Collective Marketing and Sales Options

Transcription

1 Collective Marketing and Sales Options -Training Manual- for Smallholder Farmers. 1

2 MODULE A: Time: 20 minutes Introduction 1) Why Are We Here Today? If everyone has to bring his own bag, there will not only be chaos but poor business and the farmers will lose more Large scale farmer sell in bulk to trader gets good price while Small farmer with few bags wait for trader to offer whatever sum 2

3 Obviously, this is NOT how to work together, everyone must have a role, 2) Why are you Farming? This is an Open Question to participants. Let individual farmers in attendance respond to the question and share views. Give Examples of Farmers in relation to productions small scale and large scale. For Example: 1) Some farmers just produce crops and consume all their produce at home. peasant farmer. 2) Some farmers produce crops, keep some home consumption and sell the rest for cash to buy their household needs and pay school fees. small scale farmers 3) Some farmers produce large quantity of crops, from estate land, adequate to sell to big traders or processors and earn good money to be put into the bank. large scale or estate farmer. Explain the Statement Below to Participants: Small scale farmers can only compete with large scale farmers by co-operating with each other through forming associations or marketing groups or cooperatives by combining their input, output and ensuring good quality of their products. By the end of the whole presentation, participants would be able to answer the following questions: How do we achieve this???? Will it be beneficial to all??????? Will it bring more Money to the Farmer s Household???? Role of the Marketing 4Ps (Produce/Price/Place/Promotion) should be taken into consideration in the process. 3

4 3) Cooperatives / Associations --this is the coming together by a group of people with common interest or with a desire to work together to achieve a common goal. In farming, it may be to grow the same crop: Production Cooperative; In marketing, it may be to market commodities: Marketing cooperative; Benefits of Association/Cooperative Improving economics of scale Lowering transaction costs (and cut out of middlemen) Increasing quality control Incentive to increase production Improving access to credit Obtaining communal equipment and services Social advantages (e.g. for group recognition in community, etc) Practices Needed to Achieve Success in Cooperatives: Organize themselves; Embrace democratic process; Reduction in freedom of action; Be prepared to spend time with participants to decide on group s plan; Acquire new knowledge and skills through training; Be in agreement to implement the collective market functions; Carry out the market functions themselves; Allocate specific tasks to individual members; Keep Accurate record; Develop good group relationship with traders and credit providers; Utilize available market information; Learn to negotiate with produce buyers and input providers; 4

5 MODULE B: Topic 1: Section 1: COLLECTIVE MARKETING Time: 30 Minutes Target Group: Key Influential Farmers Lead Farmers Cooperative Executive Cluster Executives AEDCs and AEDOs Farmer Organization Facilitators 1. Introduction Previous Years (pre-1994): ADMARC controls the produce market and it was regulated by the government. Then there was no need for the farmers to work together; as everything was controlled by government. For that reason, there was no strong incentive for farmers to collectively sell their produce. Now (post-1994): With the market liberalization, Private Traders control the produce market or dictate prices based on the forces of demand and supply, farmers end up to be price takers. Smallholder farmers are obliged to make complicated marketing decisions for themselves and make sure that they get fair returns from their produce. And farmers now need to make complicated market decisions for themselves, the most important one of which is for them to work together in order for them to get full benefit from their farm produce. Some farmers in many countries in Africa including Malawi, are already adopting collective marketing strategies in order to have a strong bargaining power, enjoy economies of scale, take advantage of seasonality and add value to their produce so that they realize higher returns from the sales of their produce. This will require farmers to acquire new skills, understand how markets work, develop closer relationships with their fellow farmers and be able to make informed decisions on the different sales options that would maximize or optimize their profits. 5

6 2. Objectives By the end of this session participants should be able: a) to know what a Market is. b) to know what Agricultural Marketing is all about. c) to know the different Marketing Actors and their Functions. d) to know what Collective Marketing is all about. 3. Tools The collective actions require: education, acquisition of new skills through training, market studies, and opinion surveys in order to earn more money. As not all farmers would want to form or join association (either due to their own capable resource or freedom of choice) there is need for this collective marketing training to highlight benefits and difficulties in association and inform others. 4. What is a Market? A market is where buyers and sellers come together to exchange products for money or for other products. This process of exchanging products for money or other products can happen at a single location like a village market place or a shop where buying and selling happens face to face. In a globalised market, however, exchanges also happen world-wide by using postal services, the telephone or the internet. 5. What is Agricultural Marketing? Agricultural marketing is the management process which identifies customers' wants of agricultural products, anticipates their future wants and then goes about satisfying them profitably. Marketing is more than selling, it is the whole process that occurs between the production point of any surplus commodities or services and their consumption point and it is consumer oriented. In other words marketing follows through the whole value chain of a particular product. 6

7 Marketing adds value to products by changing their form, time and place in which they are available to meet an effective demand. 6. Marketing Actors and their Functions Usually the marketing process involves many transactions from one trader to another until the product reaches its final consumer. Thus we speak of a marketing-chain or marketing-channel and some of the costs involved in these transactions are called transaction costs. Type and volume of business will determine which channel is most useful and economic. Some of the most common market-channels involve the following actors: Some of the most common market-channels involve the following actors: Farmer 1. consumer Farmer 2. retailer consumer Farmer 3. wholesaler retailer consumer Farmer 4. agent wholesaler (exporter, importer) retailer consumer Each actor in the marketing channel has its own function, where he is usually specialised and thus can offer competitive services. Whereas a wholesaler has the function of bulking a certain commodity by buying from different sources, the retailer has the function to offer a wide variety of different products in small amounts useful to an individual consumer. These functions are called marketing functions. 7. What is a Market Function? In order to carry out the agricultural marketing process, a number of specialised activities or functions must be performed. The following are the most important: i. Buying & Selling These are the so-called exchange functions whereby the commodity and the associated risks change the owner. 7

8 ii. Storage Storage can be needed at different places: at the farm, at the assembly market (collection point), at the wholesaler s go-down, at the retailer s shop, etc. The aim of storing is manifold: to wait until enough produce has been assembled to bridge the time-gap until the next customer takes over the commodity to bridge the time-gap between purchase and processing to speculate on price-fluctuations iii. Transportation Transportation is needed in different forms and different capacities, depending on the stage in the marketing channel (carrying on the head, oxcart, bicycles, pick-up cars, buses, small lorries, big lorries, etc.) iv. Processing Processing can mean simple processing like cutting and drying of cassava, curing of tobacco, etc. or more sophisticated processes like roasting of coffee, canning of fruits, etc. v. Standardization This involves some grading into different classes of quality, like sizing of groundnuts, removal of foreign matter, grouping of tomatoes according to physical appearance and ripeness, etc. vi. Financing If farmers demand cash payment, the middlemen (or the FO) will have to finance the purchase before he can sell again. vii. Risk bearing As soon as a trader has bought a certain commodity he will also bear all the risks associated with that commodity. Risks include theft, shrinkage of volume and/or weight, loss of quality with perishable goods, fluctuation of prices, etc. viii. Market intelligence This includes market information of the national and/or international market 8

9 concerning prices, supply, demand, potential customers, knowledge of laws, regulations, procedures, etc.) 4. What is Collective Marketing? The process whereby small scale farmers work together to increase the value of the goods they sell using group/bulk marketing strategies. This means taking up the roles Marketing Groups undertake: ADMARC &Auction Floor. 5. Examples of Collective Marketing Collective marketing plays a major role in farming throughout the world. In most countries farmers have found that they can increase their income and efficiency by joining with other farmers to market their goods, purchase their inputs and co-ordinate their farming techniques. In Bolivia 60% of chickens are marketed co-operatively. In Kenya 87% of pyrethrum grown is sold in this way and In Brazil 40% of the cotton produced is sold by farmers associations. In Canada, no fewer than 8 of the 10 largest firms are co-operatives. Explain to participants that Collective Marketing is NOT Collective Warehousing ---- (as produce will always be receipted on individual farmer s basis). Individual farmers will still have ownership of their specific quantity contribution and get a receipt for their deposited produce. However, if farmers are organized in a cooperative society, the cooperative can issue separate receipt to the individual members and get one receipt as a cooperative when they deliver to the warehouse. If the cooperative society or a farmer group decides to sell their commodity through a structured trading system or a warehouse receipt system (e,g. ACE Malawi), then individual farmers can get a receipt for the quantity deposited and be able to use that receipt to source for a loan or farm inputs while they wait for their produce to be sold at a premium price. Collective marketing plays a major role in farming throughout the world. In most countries farmers have found that they can increase their income and efficiency by joining with other farmers to market their goods, purchase their inputs in 9

10 bulk thereby reduce transport costs and co-ordinate their farming techniques. MODULE C: Topic 1: Session 2: Why Collective Marketing? Time: 20 Minutes Target Group: Key Influential Farmers Lead Farmers Cooperative Executives Cluster Executives AEDCs and AEDOs Farmer Organization Facilitators 1. Introduction This session will help participants to appreciate the benefits of collective marketing. Through collective marketing farmers would be able to improve economies of scale, lower transaction costs, increase quality control, have incentives to increase production, improve access to credit, obtain communal equipment and services. 2. Objectives By the end of this session participants should be able: to appreciate the benefits of collective marketing to make up a decision to start practicing collective marketing 3. Benefits of Collective Marketing Small-scale farmers should be engaged in collective marketing for the following reasons: 3.1. Achieving Economies of Scale i. Malawian Farmers: They work comparatively small plots of land. Usually smallholder farmers cultivate about 0.5 ha in the South to 1.0 ha in the Centre 10

11 and 1.5 to 2 ha in the North. They constitute about 80% of the farming households in Malawi. They cannot, therefore, produce large volumes of surplus goods for sale. Their inability to produce larger volumes of crops means that they receive much lower prices from traders who would pay for bigger quantities. ii. Produce Traders: Because the traders who buy these small quantities have to bear the cost of sorting and grading each parcel in order to match it with parcels of similar quality goods. Many of them also have to weigh and re-pack the product and transport it to another market. iii. Smallholder Farmers: Small-scale farmers need to improve their strategy to achieve what economists call economies of scale. This simply means that the groups of smallholder farmers will have to gather their produce together and market all their products collectively. For example, an individual farmer may only produce one bag of maize but if 100 farmers gather together all their bags of maize in one location adequate enough to hire a truck and sell the hundred bags at the higher bulk price. iv. Collective Marketing strategy thus include co-operation for the task of selling the goods requiring a high degree of collective activity right through the farming process. v. Higher price does not come cheap. Thus, farmers have to agree to plant the same variety of crop, to sow it at the same time and to adopt the same growing, harvesting and post-harvest techniques. Also, the farmers have to take on sorting and grading all the bags into one or a few batches which have the same quality. For farmers group to achieve economies of scale they will also require division of labour in order to make the whole operation more efficient. vi. Therefore, through democratic process, a small group of trusted individuals or their executive members will have to take the responsibility for selling the goods, keeping accurate records, dividing the proceeds among the individual members of the group and organising production and collection. Thus, the essence of having organized registered cooperatives. 11

12 Case Study: Collective Marketing (Europe Experience) Small Vineyards Owners in the Village of Mont Peyroux, Southern France. For hundreds of years the village farmers produce grapes on their own land using their own equipment but choose to market their wine collectively with their neighbours. They are one of thousands of grape farmer s groups operating in France and Italy. Each of their vineyards is small, a couple of hectares or less. Each is likely to own their own small tractor and ancillary equipment such as a plough, trailer and spraying equipment. Each of the farmers prune their vines, grow their grapes, make sure they are not devoured by pests, harvest them and transport them to a central depot. From that point onwards, the activities of the co-operative take over. The function of this co-operative activity is to turn the grapes into wine, sell it and distribute the proceeds to the farmers and, if the farmers agree, to invest some of the proceeds to maintain, expand, or improve the business. Some of this work is carried out by some of the farmers but some staff, that are not co-operative members, are employed by the co-operative. The farmers own a share of all the buildings, equipment and other assets of the co-operative according to the size of their contribution of grapes. The ownership of these assets are constituted legally as a co-operative but other groups of grape farmers have formed a normal private company with the farmers as shareholders. Lessons learnt: 1. We can see from this example that, in order to produce a consistent quality of wine, all the farmers must grow exactly the same type of grape. 2. It is also obvious that the farmers must have land which is located in the same area in order to reduce transport costs. 3. If each of these grape farmers had to produce the wine, bottle it, design and apply labels to the bottles, put the bottles in boxes and find buyers for their individual output, they would spend so much time on the post harvest activity they would have no time to cultivate their vineyards. 4. The cooperative society helps individual farmers make more money from their farming business as farmers specialise in production and the cooperative society in value addition and marketing. 5. Note that only certain types of equipment used by the group are collectively owned and only certain tasks are carried out by and on behalf of the whole group. 12

13 Case Study: (Malawi Experience) Mr. Phiri, His Wife and Their Groundnut Crop Mr. Phiri, a farmer from Chiembekezo village in Mkanda EPA heard that growing groundnuts is a good business from his friend that sold a lot of groundnuts making good money last year. Therefore he convinced his wife that they should grow about 0.5ha of groundnut. They obtained seed on loan from a groundnut project operational in their EPA. The crop did well and soon after harvest Mr. Phiri went off with his 9 bags of groundnuts to the next Boma in order to sell the crop while he gave 2 bags to his wife to sell at the nearby marketplace. The vendors at the Boma however offered him a very low price, telling him that this type of groundnuts is very difficult to sell to their customers in Blantyre. Mr. Phiri remembered a factory in Blantyre which processes groundnuts into peanut-butter so he went to the telephone bureau at the Boma and called the marketing manager of that factory. The manager told him that although it is indeed not exactly the type of groundnuts they want but they would still buy if he can bring something like 20 tonnes, but he only have 9 bags so he couldn t deliver. To avoid hiring another oxcart back home again he decided to sell them to a vendor for MK80/kg. The vendor had his own scale for weighing the bags, but there were no standard weights to check the scale so Mr. Phiri had to trust the vendor. Back home again he told his wife of the troubles he had during the day. Imagine, said Mrs. Phiri, I was not lucky either. All my customers said, no, they are looking for the big size local groundnuts, which taste so nice when you make nsinjilo, not those small red ones So Mr. Phiri went to the EPA and asked what went wrong and what could be done to improve his situation. Participants to discuss and answer the following Questions: 1. How did Mr. Phiri try to market his groundnuts? 2. What are the marketing problems that Mr. Phiri faced when he was trying to sell his groundnuts? What will you advise Mr. Phiri to do differently this year or next season?

14 3.2. Lowering Transaction Costs If farmers can put together their produce they can assist one big trader to buy the produce at once and this means lower transaction costs in terms of handling and paper work. If traders have lower costs, they can pay more to farmers and sell at a lower cost to consumers, thus making the commodity value chain fair and competitive For Increasing Quality Control If all the members of a group of farmers can bring their produce together, they may be able to control the quality of each product. This can first be done by grading the individual farmers produce. Once individual farmers produce has been graded it may be possible to improve the overall quality by drying, sieving or hand-picking to reduce foreign and unwanted material e.g. stones, weeds, etc.) and prevent the product from building up moulds or aflatoxin Incentive to Increase Production As farmers realize more money through collective marketing of their farm produce this will eventually increase the farmers incentive to use more of their land and produce larger surpluses which will make their farms more productive and further increase their farm family income levels Improving Access to Credit Collective activity might also help farmers to obtain credit. They may be able to borrow money to buy inputs and improve their farm which, in turn, can increase their income. Collective action or social capital can be used as collateral for farmers to have access to credit from financial institutions Obtaining Communal Equipment and Services It is much cheaper and easier for government and development agencies to organize training and agricultural extension services for groups of 14

15 farmers rather than for individual farmers. Groups of farmers can also construct communally owned storage facilities. If farmers can store their products they can improve their marketing performance. Some of the increased revenue derived from bulk sales could also be invested in forms of transport which can be used even over rough farm tracks. Animal-drawn carts and pick-up trucks could be used to collect produce from surrounding farms for delivery to communal storage sites. Farm inputs could also be purchased collectively. It is usually much cheaper to buy tools, seeds and farm chemicals in bulk. The purchasing power of groups of farmers will also enable them to drive a harder bargain with input suppliers thus lowering farming costs. A group of farmers may also easily have access to market information and make it possible for isolated groups of farmers to negotiate sales transactions, learn about prices and market conditions in more distant places and to identify the cheapest and most appropriate sources of input supplies Social Advantages The adoption of democratic decision-making systems to organize collective marketing can strengthen communities considerably. Although the purpose of such systems is to increase revenue from farming activity, many groups have also found that collective activity strengthens the social coherence and trust within the group. Neighbours who suffer some unforeseen problem can be assisted more easily within a group that works successfully together and the arrangement also helps groups to prioritize social improvements and to act according to those priorities. In addition, groups of farmers are likely to be able to exercise more political influence in local government decisions and within institutions which effect their farming performance such as extension services, development agencies and farmers unions. 15

16 MODULE D: Topic 2: Session 1: Sales Options of Farmers Produce Time: 30 Minutes Target Group: Key Influential Farmers Lead Farmers Cooperative Executives Cluster Executives AEDCs and AEDOs Farmer Organization Facilitators 1. Introduction In Malawi the low level earnings from grain legumes are the major problem for smallholder farmers. The major cause of this problem has been lack of farmers linkage to better or profitable market outlets as well as lack of farmers intelligence in timing their sales. Most farmers have not been able to take advantage of the rising seasonal grain legume prices. Farmers have been accepting to sell produce at very low dictated prices soon after harvest because they have been so desperate for money to meet their basic needs after investing in their fields. This is a serious problem for farmers in Malawi because farming is their main livelihood strategy and low income levels means inability of farmers to actively participate in the day to day economic activities. Low income levels can also be translated into lack of access to basic needs of life that require to be purchased with money. It is with this background that farmers need to be aware of the different produce sales options for them to make informed decisions to choose an option that would maximize their profits. 16

17 2. Objectives By the end of this session participants should be able: to know the different market channels or sales options at their disposal. To know the existence of the warehouse receipt system championed by ACE as a sales option that would help them to take advantage of seasonality and maximize their profits. 3. Marketing Channels or Sales Options Facilitate a participatory value chain or marketing channels (sales options) mapping for beans and ground nuts. 4. Steps Let participants form four groups. Two groups to draw sales options map they know for Groundnuts and the other two groups for Soyabean. Note: Two groups of women only and two groups for men only Let the groups present the sales options or marketing channel maps in a plenary. Finally facilitators comment on the maps and present the sales options hand out and discuss which marketing channel is most profitable. Present hand outs for Warehouse receipt system by ACE; and encourage farmers to sell their produce through this system. Allow participants to ask questions concerning the warehouse receipt system. (SHOW PARTICIPANTS AND DISCUSS THE PICTORIAL REPRESENTATION OF SALES OPTIONS) 17

18 Topic 2: Section 2: SALES OPTION Group Exercise (Market Research) Time: 60 minutes ---(this is to be carried out by the FOFs with their Clusters after the training). Divide the participants into two groups for this exercise. Instructions are as follows: Illustrate the market channel for your commodity as you understand it. If you are using pigeon peas, come up with a local version of the value chain. This should show the players and channels in the locality e.g. XXXX farmers group vendors at XXXX trading centre etc. Based on our assessment of the market channel, what options do we have for marketing our product? What will it take to reach the identified options and which is the best option for us as a group? Consider the 4 Ps of marketing and ask yourself the following questions: Product do we have the right product for the market we are targeting? What type is needed? What volumes are required? Are there any special requirements that our buyers need e.g. pigeon peas dried to a certain level and how can we meet these requirements? Price at what price should we sell our product so we can make a profit? How does our price compare to the price given to other farmers by the same buyers? Should we negotiate for a fixed price or leave the price open for when we are ready to sell? Place to whom should we sell our product to? Where will the product be delivered? What transport requirements are necessary for us to meet and how can we meet these requirements? Promotion how can we make sure we reach the buyers to inform them about our product? Should we provide samples? How should we present our product so it is attractive to the buyer? Have each group make a presentation based on the above analysis. They can try to answer as many of the questions under each point as possible. They should also list questions for which they are unable to answer at this point but which they feel they can investigate and get answers to by doing market research. In the end, the group should identify: Potential markets that they want to target Ideas about pricing, product type and volume, place of sell and transport needs, how to promote their product. Some Questions need to be researched and answered in making the decision on where, when and how to sell. 18

19 The above information provides the foundation for the group s marketing plan. From here, the group can plan to collect information to verify their and finalize their plan. The verification and data collection exercise is called market research. MODULE E: Brainstorming (Question and Discussion) --this process is to allow for participation by all present (now that they are aware of the issues). Request for Questions OR Comments!!! Write all Questions and Answers on a Flip Chart for ALL to see Correct any misnomer.. Relevant Questions are: i) How do Markets work? ii) Why do we need Traders? Ask for Answers. Encourage Debate. Get Many to Talk and Comment to stimulate interests and Full Participation. 19

20 MODULE F: COLLECTIVE MARKETING AND SALES OPTION TRAINING --TARGETED CLUSTERS QUESTIONNAIRE CLUSTER Name (if any..): Contact (if any..): cell No.: Location: District: EPA: Nearest Town or Boma: Distance to Nearest Town/Hour by Cycle: Nearest ACE Warehouse Market: Expected Harvest (MT/Bags): Issue Yes Or No 1 Does the proposed group of farmers already recognize themselves as a group? 2 Does the group already hold meetings? 3 For what purpose are the meetings? Social / Religious / Training / etc Does the group have a name? If the group is dominated by just one or a few people / men / /rich members /etc; Are the other members satisfied with the way decisions are made? 6 Do the members of the group live close together enough to be able to walk, cycle easily between themselves? 7 Does the group show any enthusiasm or understanding of Collective Marketing? Note: response to above questions will help the SP decide if they wish to assist the group to organize Collective Marketing. Comment/Decision: 20

21 Module G: COLLECTIVE MARKETING AND SALES OPTION TRAINING LIST OF PARTICIPANTS CLUSTER NAME: EPA: DISTRICT: DATE: Name Address Signature/Thumbprint 21