SCALING UP IN AGRICULTURE, RURAL DEVELOPMENT, AND NUTRITION


Scaling Up Agricultural Supply Chains in the Private Sector BETH SAUERHAFT AND IAN HOPE-JOHNSTONE


Focus 19 • brIeF 8 • June 2012 P


epsiCo is a global business operating in more than 200 countries and territories and rooted in creating and delivering


iconic, great tasting foods and beverages. A critical aspect of its operations is the ability to take successes in one part of the business and scale them elsewhere. This is increasingly common in agriculture supply chains as participants replicate and adapt to ensure a reliable supply of raw materials that meet cost and quality standards. An important focus of the company’s scaling practices is that sustainability issues be factored in at the start of supply chain development. The ability to scale makes an especially significant impact when


the company expands to new markets and creates new products that demand the development of a sustainable agricultural supply chain to provide raw material ingredients. Emerging markets present great opportunities, but they also present significant challenges. The latter includes an insufficient number of farmers growing targeted crops, gaps in yield and crop reliability, minimal access to capital for purchasing inputs or technology, inability to meet quality criteria or properly store crops, and inadequate infrastructure to transport materials and finished goods through the value chain to market. The ability to scale up, replicate, and adapt business models is crucial to success. Company agronomists, procurement specialists, and business


development associates working in the field develop and execute business models that expand agricultural supply chains to meet market demands. Associates often contract directly with the growers, training them on agronomic best practices, quality criteria, and storage practices that will help increase yields, productivity, and economic returns. The PepsiCo model for scaling up agricultural supply chains,


technology transfer, and agronomic education is used in similar fashion across countries and regions. In each case, the process is adapted to fit local culture, agricultural maturity, politics, and market demands. Following a description of the general scaling-up model, this brief examines two examples.


Seven steps for scaling up The model has seven steps:


1. Develop a plan for new market entry or demand for new crop procurement. The market plan includes clear direction on the commodity needed, the delivery schedule, product specifications, and the cost and quality needed for product manufacture in order to make the business model work for that market.


2. Conduct sourcing survey(s). The agriculture procurement team identifies local sourcing opportunities for existing crops as well as growing parameters, such as climate zone and soil type, needed for crop expansion


3. Identify key players in government agencies, research groups, or consultancy groups. Partnerships with these players help identify current available agricultural capacity and existing local practices that can be leveraged across the grower base. It can deliver close grower relationships, familiarity with target crop(s), relevant research programs, and access to grower capital.


4. Initiate pilot trials. Over two to three growing cycles, agronomists determine the capability of crops to comply with business objectives—answering such questions as yield, quality, cost, and reliability of supply. Global knowledge and experience are brought to bear in the pilots including the use or development of new varieties and agronomic practices.


5. Assess existing infrastructure and needs for the business venture. This includes identification of new capital investment needed for storage, mechanization, or field equipment that will justify support of new improved practices. Agronomists identify new seed programs or varietal replacements necessary to increase yields, better fit local growing conditions, and meet product needs.


6. Continually improve. Agronomists focus on increasing grower yields; productivity and other learnings from pilots and existing practices are shared with growers to develop or refine their expertise. The company develops local resources and invests in research and development that will support the local crop production program.


7. Scale up. The model expands to work with more growers and as the company cycles back with continuous improvement it includes more growers. PepsiCo identifies new supply opportunities and brings these growers into its supply chain, sharing technology and agronomic training so they too can increase yields, productivity, and economic returns while providing the raw material supply needed.


Two examples of successful scaling up


Producing local corn supply in Mexico Sabritas is PepsiCo’s snack business in Mexico. It wanted a local corn supply for its product line. This represented geographic movement of an existing supply through the development of small-scale subsistence farmers. Sabritas already had a market plan. It knew the commodity it needed as well as the timing and specifications for that crop. It had conducted the sourcing survey and understood the corn grower landscape and potential yields on existing corn lands in close proximity to the company plant needing the supply. With this information, agronomists understood the opportunities for reaching yield goals and looked for organizations to partner with,


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