Breaking Into the Smallholder Seed Market
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BREAKING LESSONS FROM THE MOZAMBIQUE SMALLHOLDER INTO THE EFFECTIVE EXTENSION DRIVEN SMALLHOLDER SUCCESS (SEEDS) PROJECT SEED MARKET Pippy Gardner © 2017 NCBA CLUSA NCBA CLUSA 1775 Eye Street, N.W. Suite 800 Washington, D.C. 20006 SMALLHOLDER EFFECTIVE EXTENSION DRIVEN SUCCESS PROJECT 2017 WHITE PAPER LESSONS LEARNED FROM BREAKING INTO THE MOZAMBIQUE SEEDS THE SMALLHOLDER PROJECT SEED MARKET DECEMBER 2017 Table of Contents 2 Executive Summary 6 Introduction 7 The Seeds Industry in Mozambique 8 Background to the SEEDS Project and Partners 9 Rural Agrodealer Models and Mozambique 11 Activities Implemented and Main Findings/ Reccomendations 22 Seeds Sales 30 Sales per Value Chain 33 Conclusion 2 EXECUTIVE SUMMARY BREAKING INTO THE SMALLHOLDER IDENTIFICATION OF CBSPS SEEDS MARKET By project end, 289 CBSPs (36 Oruwera CBSPs and uring its implementation over two agricultural 153 Phoenix CBSPs) had been identified, trained, and Dcampaigns between 2015 and 2017, the contracted by Phoenix and Oruwera throughout the Smallholder Effective Extension Driven Success three provinces. CBSPs were stratified into two main (SEEDS) project, implemented by NCBA CLUSA profiles: 1) smaller Lead Farmer CBSPs working with in partnership with Feed the Future Partnering for NCBA CLUSA’s Promotion of Conservation Agriculture Innovation, a USAID-funded program, supported Project (PROMAC) who managed demonstration two private sector seed firms--Phoenix Seeds and plots to promote the use of certified seed and Oruwera Seed Company--to develop agrodealer marketed this same product from their own small networks in line with NCBA CLUSA’s Community stores, and 2) larger CBSP merchants or existing Based Service Provider (CBSP) model in the agrodealers with a greater potential for seed trading. Manica, Zambézia, and Nampula provinces of This stratification put in place the structure required to Mozambique. tackle the “Last Mile” of the supply chain – distributing seeds from semi-urban distribution points to the most CBSPs are rural agrodealers who purchase seed remote areas – in Year 2. from seed companies for resale in their own communities, thus bridging the gap between seed/input suppliers and smallholder farmers NEGOTIATION BETWEEN PRIVATE and reducing the high distribution costs involved SECTOR AND CBSPS in making products available to Bottom of the Negotiations between seed companies and their Pyramid (BOP) consumers. The aim of this project respective CBSPs were facilitated by NCBA CLUSA was to support both firms in profitably breaking staff together with private sector sales staff, usually into the smallholder seeds market in northern and working together as a two-person team or “buddy central Mozambique through the development of system”. This is one way in which donors can their own CBSP sales and distribution systems, and provide direct support and capacity building for to support them in selling certified improved seed seed marketing activities during the initial phase of to at least 12,000 smallholder farmers. During this establishing CBSP networks, followed by a subsequent time the main findings and recommendations were phase out as the private sector takes over. as follows: Improved seed, like the variety ZM-521 shown The success of CBSP networks often depends here, is showcased by CBSPs to clients by way of disproportionately on the capacity of just one or demonstration plots set up next to their stores 3 two sales staff members within the firm. When these In order for the hub/retailer WORKING COOPERATIVELY: UNDERSTANDING CO-OPS IN CUBA individuals are ineffective at their jobs, the whole network to function, both CBSP program is jeopardized. Seed companies should therefore prioritize recruiting, incentivizing, the demand (smallholders’ training, and maintaining the right staff for the job. willingness/ability to purchase) Donors have a role to play in ensuring that private and supply (distribution) sector firms have access to resources to train and retain their quality staff. constraints must be met. DISTRIBUTION OF SEEDS AND THE CBSP TRAINING ESTABLISHMENT OF AGRODEALER CBSPs were trained in small community groups over HUBS AND RETAILERS a period of one month and by way of a course of three modules. Training should be stratified In Year 1, Oruwera opted for individual distribution to according to CBSPs’ profiles (with different content agrodealers’ stores, offering credit terms; however, for Lead Farmer and Merchant CBSPs) and should unpaid debts of around $4,000 (representing a be repeated on an annual basis, increasing in terms repayment rate of around 50%) at the end of the of complexity as CBSP cohorts gain practical seed first campaign led the firm to abandon this strategy sales experience. SEEDS recommends training CBSPs in Year 2 and opt for delivery upon cash payment in small, community groups with limited subsidies for only. Whilst this reduced Oruwera’s exposure to risk, participants (e.g. for meals and transport) as this it meant that it worked with only 4 CBSPs in Year 2, allows training to be more responsive to CBPSs’ needs compared with 13 CBSPs in Year 1. and improves the absorption of information; reduces the logistics costs involved in training large numbers In Year 1 Phoenix focused on establishing both Lead of participants at a single event; and emphasizes Farmer and Merchant CBSPs whilst simultaneously the business rather than project focus of the CBSP employing a seed fair strategy which involved model. Because many rural project beneficiaries Phoenix selling seed directly in rural communities are accustomed to more donor-led training events, and CBSPs performing a demand stimulation and project staff may need to clearly articulate the aggregation role in return for a commission on seed business focus and set the tone for the trainings at the sold by Phoenix. In Year 2, a limited credit facility was beginning of each course. made available for 58 selected Phoenix CBSPs, who received 12,723 kg of seed on credit to the wholesale As with CBSP negotiations, donors’ roles should be as value of 1,204,155 mt (or around $22,000). This facilitation-focused as possible, yet at the same time enabled Phoenix to organize its CBSPs according to recognizing that the private sector requires support in a hub and spoke distribution model and utilize a Last the early stages of setting up CBSP networks. Donor Mile approach to supply chain management, with interventions should therefore include training for 11 of its larger merchant CBSPs working as hubs and private sector staff as trainers, as well as broader supplying their own networks of smaller Lead Farmer activities that improve the enabling environment CBSPs with product. However, although the provision for CBSP networks such as working with vocational of a credit facility undoubtedly helped Phoenix to training institutions to develop an accredited increase its sales in Year 2, exceeding Oruwera’s agrodealer curriculum. seed sales, this strategy exposed Phoenix to risk and by the end of the project around $6,400 remained in outstanding debts. 4 Phoenix seed fairs in Year 1, decreasing to 7,421 kg in Year 2 as a result of a changing focus of resources away from seed fair sales and towards sales through CBSPs’ stores. Strategically placed and dynamic seed fairs are also an excellent marketing opportunity for seed companies, who should invest in visual and audio marketing materials and low cost branded merchandise as well as take advantage of community radio and existing ICT platforms. They should also leverage support from partners such A SEEDS agrodealer inspects the germination rates of as suppliers of complementary products (fertilizers, improved seed at a Seed Fair. financial services, etc.). To maximize seed fairs’ reach, CBSPs themselves should be provided with logistic, In order for the hub/retailer network to function, both financial, and other support in order to organize and the demand and supply aspects must be met. manage their own seed fairs. 1) There must be sufficient demand for certified seed amongst smallholders, MARKETING AND PROMOTION The most successful marketing tools for seed 2) Seed firms must be able to consistently companies targeting the smallholder market need supply hubs with quality seed, and not be expensive or sophisticated. They should be largely visual and include appealing, easily 3) Some form of credit or consignment facilities recognizable brand logos/product names, the must be available to CBSPs. distribution of branded merchandise and sample packs, company branding on strategic rural locations SEEDS found that the supply side was often as (e.g. market place walls, prominent shop fronts, and much of a challenge as creating demand. Even CBSPs’ stores), and micro-packaging. Firms and when CBSPs were requesting seed, both Oruwera CBSPs should also engage with community radio and Phoenix frequently struggled to make product wherever possible. available where and when it was needed, indicating that private sector firms require support in the basic Unlike in many developed countries, almost 100% aspects of their operations such as improving seed of rural Mozambican households are engaged in production/processing and transport capacity, agricultural production of some kind, making them quality control, managerial training, leadership, etc. potential consumers of certified seed. Seed should therefore be marketed not as a specialist product SEED FAIRS but just like any other household necessity, by way of: cost effective distribution strategies to ensure A community seed sales strategy through firm- that product is stocked in normal community stores; managed seed fairs at existing rural market days can branding and packaging that appeal to BOP present as an innovative solution to the problem of customers; market segmentation activities to target CBSPs’ lack of working capital for seed and input smallholder consumer groups; competitive pricing purchases. This strategy should complement sales strategies, etc. Lessons should be drawn from other from CBSPs’ stores. Seed companies benefit from non-seed related value chains marketing product to increased sales with minimum financial risk, whilst BOP consumers.