Presentation on theme: "1 Wikifarming and Open Source Processing The Organic + Fairtrade Experience 2.0 Ashifi Gogo, Evans Lartey, Bright Simons Center for Humane Education, Ghana."— Presentation transcript:
1 Wikifarming and Open Source Processing The Organic + Fairtrade Experience 2.0 Ashifi Gogo, Evans Lartey, Bright Simons Center for Humane Education, Ghana. GSEC 2007
Agenda The opportunity & WOSPRO’s vision Organic farming, certification Ghana-UK trade: ideal starting point Revenue model Timelines Social impact The team
3 The Opportunity EU Organic market: $10 billion, massive growth. UK imports 75% organic. Suppliers (farmers) in developing countries, like Ghana. Rigorous organic certification procedure –too complicated (illiteracy). Source: Packaged Facts report – projections for 2005
WOSPRO’s Vision Fairtrade + Organic food consultancy, consolidator and exporter. Social impact: –Farmers (Fairtrade). –Environment (Organic). $1.1 mil profit in 5 years with $0.5 mil investment. 1400 farmers: 3X net income increase. 4
5 Organic Farming Organic: good environmental practices. Low pesticides: Cancer & allergy fears. Low fertilisers: Environmental good. Natural growth: Great taste. Community building: Social issues. Fairtrade: pay farmer fairly. High price premiums: Organic alone: 40%. Fairtrade alone: 45%. Combined: 55%. Sources: Wikipedia, Fairtrade Organization
Source: Soil Association 6 How Do I Get Into The Market? You need a Certifier. –Monitors organic standards. –Issues certificate permitting organic sales. Soil Association certifies 75% of UK organic produce.
7 Ghana Politically stable: 25 years Fully democratic, past 15 years Free press & rule of law. 2006 Inflation rate: 10.5%. Established UK trade links. Agriculture: 40% of GDP. –Employs 60-70% workforce. Sources: Wikipedia.org, CIA World Fact Book Websites, Ghana Statistical Service
8 Typical Ghanaian Farmer Grows organically by default. Precedent for cooperative farming. Low scientific sophistication. No organic certification. –Costs $1200/day for inspection. Average yield. Low to medium net income $500 a year. Handles product distribution.
9 WOSPRO’s Solutions Guidance through UK organic certification Virtual proximity organic education VIRPROX: Cost saver Long term: certification costs fall from $1200/day to $120/day WOSPRO purchases directly from farmer at fair price Organic AND Fairtrade WOSPRO exports products to UK WOSPRO: Organic food consultant + consolidator + exporter = supply chain facilitator
10 Revenue Model UK Distributor UK Distributor (more info in Q&A) Ghanaian Certified Organic Farmer Existing Food Exporter US / Global Distributor West African Certified Organic Farmer Long Term Year 1Year 2Year 3Year 4Year 5 Sales Turnover (‘000 US$) ,2002,1004,000 Profit (‘000 US$) ,100 Bottoms up approach, conservative estimates. Available in Q&A. Hauling cost: $30 Profit: $12 50kg peanuts: $12 With WOSPRO: $36 No organic, no Fairtrade: $54 Fairtrade+organic sale: $78 Source: Fairtrade organization, NAFED 45%
11 Break Even Analysis Market size: $105 mil. Break-even sales = $1,547,500. Market growth:15% per annum. Inflation, interest rates will not exceed 30% per year. Bottoms up approach, more info in Q&A. EU Market Entry
12 Social Impact Large SROI value of 3 –$1 invested = $3 –Fairtrade farmer’s income increases from $500 to $1600 over 3 years. –Environmental and health gains. –Direct and indirect job creation. –Stem rural urban youth drift. –Eco & food tourism.
13 Project Timeline Organic subcert. from UK company Storage facilities, farmer recruit, transportation logistics Export & dist. outlet finalized Funding: $150,000 First batch of crops shipped More farmers Expand distribution Diversify crop selection Funding (IFC): $350,000 Expand to EU, starting with Netherlands Grow to primary West African Certifier Long term growth / exit strategy
14 Bright B. Simons 2005 Marie Curie Fellow (EU Migration Centre, Berlin), Journalist. Human Development Analyst. Human Development Analyst. Researcher into organic issues. Paa Kwesi Imbeah Yale University graduate and Gordon Grand Fellow. Founder, Kasahorow project: translation effort for African languages. Localized farming education materials and efforts. Evans Lartey Graduate, L’Ecole De Management in Paris. Founder and CEO of PIU, investment consultancy in Accra Top agric graduate; Top agric graduate; food security expert, USAID Title II Project. Management Team Ashifi Gogo Electrical Engineering Ph. D. candidate, Thayer School, Dartmouth. Computer consulting, online social networks. VIRPROX. Active search: CFO, CEO
15 Advisory Board Elsa Garmire: Professor, Dartmouth. Tech. transfer expert Member, National Academy of Science, Fellow, Optical Society of America, IEEE. Nancy Garrison: Organic food expert leading member, Slow Food Movement, arguably the world’s largest organic consumers’ association John Jeavons Project: organic farming education Arpit Rai: High tech social entrepreneurship Exec. Dir., ASES Singapore Business Development Executive, technology consulting giant Satyam. Gregg Fairbrothers: Director, Dartmouth Entrepreneurial Network Startup launching maestro Claude Fussler: Sustainable development expert Former Director of the World Business Council for Sustainable Development Nick Hewison: UK crops market expert MD, NDH Management Services & Consulting, commercial fruit grower in Devon, UK
17 Questions & Answers Agriculture Market Research Market Research Value Proposition Value Proposition Exit Strategy Exit Strategy Exit Strategy Exit Strategy VIRPROX Certification SROI Fairtrade Ghana Distribution SWOT Competition Marketing & Sales Strategy Marketing & Sales Strategy Feasibility Studies Feasibility Studies Scalability
Sales Strategy Short term: unprocessed food supplier Med. term: extracts Long term: WOSPRO branded food 18
19 Marketing Short term: Existing UK importers –Looking for supply Long term: Market goods to consumers –VIRPROX Secured market
21 Distribution: Timeline Fairtrade Ventures Expand to include: Utopia New Covent Garden Trade Cumbria Organics Supermarkets & caterers for in-house brand Waitrose Co-op Organic Restaurant Bistro Organic WOSPRO’s own label: Asda Tesco Sainsbury Cafeterias in universities, offices etc. Expand to USA: Whole Earth Amy’s Kitchen
22 Growth: Timeline Year 1 – [Months 1-6]: Pilot Project: 26 farmers, Crops: Peanuts, Peppers. VIRPROX trial run. [Months 6-12]: Launch: 50 farmers; Organic certification license obtained; first order through Fair Trade Ventures. VIRPROX goes live – Soil Association MOU on VIRPROX concluded. Year 2 – [Months 1-3]: 150 farmers. Fairtrade Certification obtained. New farming units admitted per sales dynamics. Ginger added. Districts in Eastern Region of Ghana come on-stream. Year 3 – WOSPRO labelling on products. First retail order secured. First batch of products reach Netherlands. Shea nuts and Cola nuts added. Districts towards Northern Ghana come on-stream. Year 4 – Derivative processing begins in Free Zones’ site – sub-contractor plant: shea butter, cola juice, pepper pastes, peanut butter and ginger extracts. Factory orders for processed produce begin. Explore prospects of USA entry. Year 5 – Enter US Market. Acquire license. Begin exploring bulk demand.
Growth: Details 23 YearProjects Crops Involved # of Farmers Output A. Total tonnage B. US$ ‘000 0 (pre- launch) Feasibility Studies. Pre-inspection consultations with SACL. VIRPROX prototype completed + simulations. MOU with SACL about VIRPROX. Staff recruitment & training. Identify farming districts. 1 Recruit farmers Organic certification license. First orders from Fairtrade Ventures. Silos completed. Peanuts Peppers (Each farming family has about 5 workers) 300 A. 418 B Fairtrade license obtained. More farmers recruited, new districts added. Negotiations with more third-party buyers. Factory and feedmill orders begin. First direct orders from retail chains begin. Above + Ginger Lime 450 A. 815 B. 900
Growth: Details Continued YearProjects Crops Involved # of Farmers Output A. Combined tonnage B. US$ ‘000 3 More retail & factory orders. Re-negotiating third-party distribution; focus on direct orders. Dutch orders. Brand-packaging of produce begins;’’ free zones concessions’’. Lease on warehouse. Ginger Lime Peanuts Pepper Shea nut 600 A: 1315 B: Processing of product derivatives. Warehouse leased near Tema port. Shelf-space in supermarkets for processed and packaged produce. U.S. Fairtrade and Organic license obtained. same 750 A: 1900 B: U. S. market. Warehouse leases in Netherlands. Shelf-space in Netherlands, Switzerland and Germany. same 1400 A: 3100 B: 4,000 Long - term West African certification agent Additional commercial applications of VIRPROX. Evaluate market & add new crops
25 Fairtrade: Sales & Growth Purchase farm produce at fair prices from farmers in developing nations North American & Pacific Rim growth: –2003 Total Sales US$ million, a 52% increase over 2002 –2004 Total Est. Sales of $ million. Source: fairtradefederation.org, Wikipedia.org
Fairtrade: Premiums 26 45% Premium
Market: Organic + Fairtrade International Premiums 27 Produce Country Of Origin Fairtrade & Organic minimum Price per MT (US$) Fairtrade & Organic Premium per Metric Ton (US$) Premium % Peanuts China Ginger India Shea nuts Uganda Shea butter Senegal PeppersEgypt LimesBrazil LemonPeru MangoPeru OrangePeru PineapplePeru Source: Fairtrade Standards For Fresh Fruit and Fresh Vegetables For Small Farmers’ Organizations. May 2006.
28 Market: Example Product Basket Crop Uses (processed organic end products) Some Targeted Buyers (UK) 2006 Market Size (US$ million) Peanuts Raw peanuts, peanut butter, livestock feed Asda, Tesco, BOPC Paul Organic Livestock farms, Utopia 25 LimesBaking additive, lime juice Asda, Morrison, Tesco, Robinsons, Utopia 40 Ginger Gingerbreads, ginger spices, ginger ale, ginger beer Green & Black (chocolate makers), Steinbecks (organic products), ARP, Cauldron 15 Peppers Spices, Ground pepper (Caribbean style), meat condiments Organic restaurant, Tesco, Asda, KFC (pitch), McDonalds (organic range), ARP, Cauldron 12 Shea nuts Wide range of cosmetics, ectopic medication (eczema), shea butter, oils BodyShop, Tesco, Asda, Duchy Organics, Ecomat 13 High growth, not peaking soon.
Market: U. S. Organic Sales Source: Southern Organic Resource Guide : $15 Billion
VIRPROX: Details VIRPROX: WOSPRO’s logistics and resources management system. Unlike SAP 6.0. Optimised for audiovisual interfacing Existing systems: NIP’s OTS, but require IT trained farmers. VIRPROX is simple and functional. 30
VIRPROX: Web Portal Portal for communicating with certifier audiovisually. Inventory orders, batch control via portal. WOSPRO field activities video- transcribed into system. Learning material for extension officer trainees. 31
VIRPROX: Practical Scenarios Training: Record SACL training sessions, upload to VIRPROX. New extension officers recruited: retrain with VIRPROX multimedia. –No need for SACL Need to educate semi-literate farmer: use VIRPROX multimedia, translated to local languages. –No need for high literacy. WOSPRO faces new farming challenges –Capture multimedia, upload to VIRPROX, notify SACL –SACL solves problem remotely. Saves $$$. –Better than , phone, air mail. Supply Chain: Keep track of product batches with codes in VIRPROX –Problem arises: traceback with VIRPROX VIRPROX: Powerful tool for data keeping, auditing, disaster prevention, training and post-crisis learning. 32
33 VIRPROX: Schematic Mock-up of a VIRPROX-powered portal plane.
34 VIRPROX: Capital Disbursement Schedule of CostsAmount (US$) Software code development (VIRPROX)40,000 Market research, pre-revenue overheads, hiring10,000 Certification and incorporation of division2,000 Wireless infrastructure8,000 Data centre and network services5,000 office space and outfitting15,000 Patents and copyrights2,000 Legal miscellaneous3,000 Operations5,000 Human Resource Development30,000 Total120,000 Premises and Assumptions Interest rates differ for IFC loan facility and venture finance. Venture finance package is an optimal mix of debt and equity. In year two, WOSPRO shall qualify for the fair-trade concessionary financing scheme under the Shared Interest program.
35 WOSPRO Services Fairtrade AND Organic products UK. Developing skills and knowledge for organic farming in Ghana. Scoping and feasibility studies, aid decision makers. Training extension officers from Kwadaso Agric University, Ghana. Training in organic certification. Market development and supply chain mapping.
Operations Peanuts, shea nuts, lime, ginger and pepper plant farmers. Exclusive agreement to supply WOSPRO –Microfinance (local bank) –Locally produced farming implements –Certification guidance Initial: WOSPRO bears certification cost (SACL core processes). Medium to long term: Farmer bears VIRPROX subsidized cost. 20% annual earnings servicing debt. Paid in 5 years. Local carting company: fully refrigerated transportation and storage silos. Existing freight forwarders: export to UK warehouse. Medium to long term: WOSPRO packaging, labeling facility at Port of Tema, Ghana. “Ghana Free Zones Scheme”: Over 70% output for export reduced tax burden by over 85 %. Support under EU’s Everything But Arms Initiative. 36
Ongoing Feasibility Studies: Farming Districts in Ghana: –Ejisu-Juaben –Bosomtwe Atwima Kwanhuma –Kwabre Ethnographic study of 14 farming families ongoing 37
Ongoing Feasibility Studies: Business Partnerships at local and International Level –IFC (International Finance Corporation) considering application under S&ME Fund scheme –IFAD (International Fund for Agricultural Development) studying proposal –District Directorate of Agriculture in Ejisu-Juaben –Kwadaso Agricultural College: recruit extension officers provide top-up organic course using VIRPROX platform. 38
WOSPRO: SWOT Strengths, Weaknesses, Opportunities, Threats. 39 StrengthsWeaknesses Leadership Advisory Board Matching funds Ghana stability High food miles Needs good marketing OpportunitiesThreats Access to big marketing infrastructure (fairtrade & activism) Booming market – right positioning Ghanaian agriculture New market Big food Environmental changes
WOSPRO: SWOT Strengths –Vice President: Evans is Director of Devt., IMANI International award-winning think tank links to major corporate bodies in Ghana. –IFC funding possibility –IFAD support possibility –Advisory board –Ghana stability 40
WOSPRO: SWOT Opportunities –Access to marketing resources through Fairtrade and environmental activism movements. –Growing society support for organic and Fairtrade. –Booming industry, being in the right niche at the right time could bring millions of dollars. –Organic by default farming in Ghana 42
WOSPRO: SWOT Threats -Agriculture is natural cycle dependent -New industry – trends can be fickle -Produce buying in EU/US: tilted in favour of big food -less bargaining power for suppliers 43
Competition: Ghana Cash crop growing system –Cocoa, coffee, pineapples. –Large export income earnings. –Great Government support (agric specialists). –Specialized marketing/distribution companies. 44
Competition: Global Duplication of cooperative model. Existing EU/US perishables trade ties. Comparatively lower commercial farming. Low earning power in agriculture sector. India. Competing crops: ginger, pepper. Problems: low consolidation, technical inefficiencies, market links, entrepreneurship and networking Only 23% of major European importers source from India. Source: FIBL Research Institute of Organic Agriculture Report Organic Agriculture in India International Competence Centre for Organic Agriculture ICCOA Report of the Need Assessment of Indian Organic Agriculture, January 06, 2004 Summary: “The Indian Organic Market [is] suffering from the incertitude about the potential market, lack of successful pioneers and courageous imitators […].” 45
Competition: Global Sri Lanka. Competing crops: Lime, pepper A 24-year old civil war: Hindu Tamils and the majority Buddhist Sinhalese. Logistics/export nightmare. Uganda & East/Central Africa Greater emphasis on Cash crop farming & commercialisation of agriculture. Only political semi-stable: Uganda, Congo and Zimbabwe. Higher freight costs to Europe. Shea nuts: grown in West Africa. 46
Competition: Long Term 47 Organic BrandAdvantageLimitation/RiskMitigation WOSPRO Fairtrade logo. Organic logo. VIRPROX enhances product integrity for supermarket and other buyers. Low production costs. Distributed produce supply base implies low risk of disruptions. High ‘food miles’ Limited marketing resources to explain all value propositions. No shelf space advantage. Web portal compensates for lack of marketing clout. Access to media agenda of development and social justice advocacy groups. Web-portal provides means for organic- related needs to be clarified and met for added value to customer. Local/ Independent ‘Comprehensively’ organic – no food miles issues. Strong ‘local sentiment’ which influences patronage; customer can support farmer directly. Freshness guaranteed. Poor ‘reach’ (typically sell through ‘open markets’ which have limited scope.) Low economies of scale/high production costs may lead to higher than industry-average prices. No ‘Fairtrade’ opportunity. Low range – limited to local crop varieties. Local producers’ cooperatives can resolve some ‘economies’ issues. Strong patron bonding may lead to some customers overlooking price. Big Food (E.g. Kelloggs’ Kashi and Weetabix ‘Organic’ ranges) Massive marketing clout. Easy access to supermarket shelves High Brand recognition. ‘Footfall drive’ – loyalty to brand’s non- organic lines can generate interest for ‘organic’ versions. Most brand images incompatible with ‘organic’ ideal e.g. fall in Kashi’s sales upon acquisition by Kelloggs. Fairtrade/organic seals harder to acquire due to Certifier resistance. Enough muscle to influence customer perception through media lobbying. Can acquire ready-made organic brands for attempted integration into brand ethos. Exclusive Organic Brands (e.g. Jordans, Dove, Whole Earth, Whole Foods, Prince Charles’ Duchy Organics) Considerable marketing clout. Favorable access to shelf space. High Customer trust. Fairtrade/organic certification advantages clear and growing. No ‘proximity’ advantage. No significant cost advantages. May pose biggest competition to WOSPRO. Some like are involved in well-publicized conservation efforts. Customer bonding may thus proceed vicariously Supermarket In-House Brands (private labels) Formidable shelf prominence. Marketing instrument (in-store promotion) highly effective. Superior grasp of customer shopping behavioral trends. Brand compatibility with organic ideal is weak. No cost advantages. Low Fairtrade/organic certification advantages. Anti-supermarket sentiment may rub off. Sourcing locally, though expensive, may enhance proximity. Can easily source from third parties for repackaging as brand recognition is assured. New Entrants (Ghanaian producers competing with WOSPRO) Lower production costs. No short of potential members for producer cooperatives. Organic and Fairtrade certification advantages. Patent cover prevents adoption of ‘web- oversight’ marketing technique. Certification presents significant managerial and technical challenges. Sound knowledge of European (western) consumer trends required. Alternative technologies that may be in the pipeline elsewhere may enhance proximity. WOSPRO’s Contractual holds on managers, freight handlers, producers etc. can never be impregnable.
48 Ghana: Country Profile Capital (and largest city): Accra Official language: English Government: Constitutional republic President of Ghana: John Agyekum Kufuor Independence from the UK –Declared : 6 March 1957 –Republic: 1 July 1960 –Constitution: 28 April 1992 Area: 238,534 km² or 92,098 sq mi (about the size of Oregon). –Water 3.5% of the area Population: 22 million (2005 estimate) –Density: 93/km² or 215/sq mi GDP (PPP) 2005 estimate: Total $55.2 billion, Per capita: US$2,643 HDI (2004): (medium) Source:
49 Ghana: Country Profile: Economic Standard & Poor country rating (2006) : B + (Best in West Africa) United Nations International Development Organization ranks Ghana ‘’Best for Investors’’ in Africa World Bank: Doing Business Report 2007 – Ghana: Top Reformer in Africa. Ghana: highest grant award from US Millennium Challenge Account –good governance, rule of law and democratic accountability. Cedi: full entry into international exchange rate mechanisms (2006) High scores: NEPAD African Peers’ Review Mechanism. Freedom House Investment Climate: Excellent
Ghana: Country Profile: Social Amnesty International Human Rights: Good US State Department Political Climate: Very Good Socio-Political Information/Institutional Environment –No national-level ethnic unrest in 50 years of independence –No political prisoners –New Commercial fast-track courts to remove bureaucracy from the commercial judicial system. 50
Ghana: Country Profile: Investment Tax breaks for foreign investors. New Partnership for African Development (NEPAD). –African monitoring of good governance, accountability Ghana Investment Promotion Act (1994) –tax concessions for up to 10 years are available. Low inflation rate (graph on next slide) 51
Ghana: Country Profile: Inflation 52 Source: Bank of Ghana
53 Ghana: HDI ██ high██ medium██ low██ n/a Human Development Index (HDI): life expectancy, literacy, education Credit: Wikipedia.org. HDI data for 2004 Ghana China, India
Ghana: Agriculture Details 5 acres, 2 or 3 full-time workers, part-time assistant during planting and harvesting –Family business. Strong communal element. –Traditional land ownership held in communal trust –Child labor. WOSPRO will ensure no child abuse takes place. Average turnover: US$3000 –No storage facilities –Exploited by middlemen WOSPRO model fits traditions. –Farmers still own their land/farms. –shared resources: storage, husbandry, training. –No privacy issues 54
Ghana: Natural Agriculture Advantage Already low inputs, easier switching to organic About 3 months to switch in Ghana, 3 years for developed countries Already low earnings, –premiums an even bigger boost All we need to do: increase capacity
Ghana: Agriculture Low Yield 56 Ghana agric: not much change since independence Source: earthtrends.wri.org. WRI : World Resources Institute
Ghana: Agriculture Organic By Default 57 All these graphs support our argument that production is organic by default, low yield and that agric is in bad shape (almost no change since independence) Organic shouldn’t be difficult or expensive and our interventions are critical. Source: earthtrends.wri.org. WRI : World Resources Institute
59 SROI: Calculation REDF blended value format End of year five, ROI = 2. –accumulative investment of $2.5 mil and net financial performance of $5 mil Social Purpose Value = 0.5 Return = $2 mil, investment of $4 mil Health and environmental gains –Additional $2 mil in measurable communal value –Calculated with Soil Association guidelines Total weighted SROI = 3.0
60 SROI: Employment Creation Employment Category Employee Strength Year 1Year 3Year 5Year 7 Sales/Marketing/ Administrative Agric Extension Officers Factory/Packaging Plant workers Data Technicians Cyber-interns (students from local colleges) Drivers/Logistics Farmers’ Cooperative 60 (300)140(600)300 (1400)700 (3200) Indirect Employment Generation Haulers, Porters, freight handlers etc Agro-input dealers; Local artisans (carpenters etc.)
61 SROI: Social Benefit Directly to Farmer Farm Operation Present Bottlenecks Loss of Ideal Output (yield & income) WOSPRO Intervention Savings Clearing Reliance on hoes and cutlasses – limits capacity 6% 1. Tricycle - tillers 2. wheeled, hand-held ploughs 3% Soil Enrichment Lack or resources to invest in expensive fertilisers. 8% Advanced training in manuring Composting techniques 5% Water useReliance on rain water.15% Rain Water Storage Sustainable ground water use Irrigation techniques 10% harvesting Frequent bruising of crops leading to reduction in appeal/shelf life 3% Gloves scything implements. 3% Control Insufficient knowledge and resources to invest in proper management. 15% Integrated Management Organic pesticides 12% Storage No local storage facilities. High perishability 15% Silos Saw dust, air control 10% Market Access/ Transport Average of 2 middle-men before urban market is reached. No negotiation power so underpaid. 30% One intermediary to export market Arrange transport 21% Analysis: 1.Ghanaian rural farmers are operating at an efficiency of 8% of achievable rates. In the short term, a conventional intervention could raise this up to 96%, but at the cost of sustainability. ‘s organic intervention can manage an uplift to 64% in first two years of operation. 2.The implication is that in the short term alone output in combined yield and income terms rise 8 times. Diminishing returns flattens this growth in efficiency over the long-term, hence the need for new farmers to be brought on board even as existing farmers expand their land stock.
Required Capital Outlay 66 Planned DisbursementAmount US$) Lease on/outfitting of company administrative, technical and operational buildings in. Construction of contingency storage silos. Lease/rent on office space in, (1 year) 170,000 Working Capital (produce bulk buying etc)250,000 Cargo trucks for farm-to-farm harvest consolidation.80,000 Farm equipment (hygiene, health and safety – oriented) to be leased out to farmers on flexible terms (portable irrigation systems, boots, disposable gloves, modern harvesting equipment) 70,000 Operational funds for start-up expenses (pre-revenue overheads), hiring, market research, legal miscellaneous, labor wages etc. 160,000 Total730,000
Cost of Sales & Revenue 67 INCOME ($’000)Year 1Year 2Year 3Year 4Year 5 REVENUE of Raw Crops of Packaged Crops of Processed Crops Sub-total COSTS ($’000) Cost of Sales Storage Bulk Transport Customs & Duties Marketing Sub-total Materials & Operations Crop Purchases Farming Inputs VIRPROX Certification0 (start-up) Packaging Processing Freight Sub-total
Third Party Costs Insurance Bank Charges Legal Advisory Sub-total Loans & Debt Servicing Interest Servicing* Sub-total Total Revenues Total Costs Start-up Costs Taxes Net Income
71 Certification: SACL Core Processes CORE PROCESSES Pre-inspection consultation Initial technical visit to site(s): Soil testing, customized best practices License granting Annual visits Soil Association (SA): Certification conducted via Soil Association Certification Limited (SACL). SACL: inspector for compliance with SA regulation consultancy for producers to meet standards. Source: Soil Association Guidance Booklet, 2006.
Certification: SACL Peripheral Processes Organic farming advocacy in developing nations. Scoping and feasibility studies for decision making (local to national). Training of certification bodies. Market development of organic products. 72 Source: Soil Association Guidance Booklet, 2006.
Certification: SACL (Certifier) Consultancy Services WOSPRO through VIRPROX: Perform SACL peripheral processes. Developing skills and knowledge for organic farming in Ghana. Scoping and feasibility studies. Training extension officers from Kwadaso Agric University, Ghana. Market development and supply chain mapping. Still need SACL inspection & certification services. 73
74 Milestones Farmers recruited: 14 IFC funding deliberations: Ongoing Fairtrade certification: Pending Organic certification: Pending Patents and copyrights: Exploration VIRPROX specifications: Ongoing Technical and managerial consultations: Ongoing Incorporation in three countries: Ghana, UK, USA. –Private LLC –Partners owning all shares outstanding after equity arrangements with strategic investors, venture financiers and development fund managers have been concluded.
75 Exit Strategies Investor Buyout Sale to larger company: SA, SACL.
77 Fairtrade: Sales & Growth Purchase farm produce at fair prices from farmers in developing nations North American & Pacific Rim growth: –2003 Total Sales US$ million, a 52% increase over 2002 –2004 Total Est. Sales of $ million. Source: fairtradefederation.org, Wikipedia.org Retail Value Global Fairtrade Sales YearSales (€) Growth (%)
78 Typical Ghanaian Farmer Grows organically by default. Precedent for cooperative farming. Low scientific sophistication. No organic certification. –Costs $1200/day for inspection. Average yield. Low to medium net income $500 a year. Handles product distribution. WOSPRO provides solutions
VIRPROX: Certification Savings $100,000 per year for 120 farmers –Each farmer has 5 workers. –About $270 per day VIRPROX: $45,000 per year –VIRPROX cost: $35,000 –SACL inspection: $10,000 –About $120 per day
80 WOSPRO Innovation SACL’s going rate for all its certification activities, including peripheral processes, is $1200 per day (plus VAT normally charged at British rates, usually 17.5%). Soil Association actively partners intermediary organisations such as Wospro to develop solutions to bring down costs. Wospro believes that it can build an innovative system that will bring to an absolute minimum the amount of peripheral certification processes outsourced to SACL. The following list is of steps that will be taken to achieve that result. I. Organising farmers within a particular community into a cooperative so as to dilute the costs per farmer. II. A close look at items III and IV on the menu in fig. 1.1 reveals that a web-based electronic system, with complete multimedia functionality, can allow Wospro staff play an effective role as a conduit of training and skills from SACL to farmers at a much more reduced cost than would have been the case were specialists to be dispatched from the UK to Ghana. VIRPROX: Similarly, strategies around supply-chains, process-tracks, new field knowledge, and consumer behaviour trends can be shaped in realtime, cost-effectively and synchronously. A system such as is being described allows complex systems to be standardised and is particularly suited to a cooperative model where new members will be regularly added through identical protocols. In this sense, we will have built a responsive mechanism for bringing new farmers ‘’organically onstream’’ in larger numbers, at greater speeds, and at low costs than can ever be achieved using prevalent methods.