Marketing Organizations in Pakistan: What Value Chain Analyses Do Not Tell About Marketing Muhammad Iqbal, Saman Bakhtawar , Grant Vinning & Rob Erskine-Smith Balochistan Agriculture Project (FAO/USAID)
Balochistan Agriculture Project (BAP) • 8 Districts Northern Balochistan • 2009-2015 • USD25.4 million from USAID • USD 1 million contributed by beneficiaries • Improved enabling environment (policy); • Increased crop and livestock productivity and value; • market linkages strengthened, improved competitiveness and sustainability of value chains; • Increased incomes by 20% – 115,000 direct beneficiaries – 230,000 indirect beneficiaries • 40% women participation
Food Security / Poverty Alleviation in Arid Agriculture Balochistan • Killa Saifullah • Loralai • Mastung • Food security
USAID Assistance to Agriculture in Arid Balochistan • Killa Saifullah • Loralai • Mastung • Zhob, Quetta • Food security • Make a small surplus
USAID Balochistan Agricultural Project • Killa Saifullah, Loralai, Mastung • Zhob, Quetta • Pishin, Musakhel • Sheerani • Food security, make a small surplus • Make a large surplus
AUS Assistance to Agriculture in Balochistan Border Areas Killa Saifullah, Loralai, Mastung Zhob, Quetta Pishin, Musa Khel, Sheerani Noshki, Chagai, Kharan, Panjgur, Kech, Washuk Food security, make a small surplus, make a large surplus Go commercial
Communities
> Loose grouping -> community organisations on community issues -> general marketing -> Farmer Marketing Collectives -> Mutual Marketing Organisations
Value Chain Approaches First approach: Identification of margins; who makes what profit Second approach: A prescriptive means of improving the efficiency of the chains (Reform approach)
Value chain reform approach An excellent approach to achieve three goals: Increase market price Reduce costs A combination of increasing market price and reducing costs
Value chains: a simplistic approach “The bit in the middle" (post-harvest preservation, Production Marketing processing, packaging, labeling, storage, transportation) Increase prices Increase productivity Increase the Increase spread of Reduce production efficiency markets costs Reduce marketing costs
Common Intervention Measures Component Element Common Issues Production Market The availability, quality, and understanding, of existing marketing information information systems that guide production decisions. Input supplies Covers seed, fertilisers, farm chemicals, water and farm machinery/tools. Credit What is the extent of producer access to credit. Production and Availability of appropriate technology such as appropriateness of harvesting technology to reduce field heat. Pests and Knowledge and appropriate equipment to deal with these. diseases Extension Extent, professionalism, relevance and timeliness of extension services. Regulation and Extent of government regulation that directly affects production. certification Research Provision and quality of agricultural research.
Common Intervention Measures Component Element Common Issues Cleaning, Appropriateness of equipment and material used? drying, grading, “The bit in the packaging middle” of Storage Availability of, and standards of, storage facilities. post harvest handling, Regulation and Extent of and adherence to government regulation such as processing, certification labeling. Product Extent of local product diversification expertise? storage, and development transport Movement from Frequency, reliability, and quality of transport. farm markets Infrastructure Availability and quality of roads, jetties/ wharves, airports. Handling What is the quality of handling procedures along the chain.
Common Intervention Measures Component Element Common Issues Market Identification of market destination. destination Marketing Market Extent of marketing information regarding extent of product information and services covered, extent of value-adding data, method of delivery of the information, and training in the use of the marketing information by the intended recipients. Regulation and To what extent does government regulation affect market certification directly (e.g. export regulations), and indirectly (taxes, exchange rate). Size What is the minimum size required for market acceptance. Marketing skills The availability of marketing skills to undertake enterprise budgeting, developing a marketing plan, undertaking market research, and undertake satisfactory negotiations.
Examples of Application of Value Chain Methodology Industry Issue Value chain reform Apples Overloading of large trucks causes On larger slower trucks, introduce increased damage to fruit due to load splitter which is an addition excessive weight on the bottom floor half way up the trailer load layers of cartons: body of the truck to reduce weight/ pressure levels. Grapes Poor product presentation Use scissors to cut the bunches from the vines then grade and pack into packed branded cartons not wooden boxes. Wool Traditional shearing methods Introduce mechanical shearing that produced highly uneven fibre has more even fibres for which lengths spinners will pay a premium.
Farmer Marketing Collective An organization owned & operated by farmers producing similar products, based on: • The user-owner principle • The user-control principle • The user-benefits principle
Rationale for setting up FMC • Increase prices received • Increase bargaining power • Reduce cost of marketing & inputs (economies of scale) • Access new markets otherwise not accessible • Gain access to knowledge & professional expertise • Make the markets for products more secure
Setting up FMC – 8 Steps • First: Get organized & identify the need • Second: Prepare a brief business plan • Third: Draft Rules • Fourth: Open a bank account • Fifth: Bond (from the Treasurer) • Sixth: Organisation (GB & EC) • Seventh: Prepare records & books of account • Eighth: Run the business
FMC: A Different Model • No credit • Business is not for free • Support from Business Support Services • Community audit
Capacity building of FMC • Organization of FMC • Basic marketing skills • Post-harvest management • Business planning • Business operations • Accounting & book keeping • Financial management • Community audit
Business Support Services • Organization & management • Marketing • Post-harvest management • Book keeping & accounting • Financial management & control
Business Support Services Provider • Preferably from the same area (local fit) • Well versed in book keeping & accounting • Conversant with Business operations • Good entrepreneurial & communication skills • Team builder • Forward looking • Empowering others
FMCs Estimated Business Turnover S.# Commodity # of Volume (kg) Target Markets Estimated FMCs Sales (Rs) Apple 5 958,500 Islamabad, Lahore, Karachi, Multan, 51,539,785 1 Faisalabad, Quetta Apricot 3 207,720 Karachi, Lahore, Multan, Quetta, 13,407,200 2 Faisalabad Grape 3 659,100 Karachi, Khanpur, Multan, Sadiqabad, 50,011,000 3 Faisalabad, D.I Khan Almond 1 7,600 Lahore, Multan 2,470,000 4 Red Chili 2 135,700 D.G Khan, Lahore, Faisalabad, Sargodha 12,738,700 5 Cauliflower 1 154,000 Lahore, D. G. Khan 2,772,000 6 Melon 2 203,800 Multan, Quetta 6,771,200 7 Tomato 1 22,800 Karachi, Quetta 1,097,500 8 Onion 3 911,250 Karachi, Multan, Faisalabad 40,916,000 9
FMCs Estimated Business Turnover (Contd.) S.# Commodity # of Volume (kg) Target Markets Estimated FMCs Sales (Rs) 10 Dried Mulberry 1 240,000 Sehwan Sharif 25,000,000 11 Carrot 2 549,750 Faisalabad, Multan 10,639,000 12 Wheat 2 551,450 Duki, Loralai, Mastung, Quetta 27,572,500 13 Dairy 2 34,740 Zhob, Quetta 2,431,800 Litres 14 Wool 4 20,000 Jhang, Karachi 1,500,000 10 Dried Mulberry 1 240,000 Sehwan Sharif 25,000,000 Total: 248,866,685
FMCs Financial Results – Quetta District Description Commodity No. of Quantity Gross Sales Net Sales Net Sales Comparison FMCs per Unit (%) FMC Apple 1 20,640 13,871,200 7,425,660 360 34.3 Non-FMC 5,950 3,913,500 1,593,746 268 FMC Apricot 1 4,500 2,925,000 1,912,500 425 11.8 Non-FMC 2,600 1,612,000 988,000 380 FMC Grape 1 2,500 1,875,000 1,350,000 540 35.0 Non-FMC 1,400 896,000 560,000 400 FMC Tomato 1 3,700 2,590,000 1,798,200 486 47.3 Non-FMC 7,000 4,340,000 2,310,000 330 FMC Onion 1 13,000 14,300,000 10,985,000 845 26.1 Non-FMC 7,000 6,860,000 4,690,000 670
FMCs Financial Results – Killa Saifullah District Description Commodity No. of Quantity Gross Sales Net Sales Net Sales Comparison FMCs (Cartons) per Unit (%) FMC Apple 3 22,492 22,132,485 14,230,894 633 29.4 Non-FMC 8,222 6,885,020 4,019,011 489 FMC Apricot 1 8,795 3,864,980 2,638,088 300 22.4 Non-FMC 3,085 1,172,300 754,590 245
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