Harvard Business School New Venture Competition Social Enterprise Track April 29, 2014

Transcription

1 Harvard Business School New Venture Competition Social Enterprise Track April 29, 2014

2 Meet Azumi. Azumi farms 1.5 Hectares of land in Jos, Nigeria. He sells maize and tomatoes. 2

3 Trapped in a Cycle of Poverty Access to Inputs Production Gluts Low Yields 3

4 Losing Out on a $2.5 Billion Market Nigeria s Annual Tomato Market ($ bn) $2.5bn $2.1bn $1.1bn of tomatoes rot $0.7bn $0.4bn $1.3bn Total Demand Tomatoes Grown Tomatoes Sold Imported Tomato Paste Supply Gap 4

5 Giving Farmers a Better Life Our Mission To make tomato farming a sustainable, profitable business for Nigerian farmers. The Solution We give farmers the tools and the incentive to sell a greater proportion of an increased tomato yield at a consistent, fair price. We provide consumers domestic tomato paste that matches the quality of imported products at a lower cost. 5

6 Producing Nigerian Tomato Paste for the Nigerian Market Farm Transport Market Better farming inputs & agricultural education Last mile logistics & transportation services Consistent sales to a tomato paste processing facility 6

7 Assembling a Team with On-the-Ground Experience Management Team Mira Mehta, CEO Sales & marketing Supply chain 4 years in Nigeria Shane Kiernan, CFO Finance & investing Real estate 2 years in East Africa Nike Lawrence, COO Food processing Corporate strategy 2 years in West Africa Jared Westheim, CTO Agribusiness Agriculture value chains 3 years in East Africa Board of Advisors Farming Processing Supply Chain Nanpan Guyit Nigerian Tomato Farmer David Bell HBS Professor of Agribusiness Macani Toungara Senior BD Manager, TechnoServe Mary Shelman Director, HBS Agribusiness Program Raj Vardhan Senior Vice President, Olam Intl. Financing Shachi Sharma Director, Syngenta Nigeria Ltd. Dr. Abdu Mukhtar Partner, Sahel Capital Partners. 7

8 Creating a Sustainable Competitive Advantage Improved Inputs Consistent Product Agronomic Training Dami System Retail Brand Competitive Margin + Forward Pricing Contracts High Turnover Market Transport Traceability 8

9 Increasing Tomato Yields and Farmer Incomes 100 $11, Yield (MT/Ha) $1,000 $4, $6, Greenhouse Irrigation System 20 7 Improved Inputs 0 Baseline Bronze Tier Silver Tier Gold Tier = Farmer Profit per Hectare 9

10 Sharing Value: Unit Economics Share of 40 Naira Selling Price Actual Allocation in Naira per sachet Share of Costs Actual Allocation in Naira per sachet Network Farm Electricity & Fuel Fertilizer Seed Agro-chemicals Transport Skilled Labor Unskilled Labor Security Blended variable costs per Ha Cost of inputs per Ha in $ Year 5 $416 $328 Labor Fertilizer Tomato Jos Profit Margin Tomato Jos Costs Retailers sales Margin $148 $146 $89 Fuel & Transport Seeds Agro-chemicals $1,128 10

11 Scaling to Profitability Prove Concept Phase 1! Year 1! Launch Product Phase 2! Years 2 & 3! A.ain Scale Phase 3! Years 4 & 5! 50 MT/day! capacity! 1,000 MT/ day! capacity! 200! farmers! 1,500! farmers! 0% Outgrowers! 50% Outgrowers! 70% Outgrowers! 30 MT / ha! Our Yield! 45 MT / ha! Yield! 80 MT / ha! Yield! 11

12 Navigating the Nigerian Context Operational Personnel Electricity Environmental Political 2015 elections Job creation Local benefits Regulatory Open to foreign investment Specific food issues - traceability Tax Predictable Capex favourable Conflict Boko Haram State choice crucial Market Forward contracting Microfinance lending 12

13 Growing the Bottom Line Phase 1 Phase 2 Phase 3 $15,000,000 $12,500,000 $10,000,000 $8,802,005 $13,360,074 $4,000,000 $3,500,000 $3,000,000 $2,500,000 Operational Performance Metrics % Average Yield (MT / Ha) 80! 45! 30! $7,500,000 $5,000,000 $4,166,373 $2,000,000 $1,500,000 Processing Capacity Utilization (%) 79! 82! 86! $2,500,000 $862,366 $1,000,000 $- $14,374 $500,000 $- Year 3 Year 4 Year 5 $(2,500,000) $(46,608) $(142,330) $508,729 $1,116,170 $2,037,242 Year 1 Year 2 Year 3 Year 4 Year 5 $(500,000) Revenues (Actual in Green) Net Income (Actual in Blue) 13

14 Measuring Triple Bottom Line Benefits SOCIAL IMPACT Greater Farmer Income Average Income in $ Families Impacted Tomato Jos Workforce Year 5 $6mm economic benefit $4,250! Year 5 $3mm economic benefit 2,700! Baseline $1,000! Baseline 600! SUSTAINABILITY Utilization of Drip Irrigation % of Farmers utilizing technology Sustainable Farming Practices % of farmers using sustainable practices Year 5 50%! Year 5 45%! Baseline 2%! Baseline 20%! 14

15 Funding Our Growth Year 1 - $100k % Allocation 50! SG&A Site selection Setup expenses Agronomist salary Year 2 - $500k % Allocation 10! 25! SG&A Marketing salaries COGS Agri inputs Nucleus farm labor Year 4 - $3mm % Allocation 5! 20! SG&A Marketing salaries COGS Agri inputs Nucleus farm labor 40! 10! COGS Agri inputs Nucleus farm labor PP&E Irrigation system 65! PP&E Greenhouse construction Small-scale processing equipment 75! 46 PP&E Greenhouse construction Large-scale processing equipment SEED CAPITAL HBS NVC prize money Founder Capital SOURCES OF FINANCE DEVELOPMENT CAPITAL Development agencies DFID, USAID, GIZ, CIDA CSR programs Walmart, Heinz Angel Investors 14 GROWTH CAPITAL Strategic partners Olam, Heinz, Morning Star Private equity Frontier funds 15

16 Thank you!

17 Appendix: Pro Forma Income Statement 17

18 Appendix: Pro Forma Cash Flows 18

19 Parsing the Competitive Landscape Companies Domestic Producers Vital Group Re-Packagers and Importers Tropical General Investments Olam Conserveria Africana Boss JGJ- Sino Limited Brands In development Our Opportunity Not yet an active player in the Nigerian market Processes tomatoes from a distant, different region Not true Nigerian products Limited customization of brands for Nigerian market 19