The International ValueThe International Value--chain of Cashewchain of Cashewand and

Alternative Paths to DevelopmentAlternative Paths to Development

Presented by:Presented by:

Hari NairHari Nair

Western India Cashew Co. Pvt. Ltd., IndiaWestern India Cashew Co. Pvt. Ltd., India

mail@wenders.commail@wenders.com

Meeting on Cashew Sub-sector Development Dakar. Feb 8-9, 2007.

Organized by:

USAID Economic Growth Program &The African Cashew Alliance

Meeting on Cashew Sub-sector Development Dakar. Feb 8-9, 2007.

Organized by:

USAID Economic Growth Program &The African Cashew Alliance

OverviewOverview

�� The Basic Value Chain of CashewThe Basic Value Chain of Cashew

�� Value addition by ConstituentsValue addition by Constituents

�� The Market for Raw CashewThe Market for Raw Cashew

�� Maximizing value in Raw CashewMaximizing value in Raw Cashew

�� Cashew processing in West AfricaCashew processing in West Africa

�� Two paths to prosperityTwo paths to prosperity

ImportWarehousingRoastingPacking

PromotionLogistics

SupermarketConsumption

ImportWarehousingRoastingPacking

PromotionLogistics

SupermarketConsumption

ImportShellingPeelingGrading

Quality ControlInert PackingShipment

ImportShellingPeelingGrading

Quality ControlInert PackingShipment

IndiaIndia USA / EUUSA / EU

RCN $650CK $3,000

RCN $650CK $3,000

The Cashew ValueThe Cashew Value--ChainChain

RCN = Raw Cashew CK = Cashew Kernels. Yield of CK is 20% Exportable (Value Equivalent)Price Sources: Africa: Trade Est.; India: Export Prices, Customs; USA: Retail Price, from IRI 2006.

RCN = Raw Cashew CK = Cashew Kernels. Yield of CK is 20% Exportable (Value Equivalent)Price Sources: Africa: Trade Est.; India: Export Prices, Customs; USA: Retail Price, from IRI 2006.

GrowingCollectionTransportDrying

Jute BaggingPort CostsShipment

GrowingCollectionTransportDrying

Jute BaggingPort CostsShipment

AfricaAfrica

RCN $1,000CK $ 4,500

RCN $1,000CK $ 4,500

RCN $2,400 CK $11,500

RCN $2,400 CK $11,500

LogisticsWarehousingReal EstateMerchandisingPromotion

Price-banding

LogisticsWarehousingReal EstateMerchandisingPromotion

Price-banding

RoastingSalting, Flavouring

PackingPromotionBrandingLogistics

Long-term prices

RoastingSalting, Flavouring

PackingPromotionBrandingLogistics

Long-term prices

ImporterImporter RoasterRoaster RetailerRetailer

CK $5,500CK $5,500

The Cashew ValueThe Cashew Value--Chain Chain –– USA USA

Price Sources: Informed Estimates of Margins of US Retailers and Food Companies. Price Sources: Informed Estimates of Margins of US Retailers and Food Companies.

CK $ 8,500CK $ 8,500 CK $11,500CK $11,500

ImportWarehousing

CreditPrice InsuranceQuality

replacement

ImportWarehousing

CreditPrice InsuranceQuality

replacement

USA / EU ValueUSA / EU Value--chainchain

�� Four to Six hands before the consumer.Four to Six hands before the consumer.

�� Costs & Margins comparable with other snacks.Costs & Margins comparable with other snacks.

�� Most costs are 3Most costs are 3rdrd party and have fixed rates.party and have fixed rates.

�� African RM Price > 25% of Retail Price.African RM Price > 25% of Retail Price.

�� Much better value for Origin than any other Much better value for Origin than any other African African agriagri product, often sold at 10 or 20 times product, often sold at 10 or 20 times the exthe ex--Africa price. Coffee, Cocoa, etc.Africa price. Coffee, Cocoa, etc.

�� ThatThat’’s why cashew cultivation is growing fast in s why cashew cultivation is growing fast in Africa.Africa.

�� Tight Chain. PriceTight Chain. Price--fluctuations reach consumer. fluctuations reach consumer.

�� Supermarkets stock thousands of alt snacks. Supermarkets stock thousands of alt snacks.

�� Promote cashew only when good value.Promote cashew only when good value.

�� Roasters can choose five other nuts, mixes of Roasters can choose five other nuts, mixes of

nuts and many other nuts and many other savourysavoury snacks.snacks.

�� Demand Fell in 2005Demand Fell in 2005--06 because cashew prices 06 because cashew prices

went up 30% in 2004went up 30% in 2004--05. 05.

�� Caused misery last year when RCN prices fell.Caused misery last year when RCN prices fell.

USA / EU ValueUSA / EU Value--chainchain

Growing Niches in EU/USAGrowing Niches in EU/USA

�� 1515--20% higher values.20% higher values.

�� Organic Organic –– certified. certified.

�� FairFair--trade trade –– certified.certified.

�� Niche products are less priceNiche products are less price--elastic.elastic.

�� Require good infrastructure, minimum size Require good infrastructure, minimum size

and strict controls.and strict controls.

Indian valueIndian value--addition to chainaddition to chain

�� Organized cluster of factories with about Organized cluster of factories with about

500,000 people in a small rural region.500,000 people in a small rural region.

�� Able to work with a 30Able to work with a 30--35% Value 35% Value AddnAddn. .

�� No other comparable intNo other comparable int’’l product processing.l product processing.

�� Partner for growing African cashew production.Partner for growing African cashew production.

�� Ready buyer for cashews round the year.Ready buyer for cashews round the year.

�� Able to manage shipment uncertainty.Able to manage shipment uncertainty.

�� Able to process varying product on proAble to process varying product on pro--rating.rating.

ValueValue--addition in Africaaddition in Africa

�� Required:Required:

�� Minimum Volume for success = 100K MT?Minimum Volume for success = 100K MT?

�� Regular grade standards.Regular grade standards.

�� Regular supplies without delays Regular supplies without delays -- logistics.logistics.

�� Responsive to major issues Responsive to major issues –– pesticidepesticide--residue, residue,

packing materials, HACCP, ISO 9000 etc.packing materials, HACCP, ISO 9000 etc.

�� By Processing at origin, it is possible to get a By Processing at origin, it is possible to get a

30% Value30% Value--addition in 5addition in 5--10 years. 10 years.

�� But new clients mean new issues, competenciesBut new clients mean new issues, competencies

Investing in the current productInvesting in the current product

�� Production has been growing phenomenally.Production has been growing phenomenally.�� Ivory Coast: 50K MT in Ivory Coast: 50K MT in ’’96 to 250K MT in 0696 to 250K MT in 06

�� Prices have still held up Prices have still held up –– in comparison.in comparison.

�� 30% value30% value--creation possible in RCN creation possible in RCN –– do it well.do it well.�� Farm practices: Yield of 2 MT/HA demonstrated.Farm practices: Yield of 2 MT/HA demonstrated.

�� Quality Quality –– OutOut--turns, Size of nuts, Defectives %.turns, Size of nuts, Defectives %.

�� Drying of RCN Drying of RCN –– Success of Tanzania.Success of Tanzania.

�� Government Policies Government Policies –– Promote the trade. Promote the trade.

�� Logistics Infrastructure Logistics Infrastructure –– Priority for development.Priority for development.

�� Avoid high & multiple taxation. Nurture the sector.Avoid high & multiple taxation. Nurture the sector.

Limited Resources, a lot to doLimited Resources, a lot to do

SituationSituation

�� Current cropCurrent crop--yield is being wasted.yield is being wasted.

�� Infrastructure is a major constraint.Infrastructure is a major constraint.

�� Too much transactional costs.Too much transactional costs.

�� RCN yields and crop can be grown.RCN yields and crop can be grown.

�� Origin processing can increase incomes.Origin processing can increase incomes.

Where and how do we start?Where and how do we start?

Worthwhile PrinciplesWorthwhile Principles

�� GoalGoal--setting: The lower hanging fruit is setting: The lower hanging fruit is

easier to reach.easier to reach.

�� Sequential Development: Excellence at Sequential Development: Excellence at

each sequential level makes the next step each sequential level makes the next step

easier. Fly before going supersonic.easier. Fly before going supersonic.

�� Partnership: The customer who you know Partnership: The customer who you know

and who knows you or the stranger.and who knows you or the stranger.

A Logical SequenceA Logical Sequence

1.1. Reduce waste Reduce waste –– Dry the product.Dry the product.

2.2. Make the turns quicker.Make the turns quicker.�� Infrastructure and FinanceInfrastructure and Finance

3.3. Improve the Product Improve the Product -- min 30% outmin 30% out--turnturn

4.4. Grow the crop.Grow the crop.�� Increase yields Increase yields –– from 300kg / HA to 1 MTfrom 300kg / HA to 1 MT

�� Plant more.Plant more.

5.5. Add value at Origin Add value at Origin –– partner customers.partner customers.

Partnerships for DevelopmentPartnerships for Development

�� Partnerships for increasing value in Africa.Partnerships for increasing value in Africa.

�� Government and PrivateGovernment and Private

�� Farming Farming –– better treebetter tree--yields, outyields, out--turns, size of nuts.turns, size of nuts.

�� ICAR in India, FAO, etc.ICAR in India, FAO, etc.

�� Infrastructure Infrastructure –– Logistics. UpLogistics. Up--country and Ports.country and Ports.

�� Procurement Procurement –– Banking, MicroBanking, Micro--credit, Certifications.credit, Certifications.

�� Processing Processing –– Rural factories, Machinery, Training.Rural factories, Machinery, Training.

�� Promotion Promotion –– Contribution from African Aid Agencies.Contribution from African Aid Agencies.

WishWish--list of Indian buyerslist of Indian buyers

�� Good drying of Raw Cashews can increase Good drying of Raw Cashews can increase value by 10value by 10--20%.20%.�� Farmer education Farmer education –– do it early.do it early.

�� Farmer credit Farmer credit –– holding capacity.holding capacity.

�� UpUp--country collection centers.country collection centers.

�� Trader / collector training. Yields and Trader / collector training. Yields and DryageDryage..

�� Commercial Commercial –– wet is heavierwet is heavier

�� Drying Facilities at port. Last control point.Drying Facilities at port. Last control point.

WishWish--list of Indian buyerslist of Indian buyers

�� No LotNo Lot--mixing. Single origin = better yield mixing. Single origin = better yield

�� Prompt transport and shipment.Prompt transport and shipment.�� Inland transport Inland transport –– trucks.trucks.

�� Port infrastructure Port infrastructure –– costs, deterioration.costs, deterioration.

�� Port storage, drying, inspection facilities.Port storage, drying, inspection facilities.

�� Container availability. Container availability.

�� Enough DryEnough Dry--bags in containers.bags in containers.

�� Weekly sailings and shorter transit.Weekly sailings and shorter transit.

WishWish--list of Indian buyerslist of Indian buyers

�� Government Policies Government Policies –– nurture the business.nurture the business.

�� Good crop forecasts Good crop forecasts –– aids Marketing plans.aids Marketing plans.

�� Crop Promotion Crop Promotion –– Low exportLow export--taxes.taxes.

�� Infrastructure Infrastructure –– reduce systemic costs.reduce systemic costs.

�� More exporters More exporters –– better farmer prices.better farmer prices.

�� Security.Security.

�� Contract PerformanceContract Performance

�� Both ways. Too many defaults and problems.Both ways. Too many defaults and problems.

�� Dispute settlement mechanisms. BiDispute settlement mechanisms. Bi--lateral.lateral.

TakeawaysTakeaways

�� Very tight valueVery tight value--chain.chain.�� Higher value to Origin than other products.Higher value to Origin than other products.

�� Higher volatility yearHigher volatility year--onon--year.year.

�� Better coBetter co--ordination and coordination and co--operation operation reqdreqd..

�� Value addition through Value addition through �� Increasing value of RCN or thru processing?Increasing value of RCN or thru processing?

�� Limited resources. CanLimited resources. Can’’t do both together.t do both together.

�� Sequenced Development.Sequenced Development.

Thank YouThank You

Hari NairHari Nair

Western India Cashew Company Pvt. Ltd., India

www.wenders.com