Beruflich Dokumente
Kultur Dokumente
Table of Contents
Section 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Table of Contents Executive Summary Background Business Opportunity Business Model Governance Structure G St t Production and Operations Marketing Strategy Human Resources Community Benefits Financial Analysis Risk Assessment and Mitigation Implementation Plan Conclusion Appendix, Closing and List of Participants Pages 36 7 12 13 18 19 29 30 34 35 46 47 49 50 - 53 54 66 67 74 75 76 77 79 80 81 82 84
Section 1:
EXECUTIVE SUMMARY
Executive Summary
Introduction
Emerging from nearly 30 years of conflict, post-tsunami years post tsunami Aceh presents vast untapped business opportunities in resource-rich North Sumatra, Indonesia. Leveraging the global shortfall in quality cocoa supply and the production potential of Acehnese smallholder farmers, we present a creative proposition of bringing together various stakeholders through a corporate vehicle sourcing cocoa directly from farmers in Pidie District, Aceh. d ect y o a e s d e st ct, ce Farmers, traders, exporters and buyers will share ownership in a profit-driven yet socially-committed enterprise, Alami Kado PT. Alami Kado aligns interests of p , g all parties by restructuring the existing supply chain and improving farmer capabilities and consistency in cocoa quality in the Pidie cocoa value chain.
Executive Summary
Alami Kado Key Success Factors:
Alami Kado achieves alignment of interests through:
Providing market access and a clear price signal for farmers to upgrade their processes and cocoa
quality, thus improving livelihoods Providing technical training and assistance to farmers through strong and long-term partnerships with NGOs and/or donor agencies Strategically positioning buyers to leverage on existing local networks and gaining direct access to suppliers Maintaining a close relationship and obtaining support from local government Being true to its roots in Aceh, Alami Kado will propel Pidie to the global cocoa supply scene.
Executive Summary
Alami Kado Key Facts: Once initial f di of USD1 031 000 i obtained th O i iti l funding f USD1,031,000 is bt i d through share capital, h h it l Alami Kado will work towards the following targets: Increase production levels from 450 tonnes/hectare at present to 825 tonnes/hectare in Year 5 Train 4000 Pidie cocoa farmers by year 3 Distribute profits to shareholders by year 4 Achieve three-fold increase in farmers income by year 5 yy
Section 2:
BACKGROUND
Background to Aceh History and Demographics Cocoa Industry in Aceh Challenges
Background to Aceh
Map of Aceh and General Information
Located on the northern tip of the island f Sumatra th i l d of S t Strategically located within the vibrant economic triangle of Malaysia, Si M l i Singapore and d Indonesia 98.6% of population in Aceh is Muslim M li Aceh is rich in natural resources especially oil, gas and conducive f agriculture d d i for i lt Rice, coffee and cocoa are the main agriculture products in Aceh A h
8
Aceh
History and Demographics
The History
30 years of conflict ended in 2005 bringing peace and economic development opportunities to Aceh Aceh was heavily damaged by the Tsunami in 2004 and the economic losses amounted to 97% of Acehs GDP In the post tsunami era, Aceh s economic growth era Acehs has been primarily driven by reconstruction/ rehabilitation efforts supported by domestic and international aid The future depends on a self-sustained economy self sustained Population (2005): 4,010,539 Land Area: 57,365.57km2 GDP Growth (without oil and gas,2006): 7.7% GDP Per capita (2006): US$1,962.75 Net Export (% of GDP, 2007): 31.1%
Demographics
Organizational Challenges
Lack of effective organization and mobilisation amongst cocoa farmers and others Lack of effective infrastructure in collection, processing and g warehousing Ineffective coordination and communication between major supply chain stakeholders and support groups
Overall Scenario
The aid assistance including funding from donors is in decline hence threatening the sustainability of Acehs economic recovery unless self-reliant economic activity commences Unstable supply from leading producer countries such as Ghana, Ivory Coast and Indonesia has motivated buyers to not only secure cocoa b beans early, b t also i l but l invest i t in farmers to improve yields and quality. Consumer demand for organic fair trade and organic, specialty products has driven exporters such as Armajaro, Olam and others to pay closer attention to traceability and supply chain issues
12
Section 3:
BUSINESS OPPORTUNITY
Background of Opportunity: Drivers and Conditions Market Opportunity Investment
13
BUSINESS OPPORTUNITY:
Drivers and Conditions
Chocolate consumption increasing with improving prosperity worldwide. The supply of cocoa is also subject to volatility due to political instability from years of conflict in the producing nations. Indonesia is one of the four regions in the world which p g produces significant volumes of cocoa. Aceh is a rich and diverse province which is located within the vibrant economic triangle of Malaysia, Thailand and northern Sumatra. Post tsunami and conflict resolution has lead the people of Aceh to commit to improving their standard of living and this includes reviving the cocoa industry. Sustained economic activity is key to the alleviation of poverty and raising the income of farmers. The building of a commercially well managed cocoa industry in Aceh can be a key contributor to economic growth in Aceh.
ACEH COCOA
14
BUSINESS OPPORTUNITY:
Market Opportunity
There is significant potential to produce higher grade cocoa through simple but well managed production process throughout the supply chain. chain Potential increases in productivity can be realized through a business forum. Production in Aceh currently averages 400 kg per ha. as opposed to the international benchmark of 1000 kg per ha There ha. exists great potential to increase production through a new business model. There is potential to increase the land areas for cocoa cultivation p through rehabilitation of land which has been neglected (24,739 ha Aceh). Organized domestic production and supply of good quality cocoa will increase the confidence of buyers in Aceh cocoa. Through simple but creative training programmes and technical assistance for the farmers, quality cocoa could be produced which will lead to l d t an i increase i th opportunity f i t in the t it for international t d ti l trade.
ACEH COCOA
15
BUSINESS OPPORTUNITY:
Investment
Improvement in productivity and increasing in crop areas will boost cocoa revenues in Aceh. This will both need and present investment opportunities. A well structured b i ll t t d business model and i l d l d implementation plan will t ti l ill attract potential investors and help secure financial assistance from donors thereby transforming the supply chain in the industry.
ACEH COCOA
The high price for cocoa being traded in the commodity market is a reflection of the sustained demand for the product. This should ensure good returns for investors. Added benefit is the high social impact as per capita farmer income is projected to increase by threefold in 5 years, presenting a winwin situation.
16
BUSINESS OPPORTUNITY:
Profits with high social impact
Three-fold increase in farmer per capita income in five years Farmer Income Per Capita Farmer's Income Per Capita (USD)
USD
865
989
200 -
460
Y1
Y2
17
Y3
Y4
Y5
PIDIE DISTRICT
The Pidie District of Aceh lies on the North Eastern area of the island Banda Aceh local government has designated Pidie as a cocoa growth area Cocoa production in Pidie began in 1980 with local communities planting cocoa plants with government assistance Cocoa can be considered as the main perennial crop in Aceh involving thousand of small holders The number of cocoa farmers in Pidie district is approximately 8,500 The area under cocoa has gradually increased over the years. The cocoa growing area in Pidie District extends from low altitude (close to sea) to the high lands near the mountains.
18
Section 4:
BUSINESS MODEL
Aceh Cocoa Industry Constraints Demand and Supply Constraints D d dS l C t i t Key Success Factor Alignment of Stakeholders Strategic Positioning in the Value Chain Shareholding and Management Structure g g Proposed Structure Proposed Solution - Operations Rationale and Benefits of New Company
19
20
Demand Constraints Multi-national buyers, processors and manufacturers want to improve the quality and consistency of their raw materials. To achieve this, they need to establish closer and more efficient supplier relationships. However, they: lack incentives to move their procurement operations closer t th f ti l to the farmers without ith t any guarantee or influence over the supply process. face resistance from entrenched local traders.
Supply Inertia Farmers would like to receive higher prices for their crops via a direct relationship with buyers as opposed to traders. However: The market offers little price differentiation for higher quality beans. Therefore, smallholder farmers have little incentive to upgrade their production and post-harvest practices. At the same time cocoa bean collectors and traders have little incentives to upgrade their supply chain
Solution:
Create a company that aligns interests
21
International Production
Regional Processors
Multinational Manufacturers
Food Markets
Smallholder Farmers
Multinational Processors
Local Trader
Multinational Traders
Cosmetic Markets
Processed
22
The brand l Th b d colours th t h that have b been chosen have their own meaning and representation. Light brown represents cocoa White emphasizes purity and White peace elements
In the Acehnese language, Kado means A gift and Alami means Natural
23
Partnership Architecture:
Farmer Training and Stakeholder Dialogue
Buyers/ Investors $ Price Signal Donor / Financing Agencies g g Partnership
Buyer
Buyer
FARMER TRAINING
Partnership
Technical Assistance
Partnership
24
Government Buyers an Processors nd s NGO / Donor agencies Form effective partnerships with donor agencies and NGOs. Benefit from their expertise and resources in providing training to smallholder farmers. Convince key p y y players that they will y benefit from moving procurement closer to the supply. Buyers leverage on existing local networks while minimising opposition from local traders.
Local Farmers & Traders Link farmers and collectors to a ready market, which requires consistency in i supply and quality. l d lit Provide impetus for farmers to organise themselves at the local level and upgrade their processes. Empower farmers with the capacity to access and adopt better practices and also to be able to respond to market opportunities. Allow participation of farmers, collectors and traders at shareholder level.
25
Buyer(s)/ Investors
HQ Operations
26
Donor Agencies
NGO / Donor Agencies Agencies - Provides funding and/or technical training to farmers, collectors or traders
Aceh Government Government - Develop infrastructure for processing unit and warehouse
Loans, Finance and Insurance Services Trade Facilitation and Marketing Technical Assistance and Training
In support of its business aims, the company will operate facilities including: Processing and collection units Warehouse Transportation services Alami Kado PT will establish partnerships with key interested parties including the UNDP, Swiss Contact, the Aceh Government and NGO th A h G t d NGOs.
28
Section 5:
GOVERNANCE STRUCTURE
Proposed Governance Structure Governance Obligations and Actions Board of Directors Memorandum of Understanding
30
V. Governance Structure
To ensure consistent financial performance in Indonesia s Indonesias challenging business environment environment, transparent and effective corporate governance is vital. vital
31
Shareholders
Management Team
Partners Pidie District Government Technical Advisors (eg UNDP, Swiss Contact) Memorandum of Understanding Ensure long-term active partnership in the Pidie cocoa value chain
32
Set S t corporate values t l Provide strategic direction and management Set corporate governance standards Oversee financial reporting Ensure l E legal compliance l li Implement HR best practices
- Fair wages - Health and safety standards - Employee training
A t in b t i t Act i best interests of Alami K d PT t f Al i Kado Attend regular and ad-hoc meetings as required by the business Adhere to company procedures M i t i open flow of information Maintain fl fi f ti Provide full disclosure of personal interests Maintain diligence and competence
33
Memorandum of Understanding
Partner MOU
Donors provide funding for technical assistance (e.g. UNDP, USAID, Swiss Contact)
Provides funding framework Defines precise role of technical assistance Identifies opportunities for technological improvement and logistical streamlining Governance oversight
34
Section 6:
35
1) Farmers collect pods daily in their respective areas. 2) After pods are collected, farmers then open pods to release beans. 3) Beans are then spread out for 2 hours or until collectors pick them up up.
Total Time: 1 day Final Output: Wet and Dry Beans Wet Price Farmers get: 17,000 per kg
36
Collector Activities
Training
1) C ll t Collectors gather b th beans (b th wet and d ) (both t d dry). 2) Quality Control for size, mold, and diseases. 3) Record keeping for traceability and weight. Transaction happens here if beans pass quality control. 4) C ll t Collectors th t then transport the beans to processing units (PU ) t th b t i it (PUs).
Total Time: 1 day Final Output: Beans and Records
37
Processing Units
Owned and Operated by Alami Kado PT
(5 7 days)
Purchase by Company Fermentation
(2 4 hrs)
Soaking in Water
(5 6 days)
Drying by Solar Dryer and other methods
(5 6 hrs)
Packing & Sorting Transport to warehouse
1) 2) 3) 4) 5) 6)
PU accepts the bean for quality control and the record for accountability Transaction happens here accountability. here. Workers place beans in fermentation boxes with identification tags. Ferment for 5 7 days with mixing of bean every 2 days. Fermented beans are soaked in water for 2 4 hours. Workers then place soaked beans on solar dryers and other dryers. Drying takes 5-6 days. Solar dryers help minimize mold, maintain temperature, and can be operated in rainy season. Workers then sort dry beans to sort for quality and pack them in bags ready to be transported to the warehouse. Batches of beans with consistently low quality can be identified for accountability at the farmer level.
Total Time: 11 14 days Number of Employee: 5 p y Equipments: Fermentation, Drying, Sorting, Packing, Computer
38
$$
Storage
Sale to Buyers
1) 2) 3) 4)
Trucks sent to gather bags of dry beans from processing units and return to warehouse. Bags unloaded from the trucks for quality control and record keeping (computerized). Bags are put into storage facility/warehouse. Bags are ready to be shipped to buyers locally and internationally. Transaction happens here.
Total Time: 1 2 days plus storage time. y p g Number of Employee: 12 Equipments: Trucks, Storage Facility, Computer
39
Farmers
$$
Collectors
$$
Processing Units
Warehouse
$$
Buyers
Tiered Price
20 25% 20-25%
25 28%
*Price Quotes are subject to market fluctuation, cocoa availability, and other relevant factors that may not be captured in this example.
40
Farmers
Collectors
Processing Units
Warehouse
Buyers
Buyers of the d cocoa b B f th dry beans will b able t t ill be bl to trace where th b h the beans came f from at each step t h t of the value chain all the way to the farmer level. Traceability will be implemented through a simple system of: -R Record k d keeping ( i (paper and computer) d t ) - Farmer identification code - Labeling of beans in batches at all levels
41
Blue shade is Pidie which is the focus( productivity is 2.3K tons /annually); white shade is Pidie Jaya
Glumpang tiga
Keumala
Tangse
Geumpang There will be 6 P.U with capacity of 250 tonnes each. Two routes will be established; one from p y ; P.U 1 to P.U 4 (55km) and one from P.U 5 to P.U 6 (10km)
43
Warehouse Location
New Port Krukuh
W
Pidie Area
Bireun
The warehouse is strategically based in Bireun district which is 2 hours from Pidie and only 1 hour to the new port Krukuh. It is along the main road from Pidie to Medan. p g
44
Cover Pidie at first stage Expand to cover Pidie jaya, Bireuen , Aceh utara and Lhoksumawe;
Office space
45
Harvest season varies tremendously every month, Peak harvest (from Nov to Feb) contributes to nearly 69% of annual productivity ;The peak 4 months is the focus of logistic;
46
Section 7:
MARKETING STRATEGY
Targets and Plan Potential Partners Branding the Company
47
Marketing Approach
Alami Kado PT
Current landscape provides an optimal scenario for investment and engagement of cocoa industry in Aceh Alami Kado Pt represents a coordinated approach to realizing the Aceh cocoa markets immense potential and connecting market participants market s Value Proposition of Alami Kado o Quality o Consistency o Dependability o Traceability o Sound Governance o High Social Impact
48
Marketing Approach
Potential Partners
Align potential partner interests to achieve market growth Highlight relationships in the region to raise profile of the cocoa industry Engage all parts of the value chain to promote superior product to ultimately benefit the end buyer Segment target market local and international buyers Set the brand of Alami Kado apart as image of enhanced quality, consistency and deliverability Achieve market share growth
Penetrate
Differentiation
49
Section 8:
HUMAN RESOURCES
Human Resources Management Team Human Resources Total Staff Organisational Chart g
50
Finance Manager
51
Mgmt Team
N/A
$70,000
Warehouse
10
10
($2,595/month for all 12 employees) x 1 Warehouse = $31,140 ($1,120/month for all 5 employees) x 6 PUs = $80,640 $181,780 $181 780
Processing Units
30
Total C Company Resources Required Part time Consultant assisting in cocoa branding
44
Additional Resources
1 (Part-time)
1 (Part-time)
45
CEO (1)
Storekeeper (1)
Guards (2)
Drivers (2)
Guards (2)
53
Section 9:
COMMUNITY BENEFITS
Program Targets, Activities and Impact Demonstration Plot - Concept Implementation of Demonstration Plots Best Practices Communication Farmer Field School Training Schedule Social Benefits
54
55
56
57
Best Practice
Farming Practices to be implemented
Studies show that majority of farms in the Pidie district dont use basic farming techniques and the demonstration plot will implement the following practices -Frequent Harvesting -Sanitation of pod husk -Bio-Control -Prunning -Fertilization g -Side Grafting
Cash Crops
Farmers operating demonstration plots will be trained in the farming of additional crops adding to resources for food, security and income stability ddi t f f d it di t bilit
58
Best Practices
Improving the harvest cycle The weakness of harvest pattern in Pidie is due to the fact that peak harvest takes l t k place d i th wet season i N during the t in November and D b d December b Good cocoa pruning techniques lead to a more conducive harvest pattern, with regards to seasonality, thereby reducing the rate of mouldy beans Availability of cocoa bean dryers is important to the p y y p process Ensuring the consistency in supply
59
Demonstration Plots
Financial Requirements
The effectiveness of a demonstration plot leads to a potential of 400kg of increased cocoa production per hectare per year
(based on a study that was done in Sulawesi by the Sustainable Cocoa Enterprise Solutions for Smallholders
(SUCCESS) Alliance Indonesia)
60
The FFS co cep teaches farmers e S concept eac es a e s through practice, on-farm observation and farmer led research. The Training of Trainers (TOT) approach will be applied and each session will have a class size of 50 trainees. The Trainers are then expected to train 20 farmers in a year. y Farmer teachers are initially schooled on their own plot, then paid monthly when they begin training others. Farmers will receive accreditation upon completion of training.
62
Implementation
Location: To ensure engagement and connectivity, training locations will be identified g g y, g collectively by the Training Coordinator, farmers, community leaders and staff from DISBUN. The curriculum/modules: The modules will prioritize areas of importance that would increase productivity level in a consistent manner. Core to the module will be the knowledge to combat the Cocoa Pod Borer (CPB) pest by using the PsPSP, a low cost low input cultural method for controlling the CPB and other pests cost, as well as for increasing tree productivity. Record: Participants will receive one logbook to write all business activities. This is an exercise in record keeping on a day-to-day basis that would enable farmers to obtain actual data on their activities to provide a tool for comparison, analysis, reflection and improvement of future business activities. acti ities
63
Training Schedule
Activity Identification of location programme socialization i.e problem and solution analysis Implementation of FFS modules a. Basic ecosystem & ecological farming b. Cocoa Pod Bearer lifecycle c. c Fertilization d. Sanitation e. Pruning f. Side grafting g. Standardization & quality of beans h. Cash h C h crops t generate i to t income i. Usage of logbook Duration 1 day Participants Training coordinator community coordinator, leader, farmers, staff from DISBUN Training coordinator, farmers, staff from DISBUN
1 day
64
Social Impacts
Improvements in Income and Livelihood Improvement of income level for farmers due to productivity increase. Livelihoods increased with education and training. g Community model leads to further communication and conflict resolution that has impacted Aceh for some time. Encouragement of women to take leadership roles as farmer teachers and students.
65
Environmental Benefits
Environmental Best practice leads to/promotes sustainable farming. Solar cocoa bean dryers allow for sustainable energy production.
66
Section 10:
FINANCIAL ANALYSIS
Farmers Income (Pidie Area) Company Operating Income Company Operating Costs Company Net Income Working Capital and Investments Balance Sheet
67
865
989
200 -
460
Y1
Y2
Y3
Y4
Y5
4,000 2,000 Y1 Y2
Commission Income
Interest Income
69
Y2
Y3
Y4
Y5
71
Grants 67%
73
EXIT STRATEGY
The business is profitable in year 4 onwards f A profitable and financially stable company is likely to attract good valuation based on future y g cash flows Farmers, Cooperative, Traders and Buyers are long term stakeholders, who could consider stakeholders buying out exiting investors New investors could replace exiting investor
74
Section 11:
75
Risk Mitigation
Risk Implication Mitigation Measures Risk Level
L Lowqualitybeansand li b d unsecuresupplies
T i i Trainingprogramsforfarmerswithfinancial f f i h fi i l compensationfortimeopportunitycost Cooperativesdividendsusedtoinvestin training,creatingcontinuousimprovement cycleofharvests Qualitycontrolandtraceabilitythroughall Quality control and traceability through all levels(collectorslevel,processunitsand warehouse) Strategiclocationofprocessingunitscloseto farmgate(10kilometerradius) Standardized warehouse management for Standardizedwarehousemanagementfor qualitycontrol Alternative revenue streams through complimentary agriculture practices taught through the training modules Clear decision making procedures in the Management and Shareholders Agreement to ensure open flow of information, transparency and efficiency Applystringentapprovalprocess Apply stringent approval process Restructureloantobecomeperforming loans
Governance risk
Inefficientdecision making
Finance risk
76
Section 12:
IMPLEMENTATION PLAN
Short Term Implementation Mid-Long Term Implementation
77
Continue to enhance market presence Work ith ffili t W k with affiliates on continuous efforts to promote Aceh cocoa ti ff t t t A h Local Agencies to continue the training program
78
Governance
Setup a company in Indonesia Establish Board of Directors, which is accountable to the shareholders. Obtain government approval. Prepare and sign legal documents Identify and employ management team (4) Coordinate current field workers for operations process (hire 16) Recruit operations team Setup processing units and collection centers Coordinate with collectors to guarantee supply to the Processing Unit Build communication with local and international buyers Set up the demonstration plots
Human Resource
Coordinate with farmers to plant seedlings to cover unused land Enhance market presence of high quality Aceh cocoa
Local Agencies to set up farmer schools and start the training program
79
Section 13:
CONCLUSION
80
Conclusion
Aceh is open for business. We W propose a unique corporate structure for the agricultural sector that is i t t t f th i lt l t th t i commercially focused, yet works in favor of improving farmer livelihoods. The key success factors are: The Th creation of a business model th t b i ti f b i d l that brings t together f th farmers and collectors d ll t with exporters and international buyers/investors. The share holder mix aligns the interests of all parties to build a financially viable and socially responsible company. Improvements to ensure consistent supply and improved quantity th I t t i t t l di d tit through: h - Strategic partnerships to ensure farmers acquire the skill-sets through training and education, - Access to working capital for farmers - Al i K d Pt proactively strengthening th cocoa value chain. Alami Kado Pt. ti l t th i the l h i The precondition for farmers to organize themselves, which will ensure exporters and international buyers/investors closer procurement to the source of supply (ie. Smallholder farmers). The model is replicable and modular, creating business opportunities for scaling up operations, and including other districts.
81
Section 14:
APPENDIX
82
Thank you
If you are interested in this investment opportunity, please contact Chandran Nair at GIFT at ( (852) 3571 8103 or cnair@global-inst.com. ) @g
83
List of Participants
Marcella Cheung g Noor Azmi Ibrahim Norshahzan Halin Yanyang He y g Sanjay Jain Jack Liu Xinru Mo Cindy Rafanelli Chaow Chiun Ong Emilia Rahman Fazul Ikmar Som Bob Van Damme Siwat Vilassakdanont Xiaojuan Wang Becky Yang Amanda Yik Anna Young Hong Zheng
84