Aflasafe Commercialization Strategy

Report
Aflasafe Commercialization Strategy
Improving the Health and Securing the Income of Nigeria’s Small Holder Farmers
Creating Companies | Creating Wealth | Creating Jobs
January 2013
Partners:
CONFIDENTIAL
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The Solution
USDA / IITA Technology that naturally and
cost effectively reduces Aflatoxin levels
by 80% to 99%
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Aflasafe Commercial Strategy
Three Strategic Question
“Establish a sustainable
premium market for low
aflatoxin maize and
ensure this premium
creates sufficient
economic incentive to
sustain farmers adoption
with the buyer and seller
sharing the economic
benefits equally”
I.
Who is the target market for
low aflatoxin maize?
II. What premium can this
market afford and does the
premium provide sufficient
economic incentive to
sustain farmer adoption?
III. How will the commercial
plan to be implemented?
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Who is the market for low Aflatoxin Maize?
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Target Market for Aflasafe Maize
Poultry Industry… Key Driver of Domestic Maize Production
Correlated Growth In Maize and Poultry Production in Nigeria
Drivers
Index of growth in production for maize and poultry relative to
Nigeria’s production in 1961*
Measure: Relative growth in production
Nigerian poultry production
has grown from 113 Million
birds in 2000 to 192 million
birds in 2010
Nigerian Government
Bans Poultry Imports
Nigerian maize production
has grown from 4 million
metric tons in 2000 to a 7.3
million metric tons in 2010
Each sector has grown on
average 5% per year.
Poultry feed is
approximately 60% maize.
* Doreo Analysis, FAO
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Is Aflatoxin an issue for the poultry industry?
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Aflatoxin has a significant economic impact on poultry production
Majority of Poultry Feed in Nigeria Toxic
Percentage of Toxic Poultry Feed *
Measure: % with levels of Aflatoxin over 20 PPB
Impact of Toxic Feed
Poultry fed with Contaminated
Feed ( >500 PPB)
Poultry fed with Safe Feed (
< 20 PPB)
Safe
38%
Toxic
62%
*IITA
Significant increased mortality
Dramatic reduction in live weight / Feed efficiency
(40% less in IITA trails)
Drop in egg production rate
Additional IITA trails in progress
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Is the poultry industry currently paying a premium
for low aflatoxin maize?
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Target Farm gate Price of Aflasafe $15 USD per Ha with Target Yields of
Aflasafe Maize Farmer of 3.5 MT /Ha
Tier 3
Customers
Tier 2
Customers
Tier 1
Customers
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3
66
Low
Low
High
Cost
High
End
Price
Binder
Price
Product
Product
Product
- Low
- High
- Low
- High
Concentraction
Concentraction
Concentraction
Toxin Binder Concentraction
Low
Low
High High
Cost
Toxin Binder
Concentration
Low
High
Low
High
Price of toxin binders vary from $2 - $4 per kg
Concentration of use varies from 1kg – 2kg per
metric ton of feed.
600kg of maize per 1000kg of feed
Economically Sustainable Farm Gate Price of
Aflasafe by Customer Segment and Farmer Yield*
Farm Gate Price of Aflasafe ($/Ha)
Poultry Industry Current Premium by
Customer Segment*
($ per Metric Ton of Maize)
60
Teir 1
50
Tier 2
Teir 3
Target Yield
40
30
20
Target Price
10
0
2
2.5 3 3.5 4 4.5
Yield Per Ha (MT/Ha)
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Assumes farmer makes 33% profit on use of
Aflasafe
* Doreo Analysis
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What incentive will farmers have to adopt Aflasafe?
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Phase 1 Aflasafe Pilot Commercialization
1
3
Purchase
Aflasafe
2
Farmer
Produces
Maize with
Yields above
3.5MT/ha
4
Repackage
Aflasafe
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Babban Gona
Test Maize at
Harvest
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Farmer
Purchase
Aflasafe for
$15.60/ha
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Maize passes
test farmer
receives
$6.25/mt
premium
Babban Gona
markets
maize for
+$6.25
premium
Modest Premium of $6.25/mt
(Approximately 2% premium) Works if Farmer Attains Yields of Over 3MT/Ha
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How do you get farmer yields above 3MT/Ha?
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Babban Gona: Agricultural Franchise Model
Trust
Group 1
Services
Trust
Group 2
Trust
Group n
Small Holder Farmer
Members
Small Holder Farmer
Members
Small Holder Farmer
Members
14
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Babban Gona Services Provided
Training
Good
Credit
Markets
Agric
Inputs
15
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Babban Gona Impact
Babban Gona Field
Yield Up to 4.6 MT per Hectare
Non Babban Gona Field
Expected Yield Less than 1.5 MT per Hectare
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Babban Gona Impact
Ibrahim Mustapha
4.6 MT/Ha
$1,250
Attained yields of 4.6MT/ha i.e. 3X the
National Average and almost 6X the
average yield in the community.
Achieved an economic value net of all
loans of over $1,250 from his small 1.1
Hectare farm. From a GDP per capita
standpoint he moves from poverty into a
lower middle income bracket..
Samaila Haruna
$2,500
1
Achieved an economic value net of all
loans of over $2,500 from his small 2.5
Hectare farm. From a GDP per capita
standpoint he moves from poverty into a
lower middle income bracket.
With his earning from his first season in
Babban Gona he bought a car.
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How cheap can you produce Alfasafe?
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Significant Product Development Investment to Reduce COGs
Reduced from $20 per Ha to $7 per Ha
Analysis of Ex Factory Price and End Farmer Cost
Key Takeaways
Aflasafe Estimated Price ex Factory*
Measure: USD per Ha
2.5
3.13
3.44
0.63
1.88
0.63
8.75
6.88
Substrate
(Sorghum)
Inoculum
Labor/OH
Packaging
Aflasafe Estimated Farm Gate Price*
Measure: USD per Ha
12.2
Ex
Factory
Price
* Doreo Analysis
0.6
Transport to
DP
SG&A
EBITDA
Margin
1.9
0.9
DP
Margin
12.19
Retailer
Margin
Ex
Factory
Price
15.6
Farm
Gate
Price
 Final ex factory price assumes an
EBITDA margin of 28% (55 Naira /
kg) applied to product to enable
factory to be sustainable.
 Simple, low-cost formulation and
manufacturing process developed
for use in this manufacturing plant
 Process amenable to seed
processing companies
 Discussions underway with 2 seed
processing companies for
manufacturing aflasafe in Nigeria
 Key actors in distribution are the
Distribution Partners (DPs) and
Retailers.
 As product is new and requires
addition work by the value chain
actors i.e. marketing and education,
margins are set slightly higher than
normal to encourage effective
distribution.
 Cost to farmer includes labor cost to
apply assuming half day at 800 naira
per day.
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How high can the premium for Aflasafe maize go?
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Poultry Industry Currently Paying an Implied Premium in Lost Profits
Aflasafe Treated Maize Dramatically Increases Profitability by up to $0.72/ Broiler Started
Lost Gross Profit ($/Broiler Started) of Not Using
Aflasafe Treated Maize*
Assumptions
 2kg live weight
 Conservative low cost finisher feed mix:
$0.50/kg
 Average bird dies at 4weeks weighing 1kg
 Price of dressed weight bird: ₦650/kg
 Cost of day old chick: $1/Chick
* Doreo Analysis
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The Recommended Premium For Aflasafe Treated Maize is
$56/MT vs. $6.25/MT
The Poultry Industry Makes Money… the Farmer Makes Money
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How will the commercial plan be implemented?
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Strategic Plan to Drive Sustainability
Leverage Strong Regulatory Enforcement to Sustain Premium Market for Aflasafe maize
1
PACA and Pull Mechanism
Generate Supply of
Cost Effective Low
Aflatoxin Maize
2
Policy:
Build
Regulators
Capacity
Enforce Regulatory
Policy
Policy:
Develop
regulatory
framework
Policy: Phased in regulatory enforcement mechanism
3
Enable Market
Forces to Drive
Sustainability
Market Forces
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Promote Health
Awareness to Value
Chain Actors
Health Awareness: Farmer Focus
Health Awareness: Industry
Focus
1
2
Health Awareness: End Consumer
3
Year
4
5
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Contact Details
Lagos
London
3B Baajiki Close
11 Mount Pleasant
Lekki Phase I
London, England
Lagos, Nigeria
SE27 9PU
Kola Masha
Managing Director
Do
reo
[email protected]
+234-(0)-805-5000-350
www.doreopartners.com
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