“Symbiotic” Relationship between a Large Scale poultry Farm and smallholder poultry Farmers
Taking a closer look into one of the projects we are supporting in Nigeria, I see a good example of an inclusive business where the base of the pyramid (BOP) seemingly provide a safe net for the sustainability of a large company navigating the effect of economic slowdown. The project involves building a sustainable model for a large scale poultry farm leveraging on smallholder farmers. In the past this farm was a major player in the production, processing and supply of poultry products in Nigeria, however the slowdown in the economy and increasing complexity of the poultry product market, the company’s fortune started dwindling forcing it to adopt a backward integration strategy. The company started rearing parent stock chickens that lay fertile eggs which it hatches and sells as Day Old Chick (DOC) supply.
The community where the company is located and its environs have a high concentration small scale poultry farms as it is seen as a family business. These farmers form the base market for the DOC operations of the company. However the company faces the challenge of harnessing the market especially owing to the fact that its first batch of parent stock birds experienced a disease outbreak that wiped out the entire batch creating a stigma in the small holder farmers some of who were also casualties of the disease. The key to address the challenge was to find the sweet spot of the farmers that will attract them to patronise DOC from the company. This is what the inclusive strategy was meant to address.
In developing the strategy, an analysis of the needs of the smallholders within the community was conducted. It was observed from interacting with the farmers that poor husbandry practices, poor record keeping and inadequate financing options hindered these farmers in maximising the potentials of their poultry farms. The farmers barely achieved 50 per cent daily egg production rate. Optimal daily egg production is about 80 per cent in the environment which means they lose the potential 30 per cent. This was an important finding as it provided the basis for developing the strategy which will involve the company providing support to the farmers in ameliorating these challenges and improve their productivity.
On the other hand providing support in developing the strategy helped the company identify opportunities for commercial advantage in an inclusive business model. The company was initially skeptical on how to fund the strategy developed taking into consideration the tight financial situation it currently is in. However seeing the opportunity for good commercial returns boasted its commitment. The company sells 95 per cent of its DOC through distributors and earns a 10 per cent margin while it sells the remaining 5 per cent directly to farmers and earns a margin of 50 per cent on each DOC sold. The aim is to reduce the ration to 60 per cent through distributors and 40 per cent directly to farmers. This will give the company some form of stability to navigate the “trying times”.
Having developed the model I am eager to see how it all plays out as the company embarks on implementation which will start with a pilot involving few farmers who will be the reference points for other farmers to join the scheme.
