Musings on market-oriented approaches to International Development
“We want subsistence farmers more involved in the value chain,” says Andy Wales, head of Sustainable Development at SABMiller
Beer and Farmers
While interacting with 20+ smallholder farmers in Kenya, I, in addition to charities like One Acre Fund, had the chance to see first hand how improved yields from farming could change lives for the 2 Bn+ smallholder farmers in the world.
Yet, it’s not only NGOs / charities that recognize the value of farmers; beer manufacturers also work to collaborate with smallholder farmers. By incorporating the outputs from farmers as raw material, firms can get a more secure supply chain, lower the cost of raw materials, while empowering households with income.
Made from Concentrate
In Sub-Saharan Africa, the production and consumption of beer is highly concentrated: around 4 producers are responsible for 90% of beer produced in Africa and 5 markets are consume 60% of beer.
Like production of beer on the continent, so too is the management of the sustainability programs, as these four producers have programs that engage thousands of farmers.
However, with recent major mergers in the industry and the possibility of continued market consolidation, what should happen to these smallholder programs?
In other words, should the search for cost savings / synergies and corporate scale decrease the social impact and reach of Sustainability programs?
Scale it up
Bigger firms can mean bigger impact, if only in two ways. First, sharing lessons in productivity across programs can help to drive greater output, which can increase incomes for farmers and decrease per unit production costs.
Additionally, supply chains can expanded across each organization’s different programs, extending a country by country (e.g. Uganda) presence to a regional (e.g. East Africa) scale.
While there are of course other ideas out there on how corporate scaling up, doesn’t necessarily mean scaling down of Sustainability programs, these are steps in the right direction to help beer firms ensure continued impact across the continent.
Cool points, firms with more mature supply chain organizations within them will perform supplier segmentation activities, to drive appropriate sourcing policies based on the nature of the goods and services being procured, balanced against the maturity of the supplier providing the good/service.
It’s rare, but as a long-term play, it helps large buying organizations weaken the hold of large suppliers on critical pieces of the production process, by putting less strenuous requirements on smaller suppliers, which should help them grow.
By contrast, Walmart is a company that has a reputation for doing the opposite.