How to manage shocks in the supply chain involving small-holder farmers

Hans Jöhr, Head of Corporate Agriculture, Nestlé

IFPRI 2020 Conference, 16 May 2014

Key supply chain benefits of Nestlé’s sourcing strategy

With “Farmer Connect”, where we have direct contacts with producers to:

• Ensure transparency and traceability up to farmers level;

• Assure quality, safety and volume growth of raw materials;

• Mitigate price volatility exposure;

• Reduce transaction costs and serving our brands guaranteeing access to specific raw materials.

Nestlé Corporate Agriculture20 May 20142

Continuous supply chain improvement in Pakistan/India (Example 1)

Continuous supply chain improvement help to prevent shocks in the supply of raw materials.

20 May 20143 Nestlé Corporate Agriculture

Outcome:

• Milk storage and transportation time reduction decreased rejection rate by 95%;

• Production and use of quality feed/fodder and analysis of Aflatoxin at different critical control points reduced Aflatoxin levels by up to 86%.

• Train farmers in good agricultural practices related to feed and fodder production & storage

• Build capacities in supply chain analysis for raw material quality improvement involving sourcing and supply chain staff.

Total Plate Count in Moga Region (mio./ml)

Aflatoxin reduction in grain in Ghana/Nigeria(Example 2)

Since 2004, Nestle collaborates with the International Institute of Tropical Agriculture (IITA):

20 May 20144 Nestlé Corporate Agriculture

Outcome:

• Trained more than 22’000 farmers on “Good Agricultural & Storage Practices”.

• Created a market for smallholder farmers worth more than US$ 20 mio. for rural communities.

• Nestle factories buy all grains locally and farmers can consume safe staple food (grains), and thereby expect improved health conditions.

• Improve quality of local grains and reduce Aflatoxin (<4 pbb) in the grain supply chain.

• Train agricultural extension officers, suppliers, transporters, and farmers.

PEOPLE

LAND

WATER

ENERGY

CLIMATE

To ensure supply we have to smarter use natural resources by

• Not wasting

• Not polluting

• Not destroying

and a good start is eradicating the worst and promoting better

Sustainable Agricultural Practices.

Producing more food from the same area of land while reducing the environmental impacts requires what we call “Sustainable intensification of Agriculture”.

Sustainable Agriculture Initiative Nestlé (SAIN)

NO FOOD WASTE

5 Nestlé Corporate Agriculture20 May 2014

Markets with “Farmer Connect” /Direct Procurement activities • 31 milk markets • 8 coffee markets • 3 cocoa markets• 51 countries

SAIN* and “Farmer Connect” – an overview

6

• Direct sourcing staff: • Supply chain support staff: • Farmers supplying directly to Nestlé: • Farmers received training:• Collection centers: • Crop demonstration plots and validation trials: • Farmers benefitting from financial assistance: • Budget for financial assistance (CHF):

Source: CSV Reports 2012 and 2013; internal reporting documents

1’ 18012’130

690’000273’800

10’000187

44’20037.8 Mio

2012> 1’200> 11’400> 686’000> 300’000> 10’000> 900> 59’000> 50 Mio

2013

20 May 2014

* SAIN (Sustainable Agricultural Initiative Nestlé)

Nestlé Corporate Agriculture

Nestlé Corporate Agriculture20 May 20147