It's About Toothbrushes. Access to Services: Part 5 of New Business Models for Sustainable Trading Relationships,Apr 6th, 2010 | By Katie Ricketts | Category: Inclusive Markets, Linking Farmers to Markets, New Business Models
Note: This post is Part 5 of a 6-part series exploring new business models for linking small farmers to global markets being analyzed through an international collaborative effort that can be read about here. Read an introductory post, see links to parts 1-3 below, or follow our series at Nextbillion.net.
Incorporating small farmers in Guatemala, one toothbrush at a time
Sometimes sustainable relationships are about toothbrushes. When Costco, LA Salad Company (a Los Angeles based wholesale company) and Cuatro Pinos undertook a CIAT study to determine the sustainability of their trading relationship for French green beans, toothbrushes were probably far from anyone’s mind.
But toothbrushes symbolize a new sort of business model for small farmers in the Costco/LA Salad/Cuatro Pinos value chain. A chain-wide tax on every bag of French beans funds a foundation that helps fund innovative social investment programs by creating a pool of money that leverages greater social impact via profitable trading relationships. With nearly all of new producers coming from regions with higher-than-national poverty rates, the foundation has helped send farmer-worker’s children to school, and assisted with extending healthcare to farmers and their families, and enabled a new dental program to give toothbrushes and dental education to children aged 1-6.
Cuatro Pinos is a successful cooperative with nearly 30 years of experience in the vegetable export business. Recently the cooperative has succeeded in opening large markets for several fresh vegetable products in the US through an alliance with a specialized wholesaler and several retailers. Existing demand significantly outstrips the capacity of cooperative members, requiring the integration of new producers,
organizations and geographies. To achieve this, Cuatro Pinos identifies existing farmer groups, including associations, cooperatives and lead farmer networks, in favorable environmental niches. It works with them to test production schemes and then contracts those that show an ability to meet quantity and quality targets.
Beyond the toothbrush: Production related services
A chain-wide emphasis on services is an investment in the people that make up the system. After connecting growers with a marketing opportunity, small growers often require assistance in meeting the quantity, quality, and delivery requirements of a dynamic market chain. This includes establishing best business practices amongst farmers by transferring relevant and necessary technology, enabling access to credit and financing, and keeping farmers abreast of important market information. Supportive services towards these ends tend to fall in one or more of the following categories:
- Input services
- Fertilizer, irrigation, pest management assistance
- Financial services
- Long term and short term loans, microcredit, working capital, crop insurance etc.
- Technical support
- Technical assistance, business planning, planting scheduling, market information and trends
- Additional Services
- Health care, housing improvement and coaching farmer associations on how to access public or donor monies
Value chains that support their growers through equitable access to services create a more stable chain and create the conditions necessary for farmers to meet quality, yields, and meet the ever-evolving environmental and food safety standards.
More mature chains tend to find themselves in a better position to offer social services and benefits. Returning to Guatemala, for example, Cuatro Pinos has been successful at assisting local partner agencies to access public funds for productive investments as well as housing improvement, health services and education. The capacity and willingness to leverage business contacts in favor of complementary social investment is one of the highlights of a new business model.
In the following parts of the series, we will outline additional considerations for new business models for small farmer inclusion, including:
- Inclusive innovation in the chain,
- Shared measurements and outcomes
Past posts on this series, Exploring New Business Models for Linking Small Farmers to Global Markets include;
- Facilitating chain-wide collaboration
- Fair and transparent chain governance;
- Exploring new market linkages;