Breaking Into the Smallholder Seed Market

LESSONS FROM THE

B R E A K I N G
I N T O T H E

MOZAMBIQUE SMALLHOLDER EFFEC TIVE EXTENSION DRIVEN SUC C ESS (SEEDS) PROJEC T

S M A L L H O L D E R
S E E D M A R K E T

SMALLHOLDER EFFEC TIVE EXTENSION DRIVEN SUC C ESS PROJEC T

2017

W H I T E P A P E R

LESSONS LEARNED FROM THE MOZAMBIQUE SEEDS PROJEC T

BREAKING INTO
THE SMALLHOLDER
SEED MARKET

DEC EMBER 2017

Table of C ontents

2678
Exec utive Summa ry Introduc tion The Seeds Industry in Moza mbique Ba c kground to the SEEDS Projec t a nd Pa rtners

9

Rura l Agrodea ler Models a nd Moza mbique

11

Ac tivities Implemented a nd Ma in Findings/

Rec c omenda tions

22 30 33
Seeds Sa les Sa les per Va lue C ha in C onc lusion

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EXEC UTIVE SUMMARY

BREAKING INTO THE SMALLHOLDER SEEDS MARKET
IDENTIFIC ATION OF C BSPS

By projec t end, 289 C BSPs (36 Oruwera C BSPs a nd

153 Phoenix CBSPs) had been identiﬁed, trained, and

c ontra c ted by Phoenix a nd Oruwera throughout the

three provinces. CBSPs were stratiﬁed into two main proﬁles: 1) smaller Lead Farmer CBSPs working with

NC BA C LUSA’s Promotion of C onserva tion Agric ulture Projec t (PROMAC ) who ma na ged demonstra tion

plots to promote the use of certiﬁed seed and

ma rketed this sa me produc t from their own sma ll stores, a nd 2) la rger C BSP merc ha nts or existing a grodea lers with a grea ter potentia l for seed tra ding.

This stratiﬁcation put in place the structure required to

ta c kle the “La st Mile” of the supply c ha in – distributing seeds from semi-urba n distribution points to the most remote a rea s – in Yea r 2. uring its implementa tion over two a gric ultura l

D

c a mpa igns between 2015 a nd 2017, the
Sma llholder Effec tive Extension Driven Suc c ess (SEEDS) projec t, implemented by NC BA C LUSA in pa rtnership with Feed the Future Pa rtnering for Innova tion, a USAID-funded progra m, supported

two private sector seed ﬁrms--Phoenix Seeds and

Oruwera Seed C ompa ny--to develop a grodea ler networks in line with NC BA C LUSA’s C ommunity Ba sed Servic e Provider (C BSP) model in the Ma nic a , Za mbézia , a nd Na mpula provinc es of Moza mbique.

C BSPs a re rura l a grodea lers who purc ha se seed from seed c ompa nies for resa le in their own c ommunities, thus bridging the ga p between seed/input suppliers a nd sma llholder fa rmers a nd reduc ing the high distribution c osts involved in ma king produc ts a va ila ble to Bottom of the Pyra mid (BOP) c onsumers. The a im of this projec t

was to support both ﬁrms in proﬁtably breaking

into the sma llholder seeds ma rket in northern a nd c entra l Moza mbique through the development of their own C BSP sa les a nd distribution systems, a nd

to support them in selling certiﬁed improved seed

to a t lea st 12,000 sma llholder fa rmers. During this

time the main ﬁndings and recommendations were

a s follows:

NEG OTIATION BETWEEN PRIVATE SEC TOR AND C BSPS

Negotia tions between seed c ompa nies a nd their respec tive C BSPs were fa c ilita ted by NC BA C LUSA sta ff together with priva te sec tor sa les sta ff, usua lly working together a s a two-person tea m or “buddy system”. This is one wa y in whic h donors c a n provide direc t support a nd c a pa c ity building for seed ma rketing a c tivities during the initia l pha se of esta blishing C BSP networks, followed by a subsequent pha se out a s the priva te sec tor ta kes over.

Improved seed, like the variety ZM-521 shown here, is showcased by CBSPs to clients by way of demonstration plots set up next to their stores

The suc c ess of C BSP networks often depends disproportiona tely on the c a pa c ity of just one or

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two sales staff members within the ﬁrm. When these

individua ls a re ineffec tive a t their jobs, the whole C BSP progra m is jeopa rdized. Seed c ompa nies should therefore prioritize rec ruiting, inc entivizing, tra ining, a nd ma inta ining the right sta ff for the job. Donors ha ve a role to pla y in ensuring tha t priva te

sector ﬁrms have access to resources to train and

reta in their qua lity sta ff.

In order for the hub/reta iler network to func tion, both the dema nd (sma llholders’ willingness/a bility to purc ha se) a nd supply (distribution) c onstra ints must be met.

DISTRIBUTION OF SEEDS AND THE ESTABLISHMENT OF AG RODEALER HUBS AND RETAILERS
C BSP TRAINING

C BSPs were tra ined in sma ll c ommunity groups over a period of one month a nd by wa y of a c ourse

of three modules. Training should be stratiﬁed according to CBSPs’ proﬁles (with different content

for Lea d Fa rmer a nd Merc ha nt C BSPs) a nd should be repea ted on a n a nnua l ba sis, inc rea sing in terms of c omplexity a s C BSP c ohorts ga in pra c tic a l seed sa les experienc e. SEEDS rec ommends tra ining C BSPs in sma ll, c ommunity groups with limited subsidies for pa rtic ipa nts (e.g. for mea ls a nd tra nsport) a s this a llows tra ining to be more responsive to C BPSs’ needs a nd improves the a bsorption of informa tion; reduc es the logistic s c osts involved in tra ining la rge numbers of pa rtic ipa nts a t a single event; a nd empha sizes the business ra ther tha n projec t foc us of the C BSP

model. Because many rural project beneﬁciaries

a re a c c ustomed to more donor-led tra ining events, projec t sta ff ma y need to c lea rly a rtic ula te the business foc us a nd set the tone for the tra inings a t the beginning of ea c h c ourse.
In Yea r 1, Oruwera opted for individua l distribution to a grodea lers’ stores, offering c redit terms; however, unpa id debts of a round $4,000 (representing a repa yment ra te of a round 50%) a t the end of the

ﬁrst campaign led the ﬁrm to abandon this strategy

in Yea r 2 a nd opt for delivery upon c a sh pa yment only. Whilst this reduc ed Oruwera ’s exposure to risk, it mea nt tha t it worked with only 4 C BSPs in Yea r 2, c ompa red with 13 C BSPs in Yea r 1.

In Yea r 1 Phoenix foc used on esta blishing both Lea d Fa rmer a nd Merc ha nt C BSPs whilst simulta neously employing a seed fa ir stra tegy whic h involved Phoenix selling seed direc tly in rura l c ommunities a nd C BSPs performing a dema nd stimula tion a nd a ggrega tion role in return for a c ommission on seed sold by Phoenix. In Yea r 2, a limited c redit fa c ility wa s ma de a va ila ble for 58 selec ted Phoenix C BSPs, who rec eived 12,723 kg of seed on c redit to the wholesa le va lue of 1,204,155 mt (or a round $22,000). This ena bled Phoenix to orga nize its C BSPs a c c ording to a hub a nd spoke distribution model a nd utilize a La st Mile a pproa c h to supply c ha in ma na gement, with 11 of its la rger merc ha nt C BSPs working a s hubs a nd supplying their own networks of sma ller Lea d Fa rmer C BSPs with produc t. However, a lthough the provision of a c redit fa c ility undoubtedly helped Phoenix to inc rea se its sa les in Yea r 2, exc eeding Oruwera ’s seed sa les, this stra tegy exposed Phoenix to risk a nd by the end of the projec t a round $6,400 rema ined in outsta nding debts.
As with C BSP negotia tions, donors’ roles should be a s fa c ilita tion-foc used a s possible, yet a t the sa me time rec ognizing tha t the priva te sec tor requires support in the ea rly sta ges of setting up C BSP networks. Donor interventions should therefore inc lude tra ining for priva te sec tor sta ff a s tra iners, a s well a s broa der a c tivities tha t improve the ena bling environment for C BSP networks suc h a s working with voc a tiona l tra ining institutions to develop a n a c c redited a grodea ler c urric ulum.

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Phoenix seed fa irs in Yea r 1, dec rea sing to 7,421 kg in Yea r 2 a s a result of a c ha nging foc us of resourc es a wa y from seed fa ir sa les a nd towa rds sa les through C BSPs’ stores.

Stra tegic a lly pla c ed a nd dyna mic seed fa irs a re a lso a n exc ellent ma rketing opportunity for seed c ompa nies, who should invest in visua l a nd a udio ma rketing ma teria ls a nd low c ost bra nded merc ha ndise a s well a s ta ke a dva nta ge of c ommunity ra dio a nd existing IC T pla tforms. They should a lso levera ge support from pa rtners suc h a s suppliers of c omplementa ry produc ts (fertilizers,

ﬁnancial services, etc.). To maximize seed fairs’ reach,

C BSPs themselves should be provided with logistic ,

ﬁnancial, and other support in order to organize and

ma na ge their own seed fa irs.

A SEEDS agrodealer inspects the germination rates of improved seed at a Seed Fair.

In order for the hub/reta iler network to func tion, both the dema nd a nd supply a spec ts must be met.

1)

There must be sufﬁcient demand for certiﬁed

MARKETING AND PROMOTION

seed a mongst sma llholders,
The most suc c essful ma rketing tools for seed c ompa nies ta rgeting the sma llholder ma rket need not be expensive or sophistic a ted. They should be la rgely visua l a nd inc lude a ppea ling, ea sily rec ogniza ble bra nd logos/produc t na mes, the distribution of bra nded merc ha ndise a nd sa mple pa c ks, c ompa ny bra nding on stra tegic rura l loc a tions (e.g. ma rket pla c e wa lls, prominent shop fronts, a nd C BSPs’ stores), a nd mic ro-pa c ka ging. Firms a nd C BSPs should a lso enga ge with c ommunity ra dio wherever possible.

2)

Seed ﬁrms must be able to consistently

supply hubs with qua lity seed, a nd

3)

Some form of c redit or c onsignment fa c ilities

must be a va ila ble to C BSPs.

SEEDS found tha t the supply side wa s often a s muc h of a c ha llenge a s c rea ting dema nd. Even when C BSPs were requesting seed, both Oruwera a nd Phoenix frequently struggled to ma ke produc t a va ila ble where a nd when it wa s needed, indic a ting

that private sector ﬁrms require support in the basic

a spec ts of their opera tions suc h a s improving seed produc tion/proc essing a nd tra nsport c a pa c ity, qua lity c ontrol, ma na geria l tra ining, lea dership, etc .
Unlike in ma ny developed c ountries, a lmost 100% of rura l Moza mbic a n households a re enga ged in a gric ultura l produc tion of some kind, ma king them

potential consumers of certiﬁed seed. Seed should

therefore be ma rketed not a s a spec ia list produc t but just like a ny other household nec essity, by wa y of: c ost effec tive distribution stra tegies to ensure tha t produc t is stoc ked in norma l c ommunity stores; bra nding a nd pa c ka ging tha t a ppea l to BOP c ustomers; ma rket segmenta tion a c tivities to ta rget sma llholder c onsumer groups; c ompetitive pric ing stra tegies, etc . Lessons should be dra wn from other non-seed rela ted va lue c ha ins ma rketing produc t to BOP c onsumers.

SEED FAIRS

A community seed sales strategy through ﬁrm-

ma na ged seed fa irs a t existing rura l ma rket da ys c a n present a s a n innova tive solution to the problem of C BSPs’ la c k of working c a pita l for seed a nd input purc ha ses. This stra tegy should c omplement sa les

from CBSPs’ stores. Seed companies beneﬁt from increased sales with minimum ﬁnancial risk, whilst

C BSPs a re a ble to bec ome integra ted into seed c ompa nies’ c ommerc ia l models by a ggrega ting dema nd in return ea rning a c ommission on a ll seed sold. A tota l of 29,860 kg of seed were sold through

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••
105,008 kg of seed were sold through

M&E, DATA C OLLEC TION, AND MARKETING METRIC S

seed fa irs a nd 98,853 kg were sold through C BSPs’ stores (52% a nd 48% respec tively),

indicating that seed companies beneﬁt from

implementing both stra tegies in ta ndem;
SEEDS rec orded ba sic sa les da ta for C BSPs (G PS, na me, loc a tion, da te of sa le, produc t sold, volume sold, a nd pric e), whic h ena bled a ba sic a na lysis of sa les da ta . Limited G PS ma pping wa s c onduc ted by the SEEDS projec t using G oogle Ma ps. Future projec ts should ta ke this further by plotting the geogra phic a l loc a tion of C BSPs a nd other a grodea lers (theirs a nd the c ompetition’s) to better pla n the pla c ement/ spa c ing of C BSPs a nd to support la rger C BSPs to develop networks of sma ller reta ilers. Muc h a lso sta nds to be ga ined by serious c ompa nies who wish to use IT-ba sed ma rket a nd da ta a na lysis systems to c ollec t soc ioec onomic , demogra phic , a nd other c lient da ta a nd c a rry out more c omplex

demographic analysis, market stratiﬁcation/

128,096 kg of seed were sold through Phoenix a nd 75,765 kg from Oruwera (63% a nd 37% respec tively);

In tota l during the projec t, 14% of c lients bought seed more tha n onc e.

Despite not being a Feed the Future va lue c ha in, ma ize wa s the best-selling va lue c ha in during the entire projec t. This wa s followed by pigeon pea a nd c owpea . This suggests tha t sma llholders dema nd

certiﬁed seed for both food security and cash crops, and is reﬂective of the recent high demand

for pigeon pea from India , whic h ha s stimula ted produc tion for the c rop. segmenta tion, a nd positioning, ena bling them to better respond to the needs of their ta rget ma rket.

SALES FINDING S

Seed sa les inc rea sed during the projec t, pointing to

an increased demand and uptake of certiﬁed seed

by sma llholder fa rmers. A c ompa rison between Yea r 1 a nd 2 sa les da ta shows a n inc rea se in the volume

of seed sold by each ﬁrm, the number of clients

per C BSP store a nd the propensity of sma llholders to return a nd buy seed more tha n onc e in the sa me c a mpa ign; however, despite evidenc e of a strengthening sma llholder seed ma rket, a vera ge purc ha ses sizes rema ined sma ll (a nd grew little over the projec t) a nd in genera l sma llholder dema nd

is not yet sufﬁcient to offer seed ﬁrms with a viable

a lterna tive to bulk sa les or to justify the esta blishment of a la rge number of rura l entrepreneurs selling only seed. The a vera ge purc ha se size wa s 12 kg from seed fa irs a nd wa rehouses a nd 7 kg from C BSPs’ stores, less tha n required to pla nt a n a vera ge hec ta re of la nd. In a ddition, despite a n inc rea se in the overa ll number of C BSPs who on pa per were tra ined a nd c ontra c ted by Phoenix a nd Oruwera , Yea r 2 did not see a proportiona te inc rea se in the number of C BSPs a c tively purc ha sing seed a nd tra ding it from their own stores. This suggests tha t C BSPs must be dema nd- not supply- or projec t-driven. Firms should therefore foc us on c onsolida ting their existing C BSP networks a nd ma inta ining the momentum ga ined through SEEDS, ra ther tha n identifying more providers merely for the sa ke of genera ting numbers.

•

203,861 kg of seed were sold in tota l during

the projec t, to the va lue of 24,950,882 mt or a round $453,000 in sa les revenue to C BSPs (a ssuming a n a vera ge exc ha nge ra te of 55 mt/US$). This is enough to pla nt a round

10,000 ha with certiﬁed seed. 20,197 unique smallholder farmers beneﬁtted from improved

seed;

Phoenix Seeds founder Kevin Gifford

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INTRODUC TION

The SEEDS projec t wa s a USAID, Feed the Future – Pa rtnering for Innova tion-funded projec t designed

to address the lack of access to certiﬁed, improved

seed in northern Moza mbique. Ma na ged by NC BA C LUSA, SEEDS a imed to inc rea se yields for six key Feed the Future supported va lue c ha ins: sesa me, pea nut, soya , pigeon pea , c ow pea , a nd suga r bea n by supporting two loc a l seed c ompa nies, Oruwera Seed C ompa ny ba sed in Na mpula provinc e a nd Phoenix Seeds Limita da ba sed in Ma nic a provinc e, to c rea te rura l seed distribution systems through a network of seed reta ilers or a grodea lers. SEEDS wa s implemented between Ja nua ry 2015 a nd April 2017, spa nning just over two c a lenda r yea rs a nd two seed sa les c a mpa igns.

Although not a Feed the Future supported value chain and not contributing towards the project milestones, the project also supported the sale of certified maize seed, as well as the six identified

value chains. During this time the projec t supported both Oruwera a nd Phoenix to esta blish networks of a grodea lers using NC BA C LUSA’s model of

One loc a l entrepreneur supported by SEEDS is Helder Jorge from Riba ué distric t, Na mpula provinc e, Moza mbique. Helder is a s a SEEDS supported a grodea ler “hub” mea ning he rec eives produc t a t preferentia l pric es for re-sa le in his own store a nd distribution to his own network of sma ller SEEDS supported reta ilers C BSPs (the “spokes” of distribution). Helder’s business ha s now grown not just in terms of links with suppliers but a lso in terms of ma na gement, with the SEEDS pa rtnership providing business rela ted tec hnic a l a ssista nc e, monitoring a nd support in a rea s suc h a s business pla nning, ma rketing, stoc k requisition/ ma na gement, tra nsport logistic s a nd c redit ma na gement.

C ommunity Ba sed Servic e Providers (C BSPs) who a re loc a l, c ommunity ba sed entrepreneurs who a c t a s one-stop shops in their c ommunities, linking sma llholder fa rmers with suppliers or seeds, inputs, tools, equipment, a nd other nec essa ry produc ts a nd servic es.

This ena bled Helder to inc rea se his stoc k, introduc e new produc t lines a nd better keep up with the dema nd from both his reta ilers a nd sma llholder c lients. As a result, his tota l sa les of Pheonix a nd Oruwera seed ha ve inc rea sed from a round 3.5 tons prior to his involvement in SEEDS to 7 tons a nnua lly a t present. With his inc rea sed

proﬁts Helder has invested in the construction of

a new 30 ton c a pa c ity wa rehouset. The 7 tons of

seed from Phoenix and Oruwera was sufﬁcient

to pla nt a round 200ha of sma llholders’ la nd with

certified seed in Ribaué district, representing increased yields and profits for 443 smallholder farmers and increasing the profits of his CBSP

network.

During this time, 281 Oruwera a nd Phoenix a grodea lers or C BSPs were esta blished, tra ined, and

sold certified seed in their communities. In addition, to promote the sale and use of certified seed, the

SEEDS projec t pa rtners implemented a ra nge of other initia tives with the a im of inc rea sing the uptake

and purchase of certified seed and other inputs,

suc h a s seed fa irs a nd promotiona l events. This White Pa per serves to outline the princ ipa l seed sa les a c tivities c a rried out by SEEDS, review the seed sa les sta tistic s over the two c a mpa igns, a nd summa rize the ma in c onc lusions a nd lessons lea rned. It is expec ted tha t this doc ument will both a dd to the existing knowledge ba se in Moza mbique rega rding the promotion/sa les/distribution of seeds to BOP c onsumers a nd improve the effec tiveness of future a grodea ler a nd seed sa les/distribution rela ted progra ms a imed a t inc rea sing sma llholder purc ha se