Unilever developed an inclusive black soybean supply chain in Indonesia to source for its Kecap Bango soy sauce brand. It collaborated with local universities, NGOs, governments and farmers' cooperatives to establish the Farmers Development Program. This program provided training, extension services and guaranteed prices to smallholder farmers to increase productivity, sustainability and livelihoods. Through this program and working with regional commodity traders, Unilever was able to develop a sustainable supply chain and meet its sourcing needs while supporting local smallholder farmers.

1. © 2014 ir. A.R. Sjauw-Koen-Fa
SUNRISE 2.0 Case Study
Unilever’s inclusive Black Soy Supply Chain
August Sjauw-Koen-Fa

2. 1109135 © 2014 ir. A.R. Sjauw-Koen-Fa
Historical back ground of the black soybean
supply chain of ULI
• ULI acquired a majority stake in a Javanese company producer of sweet
soy sauce brand ‘Kecap Bango’ in 2001.
Regular suppliers of black soybeans are local and regional commodity
traders.
• Large Indonesian market for soy sauce, but growth of KB is limited by a
shortage of local black soybean.
• Possible sourcing strategies to expand soybean supply are:
- to import black soybeans
- to expand buying from regional commodity traders
- to develop of an own black soybean supply chain.
• ULI choose to develop an own supply chain of small-scale rice farmers.
• However, the smallholder farming system need to be upgraded to meet
market standards and sustainability agricultural practices.

3. 1109135 © 2014 ir. A.R. Sjauw-Koen-Fa
Collaboration model for smallholder supplier
development
• In 2003 Unilever Foundation and Procurement Indonesia start
collaborating with University of Gadja Mada (UGM), farmers
cooperatives, NGOs and local government.
• The aims of the Farmers Development Program (FDP ):
- To increase farm productivity
- To produce sustainable according the SAC
- To improve livelihood of farmers
- To build capacity in particular of cooperatives.
• Characteristics of the FDP: Price guaranty before planting,
buying commitment of all produced soybeans, provision of farm
services.
• Women primary role in the value chain are in sorting of
soybeans, although they also participate in planting activities.

4. © 2014 ir. A.R. Sjauw-Koen-Fa
Collaboration model of Black Soybean Farmers
Development Program
Cooperatives
G o v e r n m e n t
UGM & NGO for
community
development
Buying commitment
Unilever Indonesia
Foundation
Advisory
•Training / Skills Development
•Encouragement
•Community Development
Unilever
Indonesia.
Farmers groups
• The potential area selection
• Extension officer on field
• Cooperative development
•Operational support
•Capacity building
•Financial access
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FDP performance indicators 2007-2012

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Characteristics of relationship with
regional commodity traders
• Traders are selected: they have to comply to Unilever’s
business principles.
• ULI Procurement visits farming area and meet their farmers
to ensure they have dedicated, competent and reliable
farmers or farmers group.
• Formalized in Purchase order Document: Volume, fixed
prices, harvest time, quality, delivery condition and
commitments.
• Drivers of the relationship are not only price and buying
commitments, but also to be partner of ULI network.
• Traders use mostly informal verbal ‘contracts’, based on
long standing mutual trust.
• Could provide fertilizers, seeds or credit to farmers.

7. © 2014 ir. A.R. Sjauw-Koen-Fa
Critical success factors (1)
• Strong value proposition due to large potential market for
Kecap Bango. By using local produced black soybean the
brand has a clear connection to the rural economy and local
communities.
• Proactive sustainability program within Unilever
accompanied by clear ambitions regarding challenge of food
security and small-scale agriculture in developing and
emerging economies
• Provision of price guarantee before planting.
• Open and transparent pricing system, based on a standard
cost price calculation, provides space to cooperatives (and
farmers) for negotiation about the price and delivery
conditions.
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8. © 2014 ir. A.R. Sjauw-Koen-Fa
Critical success factors (2)
• A multi-stakeholder collaborative approach to bring public and
private resources and short and long term interests together.
• Focus of ULI Procurement and UIF on a common strategic goal:
Development of a sustainable smallholders supply chain for
the business.
• Clear division but compatible tasks, resources/funds and
competences, and open communication between ULI
Procurement and UIF are critical conditions for smallholder
supplier development.
• Existence of collaborative and committed cooperatives and
traders as intermediaries for facilitating smallholder supply on
a long term win-win and trust-base.
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9. © 2014 ir. A.R. Sjauw-Koen-Fa
Critical leverage points
• Pricing system and buying conditions
• Improvement of the relatively low yield per
hectare of black soybean: further
intensification
• Deepening of cooperation with regional
traders
• Review of curerend Collaboration model for
the FDP
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Challenges to scale
• Further improvement FDP
• Transformational of the Collaboration model to
facilitate doubling/tripling of the supply
• Broader assessment of other constrains of
producing KB sauce
• Implementing SAC (from FDP as well as Traders)
• Review of the sourcing model of the traders
• Review of internal organizational barriers to scale
(Procurement and Foundation)
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Inputs for procurement/supplier guide
• Define a concrete value proposition and an appropriated sourcing
strategy from a supplier development perspective.
• Transactional relationship with suppliers must turn into cooperative
relationship.
• Empower producers organization/suppliers to organize smallholder
supply effectively and efficiently.
• Collaborate with government and NGOs to help improve
smallholder farming system (a case of public-private investment and
benefits)
• Smallholder supply must be link to the market as reference to
determine the price and buying conditions.
• Create an accurate registration, monitoring and reporting system
of the planting process and build flexibility of contract prices to
minimize supply disruption.
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