Innovative Agribusiness Collaboration Roadmap

Innovative Agribusiness Collaboration Roadmap

AGRIBUSINESS IN THE G21 REGION Produces value added of more than 1 Billion a year Directly employs 8,600 People It s a diverse industry with a sound grower base and an established post farm gate sector. Post farm gate activities account for 70% of the region s agribusiness value added. 70% THE AGRIBUSINESS INNOVATION ROADMAP PROJECT G21 Agribusiness Forum s Innovation Roadmap project was supported by the Victorian government s Food Source Victoria program, the City of Greater Geelong, Golden Plains Shire, Colac Otway Shire, Surf Coast Shire, the G21 Region Alliance and the Committee for Geelong. Key elements of the project were: Identifying and mapping of G21 region agribusiness value chains. 16 potential collaborative projects were identified from discussions with value chain participants. THE 3 IMPLEMENTED PROJECTS Selection of 8 projects for further scoping of suitability, level of innovation, regional impact and readiness for implementation. Implementation of 3 commercial collaborative development projects. The 3 projects implemented received consulting assistance with establishing the commercial bases for proceeding, scoping collaborative activities, discussions with project participants, preparing project budgets, developing governance arrangements, identifying funding requirements, and developing business cases and detailed implementation plans. All three projects will continue beyond the life of our project. Collaborative olives business model and grove services Working with several small olive growers to develop collaborative management, processing and marketing of extra virgin olive oil. Building on background analysis by Mt Moriac Olives (project champion) to scope market opportunities, develop administrative structures for collaboration, scope new investment, attract capital, and recruit/contract participants and alliance partners. Niche paddock to plate value chain Establishing collaborative value chains for small boutique meat producers (including goat, deer, alpaca, llama, sheep, ostrich, pigs and cattle). Working with Koallah Farm (project champion) to ensure an innovative, long term sustainable solution that facilitates access to high value markets including export. Logistics and retail platform for small food producers Working with The Food Purveyor (project champion)to create a collaborative supply chain system to assist small food producers to move from farm gate or farmers market type sales to become suppliers to retail supermarkets, speciality stores and food service groups. Includes building skills of participants, recruiting retailers, and development of a shared transport and logistics platform for supply. 2

The Innovative Agribusiness Collaboration Roadmap is a pathway to facilitate commercial collaborations for agribusinesses. It aims to encourage growth and development of agribusinesses in the G21 region. It shows steps to identify, develop and implement commercial collaborative projects. ROADMAP Understanding collaboration Identifying and defining projects Pre-requisites for sustainable collaboration Implementation and commercial rollout Consider viability UNDERSTANDING COLLABORATION The nature of competition has changed. In an open, globalised, high cost economy like ours, competitiveness hinges on the capacity to create, innovate and utilise knowledge more rapidly than competitors. Firms need to compete though providing high value product and enhanced customer services ie. increased specialisation. In this context agribusinesses are departing from the traditional approach of competition between individual businesses or growers. Competition is increasingly between value chains. Cooperating to compete allows firms, especially small and medium enterprises, the ability to be competitive without bearing all the risks, costs and resource commitments of going it alone. Benefits of collaboration include: Consolidating individual business strengths. Adding value to products and/or operations. Creating or expanding markets. Sharing experiences, information and market intelligence. Identifying and developing niche markets. Implementing common business standards (eg. in customer service or quality assurance). 3

the growing specialisation of... regional economies is no longer dependent on economies of scale (or price) but on the nature of the products put on the market, on the know-how to make these products, on the type of needs they satisfy, and on the capacity to make these products evolve continuously while preserving their originality. Conti, S A Systematic Perspective on Local Development, in Boschma R, Learning from Clusters, Springer (2005) Different types of collaborative strategies and structures Collaborative Strategy/Mechanism Strategic Alliance (including outsourcing) Possible Structures Formal or Informal Agreement Business Network Partnership Supply Chain/Value Chain Private or Public Company Joint Action Group Cooperative Cluster Association Industry Peak Body/ Representative Group Company Limited by Guarantee Soft Business Network No Formal Structure: Operates under Auspice Organisation Collaborations can stem from a range of strategies or mechanisms and employ a variety of relevant structures to deliver outcomes. Strategies include cooperating to compete mechanisms (such as hard business networks, joint action groups, formal alliances, supply and value chain partnerships, and clusters) and the use of intervention agencies (like industry peak bodies and soft networks) to stimulate collaboration and innovation projects. The appropriate approach will depend on each individual project and the participants. Potential collaborative and innovative projects in the G21 region would need to involve at least one of each of the strategies and structures outlined above. KEY QUESTIONS Understanding collaboration 1. Is collaboration relevant and does it fit with core business? 2. What type of collaboration is best? 4

IDENTIFYING AND DEFINING PROJECTS Value chains Commercial collaboration projects are driven by firms. They are identified via collaborative discussions with agribusinesses. Understanding value chains helps identify relevant firms and focus discussions on creating/adding value within a market framework. In our project, we mapped value chains as a means of identifying firms and the commercial collaborative development projects emerged from those discussions. Example: G21 region pig industry value chain Genetic Suppliers Vertically Integrated Companies Breeding Stock Producers Stockfeed Suppliers Sheds and Systems Livestock Services Growers: Shedded Growers: Bred Free Range Growers: Free Range Processing: Abattoir, Boning and Packing Operations Imported Processed Product Processing: Mincing, Smoking, Curing and Smallgoods Domestic Sales Specialty and Food Service Domestic Sales Supermarket Retail Export Sales Dotted lines suggest the value chain link is external to the region 5

Types of projects Commercial agribusiness projects involving collaboration can include a range of strategies for creating/ adding value. The following table illustrates these strategies and provides some examples from our project. Type of project Typical activities Project examples Commercialising co-products or underutilised materials Could be waste streams, litter, offal, skins, oils, bio-fuels, husks etc. Includes effective resource utilisation, recycling & reduction or elimination of waste. Ethical farm management group turning all parts of the animal into meat products by the innovative use of membership base. Co-products from seafood waste using fish residue after fillets are removed for oil, fish meal, food ingredients and nutraceuticals. Creating economies of scale for small/ niche producers Pooling resources/products to create a supply capable of satisfying larger customers. Making it cost efficient for a group to acquire handling, storage, processing and/or transporting equipment uneconomic for individual growers. Collaborative olives business model to utilise olive plantings of more than 40 growers and 70,000 trees that are not effectively managed or harvested. Product differentiation Can be based on production systems (eg. grass fed, free range, biological, chemical free, organic) and/or product characteristics (eg. genetically improved, early/ late/counter seasonal, genetically modified, recipes or novel ingredients. Paddock to plate meat value chain traceability and contractual arrangements to enable growers to maintain product differentiation features and branding in value chain. Food logistics and distribution solution a structured collaborative group to deliver products differentiated by provenance or regional origin through a coordinated marketing, ordering and distribution service. New technologies or production processes Food processing and manufacturing automation technologies including batch, continuous flow, robotics, chilling, freezing, retort, high pressure, separation, filtration, other extraction and cooking methods. Packaging technologies include bottling, canning, shrink wrapping, modified atmosphere, portion control. Meat smallgoods development to develop a range of longer shelf-life products and small goods. Spent hen and layer value adding technologies to extract poultry meat nutrients for further processing. Creating or re-engineering a value chain Identifying areas in a value chain where efficiency and/or customer focus of the chain can be improved. Creating a chain that is more lean (eliminating waste or delays) or agile (creating value and flexibility for individual customers, at a cost). Major events distribution alliance creating a new collaborative group to offer G21/Regional Victorian catering services, hampers and specialist food products to major events around Victoria. 6

KEY QUESTIONS Defining projects 1. How does the project relate to the value chain is where value will be added clearly identified? 2. Has the opportunity been canvassed with all potential participants? 3. Has the type of project been explored and agreed? PREREQUISITES FOR SUSTAINABLE COLLABORATION We found four important prerequisites for successful collaborative development projects: Clear commercial benefits projects need clearly identified commercial outcomes rather than generic promotions or forming collaborative groups to engage in regional lobbying or promotions. Project champion there needs to be at least one collaboration champion or value chain controller within the group to ensure the project remains a priority of the collaborating businesses. External facilitator someone who commands the respect of the participating growers and businesses will keep the project moving and focused. Communications projects need a workable communications method or style that suits the collaborative group and the nature of the collaboration. KEY QUESTIONS Prerequisites for collaboration 1. Are the commercial benefits clear? 2. Is there a project champion? 3. Is there an external facilitator? 4. What is the communications strategy? CONSIDER VIABILITY BEFORE PROCEEDING Critical questions that need to be addressed before implementing: Risk sharing - are participants convinced of the merits of the project? Are they able and prepared to share the associated risks? These questions should be addressed first, even if the scale of investment and other risks is not quantified until the feasibility and business case are completed. Feasibility are there elements of feasibility (market, financial, operational or organisational) or business case that need to be confirmed? KEY QUESTIONS Viability 1. Are participants willing to share risk and can they contribute the required resources? 2. Has feasibility been demonstrated and agreed? PROJECT IMPLEMENTATION AND COMMERCIAL ROLLOUT Implementation and commercial project activities are unique to each project, but typically there would be: A project budget. Agreed governance arrangements including new organisational structure (if required), stakeholder agreements, any necessary licences or accreditations, and targets. Funding arrangements need to agree funding eg. equity, internal contributions, grants, loans. An action plan. Project agreements can also be important to collaborative projects. They not only formally bind participants but also ensure each participant is clear on their commitment. Typically, agreements might include confidentiality; rules, articles, constitutions (particularly for a new structure); codes of practice (for quality, timeliness, performance, conflict of interest, exit and entry); shareholders agreement; Memoranda of Understanding; licence agreements; sales agreements as well as contracting or processing agreements. KEY QUESTIONS Project implementation 1. Has the project budget been prepared and agreed? 2. Is there an agreed governance structure in place? 3. What funding is required and how will it be attracted? 4. Is there a clear action plan? 7

While the Roadmap is intended as a guide for collaborative development projects, it is important to remember that every project is different. A very important factor in embarking on an initiative is to understand, and be prepared, that the timescale for implementing a project is almost always longer than anticipated at the outset. This typically is due to a combination of commercial realities, collaboration taking longer to achieve or formalise than expected, and unforeseen changes in direction or scope of the project as realities unfold. Project collaborators also need to remain flexible in approach and be willing to respond to changing circumstances eg. changes in project participants, changing market conditions and requirements of investors. The use of an independent facilitator will significantly assist project champions and participants in the collaboration to ensure these issues are addressed. An entrepreneurial approach together with commitment and perseverance to the project will ensue that any such roadblocks are adequately addressed. THE FUTURE The roadmap project is both a demonstration project and a how to guide to help initiate and facilitate collaborative opportunities that might otherwise be missed. The projects identified and implemented to date clearly demonstrate the potential for ongoing collaborations to directly grow and develop our region s agribusiness sector. A key part of the Sustainable Agribusiness Strategy for the G21 Region 2017-2022 is to create an environment that encourages innovation and collaboration across supply chains to improve productivity and attract investment. It specifically identifies ongoing support for the Roadmap as a priority. It is proposed that ongoing support be provided by establishing a structure/organisation to support facilitation of industry driven commercial collaborative development projects in the G21 region. Such a structure will be important if collaborative development projects are to be started and captured in the future. The 3 projects currently being implemented, together with the other 13 projects identified, provide a ready-made work program for implementing this part of the Strategy. Other new projects are already emerging. It is important to note that once developed, projects must be allowed to have an independent life of their own, be commercially driven and unencumbered by the need to publicly share outcomes or to report to non-commercially involved members and stakeholders. THANK YOU TO OUR SPONSORS G21 Agribusiness Forum PO Box 1600 Geelong VIC 3220 www.g21agforum.com.au For further information contact: secretary@g21agforum.com.au