmers
through (a) agriculture extension, (b) marketing assistance, (c)
infrastructure projects, and (d) by funding natural resource conservation
projects to promote the sustainability of agricultural development efforts.

The overall objectives of the program are:
[1] Increased on farm incomes for rural households; and
[2] Community-based environmental and conservation initiatives that lead
to improved natural resource management.

Program Components and Strategy

1. Agricultural Extension: Enhancement of farm productivity through
extension services assisting farmers to reduce their production costs
and risks and to maximize the production of quality marketable
produce.
2. Marketing Assistance: Identification of crops meeting consumer
demand and preferences through a farmer generated Productivity
Agenda; Marketing assistance in research and farmer-to-market
training designed to link farmers more efficiently to the domestic fruit
and vegetable supply chain.
3. Rural Infrastructure: Access to rural infrastructure inputs including post-
harvest handling and other equipment for activities promoting the
economic potential of farmer communities.
4. NRM/Landcare for Watershed Management: Improvement of on-farm
conservation in critical watershed areas allowing for sustainable
production and support to livelihoods.

CRS, its partners, and rural people are engaged in advocacy initiatives for
favorable agriculture and NRM policies at the local, national and
international level; and collaboration among diverse groups to clarify and
uphold shared rights and responsibilities over public and private resources
thru good local governance.

Approaches
The Agri/NRM program and its partners continue using well-tested
participatory rural and agro-enterprise development methodologies such as
COPAR (Community Organizing through Participatory Action Research),
the Territorial Approach to agroenterprise development and Integrated
Watershed Management.


Catholic Relief Services was founded in 1943 by the Catholic
Bishops of the United States to assist the poor and
disadvantaged outside the country.

It is administered by a Board of Bishops selected by the
National Council of Catholic Bishops and is staffed by men and
women committed to the Catholic Church's apostolate of
helping those in need. It maintains strict standards of efficiency
and accountability.

The fundamental motivating force in all activities of CRS is the
Gospel of Jesus Christ as it pertains to the alleviation of
human suffering, the development of people and the fostering
of charity and justice in the world. The policies and programs
of the agency reflect and express the teaching of the Catholic
Church. At the same time, Catholic Relief Services assists
persons on the basis of need, not creed, race or nationality.

Catholic Relief Services gives active witness to the mandate of
Jesus Christ to respond to human needs by:

• Responding to victims of natural and man-made disasters;
• Providing assistance to the poor to alleviate their immediate
needs;
• Supporting self-help programs which involve people and
communities in their own development;
• Helping those it serves to restore and preserve their dignity
and to realize their potential;
• Collaborating with religious and nonsectarian persons and
groups of goodwill in programs and projects which contribute
to a more equitable society; and
• Helping to educate the people of the United States to fulfill
their moral responsibilities in alleviating human suffering,
removing its causes and promoting social justice.

Agroenterprise Guidebook

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