A Sweet Bridge For African Farmers to Access Demand From Global Markets
A blog post by Juan Guardado, Managing Director, Natural Extracts Industries Ltd (NEI)
At a time when the global food industry is listening to consumer demand by declaring its intention to switch to natural ingredients [Nestle, Unilever, General Mills], when small-holder farmers (SHFs) are subject to volatile global market dynamics and climate change, and when a burgeoning young African population is facing unemployment, NEI is seizing an opportunity to create shared value, sustainably, by deepening its engagement within the communities in which it operates.
Take for example our recent deployment of a mobile-enabled ICT platform for field operations management, which was made possible with the Nestle CSV 2016 prize money.
Through this platform, our field officers are able to record every planting, training, farm visit, and procurement transaction with each of over 1,600 vanilla farmers in our outgrower network, enabling real-time information to be analysed by the management team and providing full “farm to plate” traceability for customers. Our level of engagement with the farmers in the value chain is substantial -- we visit each farmer at least once every 2 months and formally train them every quarter -- yielding tremendous benefits across the value chain.
For farmers, knowing that a company like NEI offers high-touch extension services and guarantees a long-term market at top prices, this has created a tangible commitment and loyalty towards the work we’ve set out to do. We have minimal side selling, reaching 95% of our yield forecast, and farmers are seeing double the vanilla yields compared to what is reported from cooperatives in Madagascar. We are also experiencing an increased demand from new farmers to register in NEI’s value chain, for participating in our trainings and planting schemes.
With the top prices paid this year and our operations that bypass unprincipled middlemen, some farmers are easily achieving USD 1,000 incremental net income from their harvest. For the majority of farmers living on less than USD 3.10 per day, this can mean their daughters may attend school that year.
The high quality of the harvest ensures we can manufacture premium, export-quality products, such as vanilla pods and extracts. With this level of quality, our products sell themselves, creating more profits for retailers and allowing industrial buyers to create distinctive products such as single-source, premium vanilla ice cream. For the end consumer, we can show which farmers (mappable on Google Earth) contributed to the product, creating awareness and demand from “plate to farm”.
Creating shared value also means caring for the environment. Although vanilla cultivation itself uses organic practices and promotes tree conservation (for shade), some of our farmers already feel the reality of climate change, in terms of reduced water availability. Thinking a decade ahead, NEI has begun testing how to help farmers better manage water for productivity and wellbeing, through climate-smart practices.
We are helping construct and repair water furrows, piloting household rainwater harvesting technologies, and promoting permaculture topics like improved land contouring. Given the success of our products, having long term initiatives such as these can only ensure continuity of returns to all stakeholders.
When tackling rural development, few people think about the flavours industry. And when building competitive advantage, few business strategists would think of being distinctive through deep community engagement.
Nestle understands this, being a founding member of the Sustainable Vanilla Initiative. NEI finds itself, a year after being recognised as a runner-up for Nestle’s Creating Shared Value prize, becoming a leader in the vanilla value chain in Tanzania, while playing our part in addressing the Sustainable Development Goals (SDGs). Our work shows that creating shared value can truly generate sustainable profits across an entire value chain.
The author would like to acknowledge the extensive capacity building support provided to NEI by Nestle Equatorial African Region and its country teams.
About the author
Juan Guardado is a co-founder of the company. As Managing Director, he oversees all aspects of the company, bringing to bear his diverse background. He has 7 years of experience in leadership roles in East Africa, most recently as Regional Director for Grameen Foundation and deputy CEO at Equity for Tanzania Ltd, a lease financing institution. Before that, he was Associate Principal at McKinsey & Co. in London, focused on using technology to enable business operations. He started his career researching graphics rendering algorithms at Matrox Graphics Inc. and Nvidia Corp., where his work was published and awarded patents. He holds a B.Eng. from McGill University and an MBA from INSEAD.
About the company
Since 2011, Natural Extracts Industries Ltd has been creating premium, sustainably grown, ethically sourced, all-natural flavour ingredients, which benefit over 1,600 smallholder farmers (SHFs) in Tanzania. Their high quality products, like vanilla, cacao and orange extracts, target the home baking, commercial kitchen and specialty foods markets. NEI provides incremental income to smallholder farmers by promoting and purchasing high value cash crops, guaranteeing both a long-term market and top prices for their harvest. Through the extension network and farmer champion model, registered farmers receive regular training in good agricultural practices, including organic topics like the use of natural bio-pesticides and composts. Follow NEI on Facebook, Instagram and LinkedIn.