Value Chain and Business
Model Approaches
Improved Food Security through the Commercialization of
Agriculture
FAO contribution to Value Chains Methodology
-------------------------Heiko Bammann, Enterprise Development Officer, AGS
FAO Rome
check: http://www.fao.org/ag/ags/index_en.html
Sequence of presentation:
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Value Chains – basic introduction
Inclusive Business Models
FAO support to VC development
Activities and tools supported
Initial lessons learned
Value Chain Approach
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A value chain is the full range of activities which
are required to bring a product or service from
conception, through the different phases of
production, transformations, and delivery to final
consumers and final disposal after use
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It is made up of a series of actors from inputs
suppliers to producers and processors to exporters
and buyers
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Aim: to elevate the value chain to ” higher level”
Improve profits
Critical Dimensions of a Value Chain
Inputs
Production Processing
Product Flow
Financial Flow
Information Flow
Incentives and
Governance
Retailing
Five Typical Action Areas/Steps
Selection of sector or product,
key issues and entry point
2.
Value chain mapping
3.
Participatory value chain
analysis
4.
Value chain action planning
(draft upgrading strategy)
5.
Stakeholder validation and
planning workshops
=> Develop a VC upgrading
strategy!
1.
Producer-Buyer linkages in VC
Institutional environment (laws, regulations, etc.)
Financial and Information flows
Inputs
Production
Buyer
Processor
Distribution
Physical flows
Supporting services
Consumption
Inclusive Business Models
Small farmers are increasingly tied to markets
and agro-industries through business
linkages and alliances with each other and
with other value chain stakeholders.
There are many models of business linkages,
but three are relevant for small farmers:
producer organisation model
 buyer driven model
 intermediary model
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Typical organisation of
smallholder production
Type
Producer driven
Buyer driven
Driver
Small-scale producers
themselves, through
FO’s: ECTAD, CPGC


new markets
higher market prices
stabilize market position
Large farmers

extra supply volumes
Processors (Hot Mama, BEL)
Exporters (GUY)
Retailers (Super J, SLU)

assure supply

supply more discerning
customers

‘make markets work for
the poor’

regional development
Traders, wholesalers
and other
traditional market actors
Intermediary driven
Objective
NGO’s and other support
agencies
National and local
Governments i.e.
NAMDEVCO, GMC, NWC

Must Be a Business Case for
Working with Small Farmers
Business Reasons
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Smallholders’
comparative advantage
(premium quality)
Securing supply
Access subsidized inputs
Corporate responsibility
Community goodwill
Politics
Costs and Risks
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Product quantity, quality,
consistency, safety
Traceability & compliance
with standards
Loyalty and fulfilment of
commitments
Negotiation, coordination
and communication
Foundations of Sustainable Models
Organized &
empowered
farmers
Facilitating
policy
sector
Receptive
business
sector
Partnership
facilitator
Rationale for supporting Business
Models
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Reduce over reliance on multi-stakeholder
participatory approaches
Focus first on key VC problems
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Empower real development drivers
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Enhance reliability of raw material supply
Enhance competitiveness of agribusiness buyer
Business managers know their markets
SMAEs create value, buy products, generate jobs
Mainstream business thinking
FAO – AGS* supported
projects
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EU All ACP Agricultural Commodities Programme (EU AAACP)
– (E)
check:
www.euacpcommodities.eu/en
http://www.fao.org/ag/ags/ivc/en/
The Phase II of the CARICOM/CARIFORUM Programme for
Food Security - (I)
check: http://www.rlc.fao.org/progesp/pesa/caricom2/
* FAO Rural Infrastructure and Agri-Industries Division
For the Caribbean
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Focus on one product (group) and improved
value creation
Activities to achieve improved business
linkages, production, post-harvest handling,
value addition and marketing to local, regional
or international markets
Focus on farmers and agribusiness
organizations
Countries, Value Chains, and
‘Businesses’ supported
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BAR
– Onion VC
– BAS (I)
BEL
– Hot Pepper
– Hot Mama + (I)
DOM
– Pineapples
– NIPPA (I)
GRN
– Roots and Tubers – NEFO (E)
GUY
– Eddoes
– GAPA (E)
JAM
– Ackee
– PO’s (I)
JAM
– R&T
– CPGC (E)
SLU
– Fruits
– BVFO, etc. (I)
SVG
– R&T
– ECTAD (E)
CARICOM – Services
- CaFAN (E/I)
Overview of the business
model approach
What are differences?
Business models for improved
producer-buyer linkages (steps)
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Identification of the key driver
Analysis/Characterisation of the current
business model
Identification of the critical success factors for
buyers
Preparation of an upgrading business model
and financing plan
Identify sub-set of activities that project can
support without distorting viability, unduly
subsidizing, undermining sustainability
Characterization of Business
Model
1.
2.
3.
4.
5.
6.
7.
8.
Product: products sold, differentiation
Product flow and distribution
Clients: clients, numbers, why buy
Resources and capacities base
Activities: production, transformation, etc.
Key partners and collaboration
Costs and revenue
Expectations
Activities and tools
supported
1 - Business to Business
Coordination
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Addressing sources of uncertainty
Implementing contractual arrangements
(formal and informal)
Promoting trust, transparency and
collaboration
1 - Business to Business
Coordination
Possible tools:
 Information mechanisms to improve
transparency
 Workshops to identify bottlenecks and
better understand on each other’s role
 Strategic plans for management of the
chains operations
 Training in negotiating skills and developing
contracts
2 - Respond to Customer
Needs
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Ensuring processes and products respond
to customers’ needs
Synchronize product delivery and logistics
Improve information on customer
requirements
Implement quality and safety standards
2 - Respond to Customer
Needs
Possible tools:
 Market appraisal and surveys
 Train in good agriculture practices and postharvest and handling
 Train in agro-processing and value addition
 Train in standards and certification processes
 Develop product quality and safety grading
systems
3 - Add Value by Managing
Processes
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Identify and address logistics constraints
Appraising business to business processes
Developing organizational innovations that
improve delivery times
Reducing waste and protect the
environment from harmful production and
processing
3 - Add Value by Managing
Processes
Possible tools:
 Mapping exercises and workshops to
understand the flows
 Appraise financial institutions and support
loan applications
 Train in bulk buying and collective marketing
 Introduce switch to re-usable items
 Training in business, financial management
and marketing skills
Relevance of this approach for
the Caribbean?
1.
2.
3.
4.
Comparative advantage in production
Import substitution
Ability to absorb external price shocks
Receptive value chain actors
-> contribution to Food Security through the
Commercialization of Agriculture
Initial lessons learned
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Change of mindset for agricultural development
required (define roles)
Good management practices are critical!!!
Transparency, accountability and trust
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Business development services
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rather new in the agriculture sector
expensive for small number of beneficiaries
Time dimension
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private sector vs public sector
business success requires time
learn from failures
look for successes and learn from champions
Involve regional partners from the start (CARDI,
CaFAN, CABA, etc)
Thank You !