GLOBAL COMMODITIES FORUM
7-8 April 2014
Using brand recognition to streamline and
shorten commodity value chains
by
Mr. Docherty
Windward Commodities
CFC
The views expressed are those of the author and do not necessarily reflect the views of
UNCTAD.
Using brand recognition to
streamline and shorten
commodity value chains
Windward Commodities
© Windward Strategic Ltd
www.windwardcommodities.com
Slide 1
Introduction; windward commodities
Windward Commodities turns low-interest commodities into high-value brands
for the benefit of producers in emerging markets by applying private sector
marketing and supply chain principles to development objectives. This leverages
intellectual property to capture value for producers by streamlining global value
chains.
partners
Sugar
Global
Coffee
Mexico
Oil
Caribbean
Nutmeg
Grenada
Pineapples
Ghana
Salt
Southern Africa
Energy
Latin America
Chillies
Zimbabwe
products
© Windward Strategic Ltd
Metals
United States
Cassava
Tanzania
Slide 2
Problem; the commodity bottleneck
Agricultural supply chains are increasingly dominated by a small number of major
buyers who form a ‘bottleneck’ between consumers and producers. This is partly
responsible for the increasing value captured by downstream activities. Branding
has the potential to provide leverage to producers through consumer demand:
Circumventing the buyer bottleneck through branding
Adapted from Grievink (2003)
Consumer
demand
Customer
BOTTLENECK
Retailers
Processor
marketing
leverage
Trader
BRAND
© Windward Strategic Ltd
Farmers
Leverage and commercial value increases
from upstream to downstream activities
Consumers
Producer
Slide 3
Problem; the limitations of certification
Certification marks such as Fairtrade or Rainforest Alliance provide leverage in
value chains at a low risk to producers but their proliferation – there are now over
126 separate marks – has lead to confusion and limited competitive advantage as
it has become more mainstream
© Windward Strategic Ltd
Slide 4
Opportunity; ingredient branding
Due to the dominance of manufacturing and own-label in commodity markets,
Windward focuses on developing “ingredient brands” (e.g. Intel inside) that support
manufacturers and retailers own brands rather than competing directly with them:
reward
low
medium
high
product brands
§
high
§
geographical indicators
risk
med
§
§
cer fica on brands
§
§
ingredient brands
§
supports
manufacturers
product brands
uses geographical &
cer fica on brands as
a pla orm
§
§
low
© Windward Strategic Ltd
Slide 5
Opportunity; product differentiation
Windward takes as a starting point that physical similarity is not necessarily a
barrier to branding. This is illustrated by three well known examples of primary
product categories, water, salt and oil where value has been successfully added
despite highly limited product differentiation:
U
S
$
0
.0
0
2
/litr
e
!
U
S
$
0
.7
6
/k
g
!
US$0.78/ litre
© Windward Strategic Ltd
U
S
$
2
.0
3
/L
itr
e
!
U
S
$
2
4
.0
0
/k
g
!
US$0.92/ litre
Slide 6
Case study; Barbados sugar
In common with many other Small Island Developing states, Barbados lacks
economies of scale to compete on price in world markets with global sugar
producers. This has been exacerbated by reductions in EU subsidies and a
traditional bulk export model that limits total benefits from the global value chain.
$1,400.00
$1,200.00
$1,000.00
$800.00
World price
EU subsidised price
$600.00
Barbados cost
$400.00
$‐
Jan‐06
May‐06
Sep‐06
Jan‐07
May‐07
Sep‐07
Jan‐08
May‐08
Sep‐08
Jan‐09
May‐09
Sep‐09
Jan‐10
May‐10
Sep‐10
Jan‐11
May‐11
Sep‐11
Jan‐12
May‐12
Sep‐12
Jan‐13
May‐13
Sep‐13
Jan‐14
$200.00
© Windward Strategic Ltd
Slide 7
Case study; branding objectives
The West Indies Sugar & Trading Company was created as a partnership between
Windward and the government of Barbados in order to, “Build a sustainable
business that supports the Barbados sugar industry through the development
of a profitable portfolio of sugar brands for domestic and export markets”.
© Windward Strategic Ltd
Slide 8
Case study; value chains
A focus on intellectual property and control of downstream operations has
streamlined the sugar value chain, creating significant added value for Barbados
producers. However, this has required extensive outsourcing, partnerships,
expertise and the resources to establish & manage complex supply chains:
traditional bulk
sugar model
Producer
Trader
Processor
Customer
Manufacturing
Bulk sales
Shipping
Financing
Import-Export
Processing
Distribution, IP, Sales
Retail
Food Service
Manufacturing
Consumer
Increased leverage and commercial value
with end customers and consumers
branded
sugar model
Producer
Manufacturing
Intellectual Property
Sales
outsourced
outsourced
Customer
Shipping
Import-Export
Processing
Distribution
Retail
Food Service
Manufacturing
Consumer
intellectual property management
© Windward Strategic Ltd
Slide 9
Case study; impact
Streamlining value chains through branding has created transparent, quantifiable
added value for producers. However, it is only one, partial solution to structural
issues in Barbados. Branding is a high risk activity, returns on investment can be
slow and need to be viewed in the context of wider industry costs and operations.
$1,200.00
$1,100.00
US$2.93m
incremental
income in
in 2014
$1,000.00
$900.00
$800.00
$700.00
$600.00
$500.00
$400.00
world price
$300.00
WISTCO price
M
Ja
n‐
11
ar
‐1
M 1
ay
‐1
1
Ju
l‐1
Se 1
p‐
1
No 1
v‐
11
Ja
n‐
1
M 2
ar
‐1
M 2
ay
‐1
2
Ju
l‐1
Se 2
p‐
1
No 2
v‐
12
Ja
n‐
1
M 3
ar
‐1
M 3
ay
‐1
3
Ju
l‐1
Se 3
p‐
1
No 3
v‐
13
Ja
n‐
14
$200.00
© Windward Strategic Ltd
Slide 10