nestlé, mobilising people to implement change dealing with ... · pdf filerwanda -...

Rwanda

Consulting Abroad Program

Spring 2012

By John Brittell

Agenda

• MacroView

• Agricultural Sector

Overview

• Value Chain

Analysis – Kenya

• Value Chain

Analysis – Rwanda

• Appendix

Rwanda - MacroView

All Figures Current (either 2011 or Feb 2012)

Source: Central Bank of Rwanda, Jan 2012, Economist Intelligence Unit, CIA Factbook

Indicator Feb 2012

Real GDP Growth 7.1%

Inflation 7.8%

Interest Rate 7.0%

Lending Rate 16.6%

Deposit Rate 8.2%

Savings Rate (nation, 105th) 16.6%

Risk Premium (on lending) 9.2%

Credit Rating (Fitch,S/P) B, B

FX Rate (US$/RWF): 600 RWF

FX Rate (KSH/RWF): 7 RWF

Key Export Partners: Kenya!

Trade Balance (% of GDP) -14.1%

Debt/GDP 15%

Rwanda – MacroView FX Rates

Source: EIU Rwanda 2012, Oanda.com

Rwanda – MacroView GDP & Growth Drivers

GDP Composition

• Agriculture 34%

• Industry 14%

• Services 52%

Source: DCA Rwanda Guarantee Report Dec 2009

Rwanda – MacroView Exports

Source: EIU Rwanda 2012

Rwanda – MacroView Social

• Population (2009 Census) *11.4 million people, 81% rural, 2.8% growth rate

overall, 8.2% urban growth rate; *400 pple/sqkm! The

most dense country in Africa…

• Age Demographic: youth < 14yrs are

> 41% of population

• Labor: xx% unemployment rate. xx% of formal

employment and more than xx% of informal

employment in agriculture

• Income distribution:

• Education: Mostly agrarian. 70% literacy rate

(men 76%, women 64%), 96% primary school

enrollment

• Societies: cooperatives limited

Agriculture Sector Overview

Agricultural Sector Overview

• Agriculture Products: coffee, tea, pyrethrum

(insecticide made from chrysanthemums), bananas,

beans, sorghum, potatoes; livestock

• Challenges: land degradation, overuse, and

fragmentation

Kenyan Value Chain Analysis

USAID’s Value Chain Analysis

What Does Value Chain Analysis Entail Per USAID?

• In identifying opportunities for upgrading and the constraints to these

opportunities, the analysis should focus on answering the following

questions:

• What and where are the market opportunities?

• What upgrading is needed to exploit them?

• Who will benefit from this upgrading?

• Who has the resources, skills and incentives to drive upgrading?

• Why has it not happened already?

• What will it take to make it happen?

Kenyan Dairy Value Chain


► Production: 3rd largest producer in

Africa (behind Sudan & Egypt) 4.7b liters

(2008); 3rd largest Ag sub-sector (larger than

tea); contributes 3.5% of GDP (14% of total

Ag GDP)

► Consumption: per Kenyan 110 liters /

year; the highest developing country

consumer (Mauritania, Mongolia); 3x as much

as Ugandans; 4x as much as avg. African

► Expenditure: ~ 18% of income spent on

milk, second only to cereals (maize); 40% of

income generated is from dairy (ILRI)

► Net Importer of Milk: $3M

opportunity – 2.3b liters imported; 70%

imports are of milk powder; KCC (co-operative

creameries, Ltd) collapse limited exports of

milk

► Supply – largest cattle herd in Africa of 7m

► Growth – 2-3% / year

► Net Exporter of Milk – 2010 reports due

to EAC trade

► Opportunities – source of improved bull

semen, source of improved genetics, COMESA

► Commodity – @ intl prices the most

significant commodity in Kenya

► Markets – formal vs. informal… not the same

• Overview of Kenyan Dairy


► Employment: husbandry skills low; but

milk bars, mini-dairies, processors, cooling

plants, cottage industries all offer employment

(account for 3.5% of GDP); 1.8m dairy farms

or 35% of rural households

► Efficiency of local production

compared to global averages

(yield gap): yields per cow in US ~

9,000 kg / year; SA & Argentina ~ 2,500 to

3,500 kg / year; Kenya ~ 670 kg / year

(NewKCC) ~ 564 kg / year by FAO

► Geography of production: 53% in

Rift Valley, 25% in Central Province

► Major players: NewKCC, Brookside

Dairy, SpinKnit, Githunguru account for 92%

of market

• Constraints ► Regulation – heavy with very low support

for artificial insemination (improved bull

semen) and veterinary services

► Capacity - smallholder (2-3 cows) farms

produce 80% supply, low per farmer

production – supply to processors shady

► Quality – is poor; adoption of technology

low

► Costs – high production costly, processing

and packaging costs high and preclude

investment

► Investments – weather to volatile; price

premium for chilled milk

• Overview of Kenyan Dairy


VC Point Inputs Production Transport / Bulking / Cooling

Distribution / Processing

Marketing / Distribution

Stakeholders Who is doing this?

- Cows, Goats, Camels of good breed

- Land & Water - Limited feed supply (no

napier grass), - Little vet services, - Structure/ housing - Waste management

- 80% from small (1-4 cows) holder farmers

- Produce 3.2b liters (2005) ~32% of this enters formal market (based on rainy seasons x2)

- Zero grazing = lower production due to feed

- Semi and Open range grazing offer 15-30liters per day

- milk marketed (2005)increased by 21.2% to over 1 billion liters

- Low technology adoption

- 85% milk is fresh, 3% yogurt, fermented 7%, 2% value added products (cheese, butter)

- 75% of total costs of production; 90% variable costs

- ~ 20-25% of total marketed milk sold through formal processors; remainder goes through informal sector

- 34 registered processors (>80% market controlled by 3 companies NewKCC (39%), Brookside (31%), SpinKnit (13%)

- Kakuzi (largest one) - New packaging brings

price point lower (250ml and 500ml = 25% lower price point)

- Sustainable Distribution system: via bikes!

Financing Needs that have/have not been met

- Feeding (nutrient intake) - Purchase of land to

prevent Common land grazing; also to seed feed (napier grass)

- Access to water

- Access to improved breeding (AI – artificial insemination); lower costs to semen

- Transportation from Farmer to Cooler/Processor

- Cooling centers a must in bank loans to farmers; largest problem in supply chain

- Large players only utilize 30-40% capacity; Brookside the exception @ 70% capacity utilization

- Consumption happens in small quantities, typically for tea drinking

- Raw milk ‘better’ for Kenyans

- Boiling is ‘good enough’ over pasteurized milk

- Transportation

Additional Info/Notes

- Fodder preservation smoothens milk flows

- New technology (by ICIPE) controls crop pests affecting dairy

Suppliers - Animal feed - Breeding / Vets - Dairy Equip - Farm Equip - Livestock Insurance

Other uses - Compost Manure - Biogas

- Center for Development Enterprises

- EADD Kenya (east Africa dairy development)

- Heifer Intl.


Farmer (Producer)

• Spread: 13-20 Ksh / lliter

Transporter or Hawker

• Spread: 4-5 Ksh / liter

Bulking & Cooling

• Spread: 2 Ksh / liter

Distribution

• Spread: n/a

Processing


Marketing & Distribution


Consumption

• Price: 30-60 Ksh / liter

Rwanda Dairy Value Chain


► Production: value of milk ~ $64billion

► Consumption: Rwandans drink 12 L /

year; Ugandans drink 22 L / year, Kenyans

110 L / year; 16% consumed @ home, 35%

spoilage

► Expenditure:

► Net Importer of Milk: $3M

opportunity – 2.3b liters imported; 70%

imports are of milk powder; KCC (co-operative

creameries, Ltd) collapse limited exports of

milk

► Supply –cattle herd of 1.2m; 14% millking

cows; 8% are improved breeds

► Growth – milk 0% / year; although livestock

growing @ 3.5% CAGR

► Opportunities – Kenya…

► Commodity –

► Markets – 47% informally marketed, 2%

formally marketed; limited cooperatives; locally

produced milk serves locals; value added

products serve intl. markets!

• Overview of Rwanda Dairy


► Employment: husbandry skills low; but

milk bars, mini-dairies, processors, cooling

plants, cottage industries all offer employment

(account for 3.5% of GDP); 1.8m dairy farms

or 35% of rural households

► Efficiency of local production

compared to global averages

(yield gap): yields per cow in US ~

9,000 L / year; SA & Argentina ~ 2,500 to

3,500 L / year; Kenya ~ 670 L / year; Rwanda

700 L / year…very inefficient

► Geography of production: Eastern

(Umutara) 5+ hectares, 100+ Ankole cows;

Northern, Southern, Western all < 1 hectare

w/ < 3 cows…

► Major players: MINAGRI, Inyange

Industries, Nyagatare Dairy Farmers Union,

Dukorere Igihugu Farmers Cooperative

(DUFACO),

• Constraints ► Regulation – heavy with very low support

for artificial insemination (improved bull

semen) and veterinary services

► Capacity/Farm Size – largest farm sizes in

Eastern 1.4 hectares; smallest farms in

Southern .34 hectare; average < 1 hectare

► Quality – is poor; adoption of technology

low; limited cooling centers

► Costs – high production costly, processing

and packaging costs high and preclude

investment

► Investments – weather to volatile; price

premium for chilled milk

• Overview of Rwanda Dairy


Farm Gate Price

(direct to farmer)

Transport

(by Cooperative)

Cooling

(by Cooperative)

150 RWF 20 RWF 20 RWF

Contract Price

190 RWF

Milk Inputs & Production

- What are the ‘inputs’ for Dairy Farmers?

- Fixed: cows, land, labor, storage

- Variable Costs: feed, water, vet, fodder

- Production aspects to consider:

- Milk types

- Players & Location

- Efficiency

- Quality

- Pricing (based on feed)


Transportation (I) – bicycle vs…


Transportation (I) – …commercial


Bulking & Cooling


Processing


Milk Vendor Location ?

Retail Vendors


Pricing – Informal Market: Dry vs. Rainy Season


Pricing – Formal Market: All Seasons


Milk Product Volume Retail

Price

UHT Whole Milk Tetra Pack 1 liter 750 RWF

UHT Low Fat Milk 500ml 650 RWF

UHT Whole Milk Tetra Fino 500ml 350 RWF

UHT Whole Milk Tetra Fino 250ml 250 RWF

Pasteurized Milk – Jerrycan 5 liters 3,000 RWF



Pasteurized Milk – Gable

Top 500ml 400 RWF

Pasteurized Loose Milk

(Dispensers) 1 liter 450 RWF

Retail Pricing

Questions

Appendix


Margins Analysis

Dairy Case Study: BSMDP DfID

Business Services Market Development Project: Local Model

Dairy Case Study: BSMDP DfID

Business Services Market Development Project: HUB Model

nestlé, mobilising people to implement change dealing with ... · pdf filerwanda -...

Documents