COLOMBIA
Cape gooseberries in the Department of Cundinamarca
The farmers. There are 250 cape gooseberry growers in the Municipalities of Silvania and Granada, Cundinamarca. Of these, about 10 percent cultivate more than 10 000 plants, while the majority (70 percent) have fewer than than 5 000 plants. Seventy percent of the producers are regular suppliers of exporters.
The markets. The cape gooseberry has a very small domestic market. Recently, demand has strengthened, and countries such as Canada, Germany, Israel, Japan and the US have shown interest in the fruit. At present there about 300 producers of gooseberries in Colombia, two large exporters, ten small-scale exporters, about ten intermediaries who buy for the domestic market, and at least 30 small-scale retail traders (some of whom are producers) who take the fruit to markets. The producing area is well-placed near Bogotá airport and the Corabastos wholesale market, and transport to other cities is easy along the Pan-American Highway.
The linkages. Large exporters handle about 95 percent of the production in the area. At first, the export companies formed societies with the land-owning producers but changed their strategy after realizing that it is risky to participate directly in a business where production is subject to weather, pests and diseases. As a result, exporters have developed informal mechanisms that allow them to link farmers to their businesses in order to ensure a permanent supply of fruit according to market requirements. Agreements are not written, but everyone understands and accepts them. Farmers wishing to supply a major exporting company must sell them all of their production during the year, starting in the high season. The exporters emphasize quality and recommend that their suppliers plant less, so that they will have enough money to take care of all crop requirements and obtain a greater percentage of export-quality fruit. The exporters are committed to pay in cash or by cheque 15 days after delivery. Additionally, they buy the entire yearly production according to the pre-established parameters of quality and quantity. In recent years, small and medium-scale producers have begun forming partnerships with sources of capital for inputs. The cost of rent is shared, and the production is divided equally. The investing partners are usually landowners, traders, exporters or simply farmers who want to share the responsibility of the business with a working partner.
The results. Currently, the production of cape gooseberries generates 250 direct jobs in the production area and numerous direct and indirect jobs in commercialization.
Lessons and distinct features. Owing to the increase in agricultural and commercial activity, rural workers, attracted by the good prices obtained for fruit in the high season, form societies with other farmers in order to participate in the business.
Source: "Alternatives to improve negotiation and market access capabilities of small-scale rural entrepreneurs in Latin America" - AGSF Working Document (FAO, 2004)
ECUADOR
Cassava processing, Manabi Province
The processors. Some 230 starch factories in Manabí Province are engaged in cassava starch production, using mainly semi-mechanized or traditional processing systems. Cassava is grown in marginal areas, where other crops do not grow, and most cassava producers are small-scale farmers who plant on hillsides without irrigation.
The markets. About 80 percent of starch produced in Manabi is sold in neighboring Colombia. A smaller part of production is sold to national traders, who sell it wholesale to agro-industrial warehouses in the cities of Quito, Guayaquil and Cuenca, and to bakeries, confectioner's shops and agro-enterprises in the province.
The linkages. Farmers make verbal agreements with the starch factories and deliver their production in situ. Sometimes the factories pay farmers in cash at the moment of sale, and other times the producer must wait until the processor sells the starch. Colombian intermediaries go to the area with their own transport, contact agents familiar with the zone and negotiate with the different starch factories. Verbal agreements are made and in many cases the intermediary pays an advance, either in money or raw materials before the cassava is processed. The export process is not formal - rather, it crosses the border unofficially. The verbal agreement between these two agents of the chain is based on trust. The intermediary buys all or part of the cassava starch production from the processor in exchange for the processor's commitment to deliver a quality product. This agreement is made before the starch is processed, which enables the processor to plan production.
Training and support services. Since aid institutions have largely abandoned the zones where cassava is produced and processed, no public or private institution has supported or promoted this activity. The dynamics of this production have developed spontaneously due to market demand, particularly in Colombia.
The results. It is estimated that the Manabí starch factories provide permanent employment to 1 380 individuals. Starch processors have acquired negotiation skills and are capable of negotiating prices owing to the linkages they maintain with the different actors in the chain. Processors' earnings have increased and a large number have improved their processing infrastructure.
Lessons and distinct features. A factor of success in business linkages between the cassava processors and intermediaries is the generation of mutual trust through the fulfillment of verbal agreements.
Source: "Alternatives to improve negotiation and market access capabilities of small-scale rural entrepreneurs in Latin America" - AGSF Working Document (FAO, 2004)
INDONESIA (1)
Bimandiri company
The company. The Bimandiri company was established in 1994 and by 1998 was supplying four supermarket chains. Initially it purchased from local traders and individual farmers. In 2000 the company decided to become a dedicated wholesale supplier only to Carrefour (Indonesia) and to develop a sustainable procurement system. Bimandiri does not produce its own vegetables, but rather has organized production agreements with different smallholder farmer groups in the Lembang region of West Java.
The markets. Bimandiri supplies a range of products to Carrefour. It has created an exclusive product, the individual-sized Baby Black Watermelon, which is planned to be marketed to other Carrefour stores in SE Asia in the coming years, and is collaborating closely with Carrefour on broccoli and chili production, aiming to produce standardized products.
The linkages. Bimandiri's procurement system encourages farmers to work in groups and to deal with Bimandiri through partnership arrangements. Such arrangements now form around 30 percent of the company's purchases. It works with farmer groups on the basis of agreed quantities. Bimandiri supplies a range of inputs (seeds, pesticides, fertilizer), undertakes postharvest handling operations (selection, preparation, packaging, transport to Jakarta), provides training and associated activities, and arranges planting and harvesting schedules to ensure continuity of supply and consistent quality, to meet Carrefour standards. The cost of these additional services to growers is covered through the margin that Bimandiri receives from Carrefour. Prices are either fixed in advance or related to returns within a floor/ceiling price range. The company's margins are said to be fully transparent.
Training and support services. Under Bimandiri's Partnership Pattern Scheme, both the company and Carrefour provide growers with supervision and technical assistance. Specific projects for broccoli and chili production involve advice on product standardization and best farming practices.
The results. Birmandiri's gross sales increased from less than $US 850,000 in 2001 to more than $US 1 million in 2004.
Lessons and distinct features. Problems faced by Bimandiri include the level of commitment of farmers, seasonality of production and price volatility, and the occasional inability of Carrefour to fully absorb the supply, resulting in loss-making sales to traditional markets. However, prospects are encouraging, as supermarkets in Indonesia expand and demand for horticultural produce increases.
Source: "Organizing the Supply of Fresh Product for Carrefour in Indonesia", by A. Rivani and Sandredo (Bimandiri, 2005)
MYANMAR
Jujube growers in Patheingyi Township
The growers. Jujube growers in Patheingyi township, the main jujube producing area in Myanmar's Mandalay Division, have farms varying in size from 0.5 to 5 acres. Some large growers have up to three farms. Growers in other towns in Mandalay Division mainly sell to large-scale wholesalers in Yangon and Mandalay, and over-supply often leads to falling prices and reduced profit margins.
The markets. The Patheingyi growers sell their produce mainly at Muse Town, 300 km away on the Myanmar-China border. The Muse market was first tapped by traders in mango and watermelon. Demand for jujube in China increases in the weeks before the Chinese New Year. Buyers prefer the green matured fruit, which is suitable for long-distance transportation to markets in Yunnan province, China.
The linkages. Jujube is packed in cardboard boxes purchased from factories in Mandalay City. The Patheingyi growers usually ship their fruit to intermediaries in Muse using their own trucks or hired vehicles. If the marketed volume justifies a pick-up truck, the driver comes directly to the farm to load the consignment. The fruit is transported in consignments ranging up to 500 boxes, across mountain roads and through security and taxation checkpoints. In Muse, the drivers deliver to intermediaries, who contact Chinese buyers and negotiate prices. The drivers usually bring the sales revenue back to the growers with a voucher signed by intermediaries (if the sale value is high, the intermediaries send cash to their suppliers through a private bank, and pay bank charges). Payment is in yuan, which can be exchanged for local currency at a money changer in Muse. Five percent of the sale value goes to the intermediary. Before sending fruit to Muse, some growers contact their trading partners in order to have market information on prices, supply and exchange rates. Other growers gather information from truck drivers returning from Muse Town.
Training and support services. The Mandalay City to Muse road was constructed and is maintained by a private company. At Muse, Myanmar's Ministry of Trade operates an office to develop and facilitate border trade. Jujube farmers received training in techniques of grafting or budding from the Myanmar Agriculture Service, which also provides grafted seedlings at a reasonable price. Some farmers sell grafted seedlings to other farmers in the main surplus-producing areas.
The results. Generally speaking, profit margins on jujube are higher in Muse Town, compared to those in Myanmar's urban wholesale markets, in part because intermediaries' commissions are lower. However, margins are at times squeezed by over-supply, rejections by buyers, and exchange rate fluctuations.
Lessons and distinct features. The jujube trade with China presents an example of a linkage developed by farmers and traders without significant external support. The potential for sustainability appears to be high. At present, the Patheingyi growers lack refrigerated transport and Muse lacks cool storage facilities. If these were available, along with more reliable market information, growers' profit margins could increase.
Source: Kyaw Myint
THAILAND
A vegetable trader
The supplier. Mr. Thee, a professional vegetable supplier in Chiang Mai, specializes in chemical residue-free (CRF) vegetables. He assembles produce, such as head lettuce, cos lettuce, Chinese cabbage, Japanese cucumber and Japanese pumpkin, from 40 farmers.
The markets. Mr. Thee delivers his produce to three buyers in Bangkok, two of whom are companies, and one an independent businessman. These buyers are all suppliers to the TOPS and Lotus supermarket chains, while one of them also exports fresh produce. From past experience, he finds it advantageous to deal with these companies since the market is assured and his revenue is reasonably certain.
The linkages. The supply chain upstream is a modified form of contract farming, based on mutual trust and without a written contract. In order to obtain CRF vegetables, Mr. Thee conducts residue tests 20 days prior to harvesting. To prevent growers from delivering non-member's vegetables, Mr. Thee visits growers' plots before harvesting to estimate production and observe chemical applications. He is responsible for quality inspection, grading, dressing, and packaging. The buyers do not provide him with exact product standards or grades, except for head lettuce. After grading, vegetables are kept in cold storage, normally for one day, before consignment to Bangkok. Payments are made seven to 15 days after delivery. Mr. Thee is responsible to his growers for financial, production and price problems, as well as for late payments.
Training and support services. Capital investment for Mr Thee's business consisted of a five-year loan from the Bank of Agriculture and Agricultural Cooperative (BAAC) at a low interest rate of 12 percent per year, a small short-term credit from the Residual-Free Vegetable Fund, and his own funds. Mr. Thee provides his members with farm manure and installed sprinklers, with costs deducted from gross revenue without charging interest. He designed sampling methods for his growers to guide them in collecting sample vegetables which are forwarded to the collection centre for CRF testing. Government agencies provided technical training to farmers.
Lessons and distinct features. This case study shows that relatively small-scale traders can overcome farmer suspicion (and the hostility that some government officials have towards the private sector) to develop long-term trusting arrangements. A precondition for such a linkage is the availability of markets for quality produce, in this case provided by two supermarket chains.
Source: "Regoverning markets: Securing Small Producer Participation In Restructured National And Regional Agri-Food Systems In Thailand", by Aree Wiboonpongse and Songsak Sriboonchitta, Chiang Mai University, Thailand (2004)
SYRIA
Caper market in desert areas of Syria
The collectors Caper collection from wild shrubs is a relatively new occupation and source of additional income for the resource-poor nomadic communities living in the Syrian desert areas, in particular in eastern and northern Aleppo province, Al Salamie and Al Jazira areas. Collectors are mainly children (6-14 years old) and women. The estimated yearly harvest in Syria is about 4,000 tonnes.
The markets Caper (Capparis spinosa L.), a spiny, heat resistant shrub is not cultivated in Syria as in other Mediterranean countries, where it is the source of a well-known condiment in the Mediterranean cuisine. The flower buds are collected by Syrian communities for foreign trade and consumption. The product is processed mainly in Turkey and consumed in Europe and the local market is almost non-existent. The amount of capers collected, the price and number of people involved in the collection depend on the yearly demand of foreign traders, which fluctuates greatly.
The linkages A collector chief is responsible for a group of caper collectors in each area. The collector chiefs liaise with a manager of a company, who defines the price. Part of the money is used to pay the collectors and, sometimes, the rent of the premises where the handling takes place. Handling the caper buds involves entire families working, mainly in their homesteads, without any value-adding activities. The caper buds are only sorted by size, with a rudimental tool, mixed with salt and stored in plastic containers. After that, they are collected and stored by the manager of the company, who will then sell the capers to foreign traders. Finally, the foreign factories further process and bottle the capers. After being branded, the product is sold on the European market with a high mark up.
Training and support services A pilot market chain analysis involved collectors, processors and traders, policymakers and cultivation specialists in order to identify ways to generate market value and reorganize the chain to generate income for the resource poor. A multi-stakeholder meeting with the market actors was organized in the collection area of Jabal al Hoss. The meeting brought together the market actors to discuss means of further developing the caper market.
The results The participatory pilot study highlighted the fact that collection contributes about 20 percent of the yearly income of the collectors and represents an unexploited economic potential if the identified commercial barriers could be overcome. The major constraints recognized in consultation with the various market actors were (i) the lack of cultivation practices, (ii) harsh working conditions, (iii) lack of training or machinery for value-addition, (iv) high fluctuation of demand and price with unstable supply, and (v) lack of control of the marketing chain by the suppliers, poor market transparency and little trust among the actors. Considering these constraints, some opportunities to enhance the market were identified by the market chain actors during the multi-stakeholder meeting, as follows: (i) horizontal integration through cooperatives of collectors to increase their benefits, (ii) vertical integration of collectors and traders through the involvement of the business sector to benefit the rural communities, and (iii) development of caper cultivation practices supported by the government and local institutions. Through the process of the multi-stakeholder meeting, some collectors, collector chiefs and traders discussed quite openly the reasons for the mistrust among them. The Government officials and the national researcher could also get the insights of the collectors of what it is missing to improve the supply (in terms of quality and quantity) and gain traders' trust.
Lessons and distinct features More attention should be paid to products offered as a result of local biodiversity. These are often easily accessible to the resource poor. However, to improve the livelihoods of the poor communities managing these resources and to exploit the economic value of the diversity, market values have to be enhanced by engaging chain actors to reorganize the market chain and increase the trust in one another. Actions towards this achievement imply a high level of commitment and joint actions by research, development agencies and local institutions.
Source: Alessandra Giuliani, IPGRI (2006): "The caper in Syria: nature's gift to Syria's resource poor", IPGRI (2005)
BANGLADESH (1)
Market Extension Training of Community Based Organizations/
Farmer Groups in North West
The farmers. Marketing training has been provided to some 80 community-based organizations/farmer groups in the districts of Rajshahi, Bogra and Dinijapur through the Swiss-funded Livelihoods, Empowerment and Agro-Forestry (LEAF) project and 12 locally based NGOs. Most of the groups are female and consist, on average, of 28% small farmers, 35% marginal farmers and 37% extreme poor. In the first stage of a six-step marketing course, the farmer groups carry out a resource audit to identify marketing problems, select two to four products for analysis, and appoint a marketing task force of four to six people. The task force carries out its own in-depth market research, and presents recommendations to the group, which then draws up a marketing strategy and an action plan allocating tasks and responsibilities.
The markets. Before the marketing education, most of the farmers sold their surplus individually to local traders who visited their villages. About 90% of output is consumed within 10 km of production.
The linkages. In carrying out market research, farmers were able to establish linkages with larger-scale traders. For example, they used mobile telephones to call in wholesalers when their consolidated production reached a specific critical mass, e.g. 50 chickens for a traveling chicken trader. Very often, they developed a partnership approach, adapting production to meet their new trading contacts' recommendations, e.g. value-added products such as jute mats, improved varieties, introduction of hybrid chickens, and creation of a milk collection centre in order to be included in a dairy processor's milk round. Potato farmers collectively rented cold storage space which reduced costs and enabled them to sell during the off-season at higher prices. Through discussions with traders, they learned how to adapt their vegetable production to match demand, e.g. early and late season crops, higher priced niche products and the use of preferred cultivars.
Training and support services. The individual training courses are spread over a period of about four weeks, each individual step lasting no more than 2 hours (except for market research, which may take up to a full day). When new products are being developed, local service providers and NGOs provide some subsequent training, e.g. bag manufacture, embroidery and sari painting. By May 2005, some 80 courses have been given, of which about 50 have been in place for sufficient time to show measurable results, i.e. between three and 14 months. Some 75% of the 2000 groups in the project have now requested marketing training as part of their annual plans. Farmers are provided with their training courses free, although they tend to cover 50% of the costs of service providers.
The results. Farmers found improved ways of working with local traders or took their product to a higher level in the marketing chain. Because farmers identified their own markets and niches, about 75% of groups have diversified into new products, thus avoiding over-supply. Results show an average increase in additional value added (a measure of the additional cash income less costs) typically in the range of $ 2 000 to $ 7 000 with an average of $4 300 per year per group. The ME course has lifted individual family incomes for participating members by 32%.
Lessons and distinctive features. The six-step training course is highly practical and is focused on providing farmers with the tools to carry out their own market research, develop an action plan, negotiate with traders, develop new products and to organize themselves. They are now seeking assistance in linking to larger traders, developing new skills and, to a lesser extent, managing funds.
Source: Grahame Dixie
BANGLADESH (2)
Mushroom contract farming in an urban agriculture setting
The farmers. Twenty poor households grow oyster mushroom in Mymensingh city. These households are beneficiaries of the FAO component on sustainable livelihood development of the Local Partnerships for Urban Poverty Alleviation Project (LPUPAP). They have access to small plots of land next to their houses. Mushroom production does not require much space: a clean, dark and ventilated room with shelves is all that is needed. The inputs into the production process are mushroom spores, bamboo shelves, water to pour onto the mushroom cultivars, and formaldehyde to clean the production room. The mushroom is grown out of plastic bags containing spores and the nutrient base. Up to 200 bags can fit in a space as small as 2 m² . Harvest starts seven days after the start of the culture and can last four months; each bag of spores can produce a minimum of 2 kg of mushroom.
The market. Abdul Kader, based in Mymensingh, also produces mushroom himself but collaborates with the project to source more produce which he then sells. He supplies the spore bags to the farmers and buys the fresh mushroom from them four months later. He travels the two-hour drive to the capital, Dhaka to buy the mushroom spore bags which he sells to the farmers, making a gross profit of Tk4/bag which covers the transport costs of Tk1.5/bag. He also makes a profit on the sales of the mushroom. Oyster mushroom is not a traditional food product in Bangladesh . Therefore his market is still a niche of educated urban households, Chinese restaurants or expatriates in Dhaka .
The linkages. An agricultural extension officer of the LPUPAP in Mymensingh knew Abdul Kader. He asked him to collaborate with the LPUPAP by training the project beneficiaries while enabling him to enlarge his production base. The project also negotiated the purchasing price.
Training and support services. Both the project and the trader provide training on production techniques. The LPUPAP provides some inputs to the producers in order to start up their mushroom production system: plastic hand gloves to wear when cleaning the production room and the sealing machine to seal the mushrooms into plastic bags. The project also provides signs and prints out leaflets to advertise oyster mushroom to local consumers to develop the local market for mushroom.
The results. With a selling price worth Tk100/kg of produce, a minimum of 2 kg of mushroom per bag of spore, a maximum of 200 bags on 2 m² , and production costs estimated at Tk9/kg of produce, oyster mushroom producers can make a minimum profit of Tk182 for every bag of spores they purchased at Tk14 per bag. The maximum profit for this production system can reach Tk40 000 (or around US$615) over a period of four months. This is not negligible for income-poor urban dwellers with some land to dedicate to agricultural production.
Lessons and distinct features. The model implemented by the LPUPAP appears to be sustainable in the fact that it uses a trader as an intermediary between farmers and markets. As long as the trader finds a market for his mushroom, he is encouraged to collaborate with the farmers. The project is helping to enlarge his market by advertising the mushroom production to local consumers and by printing leaflets on how to cook them. This model is thus an example of mutual benefit between extremely small landholders and a trader through the catalytic effect of a development project. With a micro-credit scheme due to be implemented in the next phase of the project, it can be envisaged that the small investments currently borne by the LPUPAP may be handed onto the producers; this will increase further the sustainability of this micro-enterprise development model.
Source: Jean-Joseph Cadilhon, FAO and Md. Farhad Zamil, LPUPAP–FAO
EL SALVADOR
Association of Indigo Producers of El Salvador (AZULES)
The producers. Members of the Association of Indigo Producers plant approximately 22.4 hectares of indigo, a natural dye. Automated and manual practices are used in production, depending on the size of the plot and the slope of the land. Producers plant between 0.5 and 2.0 hectares each. One hectare of indigo production requires 185 workdays during the useful life of the crop (three years).
The markets. In recent years, demand for indigo (which had largely been replaced by artificial dyes) has increased in markets that favour preservation of the environment and human health. The indigo produced by AZULES is sold on the international market, mainly in Germany.
The linkages. Primary producers, processors and agents are members of AZULES and all have clearly defined roles in the production chain. Primary producers are responsible for agricultural production, while processors are responsible for processing the raw material to obtain the final product. The product is placed on consignment at the association's marketing unit, which employs members who have marketing experience. International clients place orders for indigo powder with the marketing unit which is, in turn, responsible for collecting, packaging and transporting the product to the loading dock. The relationship between producers and the marketing unit is through a formal agreement. The marketing unit does not pay cash for the product - producers receive payment when clients have paid. The producer also gives the marketing unit a percentage of his production as samples. A small percentage of production is sold at different prices on the domestic market.
Training and support services. Thanks to the linkages with a GTZ agro-industrial project, an agreement was made with a laboratory to develop a method to determine indican content, the substance that becomes indigotin when the raw material is processed. With this technological advance, some steps of the process will be shorter. Support has been received from IICA and PRODAR in legal, organizational, training and marketing aspects.
The results. The value of indigo exports was US$4,025 in 2001 and US$18,039 in 2002. Some members plan to double their production.
Lessons and distinct features. Homogenization of the product has reduced variations in quality of the indigo from different producers. The Association lacks liaison with support organizations and institutions at the national and international levels. As a result, opportunities to establish funding agreements have been lost, leading to a continued dependency on GTZ and IICA, since the association still does not have the economic resources to cover its needs.
Source: "Alternatives to improve negotiation and market access capabilities of small-scale rural entrepreneurs in Latin America" - AGSF Working Document (FAO, 2004)
INDONESIA (2)
Nanggung tree garden farmers
The farmers In Nanggung, Java farmers live on or below the poverty line, with access to less than one hectare of land, consisting of irrigated rice fields (0.3 ha.) and tree gardens (0.5ha.). Tree garden products are for both family consumption and local market sale. Lacking clear market opportunities farmers had previously paid little attention to crop management issues.
The markets Proximity to Jakarta offered Nanggung farmers the opportunity to target production to meet rising demand for fruits and vegetables. However, farmers were poorly linked to commercial markets. Banana held particularly high potential, with market demand far exceeding supply and growing conditions being ideal. Farmers were interested in intensifying their farming activities but hesitated because they were not sure where to focus their efforts.
The linkages Assistance to the farmers was provided by the World Agroforestry Centre (ICRAF), Winrock International, and the Indonesian Institute for Forest and Environment (RMI), with financial support from USAID. With community participation, farmer leaders were identified in ten villages and these organized farmer groups who were provided with training under the programme, which also carried out surveys to identify existing marketing channels, marketing problems faced by farmers, traders willing to work with the farmers, and product specifications. Visits to markets and traders were also held so that farmers could get to know traders and their needs. At the same time, production and post-harvest support was provided to the farmers to enable them to better meet product specifications.
The results Farmers have begun to organize themselves for collective marketing and have linked proactively with traders. They now arrange harvest close to the scheduled arrival of the traders and this and other improved post-harvest practices have resulted in 85 percent of production meeting market specifications, compared with 50-60 percent before. Traders now offer a price differential for bananas meeting specified grades. Traders have adopted the plastic crates introduced by the programme and these are now used to transport bananas up to the retail stage, resulted in losses being reduced from ten percent to three percent. As a result of lower losses, increased sales (+ 38 percent) and higher prices the gross income achieved by farmers has been doubled, without the farmers incurring extra costs. Farmers in other villages are now trying to replicate their achievements.
Lessons and distinct features Traders often decry the absence of supply even when there is potential for production relatively close to them. This case study gives a good example of where external interventions can link farmers with traders where they may not otherwise have established linkages. Working with traders it has also been possible to raise quality to market specifications.
Source: Joel Tukan, James Roshetko, Suseno Budidarsono and Gerhard Manurung, "Banana market chain improvement - Enhancing farmers' market linkages in West Java, Indonesia" ICRAF, Bogor, Indonesia.
VIET NAM
The lettuce trader Mr Van
The supplier. Ms Mai specializes in the collection of lettuces around her district in Lam Dong Province . She buys an average of 4 tonnes of lettuces every day and, year round. She has five regular customers: three in the wholesale markets of Ho Chi Minh City (HCMC), and two other wholesalers in another city of southern Viet Nam . The wholesalers in HCM City usually buy 80% of her product every day. Ms Mai has been doing business with Mr Van for six years. Ms Mai actively looks for farmers with plots of well-tended lettuce to supply her regular customers. She has a pool of 15 regular suppliers whom she has selected for their good quality produce.
The markets. Mr Van is a lettuce wholesaler in HCMC selling to a large number of retailers. Mr Van has five regular suppliers for his lettuce, most of them in Lam Dong Province , located 250km Northeast of HCMC. Because he has a special interest in getting good quality produce from his suppliers, Mr Van himself made the trip to Lam Dong to find suppliers who would be capable of delivering the product he needed to his high quality requirements. This is how he found Ms Mai.
The linkages. The relationship between the rural collector and the urban wholesaler is based on mutual trust, with no written contract. However, it places particular emphasis on coordination between stakeholders and relationship-specific investment, and is thus different to other traditional supply chains in Viet Nam . Coordination between the stakeholders of this supply chain involves a high degree of advanced planning. Unlike the daily orders made by most wholesalers, Mr Van orders lettuce through a telephone call to his regular collectors five days in advance of the expected delivery. This advanced ordering enables his suppliers to take their time in finding the appropriate farmer plots to satisfy Mr Van's high quality orders. The lettuce suppliers of Mr Van also coordinate their activity with their own farmer-suppliers.
Training and support services. In tune with the high level of co-ordination between stakeholders in this supply chain, relationship-specific investments have also been made by Mr Van as a means of managing the risk of poor quality. Mr Van lent money to his longest-serving regular supplier without any interest when the latter needed to buy a new motorbike that would enable him to look for vegetable plots that were ready for harvest, and also when he wanted to build a new house. However, the most visible example of relationship-investment is the training that Mr Van offers suppliers in lettuce harvesting, processing and packing to ensure that produce arrives in HCMC in prime condition and with an extended shelf-life. Lettuces are packed neatly, upside down in wicker baskets to protect them from transit damage. Moreover, packers are instructed not to overfill baskets so that they can be stacked one on top of another without causing damage to the contents.
The results. Mr Van claims to have lower levels of waste, at 3% of unsold product every day, than his direct lettuce-selling competitors who experience up to 10% of unsold product. He is also one of the biggest lettuce wholesalers on the market in terms of quantities sold, with average daily sales of 5 tonnes. Mr Van further has a good reputation in HCMC retail markets to have constantly some of the best produce in town. The market orientation of Mr Van's business partners helps them predict future market conditions in order to plan orders and sales activities together. Moreover, joint agreements on prices between farmer and collector prior to sale as well as deposit payments by the collector are directly linked to greater satisfaction of business partners in this supply chain.
Lessons and distinct features. This case study shows that traditional traders can help improve quality in the fruit and vegetable supply chain through market orientation, quality focus, supplier training, specific investments, collaboration and joint planning. Mr Van distributes value throughout his supply chain while making a profit himself. It is also an example of privatization of extension work to farmers.
Source: Jean-Joseph Cadilhon, FAO |
