2 the agropyme program the cohorsil case 4 lessons learned

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The context

The Agropyme Program

The COHORSIL case

Lessons Learned

BDS through a Producer Association:developing competitiveness and

improving access to the fresh vegetables market in Honduras.

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AgropymeC r e a m o s O p o r t u n i d a d e s

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5245EAP (%)

6.64Average education (years)

663Households without electricity (%)

1,368504Income per capita (USD/year)

4654Population (% of 6.7 MM)

UrbanRural

57.272.8Poverty (%)

Source: Honduran National Statistic Institute, XXVII households survey, may 2003.Prepared: Agropyme

The context…Honduras Rural and Urban

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Total ImportsTotal ExportsMaquila Industry net incomeTotal commercial balance

Agro ImportsAgro ExportsAgro commercial balance

Agro imports/total ImportsAgro exports/ total exports

1995

1,6421,220

-420

251784533

15%64%

2002

2,9761,331599-1,046

523633110

18%48%

USD MM

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Change1995-2002

81%9%

-150%

108%-19%-79%

3%-16%

The context…Honduras Trade

Index* of the Competitiveness of Growth (2002-2003)

7679647375Nicaragua

7971767876Honduras

6233486957El Salvador

4743463743 Costa Rica

31 13 193320Chili**

Quality of business

environment

Macro economic

environment

Public Institutions

Technology Growth

* Index runs form good to bad, from 1 to 80.** Leader in Latin America Source: World Economic Forum (2003).

The context…Honduras Competitiveness

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Small and micro enterprises are the large majority of enterprises, very heterogeneous with many subsistence enterprises and, few with real growth potential.

Many providers remain very donor-dependent and offer “traditional” BDS free of charge, influencing on BDS demand, strengthening a non-payment culture.

Most BDS are linked to financial services. This service offer includes areas of accountability, financial analysis and warrantees, but stay far away from enterprise areas like management, marketing and technological issues.

The Honduras BDS market is probably the weakest in the Central American region.

Agropyme jointly with GTZ made an inventory of financial and BDS providers.

The context… Honduras BDS Market

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The Agropyme Program… Agropyme = AgroSME

To improve competitiveness of Honduran Small and Medium Agricultural Enterprises through BDS. And contribute to the reduction of rural poverty through education, employment and income generation.

Objective

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BDSProviders

FacilitatorsGovernment

Private SectorIntl. Cooperation

MarketOpportunities

•Programs oriented services•More theory, less practical•Sometimes market oriented•Expensive (easy money)•Few added value for AgroSME’s

•Agropymes oriented services•More practical•Market oriented•Competitive (Quality and cost)•More added value for AgroSME’s

AgropymeProgram

AgropymeAgropymeProgramProgram

MarketInformation

High quality and

profitable BDS

Synergies

AgroSME’s>Income>Employment<Poverty

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The Agropyme Program…… Intervention strategy

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Market information

SME Selection

Business plan

RESULTS:Competitiveness

Market ShareProfitability

Synergies ImplementationSub-sectorselection

EFECTS:�Income

�Employment< poverty

BDS Providers

Agropyme Program and other facilitators


SMEConditional

Payment Contract

SMEConditional

Payment Contract

Bidding Offersevaluation

Pre-SelectionNegotiationContract

BDS needsAccording

To Business plan

SME +

Agropyme

SME +

Agropyme

Agropyme’s

Data Base

Agropyme’s

Data Base

BDS bidding and contract process


ToR’s

definition

SME -AgropymeAgreement

Client definitionResult oriented

SME -AgropymeAgreement

Client definitionResult oriented

BDS

Provision

Resultsevaluation

• COHORSIL competitively supplies inputs and takes care of the commercialisation of agricultural production and so can improve the liquidity.

• Apart from the membership fees, COHORSIL generates profits from four service divisions:

• Sale of inputs• Commercialisation of coffee• A greenhouse for seedling production• A training centre.

• Nevertheless, more important is its potential for a long-term assistance to the transition towards new market niches.

The COHORSIL case… …Background

Geographical distribution of the SME and COHORSIL

POTRERILLOS(Finca experimental)1,500 metroscultivos: A, B, C, D, G, K

SANTA FEAltitud: 800 metros AGUA DULCITACultivo: A SANTA CRUZ Altitud:750 metroVACADILLA DEL DULCE Cultivo: C, F, EAltitud: 600 metrosCultivos: A, C.

RIO BONITO CERRO BLANCOAltitud: 1200-1450 metros Altitud: 900-1400 metrosCultivos: A, B, C Cultivo: B, F, K, G, C, A

EL ZAPOTEAltitud: 1200-1360 metros

Cultivos: B, C, D, G, K, A

EL RINCONAltitud: 1300 metrosCultivos: A, B, C, G, J, K SIGUATEPEQUE

Cultivos: A, B, C, D, F,G, H, I, J, K

EL JUNCOAltitud: 1400 metrosCultivos: A, B, C, D, F,K,J

LA LAGUNAAltitud: 750 mts.Cultivo: F, K, G, H, J

SAN ISIDROAltitud: 1015 mts.Cultivos: C, D, J

A. CaféB. CalabazaC. MaízD. FrijolE. ArrozF. PepinoG. LechugaH. CebollaI. AjoJ. HabichuelaK. Tomate

LA DANTAAltitud: 1500 - 1550 mts.Cultivos: A, B, C, K, D, E, J

TEGUCIGALPA120 Km

SAN PEDRO SULA120 Km.

LA ESPERANZA70 Km.

GUARAJAO

CO

Rural

The COHORSIL case… …Background

Income

Cost

Net Income

(2,000)

-

2,000

4,000

6,000

8,000

10,000

USD/Unit/Year

Vegetables

(Traditional)

3,054

2,099

954

Traditional Coffee

1,4661,847

(391)

Organic Coffee

1,475 1,537

(62)

Fair Trade

Organic Coffee

2,300

1,537

763

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The COHORSIL case… Background… The coffee crisis

+++

-+

+++

-+

-+

+++++

+++++

Exporters

Demand

--

--

+

-

--

--

--

Local RuralAttributes required

+++++-+-+--Legal aspects

+++-+-+-Logistic

+++++++----Gross Profit

++++--+-+Products mix

++++++++-+--Timing

+++++++++++Volume

+++++++-++-+Standards

SupermarketsAgro-industryWholesalerMiddlemen

Analysis of different commercialization channels for FFV

-- �--------------Market size, complexity and Competence------------------� ++

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-- ��-------------Investments and BDS requirements--------�� ++

The COHORSIL case… Market information

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The COHORSIL case… …Market information

26% of stores of leading supermarket chain

127Supermarket share of FFV (by value %)

4325Supermarket share of food market (by value %)

236191Value of domestic FFV market (USD MM)

2,3601,912Value of domestic food market (USD MM)

3715Number of supermarkets stores

20021997Variable

Supermarkets and the Honduran Fresh Fruit and Vegetables Market

Income

Cost

Net Income

(2,000)

-

2,000

4,000

6,000

8,000

10,000

USD/Unit/Year •BDS •Financial resources

Vegetables

(Traditional)

3,054

2,099

954

Vegetables (New

System)

9,180

5,954

3,225

Traditional Coffee

1,4661,847

(391)

Organic Coffee

1,475 1,537

(62)

Fair Trade

Organic Coffee

2,300

1,537

763

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The COHORSIL FV case… Strategy… Reach the FV high value market

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CO, SME±+IP,LP, COSMarket Linkages

CO Negotiation±±F,NPSMarket research

EmpowermentBDSClient/Payment

+

+

±

+

+

+

-

+

+

+

±

+

±

Quality

T

T

S/F

S

T

T

T

S

S

CO

CO Negotiation

CO Negotiation

CO, SME

CO, SME, LP

CO Negotiation

CO Negotiation

CO

CO Negotiation

CO Negotiation

CO

CO Negotiation

CO, SME

CO

NP

LP

IP,LP

IP, CO

CO

LP,NP

CO

NP

NP

CO

IP,LP

F

NP

Provider

±TTransportation

±TInputs supply (seeds, fertilizers, accessories, etc. )

±SEUREP GAP certification (Inf & TA)

-E/FTechnical assistance (production)

±TLegal services (commercial, environmental, etc.)

-TWarehouse and packaging facilities

-Packaging equipment and materials

+TSeedling produced in greenhouses

+T/ESoil and pesticide residues analysis +TA

+T/EIrrigation systems (design and installation)+ TA

+SExchange visits and business trips

±SFeasibility study and business plan

+Corporate image design

PriceSMEBDS Requirements

The COHORSIL FV case… BDS Requirements

F = FreeE = EmbeddedT = TotalS =Subsidized

CO=CohorsilF = FacilitatorLP =Local ProviderNP =National ProviderIP =Intl. Provider

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Salaries paid USD 20,500:•Soil conservation structures.•Irrigation systems installation.•Seedlings production.•Production activities including harvest.•Commercialization activities.

Investments in irrigation technology reaches USD 25.000 (19.5 Mz.)

SME Income: Incremental sales for USD 31,600.00 in the first three months of production with the first 9 SME that installed irrigation technology (1 mz each).

At the moment there are 19 SME’s producing. 50% destined to Agro industry and a 50% to Supermarkets.

First deliveries to Supermarkets have stimulated more demand by products with new contracts.

The COHORSIL FV case… …Results first 4 months

� � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � ��

� � � � � �� ! � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

� � � � � � � � �� " � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � # � � � � � � � �� " � � � � � � � � � � � � � � � � � � � � � � � � � � �

The COHORSIL FV case… …Lessons learned

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� $ � � � � � � � � � � % � � � � � � � � � � � � � � � � " � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � & � � � � � � � � � � � � � ' � � � � � � � � � � � � � � � � � � � � � � � �

� " � � � � � � � � � & � � � ' � � � � � � � � � � � � � � � � � � � � % � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �� ( � � � � � � � � � � � � � � � � � � � � � � � � � � � �� )� � � � � � � � *� � ( � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � + � � � � � � � � ��

� ( � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � , � � � � � � � � � � � � � � � � � � � � � � � �� + � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

• The most complex the market, the more need of BDS in a short run.

• For an SME Association, is highly recommended an outsourcing strategy for specialized practical services at the beginning of the incursion in new markets with new products.

The COHORSIL case… …Lessons learned

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2 the agropyme program the cohorsil case 4 lessons learned

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