MAINSTREAMING AGRICULTURAL
INNOVATIONS:
The experience of PICS bags in West
and Central Africa
Purdue Improved Crop Storage
(PICS) Workshop
Accra, Ghana
April 2012
Study objective
To better understand the challenges
and opportunities for commercial
mainstreaming of PICS storage bags
(and future agricultural innovations)
© 2012 Bill & Melinda Gates Foundation | - 2 -
Agenda
• Objectives of Study
• Methodology
• Constraints/Challenges
• Supply Chain Investments
• Key Lessons Learned
• Recommendations
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Key Questions
• What is the current status of the supply chain in each PICS
country?
• What are key constraints (i.e., financial, structural, social) that
hamper supply chain development?
• What are key factors that drive decision-making among actors
to invest in the supply chain?
• How effective have strategies been to date in expanding
distribution channels and increasing bag sales?
• What are possible investments to reduce costs and enhance
efficiencies in the PICS supply chain?
• What are the key risks and critical success factors for the
supply chain’s growth and sustainability?
© 2012 Bill & Melinda Gates Foundation | - 4 -
Methodology
• Review of project documentation
• Review of existing literature
• Adoption of case study approach
• Develop set of tools
(SC maps, timelines, SC cost structure, interview guides)
• Broad-based stakeholder consultations
• Cross-country analysis
© 2012 Bill & Melinda Gates Foundation | - 5 -
Mapping the supply chain
NIGER
NIGERIA
PICS Niger
Omarou DAN MALKA
(Niamey, Tillabery)
Husa’a Enterprise
(Dosso)
Ibrahim
ZANGUINA
(Dosso)
Assoumane SALIFOU
(Tahoua)
Lela Agro
(Kano, Nigeria)
NIGER
BURKINA
Maman NA IYA
(Maradi)
ETS Nassamou
ABDOUL
(Niamey)
Malan Manirou OUMAROU
(Zinder)
NGOs
OPVN
Fasoplast
(Ougadougou, BF)
MANUFACTURING
N=2
NAT’L
DISTRIBUTION
N=5
REGIONAL
WHOLESALING
N=61
SEMIWHOLESALING
RETAILING
FARMERS
COOPS/TRADERS
PROCESSORS
GOV’T
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Timeline
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Cost Structure
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Innovation ecosystem
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PICS Mandate
①
DESIGN
determine best design for onepiece, commercially viable 3-layer
storage bag;
© 2012 Bill & Melinda Gates Foundation | - 10 -
PICS Mandate
①
determine best design for onepiece, commercially viable 3-layer
storage bag;
②
disseminate information on nonchemical cowpea storage methods
DESIGN
DISSEMINATE
INFO
© 2012 Bill & Melinda Gates Foundation | - 11 -
PICS Mandate
①
determine best design for onepiece, commercially viable 3-layer
storage bag;
②
disseminate information on nonchemical cowpea storage methods
③
demonstrate the most effective
cowpea storage methods
DESIGN
DISSEMINATE
INFO
DEMONSTRATE
© 2012 Bill & Melinda Gates Foundation | - 12 -
PICS Mandate
DELIVER
①
determine best design for onepiece, commercially viable 3-layer
storage bag;
②
disseminate information on nonchemical cowpea storage methods
③
demonstrate the most effective
cowpea storage methods
④
Develop SC for 3-layer plastic bags
DESIGN
DISSEMINATE
INFO
DEMONSTRATE
© 2012 Bill & Melinda Gates Foundation | - 13 -
PICS Mandate
DELIVER
①
determine best design for onepiece, commercially viable 3-layer
storage bag;
②
disseminate information on nonchemical cowpea storage methods
③
demonstrate the most effective
cowpea storage methods
④
Develop SC for 3-layer plastic bags
DESIGN
DISSEMINATE
INFO
DEMONSTRATE
© 2012 Bill & Melinda Gates Foundation | - 14 -
Key Assumptions
• PICS technology responds well to the needs of smallholders
• Training/promotional activities have been critical in
stimulating demand for PICS bags
• At $2-3 retail, PICS bags are accessible to the average
smallholder farmer
• Lack of availability of PICS bags among rural farming
households represents a formidable constraint
• Distribution networks are based largely on informal business
relationships and trust-based social capital
• Poor access to credit represents a significant SC growth
constraint
• Agro dealer networks represent optimal delivery channels to
reach rural smallholders
© 2012 Bill & Melinda Gates Foundation | - 15 -
What have we learned?
• Constraints
• Investments (project, partners, SC actors)
• Lessons Learned
• Recommendations
© 2012 Bill & Melinda Gates Foundation | - 16 -
Key constraints - Market
• Poor access to better and more timely information handicaps
profit-maximization and efficient allocation of resources
• Variability and high price of raw materials raise
manufacturing costs
• Low cowpea production dampens demand
• Limited applications for niche product
trims demand
• Thin margins at the retail level discourages
downstream investments
• Slow turnover raises risks and costs of capital
© 2012 Bill & Melinda Gates Foundation | - 17 -
Supply Chain Cost Structure
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Supply Chain Cost Structure
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Gross Margin vs. Interest Rate
(6 months)
8000
50 FCFA
6000
100 FCFA
4000
200 FCFA
FCFA
2000
0
24%
18%
12%
6%
-2000
-4000
-6000
-8000
-10000
-12000
6-Month
Interest Rate
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Gross Margin vs. Interest Rate
(2x, 6 months)
15000
50 FCFA
10000
100 FCFA
200 FCFA
Return on Invetment (FCFA)
5000
0
24%
18%
12%
6%
-5000
-10000
6-Month
Interest Rate
© 2012 Bill & Melinda Gates Foundation | - 21 -
Key constraints - Market
• Lack of competition impedes potential efficiency gains
(via price/process upgrades)
• Upstream payment defaults cause systemic SC bottlenecks
• Poorly adapted vendor networks (e.g. grain traders, FBOs)
• High up-front costs of PICS vs. alternative chemical-based
storage discourage cowpea traders’ uptake
© 2012 Bill & Melinda Gates Foundation | - 22 -
PICS vs. Chemical Methods (10 tons)
120,000
Chemical Methods
100,000
PICS Bags
COST (FCFA)
80,000
60,000
40,000
20,000
0
1
2
3
4
5
6
7
8
9
Storage Period (in months)
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Key Constraints - Logistics
• Delayed delivery/availability of bags due to poor
organizational and inventory management capacity
• High transportation costs reduce margins
• Lack of coordination b/w technical, promotional and SC actors
© 2012 Bill & Melinda Gates Foundation | - 24 -
Key Constraints – Enabling Environment
• Inflated prices at harvest due to food security programs
discourages storage
• Donor-drive, large-scale distribution programs
dampen demand
• High import tariffs/taxes on raw materials
• Weak contract and regulatory enforcement mechanisms
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Key Constraints - Social
• Project bias and “project price”
• Religious laws (i.e., interest ban)
• Reliance on informal, social networks
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Investments - Project
• Promotional activities (training, radio, TV, posters,
cell phone videos)
• Tripartite arrangements with co-financed procurement
• “Guaranteed market” thru purchase of PICS bag demos
• Support for organization of mobile caravans
• Hiring of PICS Business Consultants
• Organization of vendor meetings
© 2012 Bill & Melinda Gates Foundation | - 27 -
Investments - Partners
• Vouchers, trade fairs and
storage competitions
• Training and sensitization
of trainers/farmers
• Distribution of PICS bags
© 2012 Bill & Melinda Gates Foundation | - 28 -
Investments – SC Actors
• Radio advertisements
• Mobile caravans
• Credit/consignment sales
• Use of mobile vendors
• Phone marketing, word
of mouth
• Developing branded 3-ply bags (Fasoplast)
© 2012 Bill & Melinda Gates Foundation | - 29 -
Key Lessons
• Direct procurement financing carries significant risks
• “Guaranteed market” purchase of demos offers strong
incentive
• Agrodealer networks offer optimal distribution channel, but
not only game in town
• Relying on Public Extension services can be an effective way to
expose farmers but it is not a viable distribution channel.
© 2012 Bill & Melinda Gates Foundation | - 30 -
Key Lessons
• NARC’s play an instrumental role in building awareness of the
technology and promoting adoption
• Output market orientation and revenue model of grain trader
networks are inimical to PICS bags distribution
• Mobilizing existing social capital fundamental to SC
development
• Good coordination/communication among technical,
promotional and SC participants can enhance ROI
• Price does not impinge significantly upon farmers’
purchasing decisions
© 2012 Bill & Melinda Gates Foundation | - 31 -
Key Lessons
• Strong advantage in presence of multiple wholesalers with
direct sourcing arrangements to the manufacturer
• Sensibilization of vendors and vendor meetings can greatly
strengthen SC capacity
• Farmer sensitization and training and promotional activities
are critical in creating and stimulating demand
© 2012 Bill & Melinda Gates Foundation | - 32 -
Key Lessons
• PICS brand as mark of quality offers compelling value
proposition
• Price setting can discourage SC investments, especially
downstream
• Business consultants can play an influential role in facilitating
SC relationships and encouraging SC investments
• Progressive project launch over time allowed for refinement
and validation of strategies for improved impact
© 2012 Bill & Melinda Gates Foundation | - 33 -
Recommendations
• Avoid direct investments, maximize use of guaranteed market
and other zero-risk mechanisms
• Where feasible, channel promotional resources through
manufacturers to encourage early buy-in in product
development and marketing
• Promote the setup of inventory credit programs in
collaboration with NGO partners
• Lobby for PICS bags to be included in the list of
agricultural inputs
© 2012 Bill & Melinda Gates Foundation | - 34 -
Recommendations
• Ensure well-defined TORs and strategic recruitment of Business
Consultant (rural business experience, entrepreneurial
bent/history, broader market perspective)
• Reinforce vendor inventory management and marketing skills
through training and sensitization
• Enhance emphasis on PICS quality brand/certification during
training events
• Promote broader awareness of health concerns and risks
associated with chemical-based storage methods
© 2012 Bill & Melinda Gates Foundation | - 35 -
Recommendations
• Promote vendor meetings and better communication among
PICS partners
• Conduct a feasibility study into the potential for patenting the
PICS technology
• Explore exclusive licensing arrangements with manufacturers,
leveraging “licensing fees” to incentivize marketing and
product/brand development investments
• Encourage large volume buyers (e.g., NGOs, food security
programs) to procure cowpea stored exclusively in PICS bags
© 2012 Bill & Melinda Gates Foundation | - 36 -
Thank You!!
© 2012 Bill & Melinda Gates Foundation | - 37 -