Aharam: short, afordable and profitable supply chain of traditional crop based organic foods
Aharam foods is a community based enterprise (CBE), recently registered as a "producer company", at Madurai district in the center of the Tamilnadu state, which is situated at the southern tip of Indian peninsula. It supplies ethnic food products (millet malt, juice powder, seed oil etc.) using traditional crop products rich in mico-nutrients, through membership card and no interest credit for 3 months. Women Self Help Groups (SHG) offices (60) and 15 shops deliver these to 800 landless farm labourers families lacking purchasing power (i.e. "entitlement") due to ever decreasing wages from the landlords and the urban consumers. It saves medical expenditure worth 10-15% of the family budget, due to nutrition and health security. Good quality grocery (pulses, oil and spice) products worth Rs. 500 (25 kg) per family monthly are procured from farmers and/ or urban traders at fair price. Aharam engages 15 rural poor women at value addition facilities such as building and machinery for the storage, powdering, packing, and labeling. Price is equal or 10% lower than similar products, but Aharam quality is better e.g. pulse with no pores of insect bite. Direct procurement from various commodity farmers and their redistribution within villages by avoiding the high cost urban trade (procurement-transport-redistribution) is the innovation that sustains this initiative. Choosing locally produced grocery avoids competition with subsidized products such as rice or cotton.
About You
Location
Project Street Address
Project City
Project Province/State
Project Postal/Zip Code
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Your idea
Sector of activity
Agriculture
Other sector of activity
Healthcare
On the mosaic diagram, which of these factors is the primary focus of your work?
Factor
Limited purchasing power of individual clients
Principle
Leverage the power of communities as both consumers and producers
(a) Length of supply chain as a factor and (b) the principle of nature of technology (labour intensive or labour minimizing) can enhance price and enhance or reduce employment respectively. Aharam benefited the customers by reducing the length or steps in the supply chain and cutting the costs. It benefited the customers also by enhancing their purchasing power by employing more handicrafts workers.
Name Your Project
Aharam: short, afordable and profitable supply chain of traditional crop based organic foods
Describe Your Idea
Aharam foods is a community based enterprise (CBE), recently registered as a "producer company", at Madurai district in the center of the Tamilnadu state, which is situated at the southern tip of Indian peninsula. It supplies ethnic food products (millet malt, juice powder, seed oil etc.) using traditional crop products rich in mico-nutrients, through membership card and no interest credit for 3 months. Women Self Help Groups (SHG) offices (60) and 15 shops deliver these to 800 landless farm labourers families lacking purchasing power (i.e. "entitlement") due to ever decreasing wages from the landlords and the urban consumers. It saves medical expenditure worth 10-15% of the family budget, due to nutrition and health security. Good quality grocery (pulses, oil and spice) products worth Rs. 500 (25 kg) per family monthly are procured from farmers and/ or urban traders at fair price. Aharam engages 15 rural poor women at value addition facilities such as building and machinery for the storage, powdering, packing, and labeling. Price is equal or 10% lower than similar products, but Aharam quality is better e.g. pulse with no pores of insect bite. Direct procurement from various commodity farmers and their redistribution within villages by avoiding the high cost urban trade (procurement-transport-redistribution) is the innovation that sustains this initiative. Choosing locally produced grocery avoids competition with subsidized products such as rice or cotton.
Innovation
Description of your products or services:
Aharam foods is a community based enterprise (CBE), recently registered as a "producer company", at Madurai district in the center of the Tamilnadu state, which is situated at the southern tip of Indian peninsula. It supplies ethnic food products (millet malt, juice powder, seed oil etc.) using traditional crop products rich in mico-nutrients, through membership card and no interest credit for 3 months. Women Self Help Groups (SHG) offices (60) and 15 shops deliver these to 800 landless farm labourers families lacking purchasing power (i.e. "entitlement") due to ever decreasing wages from the landlords and the urban consumers. It saves medical expenditure worth 10-15% of the family budget, due to nutrition and health security. Good quality grocery (pulses, oil and spice) products worth Rs. 500 (25 kg) per family monthly are procured from farmers and/ or urban traders at fair price. Aharam engages 15 rural poor women at value addition facilities such as building and machinery for the storage, powdering, packing, and labeling. Price is equal or 10% lower than similar products, but Aharam quality is better e.g. pulse with no pores of insect bite. Direct procurement from various commodity farmers and their redistribution within villages by avoiding the high cost urban trade (procurement-transport-redistribution) is the innovation that sustains this initiative. Choosing locally produced grocery avoids competition with subsidized products such as rice or cotton.
Description of the operational model:
CCD procures the regional products such as pulses, chili, onion, coriander, groundnut, Tamarind etc. from 100 farmers, often associated with the 600 women SHGs facilitated by CCD across 242 villages organized into 4 district federations. CCD imports non-regional products such as mustard (Madhya Pradesh state), gram (Orissa state), honey (Kerala state) etc. at 30% of the market price from partner NGOs across 6 states. Business Development Services (BDS) facility trains them into preparation of traditional recipes such as nutritious millet malt, puffed rice, herbal juice powder, cooking oil etc. using Common Facility Centre (CFC) hosted modern tools. Grocery worth Rs. 500 per month (25 kg) is delivered at home to 500 families through 40 SHGs, with 15 SHG cluster coordinators handling 3 SHGs each. Another 300 SHG member families buy these from 15 shops that also sell these to another 200 local SHG non-members. To pull SHG members out of the debt trap of other shopkeepers, Aharam provides no interest credit worth Rs. 500 monthly for 3 months. Mouth publicity saves advertisement expenses (generally 20-30% of the expenses), and existing SHGs office and staff saves cost. Innovation lies in using community based financial institutions (CBFI) savings as seed capital for enterprises (CBE). Seed capital attracts 10-20 times the matching investments from donors, as demonstrated 5 years ago in initiating Gram Moolige (Village Herbs) Company Limited (GMCL, www.villageherbs.com).
Impact
Description of the financial model:
Today 80% of the 1,000 Aharam customers posses low income - 50% of the home delivery kind, another 30% from the shops. Ford foundation has supported the no interest credit of Rs. 1.5 million offered to 1,000 families for 3 months, to pull them out of the debt trap of the unfair price shops. It was returned in 3 months, and used as "revolving fund". Ford Foundation also supports CCD 6 staff (Rs. 30,000 monthly i.e. 6% of the trade). SHGs save 5% in storage and handling i.e. Rs. 25,000/-which supports 15 SHG cluster coordinators (at Rs. 1,560/- pm i.e. Rs. 50 daily, 60% above rural wages). Next year 15 staff and 45 SHG cluster coordinators would reach 2,500 home delivery, besides 50 shops would cater to 1,500 families, and 1000 SHG non-members, to total the business worth Rs. 2.5 million monthly. Aharam central team would get Rs. 90,000 monthly as commission (12 staff at Rs. 5,000, i.e. Rs. 150 daily, higher than the urban wage rate- Rs. 100). Another Rs. 30,000/- would be distributed to 3 coordinators (procurement, processing and distribution). The staff would cost 5% of the turnover, and another 5% (Rs. 130,000/-) would be profit.
Client fees represent this approximate percentage of operational budget:
88%
Key operational partnership:
The stake holders include the 15 shopkeepers at the villages, who gain by having assured clientele due to the credit cards, rather than a fluctuating type. The 100 farmers and 11 urban traders from whom Aharam procures the good quality grocery now became quality conscious as they too gain from assured demand. SHGs that undertake the distribution responsibility as social service. The Government partners included Small Industry Development Bank (SIDBI) that earlier promoted CBEs, leading to establishment of CFC and BDS. Tamil Nadu Women Development Society (TNWDS) wing of the government trained the SHGs in diversifying their activities, including trading. NGOs and Friends of CBOs (FCBOs) from other states helped in procuring good quality and low price grocery. Some of them such as Ekgaon Co. even developed Market Information System (MIS) using Information Communication Technologies (ICT) to link farmers, traders and customers equitably. Fluctuating demand, supply and prices, strains long-term relationships. Constrained and changing market has forced stakeholders to open up and find new partners and opportunities.
Current outreach:
We are at the Scaling Up stage. Aharam is at the ?scaling up? stage, as pilot testing has been successful. Though 12% of the project costs are supported externally through grants, a business margin of 10% due to "economy of scale" principle of efficiency would permit it to be viable at 4,000 families and profitable at 5,000 families onwards. The major constraint remains the erratic seasonal fluctuations in the quantum and quality of the goods and price- delay in delivery from the traders. This will be minimized by directly procuring from partners in other states. Late repayment by the customers seemed a problem initially but then the repayment period limit was extended from 1 to 3 months, as families genuinely need it.
How many clients have benefited from your product/service in total? Over the last year?:
Overall 1000 families benefited in the first year- 2004-5, who purchased to Rs. 6 million worth grocery annually, which saved them Rs. 0.6 million at the rate of 10% lower price than the market rate. Further, better nutrition and health quality of the grocery saved a considerable medical expenses amounting to above Rs. 100/- per family monthly. Kitchen Herbal Gardens for primary health care had earlier saved up to 50% of the medical expenses. However, Aharam further addresses the root cause of ill-health needed: imbalanced and nutrition-poor diet, that Aharam tries to reduce. Aharam impact study planned in the next quarter would clarify the details but better picture would require replacing the staple food- rice with millets- to their pre-Green revolution level. About 100 farmers benefited by the way of assured market, rates and quality, besides 20 women (20) engaged in processing.
What percentage of your clients is below the poverty line ($2 per day)?
95% Most- 95% of the customers belong to BPL as defined here as the daily wage rate Rs. 30 (< 1 $) is much below 2 USD. However, considering the Indian standard of BPL (< 1 $ daily), about 80% of the CC holders get covered. Madurai, Virudanagar, Sivganga and Dindigul districts where CCD operates form the ?Ramnad? plains in central Tamilnadu, infamous as a ?semi-arid? tropics. It is one of the most drought prone are in the country, only next to Rajasthan state in Northern India. Madurai district is unique in contrasting the nations proportion of rural and urban population: 70:30 for the nation, while 30:70 for Madurai district. Lack of industries in the rural areas leaves no employment opportunities for the landless labor after agriculture during the monsoon.
What is the order of magnitude of the potential demand for your products or services? Which other low-income groups, countries or regions could benefit from it? Try to quantify (number of clients, market size in currency).
The potential demand for Aharam supply chain is 10 times in the 600 SHGs (9500 families) in the CCD loop- representing business worth Rs. 5 million (25 ton) monthly for just grocery. This implies Rs. 60 million (300 t) annually. Recently CCD initiated CFC and BDS assistance to 6,000 families of farmers and artisans in Tsunami affected areas in Tamilnadu, whose Their coverage implies 16 times upscaling - Rs. 96 million (500 t) annually. BPL families across the 4 Ramnad plains districts numbers 50 times the present reach- Rs. 300 million annually (1500 t). SHG families (80,000), mostly BPL, including the Tsunami areas imply Rs. 500 million (10.7 million USD) business (2400 t) annually. Nationally Aharam potential includes 26% of the rural families (i.e. 30 million families) that are BPL. It is double this in South Asia, and at least half in Africa- the deathbed of humanity that was onc
Scale-up strategy:
How many low-income individuals do you plan to benefit in three years from now? How are you planning to scale up or replicate your solution? What are the major constraints to scale up?
CCD plans to help Aharam reach 100,000 (0.1 million) families in 3 yrs from now, with the help of its NGO & CBO partners across 3 states in 3 southern India states: Tamil Nadu, Maharashtra and Orissa. This association is termed as Conservation Enterprise and Livelihoods (CEL) network, promoted by the Ford FOundation. Aharam would grow 5 fold to reach 5,000 families in the 1st year as described earlier. It would span 3 times to 16,000 families in the next year, within CCD coverage, and associate partners from other states fo co-leaning and experimentation. In the third year, it would skyrocket to 6 fold but 3 states together- reaching 100 times the present coverage. It would trade in gods worth Rs. 600 M/yr (3000 t). Due to Infrastructure scarcity, Aharam would use buildings of other NGOs, Government Schools etc. and machinery gifted by FCBOs to develop CFCs.
Which specific areas - and why - in your field would benefit most from investment by corporations, foundations, and other investors:
The main business constraint is the lack of infrastructure e.g. de-husking or milling machinery for the millets or storehouse facility etc. Hence, CFC needs investments to enable the poor communities more earning through delayed marketing and value addition, than undertake distress sell of the raw produce at peak supply that exceeds temporary demand. Another area of investments needed would be to strengthen the poor communities to address the emerging marketing challenges or externalities posed by the globalization, in the form of various certifications. The package covers the Saftey, Health and Environment (SHE) plethora and includes Total Quality Management (TQM), Good Manufacturing Practices (GMP), Organic cultivation, Ecocert, Sanitary and Phytosanitary compliance. A subsidiary assistance needed could be MIS, to track the appropriate buyers for the given produce.
This Entry is about (Issues)
Sustainability
The organization: How does the initiative fit with your overall organization's strategic goals and priorities? How did the initiative start?
CCD's mission is to promote revival of Local resource and Traditional Skills (LRTS) based development to reduce rural emigration to city slums. CCD began improving conditions of slum dwelling children 15 years ago, triggered by lack of employment opportunities in the semi-arid plains of Ramnad. Women engaged in collection and trade of medicinal plants, Tamarind fruits as condiment, Neem seeds as bio-manure etc. CCD first promoted these and later leapfrogged to establish GMCL that prevented emigration in 1,000 collector-cultivator families, and 25% more in trade, transport etc. SHGs (30) together contributed seed capital of Rs. 500 thousand, to initiate Gram Moolige (Village Herbs) Company Limited (GMCL) 5 years ago. Ford Foundation and DANIDA etc. pumped in Rs. 5 million. GMCL today trades 500 t of raw drugs worth Rs. 6 million annually, and Rs. 1 million of herbal medicines.
Organization's legal status:
Society
Number of Employees:
91
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