Presentation on theme: "Aflasafe Commercialization Strategy Improving the Health and Securing the Income of Nigeria’s Small Holder Farmers Creating Companies | Creating Wealth."— Presentation transcript:
Aflasafe Commercialization Strategy Improving the Health and Securing the Income of Nigeria’s Small Holder Farmers Creating Companies | Creating Wealth | Creating Jobs January 2013 CONFIDENTIAL Partners:
3 USDA / IITA Technology that naturally and cost effectively reduces Aflatoxin levels by 80% to 99% The Solution
Aflasafe Commercial Strategy 4 “Establish a sustainable premium market for low aflatoxin maize and ensure this premium creates sufficient economic incentive to sustain farmers adoption with the buyer and seller sharing the economic benefits equally” Three Strategic Question I.Who is the target market for low aflatoxin maize? II.What premium can this market afford and does the premium provide sufficient economic incentive to sustain farmer adoption? III.How will the commercial plan to be implemented?
Target Market for Aflasafe Maize Poultry Industry… Key Driver of Domestic Maize Production 6 Nigerian Government Bans Poultry Imports Nigerian poultry production has grown from 113 Million birds in 2000 to 192 million birds in 2010 Nigerian maize production has grown from 4 million metric tons in 2000 to a 7.3 million metric tons in 2010 Each sector has grown on average 5% per year. Poultry feed is approximately 60% maize. Index of growth in production for maize and poultry relative to Nigeria’s production in 1961* Measure: Relative growth in production Drivers Correlated Growth In Maize and Poultry Production in Nigeria * Doreo Analysis, FAO
7 Is Aflatoxin an issue for the poultry industry?
Aflatoxin has a significant economic impact on poultry production 8 Poultry fed with Contaminated Feed ( >500 PPB) Poultry fed with Safe Feed ( < 20 PPB) Percentage of Toxic Poultry Feed * Measure: % with levels of Aflatoxin over 20 PPB Impact of Toxic Feed Majority of Poultry Feed in Nigeria Toxic Significant increased mortality Dramatic reduction in live weight / Feed efficiency (40% less in IITA trails) Drop in egg production rate Additional IITA trails in progress *IITA
9 Is the poultry industry currently paying a premium for low aflatoxin maize?
Target Farm gate Price of Aflasafe $15 USD per Ha with Target Yields of Aflasafe Maize Farmer of 3.5 MT /Ha 10 Toxin Binder Cost Toxin Binder Concentration Low High Tier 2 Customers Tier 1 Customers Tier 3 Customers Poultry Industry Current Premium by Customer Segment* ($ per Metric Ton of Maize) Price of toxin binders vary from $2 - $4 per kg Concentration of use varies from 1kg – 2kg per metric ton of feed. 600kg of maize per 1000kg of feed Economically Sustainable Farm Gate Price of Aflasafe by Customer Segment and Farmer Yield* Assumes farmer makes 33% profit on use of Aflasafe Target Price Target Yield * Doreo Analysis
11 What incentive will farmers have to adopt Aflasafe?
Purchase Aflasafe Repackage Aflasafe Farmer Purchase Aflasafe for $15.60/ha Farmer Produces Maize with Yields above 3.5MT/ha Babban Gona Test Maize at Harvest Maize passes test farmer receives $6.25/mt premium Babban Gona markets maize for +$6.25 premium Phase 1 Aflasafe Pilot Commercialization 12 1 2 3 4 5 67 Modest Premium of $6.25/mt (Approximately 2% premium) Works if Farmer Attains Yields of Over 3MT/Ha
Babban Gona Impact 16 Babban Gona Field Yield Up to 4.6 MT per Hectare Non Babban Gona Field Expected Yield Less than 1.5 MT per Hectare 16
Babban Gona Impact Ibrahim Mustapha Attained yields of 4.6MT/ha i.e. 3X the National Average and almost 6X the average yield in the community. 4.6 MT/Ha Achieved an economic value net of all loans of over $1,250 from his small 1.1 Hectare farm. From a GDP per capita standpoint he moves from poverty into a lower middle income bracket.. $1,250 Samaila Haruna Achieved an economic value net of all loans of over $2,500 from his small 2.5 Hectare farm. From a GDP per capita standpoint he moves from poverty into a lower middle income bracket. $2,500 With his earning from his first season in Babban Gona he bought a car. 1 17
Significant Product Development Investment to Reduce COGs Reduced from $20 per Ha to $7 per Ha 19 Aflasafe Estimated Price ex Factory* Measure: USD per Ha Substrate (Sorghum) SG&APackagingEx Factory Price Final ex factory price assumes an EBITDA margin of 28% (55 Naira / kg) applied to product to enable factory to be sustainable. Simple, low-cost formulation and manufacturing process developed for use in this manufacturing plant Process amenable to seed processing companies Discussions underway with 2 seed processing companies for manufacturing aflasafe in Nigeria Analysis of Ex Factory Price and End Farmer Cost InoculumLabor/OHEBITDA Margin Aflasafe Estimated Farm Gate Price* Measure: USD per Ha Ex Factory Price Retailer Margin Farm Gate Price Transport to DP DP Margin Key actors in distribution are the Distribution Partners (DPs) and Retailers. As product is new and requires addition work by the value chain actors i.e. marketing and education, margins are set slightly higher than normal to encourage effective distribution. Cost to farmer includes labor cost to apply assuming half day at 800 naira per day. Key Takeaways * Doreo Analysis
20 How high can the premium for Aflasafe maize go?
Poultry Industry Currently Paying an Implied Premium in Lost Profits Aflasafe Treated Maize Dramatically Increases Profitability by up to $0.72/ Broiler Started 21 Lost Gross Profit ($/Broiler Started) of Not Using Aflasafe Treated Maize* Assumptions 2kg live weight Conservative low cost finisher feed mix: $0.50/kg Average bird dies at 4weeks weighing 1kg Price of dressed weight bird: ₦ 650/kg Cost of day old chick: $1/Chick * Doreo Analysis
The Recommended Premium For Aflasafe Treated Maize is $56/MT vs. $6.25/MT The Poultry Industry Makes Money… the Farmer Makes Money 22
23 How will the commercial plan be implemented?
Strategic Plan to Drive Sustainability Leverage Strong Regulatory Enforcement to Sustain Premium Market for Aflasafe maize 24 1 Year 2345 PACA and Pull Mechanism Generate Supply of Cost Effective Low Aflatoxin Maize Enforce Regulatory Policy Enable Market Forces to Drive Sustainability Promote Health Awareness to Value Chain Actors Policy: Build Regulators Capacity Policy: Develop regulatory framework Policy: Phased in regulatory enforcement mechanism Market Forces Health Awareness: Farmer Focus Health Awareness: Industry Focus Health Awareness: End Consumer 1 2 3 4
Contact Details 25 Lagos 3B Baajiki Close Lekki Phase I Lagos, Nigeria London 11 Mount Pleasant London, England SE27 9PU Kola Masha Managing Director firstname.lastname@example.org +234-(0)-805-5000-350 www.doreopartners.com Do reo