who could help the company and the growers meet these goals. Sabritas and the Sabritas Foundation reached out to the Mexican Foundation for Rural Development (FUNDAR)—an NGO with proven results in strong social and technical education programs and which could coordinate grower activities and participants. It also provided alliances with key nongrower organizations, such as Bayer, Tepeyac, and Monsanto, which supplied credit lines, backed up by grower guarantees, for agrochemicals, fertilizers, and corn seed, respectively. Together, the partnership initiated Educampo, a project to develop small-scale corn producers near Sabritas’s Guadalajara plant by providing technical assistance, social education programs for grower behavior change, and a commitment from Sabritas to purchase the entire crop. No pilots were necessary as the growers had been growing
corn their entire lives and PepsiCo Mexico already knew how to increase yields. The infrastructure needed to make this work included training, extension, and a secure market for the farmers’ crops, which presented a lower risk for financial institutions. PepsiCo provided the market security in the form of guaranteed contracts and FUNDAR facilitated training and extension. Through this partnership, PepsiCo scaled up the corn supply chain in Mexico through technology transfer and the sharing of practices already in use elsewhere in the country. At the same time, the project reduced freight cost by sourcing 40 percent of supply closer to the Guadalajara plant, and growers saw yields and incomes increasing more than 100 percent.
Navigating water scarcity in India’s supply chain
The second example involves the demonstration and deployment of various technologies that significantly increase yields and overall productivity in India. PepsiCo began developing a potato supply chain in India in 1994 and gradually transitioned from working with aggregators to direct contracting with growers as government policy permitted. This change in policy allowed PepsiCo to work more closely with individual farmers, resulting in more efficient grower training, new technology deployment, and, thus, scaling up of the agricultural supply chain. In India, developing a market plan and the sourcing survey were carried out in parallel. Agronomists looked for climate conditions and soils suitable for potato production. After focusing on areas that fit the crop needs, PepsiCo sought to understand current production practices and opportunities to influence these to deliver the required quality and volume that would benefit both the farmers and the company. As in Mexico, the company sought out partner institutions that could help to gain access to farmers and provide necessary inputs. It
found key partners in the Central Potato Research Institute and the National Bank of India. One limitation to scaling up sufficient potato production was
water. About 40 percent of potato farming in India is in water- scarce or drought-prone areas. Through pilots, the company confirmed that the introduction of drip irrigation, while not a new technology globally, had the potential to save significant amounts of water while increasing yields and tuber quality. To fill this infrastructure gap in technology and improvement of grower yields, PepsiCo helped to deploy drip irrigation in Maharashtra and Haryana states and currently has trials in Gujarat and West Bengal in India, as well as in some areas of China and the UK. In this case, the scale up has been both in expanding the potato supply chain in India and in transferring technology in areas where the company saw clear opportunity. As a result of this program, farmers found price stability, consistently higher returns, and training and technology transfer leading to an increase in productivity. In West Bengal alone, farmers gained access to technology, expertise, and the enabling environment that came from the company’s partnership with the Central Potato Research Institute and the International Potato Centre for processing grade seed potato, with chemical companies for agrochemicals at subsidized prices, with loans from the state bank at an 8 percent annual interest rate, with crop and weather insurance companies, and with a cold chain company leading to new cold storage for 10,000 tons of potatoes.
Conclusion
In these examples, the barometer of success is that while PepsiCo’s business in India and Mexico is expanding and has been established for the long term, the company has simultaneously mobilized the drivers—increased yields and successful technologies— for farmers to increase productivity and economic returns through successful scaling-up efforts in agriculture supply chains. These efforts entail three key lessons learned. First, it is imperative to ensure a market for the supply chains. Second, partnerships can help ensure access to a reliable supply that meets company standards and is mutually profitable to both grower and buyer. Third, overall costs are reduced when sustainability is part of the business plan from the start.
For further reading: P. Pinstrup-Andersen and D. Watson II, Food Policy for Developing Countries: The Role of Government in Global, National, and Local Food Systems (Ithaca, NY, US: Cornell University Press, 2011).
Beth Sauerhaft (
Beth.C.Sauerhaft@
pepsico.com) is director of global environmental sustainability with PepsiCo in New York. Ian Hope-Johnstone (
Ian.Hope-Johnstone@pepsico.com) is director of sustainable agriculture with PepsiCo in the United Kingdom.
www.ifpri.org
Copyright © 2012 International Food Policy Research Institute. All rights reserved. Contact
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