The private sector, whether as the market driver, technology provider or distribution partner, can play a much greater role in reducing post-harvest loss (PHL) in Africa. The “Building a Business Case for Nigerian Tomatoes” blog series explores the role business can play in addressing challenges that exist in Nigeria’s tomato processing industry.
As part of the IGD Advisory’s work engaging the African private sector in reducing post-harvest loss (PHL) for the Rockefeller Foundation’s YieldWise initiative, IGD identified local champions who are influencing the way business is conducted in the agricultural value chain. These champions are taking innovative approaches to allow YieldWise to rapidly scale and achieve the objective of reducing post-harvest losses.
The second blog in the series highlights a partnership between Tiger Foods, a tomato processor, and Green Sahara, a farmer aggregator, as they share the most effective business practices in backward integration and make a case for expanding into new markets by prioritizing traceability. Backward integration occurs when a company owns another business, like a supplier, in the value chain.
In the coming months, IGD will draw attention to best practices in traceability that support companies involved in the YieldWise initiative to develop other value chains and access additional markets.
Partnership of Tiger Foods and Green Sahara
Three years ago, Don Ebubeogu, CEO of Tiger Foods, a processor of spices and tomatoes located in Onitsha, Anambra State in Nigeria, started to think about investing in backward integration. Although the company wanted to capitalize on the huge market for value-added tomato products in Nigeria, one of their key operational challenges was access to raw materials.
Tiger Foods needed a sustainable strategy that would allow the company to gain greater predictability from their suppliers and stop relying on unstable local markets. Investing in backward integration seemed a solution, and they hoped it would result in improved processing efficiency and cost savings.
In the meantime, social entrepreneur Suleiman Dikwa of Green Sahara, an agricultural entrepreneur system, was asking a relevant question: How can smallholder farmers achieve scale in order to supply sustainably to big buyers?
Operating as both an independent extension services provider and supply chain manager, Dikwa contacted Tiger Foods to find out about the quality and quantity specifics required from farmers in their supply chain, so he could build the farmers’ capacity to meet market demand.
Green Sahara’s market-led approach directly followed his philosophy as both a farmer and a business person: “Don’t plant unless there is a buyer.”
The benefits for both parties were clear. The Green Sahara – Tiger Foods partnership provided a shared vision of a profit-oriented model for backward integration. Green Sahara offered supply chain management through procurement or aggregation of farmers to produce to company specifications. Meanwhile, Tiger Foods could focus on their core business of processing raw materials.
“The project gave us an opportunity to focus on our primary objective. We’re not bogged down with the nitty gritty of handling farmers or logistics. Green Sahara is guaranteeing quality and making it easy to handle with one entity rather than many farmers,” Ebubeogu said.
Achieving operational efficiency and increased productivity through traceability
In addition to securing a sustainable supply for inputs, the Tiger Foods – Green Sahara partnership also opened the door to achieving traceability within their supply chain.
Consumers along the value chain demand a large bulk of information to assure all necessary standards are being met. Traceability provides the quality assurance needed for Green Sahara to guarantee the food safety requirements for Tiger Foods, which also allows the latter to compete in export markets.
Beyond quality, Ebubeogu is also interested in the business savings provided by tracing each crop batch back to the farmer. This system allows him to integrate local suppliers into the Tiger Foods’ supply chain as the company sources high-quality agricultural raw inputs sustainably.
“Farmers that are consistent are having longer contracts and making better money than those that are excited by the little gain of diverting to other markets,” he noted.
Additionally, traceability mitigate the risks in the value chain, such as logistics tracking, reduced costs incurred in the management of inventory, and recall due to quality concerns.
Finding shared value in brand equity
Many businesses avoid the opportunity of working with smallholder farmers due to the risks and costs associated. “Coordination between different supply chain actors requires time and willingness on all sides,” said Dikwa, who acknowledges that establishing traceability and working with farmers are complex and requires investment.
“However, when collaboration is widespread, there is a greater incentive for actors to work together, which lowers cost overall,” he added.
From his perspective as a supply chain manager, Dikwa sees the fate of the Green Sahara farmers and Tiger Foods as shared. He regards the initial visits Ebubeogu paid when enlisting the Green Sahara farmers for the Tiger Foods supply chain as a best practice for building loyal relationships.
“I’m of the school of thought that corporate social strategy shouldn’t be mutually exclusive from strategic objectives. You can integrate your value chain through sales when farmers have a sense of loyalty and affinity to your brand,” Ebubeogu pointed out.
Finding shared value in brand equity provides the link that coordinates company investments in traceable backward integration and improved farmer livelihoods. A fully transparent supply chain allows both farmers and producers to share the success of their brand by mutually building their reputation for quality.
For example, the process of tagging and referencing the farmers allows each producer to create and enhance their brand by building a history of quality and to feel like they are contributing to the success of the company’s reputation for quality.
Companies who know when to share the risks effectively can leverage their business interests to achieve greater development gains. Clarifying these business incentives is critical in both encouraging farmers to grow within the supply chain and contributing to broader company success and development within the larger agriculture industry.
>> Read the first blog of the series on how the private sector confronts challenges in Nigeria’s tomato industry.
>> To learn more about IGD’s work with the Rockefeller Foundation’s YieldWise initiative to reduce post-harvest loss, please click here.
>> Join the conversation on Twitter. Hashtag: #YieldWise, #postharvest