PrOpCom. Interventions. Making Nigerian Agricultural Markets Work for the Poor. Rice: Kano Rice Marketing
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1 PrOpCom Making Nigerian Agricultural Markets Work for the Poor Interventions Rice: Kano Rice Marketing Funding for this programme is provided by the United Kingdom s Department for International Development (DFID) 40 Mississippi Street, Maitama, Abuja, Nigeria Tel: +(234) /2 Fax: +(234)
2 BACKGROUND TO THE MARKET Rice in Nigeria is primarily an urban middleclass product, but is also increasingly becoming a more widely consumed staple food. The total market is an estimated 5 million ton (2007), approximately two-third of which is urban and the rest rural. Estimated annual production is 3.4 million and rest is imported. Again approximately two-third of urban demand is met by imports. Rice in Nigeria is distributed through five channels - rural household consumptions (8%), small scale processing for rural and peri urban markets (33%), medium commercial processing for urban markets (16%) and large scale industrial processing (10%) and the fifth channel is the imported rice market (33%). Half of local rice is channelled through the small-scale processors and medium commercial processors, which have direct connection with poor parboilers and farmers. National rice production growth is 15% per annum (FAO Stat) and growth of national demand is 20% per annum. Imported rice sets the standard in the market in terms of price and quality (in terms of cleanliness, whiteness, consistency, breakage and being free of stones). In principle locally produced and processed rice can compete with imports at an estimated sales price of NGN 400/mudu (vs. NGN 450/mudu for imports) by improving the quality of local rice. To improve local quality, incentives for maintaining quality need to be passed on better through the value chain (instead of each player trying to corner the premium for better quality, passing little incentive on the next player upstream), processing equipment
3 requires upgrading and linkages between urban demand and rural production needs to be strengthened. Incentives to improve quality are better secured if processors (parboilers and millers) integrate more steps in their processing and own the rice they process (parboilers or millers controlling the entire processing steps from buying from farmers to selling to the traders). Changing the business model for the parboilers also implies that their social status is improved, better recognition is achieved (going out to buy paddy, collecting the loan amount, getting into trading, participating in the meetings and so on). Equipment to improve quality is partially available (such as small scale milling equipments), but millers and traders are by and large not aware of these. Market channels that can guarantee local rice of a good and consistent quality are virtually absent. The quality of local rice is also influenced by agricultural practices, seed varieties in particular. For last couple of years numbers of other projects are working in rice sector in northern Nigerian states, which have resulted in increased production and productivity. Kano being the hub of local rice processing and trading, this increased production becomes a good opportunity for increased income and employment. It is observed that paddy rice from different states are getting into Kano for processing and then being distributed all most all over the Nigeria, which means effectively working in Kano processing has an effect on entire North Nigerian rice sector. With this backdrop, it is imperative to channelize the additional volume of rice through processing. Due to the increase of production, quality and quantity of processing are the most crucial constraints for the
4 growth of the Kano rice sector. Thus, priority is given to the key constraints downstream: processing volume and marketing. BACKGROUND TO THE INTERVENTION Among the other channels, Medium commercial milling is a very crucial and important channel for Kano rice distribution because of two reasons - it handles a significant amount of urban demand and it has a potential to bring change in quality that can compete with the imported rice. Until now, the competition was in between the low quality locally processed rice and the imported ones where there were very minimum or no differentiation in the locally processed ones. To compete in such a market, integrated and innovative marketing i.e. better packaging, innovative media campaign, creating awareness and strong linkage between the market players are imperative along with the improvement in quality. The local large and medium processors have the capacity and knowledge to undertake these kind of activities and cater the demand, but they lack required planning and management capacity to initiate and implement such integrated marketing and communication activities. Their financial capacity is also another limiting factor for this kind of operation. If right kind of planning, management and financial support can be ensured for the local large and medium processors, then they can bring about visible change in market and can make significant contribution in making the local rice more acceptable to the high-end consumers. Another crucial
5 impact it can bring in the market is in terms of influencing a large portion of medium sized processors out there to copy and practice the model. The aim of this intervention is to increase the market for locally processed rice by increasing the volume, improving quality and developing new market channels through creating access to finance, introducing improved processing, initiating effective marketing and distribution and improving the social capital of the processors. The focus is to minimise the gap between the quality of imported rice and locally processed rice. To facilitate this, PrOpCom identified a potential partner in the form of a medium-scale rice miller/marketer in Kano City, called Golden Grains. PARTNERS FOR THE INTERVENTION Golden Grains Ltd. Is a local medium-scale rice processing and marketing company ACTIVITIES OF PROPCOM Strategy: Increasing the market for locally processed rice by increasing the volume, improving quality and developing new market channels through creating access to finance, introducing improved processing, initiating effective marketing and distribution and improving the social capital of the processors. The focus is to minimize the gap between the quality of imported rice and locally processed rice.
6 Intervention area 1: Improving quality control in post-harvest handling through introducing improved processing practices. Intervention area 2: strengthening channels by integrating processing steps and better marketing / linkages with end markets / consumers Intervention Area 3:Access to finance to upgrade equipments, integrate processing steps and initiating effective marketing Intervention Area 4:Improving social capital of processors to unlock their business potential Golden Grains agreed to partner with PrOpCom on this. In addition, the management has agreed to share some of the cost and carried out tasks assigned to them. In November 2009 PrOpCom met with the management of Golden Grains to explain the intervention and discuss a possible collaboration. The company agreed to the proposal and to share some of the cost and tasks associated with this. A market Research company was identified to provide market research support for Golden Grains, while another service provider was sought out to provide marketing communication and rebranding of Golden Grains. In December 2009, the first draft of the marketing plan was submitted and an MoU was drafted in order to move forward with the workplan while contracts were also signed with the service providers supporting this intervention. Verdant Zeal was contracted to
7 provide services on package design and production of marketing campaign jingles for Golden Grains. In January 2010, the market research survey got under way as did work on the rebranding. Golden Grains was also introduced to Alithea Capital, a local venture capital firm, to provide financial & management support to Golden Grains as needed. Negotiations between these two companies continued into February and March. Also in March, the concept for a new brand and packaging for Golden Grains was presented by the consultant. Preliminary results of the market research survey were also submitted showing consumers willingness to buy clean, well packaged, locally produced rice as well as supermarkets desire to sell such products. The review of the technical proposal for marketing research has been concluded, what is remaining is the review of research instruments by the intervention manager. The research will be conducted by ASCAS, which will help in the formulation of marketing strategy for launching of the product. The technical proposal has also been finalized for Verdant Zeal, a marketing communication company who will provide services on package design and production of marketing campaign jingles for GGA. Once the designing of new package and production of jingles are done, GGA will go for production of new package and will launch the media campaign.
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