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Agricultural Marketing

y Agricultural Marketing is an integrated process of moving

agricultural products from farms to consumers.

y Numerous interconnected activities are involved in doing this, such

as planning production, growing and harvesting, grading, packing,

transport, storage, agro- and food processing, distribution, and sale.

y Such activities cannot take place without the exchange of

information and are often heavily dependent on the availability of

suitable finance.

y Marketing systems are dynamic; they are competitive and involve

continuous change and improvement.


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Agricultural Marketing

y Agricultural Marketsperform an enormous role in responding

to the world populations daily demand for food products.

y What do you have to do to provide one hamburger, a small serving

of french fries, and a can of soda to everyone attending a ball game

on a Saturday afternoon?

y What do you have to do to provide the same food and drink to

everyone in Texas on a Saturday afternoon?

y What do you have to do if you also have to produce, process, and

prepare the food and drink?


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A business promotion approach

to improve sectoral

competitiveness

What is a Value Chain?


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The value added pig

providing wool, milk and (chocolate) eggs

What is value added?


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When talking about value we can distinguish

a consumerperspective and a business perspective


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Theconsumerperspective

value-added shopping experience


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Todays consumers demand more sophisticated products and services

Nowadays, our lifestyle has changed. We are more busy and have less time.

We want more convenience and comfort. Hence we want to buy already

processed and manufactured goods.

Thats what we call value-added products.

Example: Pineapple

In the past we bought

pineapples in the market

and processed them

ourselves, e.g. pineapple

juice, pineapple jam,

pineapple concentrate, etc,

Added value forthe consumer


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In a globalized world consumers

have the choice to demand

products and services that offer

most value formoney.



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Consumers are willing to pay

more money for the

additional features,

better quality,

greater versatility,

and higher quality standards

of the sophisticated products and

services offered.



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Thebusiness perspective

value-added business opportunity


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In a globalized world enterprises can only become (or remain) competitive,

if they innovate and provide their customers with the value-added

products and services that the market demands.

From the business perspective, every step ofvalue addition presents a

business opportunity for various private sector activities.

Value is added by using labour, materials, depreciation of machinery and

mark-up (profit margin).

The whole sequence of business activities in a (sub)sector, i.e. providing

inputs, production, processing, manufacturing, packaging, marketing,

wholesale trading, exporting, distribution and retailing functions is called a

value chain.

Put simply, a value chain is the sequence of activities required to make a

product or to provide a service.

Value is added by businesses


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Basic sequence of functions in an agribusiness value chain

Trade

Transport

Distribute

Sell

Con-

sumption

Prepare

Consume

Specific

Inputs

Provide

- equipment

- inputs

Production

Grow, harvest

Produce the

primary stage

Trans-

formation

Classify

Process

Pack

The Value Chain process the basic functions


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Value addition can happen in a single company (vertically integrated VC) and/or in a single

location (cluster).

However, a single entrepreneur cannot be the jack of all trades. They rather focus on

their core business, so that various enterprises in different locations take over different

functions of the value chain process (outsourcing).

Not every enterprise in a value chain is selling its products to the final

consumer, but to the enterprises at the next step in the value chain as

intermediate products.

Hence at every level of the value chain money is being earned forthe

value being added

However, some activities add more value and are more lucrative than others.

Private Enterprises the Operators of the Value Chain

Retail

Trade

Specific

Input

providers

Farmers,

(primary

producers)

Packers,

Agro-

industry

Whole-

salers


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Categories of operators in value chains and their relations

Retail

Trade

Specific

Input

providers

Farmers,

(primary

producers)

Packers,

Agro-

industry

Whole-

salers

Basic sequence of functions in an agribusiness value chain

Transport

DistributeSell

Prepare

Consume

Provide

- equipment- inputs

Grow, harvest

Produce theprimary stage

Trade Final SaleSpecific

InputsProduction

Trans-

formation

Classify

ProcessPack

The basic Value Chain map


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InputsProduction

Trans-

formation

The basic Value Chain map Quantification ofoperators

Seed suppliers (2)

Agrochemical

suppliers

(fertilizers &

pesticides (5)

Small holders

(2500)

Large

Plantations (3)

Pineapple

processing

plants (2)

Wholesaler (1) Small Retail

outlets (120)

Grocery stores

(4)

Retail

Trade

Specific

Inputproviders

Farmers,

(primaryproducers)

Packers,

Agro-industry

Whole-

salers

Number of

operators


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InputsProduction

Trans-

formation

The basic Value Chain map Quantification ofoperators

Seedlings

(200 000)

Fertlizer

(500 000kg)

Pesticide (12 000)

Small holders

(5mill fruits)

Large

Plantations

(8mill fruits)

Pineapple

processing

(8mill liters)

Wholesaler

(24mill bottles)

Small Retail

outlets (8mill

bottles)

Grocery stores

(16mill bottles)

Retail

Trade

Specific

Inputproviders

Farmers,

(primaryproducers)

Packers,

Agro-industry

Whole-

salers

Volumes

sold


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InputsProduction

Trans-

formation

The basic Value Chain map Economic Analysis

Seedlings

(2 Php each)

Fertlizer

(20 Php/kg)

Pesticide (37Php)

Small holders

(10 Php / fruit)

Large

Plantations

(12 Php / fruit)

Pineapple

processing

(32 Php / liter)

Wholesaler

38 Php / liter)

Small Retail

outlets

(50 Php / bottle)

Grocery stores

(49 Php / bottle)

Retail

Trade

Specific

Inputproviders

Farmers,

(primaryproducers)

Packers,

Agro-industry

Whole-

salers

Price

received


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InputsProduction

Trans-

formation

The basic Value Chain map Economic Analysis

4 Php 6 Php

Retail

Trade

Specific

Inputproviders

Farmers,

(primaryproducers)

Packers,

Agro-industry

Whole-

salers

Value

added

Share of

Value

16 Php 9 Php 15 Php

8% 12% 32% 18% 30%


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But how does the farmer know what the end consumer

demands?

There is need for information and coordination along the chain

to avoid or overcome gaps and problems (developing business

linkages)

Important: the end market determines what each VC level has

to deliver.

Lead firms (usually at the manufacturing/marketing stages of

the chain) have an interest to organize their suppliers to match

the quality standards of the market.

Suppliers in the value chain (also called supply chain) provide

the intermediate products and services required to

manufacture or assemble the final product.

Value addition process


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a sequence of related business activities (functions)

from the provision of specific inputs for a particular product to primary

production, processing, marketing & up to the final sale to consumers.

the set of enterprises (operators) performing these functions,

linking and coordinating producers, processors, traders and distributors of a

particular product.

a systemic economic model of the business transactions,

in which a value-added product is conceived and passed on from primary

producers to end consumers in order to access the market.

Specific

Inputs

ProductionTrans-

formation

Trade Final sale

In summary, a Value Chain is

RetailTrade

SpecificInput

providers

Farmers,(primary

producers)

Packers,Agro-

industry

Whole-salers


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Systemic, holistic approach focuses on competitiveness of the whole value chain.

All operators can trust that others will do their part of the upgrading task, i.e. that the

concerted approach of collective action will work.

Market-oriented approach, because all upgrading action along the chain is guided by the

demand of final consumers.Participatory approach where the stakeholders determine the strategy and are responsible

for the implementation.

Coordinated support by various enablers avoids duplication and ensures impact.

Advantages of the VC approach


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Consumers demand more sophisticated products and services that no single

company can produce by itself.

Systemic competitiveness has become critically important due to the growing

division of labour & the global spread of component production.

Due to globalization VC functions are often carried out in different parts of the

world, requiring enhanced communication and cooperation.

Small enterprises lack technical capacity and investment volume to service the

market of sophisticated consumer products by themselves.

Local enterprises produce for more distant markets and need to conform with

global labour and environmental standards.

Local MSMEs need to reposition themselves as they feed their inter-mediate

products into larger value chains servicing the global market.

Why are Value Chains becoming more important

in economic development?


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The competitiveness of a value chain, i.e. its

ability to conquer (distant) markets, depends to a

large extent on the interplay of all chain operators

and their performance.

If at one or the other stage of the value chainsome operators do not perform their function, the

other operators before and after will not be able

to satisfy the final consumer.

As the saying goes:

A chain is as strong as its weakest link.

Value Chain competitiveness


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Value ChainAnalysis

Value chain analysis (VCA) will reveal the value added at each

chain function

VCA will also tell the performance of the whole value chain, and

helps the actors in a value chain to understand their role for the

functioning of the whole chain.VC Analysis is to unpack the relationships between (global) lead

firms and local producers

VCA will disclose the constraints and the opportunities to add /

capture value resulting from such relationships.

The economic analysis of the value chain needs to be informed

by empirical data on the VC functions, the respective operators

and the final market.

VCA also helps in identifying business opportunities to add value

to the final product.

Why do we do Value Chain analysis?


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Value chains exist at the sub-national regional level, the national level, and the

global level.

In sub-national regions, value chains are difficult to distinguish from clusters.

Tourism is an example of a truly global value chain.

A value chain can be relatively straightforward, for instance in the case of a

vegetable value chain, where rural producers, intermediates and processors /

packaging houses, and wholesalers and retailers are involved.

A value chain can be extremely complex, for instance in the case of a passenger car

or a personal computer, or in fact in footwear or garments, where producers invarious countries across the globe interact.

Types of Value Chains


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The Value Chain process in the cotton clothing sector

Cotton growing

Cotton harvesting

Cotton transport

Cotton cleaning

Cotton spinningCotton combing

Cotton weaving

Cotton yarn

Fabric beneficiation

Garment sewing

Clothing retail shop


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elect a value chain in a sector that has good economic growth potential.

Other selection criteria include the poverty alleviation potential, gender

equality, etc).

High value addition potential at various stages (functions) along the

chain.

Orientation at existing markets and institutional buyers (market survey).

Involvement of all relevant value chain actors in VC analysis and

upgrading.

Strong private sector participation by lead firms and sector associations.

The value chain map reflects the relationships among operators.

Prerequisites of a successful Value Chain project


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Excellent analytical skills to identify the real constraints along the chain.

Concise formulation of opportunities and constraints.

Realistic upgrading strategy matched by adequate human & financial

resources.Determined core group implementing the upgrading action plan.

Willingness to lobby for an enabling business environment.

Skilled facilitator with technical expertise, social competencies and

sector network.

Alliance of collaborating enablers and service providers.

Value chain upgrading is considered as a process, not a workshop event.

Prerequisites of a successful Value Chain project


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Selecting the chain

Conducting a chain analysis

Derive objectives and strategies of the

upgrading plan

And, finally, take action to upgrade the

value chain

Focus on quick wins to demonstrate

results and keep the motivation of

stakeholders up.

Monitoring the results of the upgrading

and promotion process.

Sequence of basic steps in a Value Chain project


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Government Support in the Value Chain

We dont conduct a value chain,

but we map an existing value chain

in order tounderstand the

relationships between enterprises,

then we analyze the opportunities

and constraints that exist along the

value chain,

then we facilitate the upgrading

efforts of a value chain core group,

and finally we coordinate the

support of various enablers and

service providers.


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Association is formed forbusiness

reasons, not political ambitions

Harmony of business interests (traders

vs manufacturers vs farmers)

Strong ownership and common interest

of its members

Powerful membership (large numberof

members, strong commitment, healthy

financial status, political influence)

Capable leaders (democratically elected

office bearers, possessing leadership and

networking skills, avoiding politicization of

the association)

10 Characteristics of successful

Business Membership Organizations (BMO)


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10 Characteristics of successful

Business Membership Organizations (BMO)

Competent and committed secretariat

(permanent staff capable of translating vision

and strategies set by office bearers into action)

Provides tangible services to members andfocus on the main purpose

Business-like and unbureaucratic approach to

problem-solving

Financial transparency (proper book-keeping

and auditing)

Diversified resource base (reliance on

membership fees, avoiding dependency on

government support or donor funds)

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