Feed the Future
This project is part of the U.S. Government's global hunger and food security initiative.

2.3.2. Lessons from the Field on Strengthening Vertical Linkages

 

  • Lead firms can sometimes drive change in value chains more quickly and effectively than outside catalysts. Mars Inc., has had a significant impact on cocoa value chain, cocoa sustainability and smallholder cocoa farmers in a number of countries. In Indonesia, Mars has been working through the SUCCESS Alliance and Prima project to improve cocoa farming techniques for thousands of smallholder cocoa farmers.[1]
  • A lead firm may have the incentives to provide embedded services to MSEs to ensure a consistent supply, higher quality and greater control over production. The USAID-funded GMED project in India worked with the new retail venture of a lead firm (ITC Ltd.) to integrate smallholder vegetable farmers into ITC’s fresh produce supply chains. ITC developed an integrated system to deliver a wide range of embedded services to vegetable farmers to ensure a consistent supply of high-quality vegetables. ITC provided agriculture extension services, improved varieties, better seedlings, soil and water testing facilities, access to market information services and access to tools and equipment for improving farmer productivity.[2]
  • Suppliers of goods and services can be an important leverage point for increasing benefits to MSEs and the entire supply chain. The Strengthening Micro, Small and Medium Enterprises in Cambodia project worked with a large number of feed and medicine suppliers in the swine value chain. The project assisted these suppliers to enhance the depth and breadth of their embedded services to swine producers. Increased embedded technical assistance regarding various aspects of pig breeding, survival and feed boosted the number and marketability of downstream producers’ animals, with a consequent increase in demand for the suppliers’ products. [3]
  • Local traders or other intermediaries can be used to improve value chain efficiency and transparency. The Chiapas coffee project in Mexico tried to assist producer cooperatives to export directly to Starbucks. When this proved unsuccessful, it introduced a local trading company, AMSA, into the value chain to provide export services to the cooperatives. Using AMSA for export functions had a positive result for the farmers, leading to increased transactional efficiency, reduced rejection risk, and increased returns. By delegating the trading functions to the trader, the cooperatives were able to focus on fewer core functions. [4]
  • Trust is a major factor in the relationship between different firms, but it takes time to develop. The Kenya BDS project developed new vertical linkages between avocado producers and five exporters. The new relationships helped increase the supply of export-quality avocados and improve access to markets for smallholder avocado producers. The project also created four new market-linkage firms that linked avocado farmers with exporters and oil processors. An impact assessment of the project revealed that as new entrants in the chain, the market-linkage firms faced challenges in establishing themselves as trustworthy service providers, constraining their future growth. [5]
  • Win-win relationships in which value chain actors engage in behaviors that lead to mutual improvement in productivity and the adoption of innovation are fundamental to long-term competitiveness. Centro de Desarrollo de Agronegocios (CDA), an agribusiness project in Honduras, convinced firms in a market relationship to behave in ways that served not only their self interest but also that of the firms with which they transacted. The project demonstrated that by improving the flow of goods, services, and information, capacity and quality of growers could be improved which, in turn, led to greater benefits to exporters, processors, and market intermediaries. By demonstrating to firms that long-term win-win relationships would lead to improvements for all, CDA was successful in developing incentives that furthered competitiveness. [6]

Notes

  1. The SUCCESS Alliance
  2. GMED India Project
  3. Strengthening Micro, Small and Medium Enterprises in Cambodia Project
  4. Mexico Sustainable Coffee
  5. Impacts of the KBDS and KHDP Projects in the Tree Fruit Value Chain in Kenya
  6. Fintrac Honduras CDA