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Liberation CIC Evaluation Dr Bob Doherty Head of the Business School Liverpool Hope University.

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Presentation on theme: "Liberation CIC Evaluation Dr Bob Doherty Head of the Business School Liverpool Hope University."— Presentation transcript:

1 Liberation CIC Evaluation Dr Bob Doherty Head of the Business School Liverpool Hope University

2 Overview Research process Competitive Context & Challenge Impact on UK Market Impact on Producers Impact of INPC Governance Lessons Learnt

3 Governance of Liberation CIC

4 Background Set-up in May 2007 to develop market access for small-holder nut farmers 42% shares owned by 12 producer coops from 3 continents called INPC Investment provided by Comic Relief and Hunter Foundation Southern Africa share of global groundnut market had declined from 77% in 1970s to <4% by 2005

5 Research Process 20 interviews – Range of 20 informants from supermarkets to producer representatives – 4 group discussions Review of secondary documents – Internal meeting minutes and annual reports Market reports Academic sources

6 Competitive Context UK Nut market the supermarket own-label figure is a significant 73% of total nut market share (Mintel 2009b) Major brands struggling Some nut traders cross subsidising price of FT nuts Launched at a time of economic recession and devaluation of £

7 Improvements in quality Producer representatives in key meetings with retailers (strong integrated supply chain) Positioned as the FT nut specialist INPC working together to prevent larger players securing FT nuts Liberations FT nut supply Working with Sainsbury’s to add value in country of origin Educating supermarket buyers Stakeholder coalition Highly competitive market Volatile commodity prices Devaluation of the £ Lots of competitive activity and NPD in nuts since launch of Liberation Economic recessionSevere price cutting Anti-competitive activity from major players Forces against Restraining Forces Liberations competitive position Weak position of nut farmers

8 Impact on UK Market (20) Established strong business (19) Strengthened producer Market position (13) Performance Improvement (18) Sainsbury's relationship (16) Listings in top 4 supermarkets (16) Direct role with UK retailers (12) INPC leaders international Reputation (10) Good media coverage(4) Positioning of branded products (14) World leader in FT own-label nuts - one stop shop (9) High quality reputation (12) Changed supermarket practice (7)

9 Strong Liberation Business? Number 1, fair trade nut company T/O =£3.5m2009/2010 Product listings in four of the five largest supermarkets in the UK. Informant G comments “ Supermarkets know we are the one-stop shop for FT nuts”! (Interview, informant G) One of Liberation’s key customers informant L, “ To gain listings in all the leading supermarket retailers against some very powerful competitors should not be underestimated and what’s more they have managed to hold onto these contracts despite a very competitive annual tendering process” (interview, informant L, 2010)

10 Strong Liberation Business According to informant R Liberations products compete because – “Liberation have got the balance just right in the modern business environment, they are a competitive supplier from both an excellent quality and cost perspective. Plus they benefit the growers which for our supermarket is crucial. There passion for farmers comes through very strongly. Don’t forget this market is very competitive” (interview informant R, 2010)

11 Impact on UK Market Executive of Liberation comments; “You are always starting off on the back foot with buyers due to Liberation’s higher prices. However, doing meetings with supermarket buyers as a team with Dyborn Chibonga or Tomy Matthews just works incredibly well. I remember one meeting with one supermarket when Tomy came along to talk to the buyer about the difference that Liberation makes to his farming community in Kerala, India, the buyers eyes did really light-up!, Normally this buyer is just interested in profit but this was something different, this joint representation gives Liberation a lot of weight in the market” (interview, informant P)

12 Strong Liberation Business Very good supermarket store distribution including Tesco Express Very good press coverage reaching 30 m consumers (appendix 3) Established a number of business supply chains

13 The Liberation Business Co-op Suisse Be Fair DEK Fair Mary (Finnish) Pakka (Swiss) Ethiquable (France) Mozambique/peanuts & cashews Malawi/Peanuts-Macadamia Nicaragua/peanuts Brazil/Bolivia & Peru- Brazil Nuts India/Cashews Twin Trading Simmonds UK Warehouse NL Warehouse Vebero Trigon (Pack & ship Lib lines) & Sell O/L to Morrisons Oxfam (Liberation lines) FTO Gepa Ethiquable Oxfam Belgium EZA Waitrose (Lib&HH), Peros, Simply D Traidcraft (margin share) Duerrs (UK Peanut Butter) Swartberg (EU Peanut Butter) Liberation (takes ownership and pays import and logistics fees to TT) = Liberation managed relationship Dried Apricots/Pakistan Dried Mango/Burkina Fasso Other Dried Fruits Fullwell Mill Raisins/Sultanas South Africa/Chile Traidcraft Liberation (Buys fruit delivered to warehouse in UK Blanch & Ship Fairtrade BULK SALES Comercio Alternativo Traidcraft Altromercato., EEX, The Roast Co, etc UK Snacks (process Harry’s Nuts and store Lib nuts for WR Pindar HH Eddie Stobart (O/L) Fradley (O/L) JS TAZ (pack & ship O/L) Tesco Morrisons (O/L) Supplier Raw Material WarehouseProcessor Warehouse/consolidator/distributor Customer Profresh (Xmas O/L) = Relation with customer managed by others Key

14 Areas for Improvement (20) Commercial Management (14) Focus mainly on social (12) Staff team balance (11) Marketing over spend (14) Business plan untested assumptions (5) No distribution(5) Staged release of investment (3) Poor balance sales vs social(8) Poor margins (4) poor focus on sales (14) Too many changes(8)

15 Impact on Producers (20) Adding value At origin (15) Development of Producer communities (13) Sense of Pride (8) Quality improvement (14) Growth in FT Producer groups (5) Guardian shelter(5) Women’s empowerment (6) quality of life (6) Joint representation (7) Sainsbury's Partnership (10) Development in Sub-Saharan Africa(7) Seeing nuts in final packaging (4) New producer Groups to FT (3)

16 Producer Impact FT premium total =$251,000 up to end of 2009 Community projects have brought improvements in the quality of life and well being for 440,000 people Transformative change in adding value in Sub- Saharan Africa, with revival of Malawi nut industry No one else bringing FT nuts from Sub- Saharan Africa

17 Producer Impact NASFAM in 2008/2009 exported 576 tonnes of groundnuts generating income $527 and $58k FT premium= 10,709 farmers RTU ‘Plumpy nut’ relationship with Sainsbury's Catalyst in raising £1.75m of further funds for producer partnership programmes

18 Producer Impact 6 informants also identified the impact of Liberation in enhancing the role of women in their producer communities. Informant B explains; “Fair trade has been a real plus for women as the price is even and stable. This really does encourage women to get involved in groundnut farming because the price is even and constant. Remember women are the stabilisers in the community. Our FT certified group is 2,000 farmers strong and now 40% of them are women, ten years ago the percentage was only 15-20% women in the group maximum. The MASFA Board has 5 women and 7 men giving a total of 12 members, while the Premium Committee also has 12 members 3 of which are women and 9 are men” (interview, informant B)

19 Impact of INPC (20) Unique producer partnership(13) Strengthened producer Market position (13) Advocacy work (10) Kerala AGM assembly (9) Cashew exchange (6) Growing international reputation (10) Influencing FLO (6) FLO (7) Across 3 continents, 3 languages (11) Impressive governance (4) Retailers (10) Sourcing board (5)

20 Impact of the INPC Unique producer partnership Remko Komjin (formerly of Cordaid in the Netherlands) commented; “I have never seen democracy in action with producers quite like in Kerala”(source :Liberation Annual Report 2008/2009) “ There is no question that Liberation and INPC is working. It is a key instrument to gain greater value for producers in the value chain. The ownership is substantially tangible”! (interview, informant C)

21 Governance (20) Conflicts of interest (12) Legal Form CIC (10) Fiduciary responsibility(8) Not appropriate for farmer ownership(6) Untested (4) Sense of participation (14) Problem solving (8) Solidarity (8)

22 Governance More financial experience on board in early stages Hunter Foundation taking a seat on the board Investment being released in tranches

23 Community Interest Companies Pros Specific for social enterprise Asset lock protects social mission Company can appreciate like any ordinary company Brand and credibility Easy to set-up Cons Can’t sell shares to public INPC collective ownership makes it complicated to borrow money against the capital asset

24 Lessons Learnt (20) Commercial focus weak in 2007/2008(16) Governance (15)Ownership (9) Imbalance of objectives(11) No listings and high marketing spend (12) Conflicts of interest (12) Legal structure (9) Money paid upfront (3) Fiduciary responsibility (8) Access to capital (3)

25 Lessons learnt Producer expectations to be managed more effectively Dual aspect of FT marketing Focus more on low cost marketing options such as using activist groups Hunter Foundation seat on board Important work of TWIN Comic Relief in future perhaps provide grant in tranches against key performance indicators

26 Conclusions Findings support focus on own-label Created whole new FT category Delivered the right quality nuts and the right price for some very demanding customers Work of TWIN and NASFAM in Malawi is truly transformative INPC has strengthened the position of nut producers and influenced practice and policy

27 Conclusions At the outset need to get the balance of objectives right Catalytic effect to gain more funding (See table 9 in report for summary)

28 Recommendations Agreement at the outset to be clear about conflicts of interest Get the balance right Build stronger links with fair trade activists Continue to build the partnership with Sainsbury’s

29 Recommendations Further development of Latin American relationships Further business to be developed with local South African market and via developing links with new producer groups who add to the variety of nuts on offer Further work on climate change projects

30 Recommendations Test assumptions in business plan Also use the Liberation story with other business opportunities with larger players Investigate how collective ownership can be used to raise capital Further education of supermarkets in the nut cycle

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