Identifying Market Opportunities

for Rural Smallholder Producers

Carlos Ostertag, Mark Lundy, María Verónica Gottret, Rupert Best, and Shaun Ferris Identifying Market Opportunities

for Rural Smallholder Producers

Carlos Ostertag, Mark Lundy, María Verónica Gottret, Rupert Best, and Shaun Ferris i

Copyright © 2007 Centro Internacional de Agricultura Tropical Reprint edition published by Catholic Relief Services, Baltimore, 2008.

ISBN 0-945356-42-0

First edition published 2007 by

Centro Internacional de Agricultura Tropical

(International Centre for Tropical Agriculture)

Cali, Colombia

ISBN 978-958-694-090-0

For information, address

Catholic Relief Services

228 W. Lexington St.

Baltimore MD 20201

USA

www.crs.org

AGROVOC descriptors in English:

1. Markets. 2. Farmers. 3. Small farms. 4. Small enterprises. 5. Rural development.

6. Marketing. 7. Value added. 8. Market research. 9. Marketing techniques. 10. Profitability.

Local descriptors in English:

1. Agroindustrial development. 2. Productive chains.

AGROVOC descriptors in Spanish:

1. Mercados. 2. Agricultores. 3. Explotación en pequeña escala. 4. Empresas pequeñas.

5. Desarrollo rural. 6. Mercadeo. 7. Valor añadido. 8. Investigación de mercados.

9. Técnicas de mercadeo. 10. Rentabilidad.

Local descriptors in Spanish:

1. Desarrollo agroindustrial. 2. Cadena productiva.

I. Lundy, Mark. II. Gottret, María Verónica. III. Best, Rupert. IV. Ferris, Shaun. V. Tít.

VI. Centro Internacional de Agricultura Tropical. VII. Ser.

AGRIS subject category: E20 Organization, administration and management of agricultural enterprises or farms / Organización, administración y manejo de empresas agrícolas o fincas LC classification: HD 9014 .O7

Republication of this report is made possible by the generous support of the American People through the United States Agency for International Development (USAID) Bureau for Democracy, Conflict, and Humanitarian Assistance’s Office of Food for Peace under the terms of Catholic Relief Services’ Institutional Capacity Building Grant Award Number AFP-A-00-03-00015-00. The contents do not necessarily reflect the views of USAID or the United States Government.

ii

Contents

Page

Preface

vii

Acknowledgments

viii

Introduction and Background to the Guide

1

Purpose

1

The Guide’s General Structure

2

How to Use this Guide

4

Section 1. Marketing Concepts and Forming a Market Research Team 5

1.1. Marketing Basics—What is Marketing?

6

1.2. Understanding the Context of the Smallholder Rural Producer 9

1.3. Meeting the Marketing Challenge

12

1.4. The Market Chain

13

1.5. Value Addition

14

1.6. Marketing Strategies Based on “Risk Assessment”

15

1.7. Forming the Market Research Team

16

Exercise 1.1. Mapping an Extended Product Chain

17

Exercise 1.2. Visioning a Value-Added or Processed Product 19

Exercise 1.3. Defining Market Growth Strategies for a Project Area 20

Section 2. Designing and Conducting a Rapid Market Survey 22

2.1. Defining Market Research Objectives

23

2.2. Defining Market Research Strategies

25

2.3. Developing a Market Research Plan

28

2.4. Collecting Market Information

37

2.5. Analyzing Data and Preparing Product Option Report 41

Exercise 2.1. Determining Research Tool Requirements

44

Exercise 2.2. Questionnaire to Study Product Purchasing Conditions 47

Practice 2.1. Observing Product Categories in a Supermarket 50

Section 3. Assessing and Selecting Market Options

52

3.1. Establishing Appropriate Evaluation Criteria

53

3.2. Characterizing Market Options Using Summary Matrices 55

3.3. Defining the Second Market Option Portfolio

65

3.4. Final Evaluation of Market Options by the Rural Community 66

3.5. Defining the Final Market Option Portfolio

71

3.6. Preparing the Final Report

72

3.7. Preparing for Enterprise Development

72

3.8. Conclusions

73

Exercise 3.1. Agronomic Characterization of a Crop

74

Exercise 3.2. Marketing Characterization of a Product 75

Exercise 3.3. Agroindustrial Characterization for a Processed Product 77

Exercise 3.4. Designing a Product Card

79

Exercise 3.5. Preparing a Timetable for Final Evaluation with a Rural Community 82

Practice 3.1. Survey of Decision Criteria for Crop Selection 85

iii

Identifying Market Opportunities for Rural Smallholder Producers Page

Appendices

1. Format for Preparing a Production System for a Crop 89

2. Financial Profitability Model for a Product: Example of Lulo 93

3. Format for Ranking Market Options

97

Glossary

99

Bibliography

109

iv

Contents

Page

List of Figures

1. Selection of market options based on three levels of selection/discard 4

2. The market chain

13

3. Market links extend beyond the intervention area

24

4. Planning steps for a rapid market survey

28

5. Profitability analysis: “gross margin” for beans in Uganda 60

6. Graphic interpretation of the financial rate of return 63

7. Format of a product card with information on a market option 67

8. Product card for uchuva (cape gooseberry)

68

9. Market facilitator, discussing product options with farmers 68

List of Tables

1. Marketing variables or the marketing mix

8

2. Product-market growth matrix

15

3. Sources of secondary information

29

4. Initial survey questions to establish contact information 31

5. Key questions for each research strategy

32

6. Quality aspects of grains, fruits and vegetables

32

7. Matrix format for a questionnaire on purchase conditions 33

8. Market survey checklist

35

9. Planning matrix to determine research tools

36

10. Screening procedure for the initial set of market options 43

11. Suggested structure for the rapid market survey’s final report 43

12. Agronomic characterization matrix

56

13. Livestock characterization matrix

57

14. Agroindustrial characterization matrix

57

15. Marketing characterization matrix

58

16. Profitability gross margin analysis for cassava processing in Ghana 61

17. Financial characterization matrix

61

18. List of activities for planning and conducting an evaluation meeting 69

19. Checklist for conducting an evaluation meeting

70

20. Example of a table used to present results of an evaluation meeting 71

List of Boxes

1. Questionnaire for a supermarket produce manager

34

v

Identifying Market Opportunities for Rural Smallholder Producers About the Authors

Carlos Felipe Ostertag

Corresponding author, based in CIAT headquarters, Cali, Colombia. Dual Colombian/United States of America National.

Senior Marketing and Business Administration Officer, Rural Agroenterprise Development project.

E-mail: c.ostertag@cgiar.org

Mark Lundy

Based in CIAT headquarters, Cali, Colombia. United States of America National.

Senior Research Fellow, Rural Agroenterprise Development project.

E-mail: m.lundy@cgiar.org

María Verónica Gottret

Based in CIAT headquarters, Cali, Colombia. Bolivian National.

Senior Research Fellow, Rural Agroenterprise Development project.

E-mail: m.gottret@cgiar.org

Rupert Best

Based in FAO offices, Rome, Italy. British National.

Senior Technical Advisor for the Global Forum for Agricultural Research.

E-mail: rupert.best@fao.org

Shaun Ferris

Based in CIAT headquarters, Cali, Colombia. Dual British/Australian National.

CIAT Project Manager, Rural Agroenterprise Development project.

E-mail: s.ferris@cgiar.org

vi

Preface

This Marketing Guide for Smallholder

capacity to innovate and ultimately improve

Rural Producers was first published in

their livelihood options. To date, the titles in the

Spanish in 1999 as a training material for

CIAT agroenterprise “good practice guide” series

use in Latin America. The manual was

for agroenterprise development include:

translated into English later that year and has

subsequently been used as a training material

· Strategy Paper: A Participatory and Area-

for development projects in both Africa and Asia.

based Approach to Rural Agroenterprise

This new English version has been extensively

· Development.

A Guide to Developing Partnerships, Area-

updated based on feedback obtained from

based Resource Assessment and Planning

colleagues and workshop participants. This

edition is the third title within a series of best

· Together.

Identifying Market Opportunities for Rural

“good practice guides” describing the

components of “Participatory and Area-based

· Smallholder Producers.

Strategies to Improve the Competitiveness of

Approach to Rural Agroenterprise Development”.

The series provides a methodological tool kit

· Market Chains for Smallholder Producers.

Evaluating and Strengthening Rural Business

developed by CIAT’s Rural Agroenterprise

Development Project.

· Development Services.

A Market Facilitator’s Guide to Participtory

The aim of this set of methods is to meet the

· Agroenterprise Development.

Collective Marketing for Smallholder

entrepreneurial development needs of service

providers1, i.e., those institutions and agencies

· Producers.

A Guide to Rapid Market Appraisals to

that support the development of rural

Support Smallholder Agroenterprise

communities. The methods can be used for

capturing and systematizing market information

· Development.

A Guide to Policy Analysis for Smallholder

leading to the development of new

Agroenterprise Development and Advocacy.

agroenterprises and effective local business

services.

This guide combines market research, product

concept evaluation and business analysis

The goal of this work is to enable service

techniques, within a practical, innovative

providers to empower rural communities with

approach for identifying market opportunities for

skills to engage more effectively in the

rural agroenterprise development projects within

marketplace so as to increase their income, their

a defined area2 or territory. The participatory

methods enable rural producers to make key

decisions in market analysis and evaluation.

1.

The term “service providers” refers to public agencies for research, extension and local administration and

private sector actors and agencies involved in inputs, 2. Area can also be interpreted as a territory and in the extension, business planning, finance, market

French and Spanish versions of this text, where the

facilitation, storage, etc.

term territory or territoire is used.

vii

Identifying Market Opportunities for Rural Smallholder Producers Acknowledgments

The lead author, Carlos F. Ostertag wishes support during the development of the to express particular thanks to the

methodologies presented in this guide and

following people for their specific inputs

during its production. I would also like to thank

and support in preparing this guide:

the many colleagues and trainees in Latin

Joyotee Smith, Teresa Gracia, Carlos A. Patiño,

America, Asia and Africa who have provided

staff members of CIPASLA, William Edwardson,

questions and comments for improving this

Jacqueline Ashby and Rupert Best for their

guide.

viii

Introduction and Background to the Guide

Introduction and Background to the Guide

This guide is the third in a series designed The main output of the work from this guide is a to support agencies implementing a

“short list” of prioritized demand-based market

participatory approach to rural

opportunities. This list of products will be

agroenterprise development. These guides are

reviewed by farmer groups to select a product (or

designed for use by service providers in

products) for immediate investment in the case of

assisting farmer groups and local entrepreneurs

existing products, or for more detailed market

within a community or “area” to develop skills

analysis leading towards the development of new

in agroenterprise development.

agroenterprise opportunities.

The aim of this guide is to provide a simple and

For those actors who are following the full CIAT

systematic participatory method for gathering

process, this guide is the second step in the

market information to identify products and

process. At this point you will have completed the

services for agroenterprise development. This

following tasks:

approach enables local producers to undertake

market studies and identify investment options

From the work in Good Practice Guide 2 you

based on their local knowledge and on market

will have:

demand, rather than relying on pre-selected

1. Selected an area.

products that have been decided by external

2. Undertaken a biophysical and

experts.

socioeconomic analysis of your area.

3. Developed a vision for your community and

The starting point for this guide is an analysis

defined the rules of engagement.

of the client group and the establishment of a

4. Identified partners who will constitute the

research team to identify new market

agroenterprise working group.

opportunities. This process enables service

5. Identified farmer organizations interested in

providers and farmers to take a fresh look at

adopting an agroenterprise approach.

their existing production portfolio and also to

explore options for diversification based on the

Purpose

agronomic, marketing and financial merits of

This guide aims to promote a greater market

selected products.

orientation when working with rural

smallholders. The specific purpose of this

1

Identifying Market Opportunities for Rural Smallholder Producers approach is to enable service providers and

reference to collective marketing within a

farmer groups to evaluate their marketing

group.

opportunities based on market DEMAND. This

(ii) Evaluate market options for new products

method aims to promote diversification and find

to encourage diversification, with an

ways to add value to agricultural products.

emphasis on higher value goods.

(iii) Evaluate the market options for value

This method will also help in the identification

added products, so that service providers

of better market opportunities for existing

can assist farmers in shifting from raw to

products but with emphasis on finding ways of

processed goods.

increasing income through collective or group

marketing, and by evaluating current practice

In each case, critical marketing information is

and finding ways to upgrade methods for

gathered on products and buyers to gain a

production, marketing and business relations

better understanding of product supply and

in order to be more competitive in the

demand characteristics. It is important to

marketplace.

clarify from the beginning that the purpose of

this market opportunity identification method

The guide proposes a participatory procedure

is not to replace existing smallholder crops,

that involves smallholder rural producer from

products or production systems, especially

the beginning of the research process to the

those that are critical for food security, but

final selection of products for enterprise

rather to offer options for increasing farmer

development. Service providers are also

income through increasing market

encouraged to use this approach to support the

competitiveness, diversifying products or

needs of more vulnerable groups within their

identifying more lucrative markets. This is

target communities such as women’s groups,

important given the relatively small risk-

the youth and elderly, who may require special

taking capacity of most smallholder rural

consideration in making suitable product

producers.

selections.

The Guide’s General Structure

Within the context of rural agroenterprise

The guide is divided into a series of stepwise

development, the aim of a market opportunity

sections which can be used by the service

identification process is to:

provider to facilitate market linkage for

smallholder producers.

(i) Evaluate market demand and buying

conditions for existing products with

Understand marketing

concepts

Designing and conducting a

First market option

Design process for filtering

rapid market survey

portfolio (long list)

products

Assessing and selecting

Discard obviously unsuitable

market options

Defining selection criteria

products

Characterizing market

Prioritize 3-5 market option

options

portfolio (short list)

Evaluation of market options

Final market option

with the rural community

portfolio

2

Introduction and Background to the Guide

Section 1. Marketing Concepts and

strategy” may require a focus on specific product

Forming a Market Research Team

group(s), such as livestock, non timber forest

The guide starts by explaining key concepts that

products, agroindustrial products, or handicraft

are useful when designing a market opportunity

products.

identification (MOI) process for smallholder rural

producers in a given area. These concepts

The rapid market survey will generate a “long list”

include the marketing function, market research,

of potential products with market prospects.

the social and economic context of smallholder

However, this list is likely to be too long for more

rural producers, basics of the production chain3

detailed studies. Therefore a first level of discard

concept, basics of rural agroindustry, Ansoffś

is applied to this first product portfolio.

product-market growth matrix, and key macro

food consumption trends. The guide also

Filter 1. Obvious discards

explains how research teams can be organized to

The first level of discard removes products that

support the participation of smallholder rural

are not suitable for further consideration. In this

producers.

case, the research team will review the list of

products that have been included in the product

Section 2. Designing and Executing a

portfolio, prior to any further systemization or

collection of information, to eliminate products

Rapid Market Survey

that clearly cannot be grown in the area for

Survey objectives and strategies are initially

agronomic or environmental reasons. This will

defined to evaluate preferred scales of market

include products that are unsuitable for

analysis including local, national, and even

smallholder producers, that require too high a

regional/international markets. The guide

level of investment, sophisticated production

explains how to design research instruments and

methods, or are culturally or socially

how to develop a questionnaire or checklist.

unacceptable.

Potential market options are discovered through

gathering secondary and primary data from a

Section 3. Assessing and Selecting

range of market sources. This work will develop a

Market Options

“long list” of market options.

This section deals with establishing a series of

The options in this list will be based on market

evaluation criteria by which the “long list” of

demand and the type of “research strategy”4 that

market options identified in the previous phase,

was selected by the market research team in

can be distilled down to an objectively verified

consultation with farmer group(s) prior to

“short list” that will be reviewed by the farmer

undertaking the rapid market study. Depending

group. The discard process is based on feasibility,

on the suggestions of the local community and

business attractiveness, viability on small farms,

previous resource assessment, a “research

risk and contribution to production sustainability.

The three levels of product filtering are listed

below and schematically represented in Figure 1.

3.

The terms production chain, market chain, supply

chain are used synonymously, to refer to the

business links that allow the flow of goods, services Filter 2. Market Option Characterization

and finances between producers, intermediaries

The second level of discard is based on an

and consumers. The market chain is differentiated

objective analysis of agronomic, agroindustrial,

from the value chain in the sense that business

livestock, commercial and economic

transactions and investments in production chains

characterization. Summary tables/matrixes are

are mainly conducted on an informal basis,

whereas value chain approaches focus on

used to systematize information based on

strengthening business relationships and product

economic characteristics, marketing requirements

quality standards between market actors.

and profitability.

4.

“Research Strategy” is a term used in this text to

define a product or group of products, such as

Filter 3. Final Evaluation of Market Options with the cereals, pulses, temperate fruits, livestock, that are identified by farmers as products which they would

Rural Community

like to learn more about in terms of their market

The final selection of products is based on

potential. Generally a “product group” is based on

producer preferences. This process can be done

what farmers are already producing or are interested

for mixed groups or through a series of meetings

to invest in due to a local comparative or competitive with producers being associated according to their

advantage in the selected project area. The “product

group” is used so that market studies ensure data

wealth ranking so that investment options can be

on specific products is collected as part of the

made according to the levels of risk that

market survey.

producers want to take on.

3

Identifying Market Opportunities for Rural Smallholder Producers Filter 1: Obvious discard

Filter 2: Selection matrices

Filter 3: Farmer decisions

Criterion: Can be grown

Criterion: Production,

Criterion: Farmers have

in area, investment limit

marketing, financial/

casting vote on

profitability

final selection

Final

selection of

Initial long

market

list of

opportunities

products

by farmers

Filter 3: Final selection

Selection

Filter 1: Obvious discard

Filter 2: Selection matrices

3–5 down to 1–2 for

rates

Many options: 10–15

10–15 down to 3–5

investment and/or market

chain analysis

Figure 1. Selection of market options based on three levels of selection/discard.

SOURCE: Adapted from Abele et al. (2004).

How to Use this Guide

while the third section provides a two-stage

This guide is for rural development practitioners

screening procedure to select an appropriate

(professionals and technicians) in the public and

market product for smallholder producers. The

private sectors, who are dedicated to research,

execution of the complete methodology will result

development or training. The guide can be used

in a solid data that can be used for sound

to facilitate field work or as a training material.

business decision making that will reduce risk.

The guide contains exercises, practices and a

glossary to facilitate training processes. This

The full process can take several weeks to

guide could also be used by high school, college

implement, analyze and formulate a report. In the

and university professors teaching subjects

case of timing or funding constraints, the process

related to agricultural sciences, rural

can be reduced and some parts such as the

development, agroindustry, and participatory

Rapid Market Survey, can be executed with a

research.

lesser degree of participation and include fewer

market visits. Although a higher degree of

Use of content and level of

participation by farmers will either increase costs

participation

or take more time, we believe that this is

This guide is designed for use in its entirety,

warranted as the local actors will gain new

because it describes a logical process. The first

marketing skills through a “learning by doing”

section provides important concepts that can

interaction. The service provider should discuss

enrich the subsequent research and analytical

and negotiate this practical element with the

process. The second section, the Rapid Market

client groups so that information is gathered

Survey, generates the first product portfolio,

within an agreed resource allocation.

4

Marketing Concepts and Forming a Market Research Team SECTION 1

Marketing Concepts and Forming a Market

Research Team

General Objective

Orienting Questions

To gain a better understanding of the key

1. Why are most smallholders in developing

background concepts to marketing and how to

countries finding it difficult to compete in

apply this knowledge in planning a market

the marketplace?

opportunity identification study.

2. Describe a possible route travelled by a

banana from a small farm to the final

Specific Objectives

consumer.

After completing this section of the guide, the

3. Make a list of five products that can be

reader or trainee will be able to:

derived from potatoes, and for each product

·

describe the type of processing that would be

Understand marketing basics and the

required.

· marketing mix.

4. What modifications can you think of, related

Recognize the social and economic context of

to your personal or family’s food

· smallholder rural producers.

consumption trends in the last 10 years?

Be aware of the major trends in food

5. Describe possible growth strategies for a

· consumption.

project area in terms of products offered and

· Grasp the basics of a market chain.

markets targeted.

Understand how to assess risk, related to

6. Why do you think it is important to include

· products and market growth strategies.

representatives of smallholder rural

Establish a research team to plan and

producers in the team that will plan and

execute the market study.

execute a market opportunity identification

process for them?

5

Identifying Market Opportunities for Rural Smallholder Producers 1.1. Marketing Basics—What is Marketing?

This section of the guide presents theory and

interaction. As markets have become a vital

concepts useful for members of a research

element of our lives, attitudes towards

team, when planning and executing a market

marketing have changed and business

opportunity identification study. The

management has become a more central part of

information is especially pertinent for service

the supply of goods and services. The emphasis

providers who lack a solid business and

of marketing has also changed dramatically

marketing background. The following theory

over the past 50 years taking on new priorities

and concepts aim to enrich the research

to meet changing consumer needs. Whereas

process. If you already have a good

business’s in the 1950-60’s focused on

understanding of marketing, skip this

production, changes in consumer attitudes and

section and go to Section 2.

purchasing patterns, meant that greater

emphasis was required in the area of product

In today’s ever more commercial world, success

quality to retain customers. Sales teams during

in the marketplace is based upon the ability of

the 1970s-80’s adapted from the “hard sell” and

individual producers and companies to offer

reaching new customers, to placing more

new and improved products at ever more

attention on understand how buyers needs,

competitive prices. They should also develop

attitudes and trends affect buying patterns,

and maintain an expanding base of long term

with new products being developed to suit

customers. Within this environment the

consumer trends. Most recently greater

marketing function is a powerful business tool.

attention has been placed on social marketing

It is used to identify, quantify and meet the

in order to retain customers, based on their

needs, wants and desires of people, people like

desire for products that are environmentally

you.

sustainable, have greater food safety and are

not based on exploitative working conditions.

Marketing is often described as the “delivery of

customer satisfaction at a profit”, however,

This rapid evolution in marketing has been

there are many elements to the marketing

driven by the need to remain competitive in the

function. As consumers have become more

marketplace, to attract new customers with the

discerning, marketing has also become a more

promise of better value and retain existing

sophisticated area of research and social

customers, by delivering long term satisfaction.

6

Marketing Concepts and Forming a Market Research Team The role of marketing is therefore not only to

some consumers will seek a simple pair of

capture “our hearts and minds” today, but also

unbranded shoes that will provide the

to identify what we will be needed tomorrow.

necessary protection for playing a sport at low

cost. Whereas at the other end of the spectrum,

Due to the increasing exposure to marketing,

other consumers will select the latest “Nike”

and its concerted effort to sell things to people,

sports shoes, endorsed by a world renowned

there are differing views of marketing ranging

sports hero; these shoes apparently offer more

from “an essential component of sound

than the regular shoe, they will provide ultimate

business practice” to “a fraudulent activity used

levels of protection, comfort, luxury and equally

to persuade people to buy goods they don’t need

important they offer the less tangible but highly

at inflated prices”. Like it or not, marketing is

valued added aspects of style, glamor and peer

an ever more pervasive element of our daily

status. Therefore marketing is also based on the

lives. According to Kotler and Armstrong (2001),

idea of matching a range of products at different

marketing is defined as “a social and

price-value levels with consumer needs, desires

managerial process by which individuals and

and their ability to pay.

groups obtain what they need and want through

creating and exchanging products and value

Given this somewhat globalized, view of

with others”. The process providing goods and

marketing, how does this relate to smallholder

services that are essential to function or simply

farmers located in remote rural settings?

improve people’s well-being.

Perhaps at first glance, not much, however,

when we analyze the situation of smallholder

There are two distinct categories of need that

farmers, we recognize that they have all the

marketing aims to service. The first area

same elements of a commercial company.

includes basic physical requirements, such as

Farmers have valuable assets in their land and

food, clothing, shelter and safety; social needs,

location, they have knowledge about what is

related to belonging and affection; and

grown or produced in their locality and they

individual needs for knowledge and self

have access to labor and natural resources. As

expression. The second area includes wants or

with any other business, they produce a range

desires, which go beyond immediate

of goods and services for others in the

requirements for basic human operations and

community and they know what the community

social interactions. Desires are a seemingly

likes to buy, in general, and have an idea of

unlimited set of ideas, products, services that

what they can afford. Therefore farmers make

people seek in order to satisfy perceived need.

decisions on what they produce to meet local

The main limitations to satisfying perceived

conditions, using the resources that are

needs are the resources to pay for them.

available to them.

Whichever category, the consequences are

similar in the marketplace, in that, when wants

Although farmers may face difficulties in regard

are supported by the ability to pay, these wants

to infrastructure, social organization, market

can be translated into demands.

access and income levels, all farmers sell a

proportion of their goods and services. Therefore

If we consider products and services as benefits,

all farmers have a sales and marketing

consumers will choose products and services

challenge and could benefit from increasing

that provide them with the best value for

their knowledge about marketing functions and

money. As value is based on an individual’s

how to engage in the marketplace.

estimation of satisfaction, there are many

degrees of fulfilment when making a purchase,

This guide aims to assist service providers to

and decisions are based on a multitude of

gain a better understanding of the marketing

cultural, ethical, moral, climatic and wealth

options and relationships that a selected

related dimensions. To address the value

farmer/client group can develop in order to sell

principle in an exchange, producers and

their goods and service more profitably and on a

marketing agents have developed a mesmerizing

more sustainable basis. Given this introduction,

range of quality, price and emotionally loaded

the first rule of marketing for smallholder

options. Even in the case of buying what may

farmers is to:

seem to be an innocuous pair of sports shoes;

consumers face an incredible range of options.

Produce what you can sell, rather than trying Given the choice, at one end of the spectrum

to sell what you have produced.

7

Identifying Market Opportunities for Rural Smallholder Producers Whilst, this appears to be obvious advice, to

The marketing function is one of the main

achieve this goal in the agricultural context

business activities of an enterprise, it can be

means that farmers and service providers need

defined as “a business activity that focuses on

to know what consumers are demanding in the

identifying and satisfying market needs, through a marketplace and how the laws of demand and

profitable and socially responsible production and supply affect prices, price trends, volumes being

supply of products in the form of goods and/or

sold, and what is required to meet these market

services” (Kotler and Armstrong, 2001). This

opportunities.

broad definition encompasses market research,

new product development and the planning and

The marketplace generally operates on the laws

execution of marketing strategies.

of demand and supply with the basic principle

that as supply increases, prices fall and vice-

Marketing plans or strategies often refer to the

versa. To make informed decisions, clients

marketing variables or the marketing mix

(farmers, processors and traders) need to know

(Table 1). In many marketing reference books, the

how their production fits within this law in the

marketing plan is based on what is commonly

marketplace.

known as the four, or more recently the five, Ps:

product, price, place, promotion, policy.

We must clarify our terminology with the

following definitions:

Marketing variables are aspects that are under the

·

control of the enterprise and managed to obtain

Supply: the quantity of products that

the desired response from the marketplace. The

· producers can offer for sale.

marketing plan is used by the enterprise team to

Demand: the quantity of products that the

design and implement a marketing strategy, and

consumers can buy.

this aspect is generally the key component to any

business plan.

Although the law of supply and demand

appears to be simple, in reality the dynamics of

The methodology in this guide includes

the marketplace are extremely complicated.

components of market research, business and

This section aims to provide some insight into

market analysis, and financial profitability models.

the many factors that affect conditions within

The rapid market survey is an example of market

the market. However, before we consider these

research. Readers who are interested in more

factors, let us further define what marketing

detailed information with regard to the marketing

encompasses.

topic should consult marketing textbooks; those

by Kotler and Armstrong are highly recommended.

Table 1. Marketing variables or the marketing mix.

Marketing

Definition

Aspects of this variable include

variables

Product

Everything that we sell. That which can satisfy a

Variety, quality, design, characteristics, brand,

need or a want; includes material objects, services,

packaging, sizes, services, guarantees

persons, places, organizations and ideas

Price

The monetary value that a seller seeks from a

Price lists, discounts, price margins, credit

buyer

conditions

Place

Distribution and marketing channels A series of

Market sales points, spatial coverage of market

independent organizations involved in the process of

sales points, locations within markets,

allowing the consumer or industrial user to use or

inventories of products, transportation

consume the product or service

channels

Promotion

The aspect of the mix that consists of convincing or

Promotion includes advertising, personal sales,

persuading the audience of the quality or features of trade and consumer promotions and public

the products or services offered by the organization

relations)

Policy

Developing an enabling political and administrative

Local policy, national policy and international

environment, such that smallholder rural

policies related to business development,

businesses can develop in a sustainable manner

entrepreneurship and trade

8

Marketing Concepts and Forming a Market Research Team 1.2. Understanding the Context of the Smallholder Rural Producer

Traditionally, smallholder rural producers in

In many cases, current socioeconomic trends

developing countries of Latin America, Africa

will continue to marginalize increasing numbers

and Asia have focused their efforts on

of smallholder rural producers with particularly

producing sufficient amounts of food to support

negative effects on those that are least organized

their families and thereafter to sell small

and distant from markets. To address these

amounts of surplus. This subsistence approach

changes, rural communities are adopting

is risk adverse and whilst it can assist a

various strategies, including agricultural

community to avoid famine, it is not a rapid

extensification, intensification, diversification

ladder out of poverty. It was hoped that with

and using a combination of on and off-farm

time, the farming community would progress

activities to achieve a living wage. When these

from a focus on food security into more

options fail, communities fall into chronic

commercial farming systems; however, for many

poverty situation and increasingly under or

farmers in the developing world this has not

unemployed youth are migrating from poor rural

happened. The majority of farmers in developing

areas into poor urban areas.

countries perpetuate system of low input, low

output, low income.

Some of the key trends that are affecting the

marketing environment for smallholders include:

Despite their production potential, smallholders

confront serious constraints in profiting from

Population growth

their resources due to lack of investment in

One of the more positive trends for agricultural

basic infrastructure, limited access to new

produce in developing countries is due to rapidly

technologies and services and unfavorable

rising numbers of people, who create increasing

government and global policies. Major global

demand for volumes of agricultural products

trends are also rapidly changing the rural

and agricultural support services.

economic environment and communities need

to devise ever more innovative ways of using

Globalization

their labor, resources and skills to take

advantage of new business opportunities.

The effects of market liberalization across the

world coupled with innovations in finance,

9

Identifying Market Opportunities for Rural Smallholder Producers communications and transport, has led to

collapse of the commodity agreements in the

opportunities for global trade of products and

1980’s and the effects of globalization.

services. This new global market is having

Commodities from the mid 1990s have been

profound effects on how business is done, with

trading at all time low levels. The effect of these

players from across the world now competing

low prices has had a seriously negative impact

within local, regional and international

on economic growth in many developing

markets. To remain competitive in this

countries, particularly those most dependent on

environment requires strategies that increase

the trade of a narrow range of primary

efficiency and this is generally achieved through

commodities, such as coffee, tea, rubber, rice

increasing economies of scale. One of the major

and milk.

effects of globalization has been a shift in

market power away from the producer end of

Market formalization and the rise of

the market towards the wholesalers and this

the supermarket

has placed great pressure on the market

At the same time that global markets have

prospects for smallholders.

become more liberalized, the food markets in the

industrialized countries of Europe, North

World trade negotiations

America and Asia have maintained a steady shift

The World Trade Organization (WTO) was

from informal to formalized market channels. The

designed to support greater equity of trade

formal markets are characterized by standardized

across nations. However in the agricultural

branded products and the use of integrated

sector, there has been limited success in

marketing, logistics and financing processes. The

opening new markets in the industrialized

“rules of the game”, in terms of product types,

countries for rural producers in the developing

methods for production, processing, procurement

world. Attempts in the 1980’s, to develop

and payment are typically set by international

international commodity agreements failed

supermarkets, such as Carrefour, Tescos and

when importing countries opted out of these

Walmart. The goods and services offered by these

protocols. Alternative channels such as Fair

modern market chains are closely tied to the

Trade5 show promise but have been slow to

lifestyles of urban consumers who want year

have widespread impact. New trade initiatives

round access to high quality, trustworthy goods,

such as, EBA6 and AGOA7, which offer zero or

at consistent prices. Similar principles apply to

reduced tariffs from LDCs8 have not been

other modernized food outlets, such as fast food

exploited effectively as most developing

restaurants, hotels, institutional buyers, tourism

countries lack the finances and infrastructure

and travel companies, essentially all markets,

to access these new market options. The latest

where international food standards are in

failure of the WTO Doha round has led to an

demand.

impasse between developing countries who

want more access to markets and industrial

Food safety regulations

countries who are maintaining their subsidy

Consumers and processors are increasingly

system to support their farming community.

demanding agricultural products with greater

quality, safety and traceability. Demands for

Longterm decline in commodity prices

health foods, particularly fruits and vegetables,

Real prices of commodities have steadily

are increasing and the market for organic

declined over the past 100 years. This

products continues to show growth, above 20%

downward trend has also accelerated with the

per annum. However, trends even in these

markets indicate that mainstream producers are

increasing their production size to supply larger

5.

Fair Trade = A small segment of the global market in

which socially-sensitive traders and consumers offer

retail markets. Traceability issues offer some

higher prices and better conditions to poor

producers an opportunity to protect particular

smallholders and other marginalized actors in the

genetic, location- or process-based products,

chain.

through appellation schemes, but there can be

6.

EBA–EU = Everything But Arms initiative, waives

considerable cost implications to such

tariffs for virtually all products for least developed countries.

identification systems.

7.

AGOA–African Growth and Opportunities

Agreement, offers tax exemption for fibre products

Food consumption trends

into US markets.

8.

LDCs least developed countries, DCs developing

In addition to the global trends there are specific countries.

trends to food consumption that researchers

10

Marketing Concepts and Forming a Market Research Team should be aware of when seeking new options

Exotic/novelty foods

for farmers. This knowledge can help identify

Consumers in developed countries are showing

market opportunities for both traditional and

great interest in exotic tropical products, such

new potential products.

as fresh and dried fruits, vegetables, nuts,

herbs and spices.

Convenience products

As a result of urbanization and increased

Off-season purchasing

female employment, consumers are increasingly

Consumers in developing countries and

attracted to foods that are practical and quick

increasingly in urban areas of developing

to prepare. New cooking technologies such as

countries want to buy the full range of

the microwave cooker have stimulated this

agricultural products out of season. This has

area. Convenience products are generally

developed huge demand for food, fiber and

processed, or transformed, and are packaged

flower products, particularly the higher value

and labelled. Some examples of convenience

goods on a continual year round basis.

products are: packaged, dried, refrigerated, pre-

cut vegetables for home-made salads, bottled

Ethnic market

fruit juices, dairy products; beverage, soup and

cake mixes; pre-cooked, frozen foods, pre-

The so-called “ethnic market” is expanding

cooked, frozen meals; packaged snacks; canned

rapidly, stimulated by domestic and

food; bottled fruit and vegetables; processed

international migrations, which means larger

meats, etc.

numbers of people living in developed countries

want to buy their traditional products locally.

Consumer demands for healthy foods

New applications

Consumers are increasingly aware of the

benefits of eating healthy, balanced and

Research into new applications and

nutritious diets, including natural and organic

transformed plant and animal products have

products. The following consumer trends are

opened the possibility of new markets including

showing rapid growth:

biofuels, biomedicines, i.e., harvesting

·

chemicals and drugs and bioplastics. In

Health foods, including fresh produce,

addition, the agricultural industry has shown

· dietary fiber, fruits and vegetables.

interest in renewable raw materials, including

In industrialized countries the organic

starch-based products and fuel options, which

· market is growing at 20% per year.

may have significant effects on the production

There is increasing interest in eating low-

of traditional commodities.

· calorie (light) foods.

There is renewed interest in natural

All of these trends and options offer

medicines, based on the use of natural

opportunities for sales of agricultural products

medicinal plants.

and market research teams should be alert to

the prospects of smallholder farmers producing

for these emerging markets.

11

Identifying Market Opportunities for Rural Smallholder Producers 1.3. Meeting the Marketing Challenge

Given these changes, it is clear that new

(a) Promote participatory methods that directly

approaches need to be used to support

involve local chain actors in decision making

communities to take on the opportunities and

and develop local capacity for business

challenges that result. Strategies to meet the

development and more competitive supply of

challenges of these changing marketing

goods.

conditions include initiatives that seek to build

(b) Stimulate collective action and organization

the marketing capacity of producer groups and

of rural economic organizations with a solid

the effectiveness of rural service providers

business and market orientation.

through a bottom-up approach and alternative

(c) Promote intensification, diversification and

strategies that seek to build marketing links

value adding in rural areas.

from corporate buyers with smallholder

(d) Strengthen the market for rural business

producers in an equitable manner.

development services and its coordination.

Whichever approach is adopted, the review of

The emphasis of this guide is to find ways of

macro-trends in the agrofood sectors suggests

identifying market opportunities that are linked

that rural business development needs to

with growing high volume and high value

address two major challenges which:

markets. The methods will enable service

providers and farmers to evaluate market

1. Develop competitive rural enterprises at the

options for existing products and to identify

micro level.

new products. It should, however, be recognized

2. Create an enabling policy environment at the

that any change in a marketing system and

macro, meso and micro levels.

investment in new market chain options tends

to increase risk and therefore it is important to

To address these rural business challenges, the

understand the relationship between the

following strategies are recommended:

potential gains by investing in an identified

market, against the potential risks.

12

Marketing Concepts and Forming a Market Research Team 1.4. The Market Chain

The market chain refers to the actors and

Having a market chain perspective assists in

organizations that enable the transfer of goods

understanding the types of constraints and

and services from the producer to the final

opportunities that can be addressed at various

consumer. A production chain is made up of

points in the system and where investments

inter-related links, which are generally based

may have greatest effect, which means thinking

on pre-production, production, post harvest,

beyond the farm level. The market chain

trading processing, marketing and consumption

generally includes three components.

(Figure 2).

Market chain actors

Traditionally, rural development practitioners

have placed emphasis on the first link in the

These are the people directly involved in the

chain, i.e., the production phase, because it

exchange of goods; they include input

deals directly with smallholders. Focusing on

suppliers, producers, rural traders or

production has enabled communities to gain

assemblers, processors, urban wholesalers,

food security. Less attention has been given to

retailers and consumers.

marketing and this has led to problems with

over or under supply of products and lack of

Business development services

project sustainability.

These services support business development

and enable the marketing process to proceed in

Taking a more systemic approach to the market

an efficient manner. These services include

chain can assist in developing strategies that

technical inputs from research, such as new

enable producers to understand their market

production technologies and varieties, finance

options more effectively and for interventions to

both formal and informal, information on

be designed that match product supply with

market conditions, marketing rules and

market demand and take into account the roles

regulations, basic infrastructure such as

of the various actors and services that make up

roads, communication systems and market

a functional market chain.

structures.

Consumption

Retailing

Research

Trading

Transportation

Processing

Government policy regulation

Communications

Trading

Technical & business training & assistance Post harvest

handling

Market information and intelligence

Production

Financial services

Production input supply

Figure 2. The market chain.

13

Identifying Market Opportunities for Rural Smallholder Producers

Business organization

retail outlets such as supermarkets, corner

A third aspect is the level of organization that

stores and wholesale markets.

integrates market actors and business support

services. Business organization throughout the

This extended chain concept is useful because

chain refers to the social links between the

integrating interventions that strengthen

different actors including informal farmer

market chain actors and local support services

groups, farmer cooperatives and associations,

is key to improving both competitiveness and

traders or intermediaries, technical services,

business organization, which makes for a more

processing enterprises, financial services and

sustainable development.

1.5. Value Addition

This aspect of marketing deals with practices

providers. Whilst, some of these functions can be

that change or transform a primary product into

done on-farm, there is often a high investment

goods that have additional value. At the simplest

required to achieve this level of value added.

level, adding value includes operations such as

washing, cleaning, grading, bulking and storage.

The promotion of rural agroindustry is important

These processes are generally within the control

in rural development for the following reasons:

of farmers groups and attention to these

processes can have considerable effects on

· Agroindustrial products, in contrast to basic

improving income.

commodities, do not exhibit a long-term real-

price decline so they are more effective in

More complicated processing may include

ginning, roasting, refrigerating, milling, cutting,

· increasing local income (Figure 2).

Adding value in rural areas increases local

mixing, dehydration, cooking and packaging.

employment and income and has a positive

Higher level value adding involves operations

impact on the local economy due to forward

such as extraction, distillation, freezing,

fermentation, extrusion and enzymatic processes.

· and backward linkages.

Product differentiation is easier for goods

These activities are generally undertaken by

that have been processed, transformed,

specialist market chain actors or service

packaged and labelled.

14

Marketing Concepts and Forming a Market Research Team

· Consequently, agroindustrial products

incomes of rural producers. Market research

tend to enjoy a higher profit margin than

teams should be sure therefore to investigate

basic commodities.

both fresh and processed markets. Value added

products can be traditional and already exist in

As markets become more competitive, it is

the area or can be new products, which can be

important to seek ways that taking advantage of

processed using new, low cost technologies.

value adding opportunities to increase the

1.6. Marketing Strategies Based on “Risk Assessment”

Given the range of market opportunities,

without changing the product offered. This

making decisions on the most appropriate

can be achieved by reducing prices,

products and market types that a farmer group

maintaining price but improving quality,

or entrepreneur should target is clearly an

improving distribution and increasing

important decision. One of the tools to assist in

promotion.

the process of assessing market risk strategies

2. Market development means identifying and

is the Product-Market Growth Matrix, developed

developing new market segments for current

by Ansoff (Table 2).

products. These new market segments can

be represented by institutional markets,

The marketing strategy9 is the method that a

other geographical areas including export

business or enterprise will use to increase

markets or buyers using the product in new

profitability and competitiveness within a

ways.

marketplace. Selecting the appropriate

3. Product development refers to the offer of marketing strategy is important, as the type of

innovative products, new products for the

product and selection of marketplace will have

region, or modified products to current

a considerable bearing on the level of

market segments. Products do not

investment, profit and risk. An important role of

necessarily have to represent an innovation,

the service provider/NGO or market facilitator,

but can be existing products that are

working with rural producers or entrepreneurs,

improved or packaged and labelled differently.

is to gather sufficient information to be able to

4. Diversification is the production of new match a suitable level of risk with the assets,

products for new markets.

skills and business opportunities of the client.

Each of these growth strategies represents a

Based on two variables, product and market,

different risk level. Risk is an essential aspect to

the matrix proposes four main product-market

consider when working with smallholder rural

growth strategies, as explained below.

producers, because they tend to be risk-averse

due to their weak economic context. Risk

1. Market penetration means increased sales of increases in direct proportion to the level of

products to current market segments,

change. For example, the market penetration

strategy implies the lowest risk level because it

demands the least change, the diversification

9.

Marketing strategy based on the Ansoff matrix is a

strategy signifies the greatest risk because it

plan for engaging with a specific type of product and requires most change. According to the Ansoff

market type. There are four types of marketing

matrix, risk increases from strategies 1 to 4 as

strategies in this context, which offer increasing

levels of profits that are associated with increasing indicated in Table 2. However, it should be noted

levels of financial risk.

that risk is always present in business and

Table 2. Product-Market Growth Matrix (Ansoff, 1957).

Existing products

New products

Existing markets

1. Market penetration

3. Product development

New markets

2. Market development

4. Diversification

15

Identifying Market Opportunities for Rural Smallholder Producers marketing activities and therefore marketing

regarding both traditional and new, potential

interventions should seek to gather information

products. The Ansoff matrix is a simple tool

so as to manage risk effectively.

to enable the research team to be in a

position to prioritize products based on their

The Rapid Market Survey is a process that will

level of risk.

identify many new products for a given region,

1.7. Forming the Market Research Team

The research team conducting the market

discarding market options, because they are

opportunity identification study can be small,

the investors and may have a different

from three to five persons, and should combine

rationale or “way of thinking” compared with

one to two technical personnel with two to three

representatives of smallholder rural producers

· a technical person.

The research team will gain more credibility

from the area under consideration.

from the rural community if the final

research results are presented by equals or

The facilitator or coordinator of this team

should be a professional with a business and

· friends, and not by technical people.

Commitment from the rural community will

financial background, or a rural development

be enhanced if they are aware that two or

practitioner with basic training in business

three of their equals are participating in the

topics. This background is essential given the

research team. In this manner, the

objectives and content of the market

probability of implementing research results

opportunity identification procedure.

will increase.

Smallholders should be in the team for several

The members of the research team should be able

reasons.

to speak, read and write fluently, as this will be

·

required during the research procedure. Personal

It is important to have the point of view of

business or sales experience will be an asset. The

the rural producers as they are the clients of

rural community should be aware of these

the research. They should participate in

requisites ahead of time, if they decide to select

decision making when selecting and

their representatives in the research team.

16

Marketing Concepts and Forming a Market Research Team Exercise 1.1

Mapping an Extended Product Chain

Objective

· The trainee will be able to identify key links, actors and organizations, functions, price formation and local support services along a selected production chain.

Instructions for the Facilitator and Trainees

1. Form groups of four participants, by area if possible, and select a coordinator.

2. Choose a product or product chain from the area with which at least one member of the group is well acquainted.

3. The group can use the Worksheet for this exercise. The Worksheet has two parts: the upper section (A) can be used to map the production chain and the matrix appears in the lower part (B).

4. Information for this exercise is found in Section 1.3.

5. In Worksheet A, the group will draw (using symbols, figures and arrows) the production-to-consumption route of a selected product. The map or route should include the different chain links, plus the actors and main functions in each chain link. If the group has sufficient information, price formation along the chain can also be mapped.

6. In Worksheet B, the group will complete the matrix with information on the chain links, functions, actors and organizations, and local support services (informal and formal).

7. When finished, the group will copy the map and matrix onto large sheets of papers or onto a PowerPoint presentation, so that their work can be seen by all the participants in a plenary session.

8. The group coordinator will present the results in a plenary session.

Resources needed

1. Section 1.3 of the guide.

2. Worksheets A and B for Exercise 1.1.

3. Paper and pencils.

4. Flip chart or overhead projector and transparencies.

5. Magic markers or markers for transparencies.

Time required: 1.5 hours.

17

Identifying Market Opportunities for Rural Smallholder Producers Exercise 1.1

Mapping an Extended Product Chain – Worksheets A and B

Production Chain Matrix

Production Chain:

Area:

Chain link

Functions

Actors and

Local support services

organizations

18

Marketing Concepts and Forming a Market Research Team Exercise 1.2

Visioning a Value-Added or Processed Product

Objective

· If a trainee does not have information on a value added/agroindustrial product s/he will be able to use “visioning” to provide an outline of a possible agroindustrial products derived from a basic commodity and then think of its corresponding use, markets and the type of processing required.

As an example, sausages from pigs.

Instructions for the Facilitator and Trainees

1. Form groups of four participants, by area if possible, and select a coordinator.

2. Choose a basic commodity or staple food product from the area with which at least one member of the group is well acquainted.

3. The group can use the matrix in the Worksheet for this exercise.

4. Information for this exercise is found in Section 1.4.

5. The group will complete the matrix in the Worksheet with a list of potential agroindustrial products (real or imagined) derived from the chosen commodity, together with its corresponding use, target market and required processing or transformation.

6. When finished, the group will copy the matrix in a large paper or transparency, so that their work can be seen by all of the participants in a plenary session.

7. The group coordinator will present the results in a plenary session.

Resources needed

1. Section 1.4 of the guide.

2. Worksheet for Exercise 1.2.

3. Paper and pencils.

4. Flip chart or overhead projector and transparencies.

5. Magic markers or markers for transparencies.

Time required: 1 hour.

Exercise 1.2

Visioning a Value-Added or Processed Product – Worksheet Agroindustrial Product Matrix

Basic commodity:

Area:

Derived agroindustrial

Use

Target market

Processing required

product

19

Identifying Market Opportunities for Rural Smallholder Producers Exercise 1.3

Defining Market Growth Strategies for a Project Area

Objective

· The trainee will be able to use the Product-Market Growth Matrix or the Market Risk Matrix to define possible growth strategies in a area, based on existing and potential agricultural and agroindustrial products.

Instructions for the Facilitator and Trainees

1. Form groups of four participants, by area if possible, and select a coordinator.

2. Choose an area or region with which at least two members of the group are well acquainted.

3. Make a list of the main three agricultural or agroindustrial products in that area.

4. Then make a list of the principal two geographic and industrial markets for the regional products selected in Point 3.

5. The group can use the matrix in the Worksheet for this exercise.

6. Information for this exercise is found in Section 1.5.

7. The group will complete the first matrix and the second Product-Market Growth Matrix in the Worksheet. In the latter matrix, the group will place a short list of existing and potential agricultural and agroindustrial products in each of the four growth strategies. The group will attempt to complete both matrices based on real information and logical decisions, but may invent or formulate information as required.

8. When finished, the group will copy the matrix onto a large paper or PowerPoint, so that their work can be seen by all of the participants in a plenary session.

9. The group coordinator will present the results in a plenary session.

Resources needed

1. Section 1.4 of the guide.

2. Worksheet for Exercise 1.3.

3. Paper and pencils.

4. Flip chart or overhead projector and transparencies.

5. Magic markers or markers for transparencies.

Time required: 1.5 hours.

20

Marketing Concepts and Forming a Market Research Team Exercise 1.3

Defining Market Growth Strategies for a Project Area – Worksheet Preliminary Matrix

Area:

Three most important products in the area

Two most important markets for the area’s

products

1

1

2

2

3

Proposed Regional Growth Strategies

Existing products

New products

Market penetration

Product development

Products:

Products:

Existing markets

Market development

Diversification

Products:

Products:

New markets

21

Identifying Market Opportunities for Rural Smallholder Producers SECTION 2

Designing and Conducting a Rapid

Market Survey

General Objective

·

After studying this section, the participant will

· Develop a questionnaire.

Explain how to collect primary and

be able to facilitate or coordinate a market

research team. This team will then plan and

· secondary information.

Explain how to obtain the first product

execute a Rapid Market Survey for a given area

or region, with the participation of smallholder

· option portfolio.

Explain how to organize the Rapid Market

producers. At the end of the process, the service

Survey report.

providers should be confident in identifying

markets for other stakeholders, and the client

Orienting Questions

group should have the ability to conduct their

1. What is the purpose of market research?

own future marketing studies.

2. How can we focus market research in an

area-based approach?

Specific Objectives

3. Who should perform market research for a

The participant will be able to:

·

given area or region?

Explain the objective and strategies of a

4. Can secondary information be sufficient for a

· Rapid Market Survey.

Rapid Market Survey?

Describe the aspects to be considered when

5. What essential information is needed to sell

· developing a research plan.

or market a product?

Determine the number of research tools

6. What kind of information can traders and

· needed.

retailers provide on products they sell?

Define the key research questions for the

survey.

22

Defining and Conducting a Rapid Market Survey

2.1. Defining Market Research Objectives

Market research is used to identify current

group living in a defined area. This type of

market trends and opportunities. This type of

study includes methods to identify produce that

research is often associated with large

is in highest demand, and also to study

commercial companies, but the method is also

products that are known, and are of interest to

of great value to rural development agencies,

the producer groups. The information gathering

rural communities and farmer organizations

should target their needs and abilities, and

interested in playing a more effective role in the

provide sufficient information to enable them to

marketplace. This section focuses on how to

make sound decisions on which products

develop a market research plan that is

should be selected for enterprise development

appropriate to the economic conditions and

plans.

capacities of smallholder farmers client group,

with a focus on service providers working

Client selection

alongside farmers.

One of the most important decisions in any

marketing or business support activity is to

The typical sequence of events to develop

clearly define the clients and their needs. The

market research is as follows:

service providers must have total clarity

·

regarding who the work is being done for, the

· Define objectives.

socioeconomic status of the client(s), and what

· Establish a market research plan.

is expected of the client group when the work

· Collect secondary information.

has been completed.

Evaluate gaps in information and collect

· primary data.

Role of the service provider

· Process data.

· Analyze and interpret results.

This methodology has been developed to be led

· Prepare final report.

by a service provider. The aim of following this

· Provide feedback to clients.

process is first to enable the staff of a service

Make amendments to report based on

provider, such as an NGO, a government

feedback.

extension officer, researcher, etc., to build their

own marketing competency and, through

The objective of a Rapid Market Survey is to

participatory means, to pass on these skills to

identify market opportunities for a client

the client group.

23

Identifying Market Opportunities for Rural Smallholder Producers

Area selection

· To foster partnerships with other service

The starting point for this method is the

providers and local government who are

selection of a defined area of operation. An area

can be small, i.e., a village or scaled up to a

· generally bound by a geographic area.

To link local assets and comparative

country. Options therefore include a:

advantages to the geographic zone, and

·

particularly to appreciate the range of

· Village or community.

possible products and value adding

· Cluster of villages (or parish).

possibilities that could be achieved within

· Cluster of parishes (or diocese).

the target zone.

· Smallest administrative/political boundary.

· Agroecological zone.

Size of the area

· Watershed or Market shed.

Decisions in regard to the size of the area being

· Country.

analyzed are generally based on resources such

Region

as budget, time, and coverage of the service

provider. This method was designed for market

Why take an area-based approach? The identification within a localized area, so that

advantages of a defined area of operation

more participatory methods can be applied with

include:

a farming community. This method can however

·

be applied to a cluster of districts, national or

Linking a spatial demarcation of intervention

international markets. As a general rule, the

to a specific community or local

level of participation will decrease as the

administrative geographic area assists in

territorial size increases and the duration of the

· focusing information gathering and analysis. exercise will increase with size.

Better targeting can allow the service

provider to take into account special needs

Whilst the area defines the agroenterprise

groups, such as existing associations of

intervention zone, the reader should appreciate

farmers, women’s groups, orphans’ groups,

that marketing chains, investment links and

· food insecure farmers, etc.

information flows go beyond this area

An area, assists with establishing a spatial

(Figure 3). The key point is that the market

reference for baseline analysis and

opportunities being investigated are dependent

subsequent impact analysis.

on the possibilities of a particular area, and on

the requests of the target community.

Figure 3. Market links extend beyond the intervention area.

24

Defining and Conducting a Rapid Market Survey

Basic data set

consignment being purchased, terms of sale,

The minimum information set that the research

(cash, cheque, credit, mix), minimum quality

team should determine per product includes,

requirements, frequency of supply, packaging

buyers’ contact details, product price, price

requirements, level of interest of buyer in

trends according to season, minimum volume/

working with client farmer groups.

2.2. Defining Market Research Strategies

Once the client group and areas have been

7. Products associated with the conservation of

selected, the next task is to establish research

natural resources.

strategies for gathering information to prioritize

products based on (i) market demand, and

The first two “research strategies” are

(ii) specific interests of the client group. Products recommended for all studies . This approach will can include agricultural crops, livestock,

enable the survey team to gather information

forestry, handicrafts, and agroindustrial

based on market demand. When using these

products. These products can be existing or new

research strategies, the outcomes or product

products for the region of interest.

lists that are created will be unknown. This

approach is particularly useful to encourage

To evaluate products this method uses “research

diversification.

strategies” to guide the analysis and collection of

market information. The following list provides

The other research strategies aim to investigate

examples of research strategies.

market characteristics for known products or

product groups that farmers are interested to

1. Products in high demand.

learn more about, as they have an interest in

2. Products in scarce supply.

investing in these products themselves. In some

3. Products being imported into the area.

cases, an external investor may also want to

4. Products which have a competitive

focus the market study into a specific area of

advantage over others in this area.

interest.

5. Products being grown by farmers.

6. Specific product groups, such as fruits or

To limit the workload, the research team should

vegetables.

concentrate on one or two research strategies

25

Identifying Market Opportunities for Rural Smallholder Producers and limit the number of products within each

unknown or less known to the group, the

strategy, before developing the research plan.

research team needs to concentrate on collating

The following section provides greater detail on

the necessary information on buying conditions

the rationale for each research strategy.

as these can highlight important areas of

challenge for the client group.

Identifying products in high market

demand

Identifying products in scarce supply

This research strategy is perhaps the most

A product may be scarce because demand has

important and is particularly useful in

outstripped product supply, it may be “off-

developing ideas for diversification and

season” at the time of market analysis, or the

innovation at the farm level. When evaluating

product may suffer from problems such as

demand (which may be highly variable), the

diseases, pests, and drought. Although these

market team should take care to capture

products can represent an opportunity,

information about specific events that influence

identifying the underlying causes is important

demand, such as seasonality, or cultural

because these can be related to high investment

events, such as “turkeys at Christmas”. Market

needs, such as irrigation to overcome drought.

growth for a product is usually measured as a

percentage of annual increase in sales for a

It is important to examine when product

product; this percentage is compared to the

shortages occur during the year. Some products

local annual population growth rate to classify

present consistent annual shortage patterns. If

it as high, medium or low. Growth can be high

available, the research team should consult

(more than 6% per year), intermediate (from 4%

price series to identify these possible patterns.

to 6%), low (from 0% to 2%, which is similar to

In months of shortage, product prices increase

population growth rate). Some interviewees may

and off-season production can be a good market

find a percentage concept difficult to

opportunity for the area.

understand. Therefore, the interviewers may

need to resort to low, medium and high

In this strategy, the research team will identify

categories based on volume numbers, i.e.,

products with supply constraints and, as in the

numbers of items, sacks, truckloads, bought

previous strategy, researchers should focus

and sold.

their efforts on product categories that are

currently important, or viable, for smallholder

The research team should concentrate efforts

rural producers in the area under

on detecting products with a high or

consideration.

intermediate growth. This type of growth is

usually characteristic of innovative products or

Why are strategies 1 and 2 considered

of traditional products that respond well to

to be important?

current trends in consumer habits and

As indicated in the first chapter, we believe that

industrial preferences.

an important strategy for smallholder producers

is to seek ways in which to diversify their

The research team should focus on studying

income streams. Farmers and service providers

growth rates for product categories that are

can be highly conservative in selecting business

appropriate for smallholder rural producers in

options. This is normal, given their limited

the area under consideration. Products such as

investment capital and aversion to risk.

fruits, vegetables, livestock- and fish-derived

However, there is also ample evidence to show

(meat, dairy products, etc.), fresh and processed

that if farmers continue to rely on traditional

roots and tubers and basic grains should be

products they will remain poor. Therefore if

considered. If pertinent, biodiversity-related

farmers and their service providers are to find

products such as spices, aromatic and

new income areas, it is most likely that they will

medicinal plants, essential oils and natural

need to try new marketing options. Strategies 1

colorants should also be taken into account.

and 2 are ways in which farmers and service

providers can start to gather information on

This research strategy offers the opportunity to

possible avenues for developing new business

“open the box” and think freely. The team

options that are based on market demand.

should take all options into consideration. As

this strategy may throw up products that are

26

Defining and Conducting a Rapid Market Survey

Traditional products being grown by

quality, a lower selling price, or a unique

farmers

differentiating characteristic.

This strategy refers to products already existing

in the target region. This strategy can also be

The research team needs to develop a list of

considered as a pilot approach to test the

products that have a competitive advantage and

marketing approach and in many cases,

may require the support of an expert for this.

especially for the poorer, more remote farmers,

Examples include exotic, native products

the first round of enterprise development can

(fruits, medicinal plants, nuts, and raw

focus on improving the marketing of existing

materials) found in an area that are not

products.

produced in neighboring regions. In this case,

the presence of a comparative advantage is

Analyzing known products is also something

clear, but only after the effective intervention of

that appeals to farmer groups, as the farmers

the human and social capital, will it really

are familiar with these products and have more

become a competitive advantage.

confidence in applying new ideas to current

practices. This is sensible as there is often a

Smallholder rural producers have the potential

great deal that can be done to improve value,

of reaching competitive advantages for some

through simple methods such as grading,

labor-intensive agricultural products, that can

bulking and improving business relations with

only be grown in high altitude locations such as

traders.

fruits, vegetables, spices, medicinal and

aromatic plants, roots and tubers, organic

Products imported into the area

products or fibers. For example, 80% of fruit

production in Colombia is estimated to come

Substitution of imports can represent a good

from smallholder rural producers (Asohofrucol,

growth strategy for an area, given that local

personal communication, 1998). Competitive

production usually represents savings in

advantages may also exist for woven fabrics,

transportation and post harvest losses.

handicrafts, and other similar items.

Tropical, mountainous, regions generally offer

different climates at various altitudes which can

Specific commodity groups, i.e.,

be exploited to grow a range of products that

cereals, fresh fruit and vegetables

may otherwise be imported.

This strategy is designed for service providers

For this strategy, the research team should first

who are working on projects in which an

prepare a list of key products that are being

agreement has already been made on which

imported and which can be produced in the

commodities or products will be developed. In

area. This type of information can be obtained

many cases, large development projects focus

using secondary information in agricultural

on 3-5 products or commodities that require

wholesale centers, government statistics or by

support in terms of productivity and market

interviewing key informants. Afterwards,

linkage.

demand trends will be examined as well as

purchasing requirements.

Under these conditions, the farmer group and

service provider should develop marketing

Products that enjoy a comparative or

studies that focus on ways to increase value

competitive advantage

and income through sales of the selected

commodity. This may include investigating

The difference between a ‘comparative’ versus a

processing options and sales into industrial

‘competitive’ advantage is that the former term

applications for the product.

includes only the biophysical aspects of a area,

such as climate, soils, roads, location, etc.,

Products associated with conservation

whereas the latter also comprises the human

of natural resources

and social factor (local knowledge, skills,

organization). In this guide we refer to

This strategy is closely related to natural

‘competitive advantage’, which combines

resource management. A large percentage of

human, social and organizational factors with

smallholder rural producers worldwide inhabit

the region’s biophysical characteristics. The

fragile ecosystems such as hillsides and tropical

inhabitants of a region will have a competitive

rainforests, where the probability of erosion and

advantage when its products offer higher

environmental degradation is high. If products

directly or indirectly related to conservation

27

Identifying Market Opportunities for Rural Smallholder Producers (e.g., live barriers, grasses and cover crops) are

To implement this strategy, a list should be

available and represent a market potential, then

made of the products directly or indirectly

the adoption of conservation practices by

associated with the conservation of natural

smallholder rural producers is viable. Many

resources. For example, if the community

production systems have been proposed in the

prefers live barriers of forage grass, the local or

past, but their economic feasibility is generally

regional demand for related products, such as

not well studied.

milk and dairy products, should be studied.

2.3. Developing a Market Research Plan

Once the strategies have been defined and

collection of both secondary and primary

selected, the research team should proceed to

market information.

plan the market opportunity identification

survey, as shown in Figure 4. This includes the

Secondary information requirements

Secondary information is data that already

exists. This information is usually cheaper to

Determining

Determining primary

collect than primary data and provides a means

secondary information

information

of prioritizing where there are gaps that should

requirements

requirements

be filled by direct primary data gathering. A

serious effort to gather secondary data can save

considerable time and effort, as previous

Defining methods

Defining the research

studies may have undertaken the work that

of contact

approach

you want to do.

Secondary information is especially important

Devising the

Design of the research

when studying the larger, national, regional

sampling plan

instruments

and international markets, especially in the

case of selling into developed countries. In most

cases, localized market information will not be

Figure 4. Planning steps for a rapid market survey.

available. Researchers should aim to collect

28

Defining and Conducting a Rapid Market Survey

only the most up to date information because

Primary information requirements

market processes are dynamic and information

Although secondary information contributes

grows old rapidly. As a rule of thumb, market

greatly to market surveys, markets are

trend information should not be more than

dynamic and therefore primary information is

2 years old. A list of possible sources of

essential to understand current market

secondary information is given in Table 3.

conditions. Primary data is gathered directly

from people involved in the area of research.

Furthermore, secondary information related to

In the case of market research, primary data

price series at either the wholesale or retail level

is collected from key informants, i.e., people

should be sought for target products. Such

that are actively engaged in the market chain

series can be used to determine the degree of

or providing business service providers and

stability of a product’s prices, essential

key observers. Key observers are those people

information for the smallholder rural producer

who are knowledgeable about the market

who, because of his/her economic fragility, may

chain of interest by are not actively involved

have low risk capacity. Monthly price series can

in any business operations.

also suggest times of scarcity, when prices tend

to be higher.

Table 3. Sources of secondary information.

Local market

· Market information centers (telecenters)

· Wholesale supply centers and marketplaces

· Local development agencies

· Nongovernmental organizations (NGOs)

· Trader associations

· Local governments

· Local press

· Private-sector companies

· Internet

· Service providers, local consultants

Domestic market

· Information centers of wholesale supply centers and marketplaces

· Chambers of Commerce

· Development agencies

· Trade associations

· National, departmental, provincial, or municipal governments

· Press, specialized and standard publications, and journals

· Private-sector companies

· Internet

· Consultants

Markets in neighboring countries

· Foreign trade agencies

· Agencies promoting exports

· Chambers of Commerce

· Development agencies

· Trade associations

· Press, specialized and standard publications, and journals

· Private-sector companies

· Internet

· Consultants

Markets in developed countries

· Foreign trade agencies

· Agencies promoting exports

· State agencies of developed countries

· Development agencies

· Chambers of Commerce

· Trade associations

· Press, specialized and standard publications, and journals

· Private-sector companies

· Internet

· Consultants

29

Identifying Market Opportunities for Rural Smallholder Producers

Research approach

designing the sample, the following decisions

Surveys are used to gather market information

must be made:

using either structured or semi-structured

surveys. Structured surveys use questionnaires

(a) Who should be interviewed (sample unit).

with lists of questions that are asked in the

(b) How many people should be interviewed

same sequence and manner for all interviewees.

(sample size).

This approach is preferred for large quantitative

(c) How will they be selected (sampling

studies but usually require statistical analysis

procedure).

for interpretation.

Selection can be done at random among the

Semi-structured surveys or checklists,

entire population (probability sample) or

consisting of a list of topics that need to be

among people from whom it will be easy to

covered by the interviewer, are more often used

obtain information (convenience sample). A

in qualitative studies. Checklists are flexible as

specific number of people from different

they allow the interviewer to direct questions

categories or groups (quota sample) can also be

according to the replies. Generally people

interviewed.

provide more commercially interesting

information if they are interviewed in this less

For our purposes, the sample should consist of

formal manner.

a list of contacts that includes local and

district/provincial traders, wholesalers and

retailers in wholesale supply centers, heads of

Recommendation

purchases for supermarkets at the district or

For first time survey work, interviewers should

national level, officials of agroindustries and

prepare a more structured questionnaire, which

other companies, and retail stores. If contacts

should be pre-tested. As interviewers gain

are few and relatively close to each other, then

experience and confidence, the team can shift to

all can be interviewed. But if they are numerous

the use of less structured checklists.

or distant, then a representative sample should

be chosen; for this case, a quota sampling

Methods of contact

procedure is recommended.

Information can be requested by traditional

mail, electronic mail, phone, or in person. The

The research team may, for example, decide to

two last alternatives are recommended. A

contact, in the area covered by the survey, all of

mailed questionnaire is inflexible and the reply

the supermarket chains, five processing

rate is relatively low. Phone interviews can be a

enterprises, 10 corner stores, 10 traders, and

good way of contacting those who cannot be

15 market retailers. Identifying pertinent

accessed in person. Personal interviews are the

population segments can stratify the quota

best method of contact. Interviews can be

sample; for example, corner stores can be

conducted individually or as a group. Individual

categorized according to income level of the

interviews are recommended when more

neighborhoods where they are located.

sensitive information is required, such as

commercial data on prices and volumes of sale.

In addition, a list of contacts for obtaining

When interviewing people about sensitive

relevant secondary information should be

information, it is recommended that this type of

made. The list usually includes public or

interview be on a one-to-one basis. Group

private sector officials involved in foreign trade,

interviews are also useful and these types of

export promotion, or economic development;

interviews are particularly effective when

staff of pertinent trade associations; and

attempting to evaluate less sensitive data at the

chambers of commerce.

community level.

Identification of key informants and

Sampling plan

observers

Because the Market Opportunity Identification

Within any community there are often well

Survey is rapid, it does not focus on contacting

known people that have a major stake or

consumers directly but rather on surveying a

knowledge about the production and trade of a

limited number of well informed actors in the

particular product. The research team should

marketing channels and from industry. When

identify these personalities before starting a

survey. These people can be a rich source of

30

Defining and Conducting a Rapid Market Survey

information, but equally importantly, these

· Survey tools should be separated into

people can guide the research team to other

sections that can be clearly identified.

people to accelerate data gathering. Ideally the

Sections may correspond to (i) specific

research team should identify “key informants”

products/marketing topics (Table 4), and

at each stage in the market chain.

· (ii) survey strategies (Table 5).

The first part of a survey tool should identify

Focus groups

the contact or source of information; his/her

This type of interview is used typically to

position; the company’s name, address,

interview communities or farmer groups, or

phone and e-mail; date of interview; and

specific types of consumer groups. This method

name of interviewer. This information is not

is cost-effective but requires good facilitation

only important for data processing but also

skills, as the person undertaking the interview

has to be able to work with numbers of people.

· for monitoring the survey.

All survey tools should include questions

The focus group is particularly good for

with respect to basic purchasing conditions,

gathering information on issues such as:

such as quality requirements, quantity

·

purchased, frequency of purchase, prices,

Production and post harvest technologies

· and practices.

· required varieties and packaging.

Sufficient space should be left below the

questions so that the interviewer can write

· Seasonality.

· Access to inputs and services.

· the answers.

The questionnaire should include precise

· Local buyers/market channels.

instructions in bold type to avoid confusing

· Organization of farmers.

the interviewer. Sometimes Yes or No

· Trends in local prices.

questions will help the interviewer determine

· Major changes/innovations.

whether he/she should skip a question or

· Trends in production and marketing,

Key constraints in production, post harvest

· set of questions.

All the tools should be pre-tested with at

and marketing.

least two contacts before the full survey is

carried out.

The focus group approach does not work well

with market chain actors or key informants. For

Developing questions

these market actors, questionnaires or

As this maybe the first time that you are

checklists are more effective.

designing a questionnaire, it is important to

remind the research team to have the objectives

Designing questionnaires/checklists

of the survey clearly defined and then build lists

The questionnaire and interview checklist are

of questions to ensure that information can be

basic tools for a market survey. A questionnaire

gathered to answer major issues.

consists of a series of carefully prepared

questions in a logical sequence, which the

The teams should be aware that there are no

interviewee should answer. A checklist is a less

preliminary product lists for Market Strategies

formal guide to questioning an interviewee.

1 and 2. This means that in these two cases,

Some basic rules for both approaches include:

the questions have to be formulated with no

·

product in mind. In contrast, Strategies 3 to

Questionnaires and checklists/survey tools

7 have preliminary product lists, and therefore

should have a name or title identifying it, for

questions can be prepared for a specific

example, ‘Questionnaire for Bean Trader’,

product. The team should work to develop a

and a code if necessary, e.g., Q1BT.

series of questions that are simple and logically

Table 4. Initial survey questions to establish contact information.

Section 1: Information on contact and interviewer

Name of person interviewed

Position in market chain

Business name

Contact information

Interviewer(s) date

31

Identifying Market Opportunities for Rural Smallholder Producers Table 5. Key questions for each research strategy.

Market research strategy

Key questions

What is the annual

Is it ever scarce?

Which are the purchase

growth in demand?

When? Why?

conditions?

1. Products in high demand

2. Scarce products

3. Selected existing products

(e.g., blackberries)

Buying conditions

Highest demand

Scarce supply

Blackberries

Product 1

Product 1

Price

Volume of sales

Quality

Source

Minimum purchase

Would you be interested in

yes no

yes no

yes no

buying beans from a farmer’s

group

ordered. This is not difficult, but neither is it

questions have been developed for detecting

as easy as one may think. When planning a

products in high demand and scarce products.

questionnaire, make the questions short, simple

The questions may be asked for categories of

and to the point.

products (such as fruits and vegetables) or

specific products (such as banana, beans, or

Examples of how to formulate and test

maize flour).

questions are proposed in this section. The first

questions in an interview should define who you

In Table 6 more detailed questions have been

are interviewing, their position in the market

developed to evaluate specific quality aspects

chain and their contact information (Table 4).

for grains, fruits and vegetables. The research

This information is essential to know where the

team should be aware that quality requirements

information is coming from and may be useful

are more stringent for fresh produce to be sold

later for any follow up.

directly to final consumers, than for products to

be used as raw materials for transformation in

Subsequent questions should be developed to

agroindustries.

answer key issues in the survey. In Table 5,

Table 6. Quality aspects of grains, fruits and vegetables.

Grains

Fruits

Vegetables

· Moisture content

· Size

· Size

· % broken

· Color

· Color

· % insects

· Pest damage

· Pest damage

· Color

· Disease damage

· Disease damage

· Odor

· Maturity

· Cleanliness

· Milling yield

· Cleanliness

· Maturity level

· Freshness

· Freshness

· Juiciness

· Sweetness or Brix grade

32

Defining and Conducting a Rapid Market Survey

The information in Table 7 presents a practical

consist of a list of issues that the interviewer

layout for questions (in matrix format) to

should cover, but with few details. This tool

identify the key purchasing conditions or

allows great flexibility and is very useful for

requirements for products of interest. This

qualitative surveys, and for extracting sensitive

matrix is more convenient and easier to use for

information through a more informal process.

the interviewer.

See Table 8 for example of a marketing

checklist. In this case, formal questions are

Based on the needs of the survey, the team

condensed into vital information needs and

should compile a list of the most useful

then summarized to a mental reminder of the

questions to develop the survey tool. The

area of questioning to pursue. When

following sections provide information on

interviewers have gained experience, the

questionnaires and checklists:

research team can use only the points in the

shaded left hand column to lead the

Questionnaire

discussion.

In this type of research tool, questions may be

open or closed. Open questions allow the

It may be necessary to prepare different tools

interviewee to answer the question with his or

(either questionnaires or checklists), for each

her own words. Closed questions include all

type of actor to be interviewed. For example,

possible responses to the questionnaire, which

interview checklists may be more practical for

are chosen by the interviewee. Examples of

traders, while short questionnaires should be

closed questions are those of multiple selections

prepared for heads of purchases of supermarket

or of scoring against a scale. Questionnaires

chains and food-processing companies or

with closed questions are easier to process, but

agroindustries.

open questions are widely used because it is

impossible to anticipate all possible answers to

Planning matrix

questions. In general, questions should be easy

To assist the research team to develop specific

to understand, so wording has to be kept

survey tools for specific contacts, a matrix can

simple. An example of a simple questionnaire

be developed as an aid for determining the

developed for a supermarket produce manager

number and types of questionnaires or

is given in Box 1.

interview guides required for the Rapid Market

Opportunities Survey (Table 9). Before building

Checklists

this matrix, the research team should prepare a

Interview guides/checklists are used in

list of products for investigation according to a

unstructured surveys, which seek to direct the

selected research strategy and a list of types of

interview according to the replies. They usually

people that should be interviewed.

Table 7. Matrix format for a questionnaire on purchase conditions.

Product

Purchasing conditions or requirements - 1

Required quality

Preferred variety of

Preferred presentation

Unit purchase price

aspects

product

or packaging

Product

Purchasing conditions or requirements - 2

Method of payment

Minimum volume

Preferred frequency of

Minimum acceptable

purchased per

purchase

supply continuity

supplier

33

Identifying Market Opportunities for Rural Smallholder Producers Box 1

Questionnaire for a supermarket produce manager

Section 1. Information on contact and interviewer

1. Person interviewed:

2. Position:

3. Business name:

4. Interviewer(s):

5. Which agricultural products do you trade in?

Fruit Vegetables Red Meat Poultry Dairy Spices Processed Cereals Fish Other Name others:

Section 2. Strategy 1: Products showing a good growth rate in sales 6a. Was the volumes of sales of

(example product)

in your business?

Greater Equal or Less than last year 6b. How would you describe the changes in sales?

Small change Medium change Large change Do you know why demand has changed?

7. Which products have had the highest increase in demand?

a.

b.

c.

d.

Section 3. Strategy 2: Products in scarce supply but in high demand 8. Do you find difficulties in obtaining any particular products?

9. If yes, what specific product(s) are in scarce supply?

a.

b.

c.

d.

10. Why is this product (or these products) scarce? (keep in same order) a.

b.

c.

The columns in Table 9 indicate the research

specialize. Other contact types, such as heads

strategies and the rows indicate the contacts

of purchases for supermarkets and

that should be interviewed. This matrix is

marketplace retailers will probably have

useful to help the research team visualize which

information on a wide range of products.

contacts should be interviewed for each

strategy. The research team should aim to

This implies that the latter contact types would

gather information with the least number of

be ideal interviewees for Strategies 1 and 2. In

questionnaires or checklists.

the case of processing firms, if they market a

wide range of products, they will be able to

The research team should be aware that some

provide information on many different products.

contact types, such as traders and wholesalers,

However, this will not always be the case, since

will probably have information on only a limited

some processing firms specialize in one or two

number of products, because they tend to

products.

34

Defining and Conducting a Rapid Market Survey

Table 8. Market survey checklist.

Topic checklist

Subtopics/Information

Questions/Comments

required

Personal information

Name

For established firms try to get a business card or mobile Physical address

phone no. for purposes of future reference

Telephone

Type of business

Value addition

How does the respondent add value along the market

chain?

Physical functions

Does he change the form of product (processor)? move the Experience

product (transporter) or store the product (wholesaler) or is he a retailer or consumer. Is there vertical integration?

Demand

Quantity

· Quantity sold normally, e.g., per day, week

Type of buyer

· To whom do you sell?

Seasonality

· Are there changes in volume of sale over time?

Variety

· Are there different varieties?

Consumer

· If so, what is their respective demand/preference?

Preferences

· What is the price variation per variety?

Price data

··Are there changes in prices over time?

· If so, what are the reasons?

What are key problems in selling your products?

Supply

Source by area

· Which are your supply areas (geographically)?

Source by type of person

· From whom do you buy?

Price

· From where do you buy? (meeting pt.)

Quality

··What is the current price for the top three varieties?

· Does the price change over time? If so, why? and how?

Do you have problems getting products? If yes, describe Quality

Perishability

·

Post harvest issues

· What is the quality of products along the chain?

What is the shelf life of the products?

Storage

Quantity

· How much do you usually store?

Time

· For how long?

Storage problems

··Do you have any storage problems?

Do you experience storage losses?

Grading and sorting

Grading incentive

··Do you grade or sort?

Do better grades fetch higher prices?

Market information

Sources

· Do you get market info? (e.g., on prices)

Spatial arbitrage

··If so, from whom and how?

Are there large price differences between markets at a given time?

Price formation

Market power

··Who determines the price?

· How is the price determined?

If firm/individual is a price taker, find out why

Institutional and legal

Associations

·

framework

· Do you belong to an association?

Are there any market regulations? If so, which are they and how do they affect your business?

Market structure

Competition

No. of sellers

Is there price competition?

· Is there non-price competition? If so, how (interlocking

· markets)?

Credit availability

Sources and type

··Are there any credit institutions?

· Do you use them?

What are their rates of interest?

35

Identifying Market Opportunities for Rural Smallholder Producers NRM

Products that

support

activities

.7

low

Products

commodity

groups,

value/high

value

.6

Products in

which the

region has a

competitive

advantage

.5

into

area

Products

imported

the

.4

Research survey strategies

that

traditionally

Products

are

grown by

clients

.3

supply

Products in

scarce

.2

Products in

high demand

.1

Type of contact

Traders or

middlemen

Agricultural

wholesale centers

Marketplaces:

wholesalers and

retailers

Heads of

purchases for

supermarkets

Food-processing

companies

Corner store

retailer

Small kiosks or

Duka’s

Shops and

retailers

Street vendors

Table 9. Planning matrix to determine research tools.

36

Defining and Conducting a Rapid Market Survey

2.4. Collecting Market Information

Once the survey tool has been designed and

Sources of secondary information

tested, the next step is to gather information.

·

This process should begin with gathering

· Chambers of Commerce.

relevant secondary information. Based on this

· Development agencies.

information, the primary data collection can

· Local development agencies.

focus on information gaps.

· Local governments.

· Market information centers/telecenters.

National, departmental, provincial, or

Sources of secondary information

There are many sources of secondary

· municipal governments.

information as indicated in the list below.

· Nongovernmental organizations.

General information on issues such as national

· Local press.

Press, specialized and standard

production statistics can usually be obtained

through agencies such as the Ministry of

· publications, and journals.

agriculture or statistics. Market information

· Service providers, local consultants.

centers and wholesale markets are usually good

· Trade associations.

sources for obtaining price series data.

· Trader associations.

Economic and agricultural publications and

· Wholesale supply centers and marketplaces.

agricultural and livestock and economic

· Consultants.

sections of newspapers can be good sources of

· Internet.

Private-sector companies.

information on market trends and new product

options. In some cases, hiring a consultant to

Collecting primary data

help acquire secondary information may be

Collecting primary information is like being a

justified, especially if the target product is

detective. The process of data collection means

related to a specialty market or is traded in

that the researcher needs to behave like an

overseas markets. A full list of contact points

analyst during the study and not be a passive

for gathering secondary information is given in

enumerator. The researcher needs to consider

Table 3 (page 29).

what the client is trying to define, to focus on

identifying options that are in demand. This

requires that market chain actors are

37

Identifying Market Opportunities for Rural Smallholder Producers considered to be the experts, who hold vital

research team should be aware that generally

information.

operate very early in the morning and generally

have limited amounts of time for questioning.

As the process is rapid, the researcher needs to

Interviews with traders should be short and to

gather minimal amounts of information, but

the point. Key areas of information to collect from

also be rigorous, ensuring that information

traders are related to market trends, demands for

from one interview is confirmed through

specific varieties, quality parameters and major

questioning other chain actors. The researcher

constraints to sales. Interviewers should also

also needs to be flexible and be prepared to

determine how payments are made to farmers

investigate new areas as they arise. The

and any services that the traders provider to the

researcher therefore needs to listen carefully to

farmer groups. Traders may also be able to

the answers from interviewees, be prepared to

explain why some farmers or farmer groups are

challenge answers if they seem inaccurate or

more successful and provide information relative

inconsistent with other answers and at then

to interesting opportunities for new enterprises.

end of each day to review the information and

piece together the separate responses to build

Wholesale supply centers and

an idea of the market opportunities.

marketplaces

These locations are key sources of information

Traders

because they concentrate many actors such as

Traders are often considered to be exploitative

wholesalers and retailers, selling a wide range of

middle men in the market chain, who are

products. Actors in these sites tend to pay cash

unwilling to give accurate information and

and their quality demands are not too strict. In

make it their practice to cheat innocent farmers

these strategic sites, data collection for the

when buying goods. This is generally not the

research team should focus on three main

case, most traders are interested in discussing

objectives:

their business and generally offer farmers a fair

price. Due to their position in the market chain,

· To visit central information centers (if they

they are an especially good source of

exist, they are usually located in the market’s

information.

administrative office), to obtain secondary

information to identify either products with

The research team should make particular

high and intermediate demand growth or

efforts to interview traders in both rural and

scarce products, and on the other products

where possible urban centers. However, the

related to Strategies 3 to 6.

38

Defining and Conducting a Rapid Market Survey

· To obtain monthly price-series data for

Several categories of agricultural and rural-

several years if possible, which may be

sector related products sold in supermarkets

available in such central information

are listed below:

centers. This monthly price information will

help identify the degree of monthly price

·

variability and to determine annual patterns

· Basic grains sold in bulk or packaged.

of low and high prices for individual

· Fresh fruits and vegetables.

· products of interest.

· Fresh meat and fish.

To interview wholesalers and retailers

· Dairy products.

operating there, to identify products with

· Fresh and dried herbs and spices.

high and medium demand growth and

· Flowers.

scarce products, and with respect to

· Handicrafts.

products corresponding to Strategies 3 to 6.

· Flours and starches.

Canned and bottled fish, meat, fruits and

Purchase centers for supermarkets

· vegetables.

These sites can provide considerable amounts

· Bottled products.

of useful information because supermarkets

· Frozen and refrigerated products.

Rural agro-industrial products.

retail a wide range of products. In particular,

supermarkets are excellent sources of

Agroindustries and food-processing

information for identifying high-growth

companies

products or products in scarce supply, and in

Industrial entrepreneurs are another excellent

general, for all of the research strategies.

source of current market information for all

survey strategies. The research team should be

However, the research team should be aware

aware that processing firms are interested in

that supermarkets generally do not pay cash to

buying low-cost, second- or third-grade

suppliers, can take several weeks or months to

agricultural products that cannot be sold as

make payments, and may request special

fresh produce. This is important because a

discounts from suppliers to cover promotional

often used and highly successful marketing

costs. Methods of payment have important

strategy for smallholder producer organizations

implications for smallholder rural producers:

is to sell first-grade products to more

(a) they will need working capital, and (b) they

demanding clients such as supermarkets that

will need other sources of income while they

will pay premium prices and second-grade fresh

wait for supermarkets to pay them. In addition,

produce to marketplaces and third-grade

supermarkets tend to be more demanding with

products to industrial processors. In this way,

respect to product quality and presentation.

all produce can find a market, over an optimal

range of cost-quality parameters.

Heads of purchases are very busy people, and

the research team will usually need to ask for

If the survey is directed only towards local

an appointment well in advance. There may be

companies, the research team may be able to

several heads of purchase in the supermarket

cover the entire population being sampled. If

chain; each one specializing in a different

the market survey coverage is broader, a quota

product category. For example, purchasing of

sample will have to be selected in accordance

fruits and vegetables is generally the

with the products of interest for the market

responsibility of one person. The fruit and

survey. Local companies can use raw materials,

vegetable head of purchases should be

including fruits, vegetables, grains, milk, meat,

contacted, as these products offer good income

cereals, roots, tubers and vegetables, from

prospects for smallholders.

smallholder producers.

In this case, the use of a questionnaire is

The research team must identify the most

recommended to facilitate collection of data on

suitable person to interview. If the company is

many products. However, questionnaires for

small, the ideal person may be the owner,

heads of purchase of supermarkets will tend to

general manager, or marketing manager. If the

be long. In this case, the research team should

company is intermediate in size or large, then it

explain, and if necessary, make more

is better to contact the head of purchases.

appointments.

These companies handle a great deal of

39

Identifying Market Opportunities for Rural Smallholder Producers confidential information and the interviewer

· For specific data gathering, do not interview

must guarantee that all information given to

more than one person at a time. Focus

him/her will be handled confidentially.

groups do not work with traders or business

Interviewees may be unwilling to provide

people, particularly when dealing with

information on sales volumes, but it is even

commercial data, such as prices and

more important to obtain information on

annual growth rates of sales for their products

· volumes of trade.

Interviewers should be flexible and be clear

and on basic buying conditions.

about the purpose and timing of the

Other industries and retail stores

· interview and stress confidentiality.

Be friendly and relaxed, use humor and ask

The preliminary product lists for Strategies 3 to

simple and clear questions, avoid influencing

6 will include a wide range of products that will

surely lead the research team to contact many

· or suggesting replies.

Follow a logical sequence, avoid leading

sorts of companies and stores. For example, in

a market opportunities identification survey

· questions.

conducted in south-western Colombia, a candle

· Ask most sensitive questions last.

Be prepared to listen and learn, and try to

factory, flower shops, dairy industries, and

engage the respondent

frozen fruit-pulp producers were interviewed.

- don’t be afraid to challenge the accuracy

These sales outlets were not considered in the

of the information provided.

initial survey plan, but were found to offer

interesting market opportunities. Hence,

· - use diagrams to assist discussions.

Investigate new areas of interest as they

another important aspect of the study is that

the research team needs to be flexible and

· arise.

Use the information from one interview to

follow up on new leads as they arise.

· improve the next interview.

Interviewers must make sure that contacts

Tips for collecting primary

specify units, such as product type, weight,

information

·

· volume, and time units clearly.

Where possible, interviews should not be too

Begin all interviews by introducing yourself

long, although this may be, on occasion,

and your organization. Where possible,

unavoidable. An interview lasting

interviewers should make appointments with

30 minutes is long. If it’s likely to take

contact people, then confirm and keep them.

longer, the interviewee should be previously

· Appointments can be made by phone.

informed and the interviewer may request

Interviewers should introduce themselves

that the interview be conducted in two

and have a formal letter using stationery of

the organization executing the survey. This

· sessions.

At the end of each day, the research team

may not always be necessary but is helpful

should discuss the major findings and write

to identify and empower the interviewer. The

up a short summary sheet from each

letter should also inform of the survey’s

interview to facilitate data analysis and

objectives and emphasize that all

· information will be handled confidentially.

· preparing the report.

Supervision: Of interviewers is optional, Interviewers must be informed of the

depending on the degree of confidence that

survey’s objective and be familiar with the

exists. The facilitator should accompany the

· research tools developed.

research groups on their first interviews and

Interviewers should be dressed respectably

to discuss the results with the group on

and give the interviewee their full attention.

Switch off mobile phones and be professional

· completion of the interview.

Timeframe: The rapid market survey is

· at all times.

designed to be a short-term project.

No more than three reliable people are

However, the time taken to complete this

needed to gather this information, with the

task depends upon the amount of strategies,

support, if necessary, from one consultant.

products and client groups that are involved.

In most cases 2 people are better, one to ask

We suggest that research team should aim

questions and the other to record answers.

to spend at least 2-3 days in preparing and

Small teams are not threatening and can

gather more sensitive information more

· testing the questionnaires.

First time: The first time that a survey is easily than having larger groups.

conducted, and especially if the team

40

Defining and Conducting a Rapid Market Survey

includes a high degree of participation

strategy. The selected additional strategy should

between farmers and service providers, we

have a limited number of products not more than

recommend that you start by focusing on a

5. As a trial run the number of contacts should

local market. Do not make the first survey

also be limited to 5 types of informants. Within

interviews too complicated.

each interview category, limit the number of

interviews to 5 for each category. Given this level

Start by developing your survey using only

of information gathering it should possible to

research strategies 1 and 2, plus one other

complete the survey.

2.5. Analyzing Data and Preparing Product Option Report After collected primary and secondary data, the

opportunities. These considerations indicate the

next task for the research team is to analyze the

qualitative nature of the study, which makes it

data and provide the first set of market options

difficult to process the data using a

to the clients for their comments and further

computerized statistical package such as SPSS.

insights.

Therefore it is recommended that the research

team, led by its coordinator, undertake manual

Data processing

processing of the information. The research

The information gathered for the Market

group is well prepared for this task as they

Opportunities Identification Survey will be

understand the survey objectives and collected

located in several questionnaires and interview

the data. The information should be organized

guides, and will probably include many

by product and market type to facilitate data

responses to open-ended questions. The

processing and analysis. Information on

research team will have questionnaires

opportunities for domestic and export markets

completed by traders, wholesale supply centers,

should be separated.

supermarkets, agroindustries, retailers in

marketplaces, corner stores and other types of

First level of data analysis

shops. There will also be documents, articles

The information obtained from the survey can

and data on different products and export

be classified into four categories:

41

Identifying Market Opportunities for Rural Smallholder Producers

· A “long list” of market opportunities for the

Product option report

area in the domestic market and, if included

The structure for the product option report can

in the initial survey objectives, also for

be organized by market type and strategy as

· export markets .

indicated in Table 11. Note that the products

A description of trends in market demand,

corresponding to Strategies 1 and 2 are not

· including the estimated annual growth rate. determined beforehand, but are identified Information on the months of scarcity and

during the Market Survey. In contrast, the

· the reasons for this situation.

products of Strategies 3 to 7 are chosen

A summary of the basic purchasing

beforehand.

conditions.

The matrix proposes two reports, one focused

Determining the first market option

on the local market and the other on the

portfolio

international market, if this has been included.

The initial synthesis of data will lead to a “long

Each report is divided into sections containing

list” of products and it is recommended that the

information on product options for the research

research team reduce this list down to a

strategies studied. These include the list of

maximum of 10 market options to keep the

market options and the basic purchase

subsequent work at a manageable level.

conditions. As the report can be long, an

executive summary should be prepared with the

To reduce the long list down to a manageable

most important conclusions in accordance with

number, selection criteria should be developed

the Market Survey’s objectives and original

to enable the team to discard options in an

strategies.

objective but rapid manner. Selection criteria

can include issues such as:

Contents, and drafting of the report

Below are suggestions on content and drafting

Selection criteria to reduce long list

of the final report:

of products

·· Local knowledge to produce the product.

·

· Access to local technical support.

· Organize the report into clear sections.

Only include information relevant to the

· Investment costs to establish the product.

· Costs and availability of inputs.

· objectives and strategies.

Where possible, detail the information on

Time from planting to first harvest and

products representing a marketing

· payments.

· Estimated rate of market growth.

· opportunity for the targeted region.

Summarize as much as possible, and avoid

· Fit with current production systems.

· Local marketing capacity of the product.

· being repetitive. Use matrixes and tables.

Make sure your report has a title page, a

· Level of competition from larger growers.

table of contents, an executive summary, a

· Market price volatility.

bibliography and a list or directory of

Fit with local culture.

· contacts or buyers.

Specify the dates on which fieldwork was

The research team can propose additional or

performed.

different criteria, and use templates as shown

in Table 10 to evaluate options. The opinion of

Present information in a consistent manner, for

the smallholder rural producers in the research

example, matrices should have the same

team is very important when grading the

format.

market options. The market options with the

lowest total scores should be discarded. Having

· A summary of the final report in PowerPoint

obtained the 10 market options as the main

will be very useful for presenting the results.

output of the Rapid Market Survey, the

research team can now proceed to prepare the

first product option report.

42

Defining and Conducting a Rapid Market Survey

Table 10. Screening procedure for the initial set of market options.

Market option

Screening criteria

Competitive

Availability of

Estimated

Fit with

Estimated

Total score

advantage

local

growth rate or

current

level of

knowledge

scarcity level

production

investment

systems and

markets

Max: 5

Max: 5

Max: 5

Max: 5

Max: 5

Min: 1

Min: 1

Min: 1

Min: 1

Min: 1

Product 1

Product 2

Table 11. Suggested structure for the rapid market survey’s final report.

Components

Part 1: Domestic markets

Part 2: International markets

Executive summary

Section A:

Section B:

Section A:

Section B:

List of market

Demand trends,

List of market

Demand trends,

options and reasons

supply constraints

options and reasons

supply constraints

for inclusion

and purchase

for inclusion

and purchase

conditions for each

conditions for each

market option

market option

Report 1

Section A:

Section B:

Section A:

Section B:

Strategy 1:

List of market

Demand trends,

List of market

Demand trends,

Products in high

options and reasons

supply constraints

options and reasons

supply constraints

demand

for inclusion

and purchase

for inclusion

and purchase

conditions for each

conditions for each

market option

market option

Report 2

Section A:

Section B:

Section A:

Section B:

Strategy 2:

List of market

Demand trends,

List of market

Demand trends,

Scarce products

options and reasons

supply constraints

options and reasons

supply constraints

for inclusion

and purchase

for inclusion

and purchase

conditions for each

conditions for each

market option

market option

Report 3

Section A:

Section B:

Section A:

Section B:

Strategy 3:

List of market

Demand trends,

List of market

Demand trends,

Traditional

options and reasons

supply constraints

options and reasons

supply constraints

products

for inclusion

and purchase

for inclusion

and purchase

conditions for each

conditions for each

market option

market option

43

Identifying Market Opportunities for Rural Smallholder Producers Exercise 2.1

Determining Research Tool Requirements

Objective

· The trainee should be able to determine the different research instruments and formats required to obtain primary information in the Rapid Market Survey.

Instructions for the Facilitator and Trainees

1. Form groups of four or five, preferably by region, and name a coordinator.

2. Suppose that you are conducting a Rapid Market Opportunities Identification Survey for a given region and that you have to determine the number of tools (questionnaires or checklists) required to execute all seven strategies. Assume that the products lists for Strategies 3 to 7 are as follows: Strategy 3. Traditional products: beans, maize, pigs.

Strategy 4. Imported products: lettuce and cabbage.

Strategy 5. Products in which the area has a competitive advantage: roses.

Strategy 6. Products related to a commodity group: soybean, apples, blackberry.

Strategy 7. Products related to soil conservation: dairy products.

3. Use the tool matrix as an aid to determine the types of contacts that you will need to interview for each of the six survey strategies.

4. Decide for each type of contact, whether you need a questionnaire or checklist.

5. Decide for each type of contact, whether the tool serves one or more strategies.

6. Think and write down the different tools you need in the tool matrix. See the Worksheet.

7. Then, in the Worksheet list the tool formats with their respective description. Make sure that the list of tools meets the needs for all strategies.

8. Write details of the Worksheet onto a large piece of paper or in PowerPoint, for presentation in a plenary session.

·Resources needed

· Section 2 of the guide.

· Worksheet for Exercise 2.1.

· Paper and pencils.

· Flip chart or PowerPoint projector.

Magic markers or markers for the transparencies.

Time required: 2 hours.

44

Defining and Conducting a Rapid Market Survey

natural

products

Study

demand

for

associated

with

resource

management

6.

Study

demand for

products in

which the

region has a

competitive

advantage

5.

that

imported

Study

demand for

products

are

into the area

4.

and

Study

demand for

traditional

biodiversity

products

Market research survey strategies

3.

that

scarce

Identify

products

are

2.

with

Detect

products

high or

medium growth

in demand

1.

contact

of

Exercise 2.1

Matrix to Determine Research Tools – Worksheet

Type

Traders or

middlemen

Agricultural

wholesale

centers

Marketplaces:

wholesalers

and retailers

Heads of

purchases for

supermarkets

Food-processing

companies

Corner store

retailer

Shops and

retailers

45

Identifying Market Opportunities for Rural Smallholder Producers Exercise 2.1

Determining Research Tool Requirements – Feedback

There can be many different answers to this exercise, and all can be correct. Contact types like supermarkets and wholesale centers that work with many products can be interviewed for several strategies. Some contact types, such as agroindustries and traders, who are usually specialized in one or two products, can be interviewed with respect to fewer strategies. Agroindustries purchasing fruits and vegetables should be contacted for Strategies 1 and 2. Note that some tools are directed to a single strategy or product. As a rule, checklists are used more with traders and wholesalers.

Tool

Questionnaire (Q)

Type(s) of contact and/or product(s)

List strategies included in

no.

or interview guide (G)

tool

1

Q

Heads of purchase of supermarkets

All

2

Q

Agroindustries: fruits and vegetables

Strategies 1, 2, 3 and 6

3

Q

Agroindustries: dairy products

Strategy 4

4

Q

Flower shops (retailers)

Strategy 6

5

G

Traders and wholesalers: fruits

Strategies 1, 2 and 6

6

G

Traders and wholesalers: vegetables

Strategies 1, 2, 3 and 6

7

G

Traders and wholesalers: flowers

Strategies 1, 2 and 5

8

G

Agricultural wholesale centers

Strategies 1, 2, 3, 4, 6 and 7

9

G

Marketplace retailers: fruits

Strategies 1, 2 and 6

10

G

Marketplace retailers: vegetables

Strategies 1, 2, 3 and 6

11

G

Marketplace retailers: flowers

Strategy 5

46

Defining and Conducting a Rapid Market Survey

Exercise 2.2

Questionnaire to Study Product Purchasing Conditions

Objective

· The trainee will design a simplified questionnaire for identifying key purchasing conditions or requirements for a given product of interest.

Instructions for the Facilitator and Trainees

1. Form groups of four or five trainees and name a coordinator.

2. The group should examine Tables 7-11, which provide topics for key questions directed to studying buyer requirements.

3. The group will select both a product and a type of contact for the simplified questionnaire.

4. The group will prepare complete questions for the eight topics in the matrix columns, and make sure that the questions are easily understood, and keep vocabulary as simple as possible.

5. All questions should be open-ended, except for the question on method of payment and frequency of purchase, which can be closed. Therefore the group will think of appropriate response options to close the two questions.

6. Write the complete questions in the Worksheet for this exercise.

7. Afterwards, transfer the Worksheet content onto a large piece of paper or transparency to present in a plenary session.

Resources needed

·· Section 2 of the guide.

· Worksheet for Exercise 2.2.

· Paper and pencils.

· Flip chart or PowerPoint projector.

Magic markers.

Time required: 1.5 hours.

47

Identifying Market Opportunities for Rural Smallholder Producers Exercise 2.2

Developing a Simplified Questionnaire to Study Product Purchasing Conditions – Worksheet

no.

Topics

Questions

1

Required quality aspects

2

Preferred variety of product

3

Preferred presentation or

packaging

4

Unit purchase price

5

Method of payment

(closed)

6

Minimum volume purchased

per supplier

7

Preferred frequency of purchase

(closed)

8

Minimum acceptable supply

continuity

48

Defining and Conducting a Rapid Market Survey

Exercise 2.2

Developing a Simplified Questionnaire to Study Product Purchasing Conditions (Mango) – Feedback

no.

Topics

Questions

1

Required quality aspects

(a) Which is the list of key quality requirements for the mangoes that you purchase?

(b) Is that all?

2

Preferred variety of product

(a) Which mango varieties do you buy?

(optional)

(b) Which variety do you prefer?

3

Preferred presentation or

What presentation or packaging to you demand from

packaging

your mango suppliers?

4

Unit purchase price

(a) Which is the unit of purchase for mangoes?

(b) At what price per unit are you currently buying?

5

Method of payment

(closed)

What is your method of payment for mangoes?

a. For cash.

b. After 1 week.

c. After 2 weeks.

d. After 1 month.

Other: _____________________________________________

6

Minimum volume purchased

Which is the minimum volume of mangoes that are

per supplier

you willing to purchase per delivery from a given

supplier? Please specify the units

7

Preferred frequency of purchase

(closed)

Which is your preferred frequency of purchase for

mangoes?

a. Every day.

b. Every 2 days.

c. Once a week.

d. Every 2 weeks.

e. Once a month.

Other: _____________________________________________

8

Minimum acceptable supply

Which is the minimum acceptable supply continuity

continuity

expected from a given supplier?

49

Identifying Market Opportunities for Rural Smallholder Producers Practice 2.1

Observing Product Categories in a Supermarket

Objective

· The trainee will observe the variety, characteristics and will make an inventory of selected agricultural and agroindustrial product categories sold in a supermarket.

Instructions for the Facilitator and Trainees

1. Form groups of four or five trainees and name a coordinator.

2. Each group will be assigned one of the following product categories:

- Basic grains sold in bulk or packaged.

- Fresh fruits.

- Fresh vegetables.

- Flours and starches.

- Canned fruits and vegetables.

- Bottled fruits and vegetables.

- Refrigerated products.

- Frozen products.

3. Trainees will place special attention to the product’s packaging, label, brand and origin (if applicable).

4. Each group will make an inventory of the products in the category assigned to them, using the format in the Worksheet for this practice.

5. Each group will transfer the Worksheet format into a large paper or transparency.

6. The coordinator will present findings in a plenary session.

·Resources needed

· Worksheet for Practice 2.1.

· Permission from the supermarket’s administration to visit the store.

· Transportation to and from the store.

· Note cards and pencils.

· Flip chart or overhead projector and transparencies.

Magic markers or markers for the transparencies.

Time required: 3 to 4 hours.

50

Defining and Conducting a Rapid Market Survey

Practice 2.1

Observing Product Categories in a Supermarket – Worksheet Group no.

Product category

Product

Type of

Brand

Describe

Origin

packaging

its label

51

Identifying Market Opportunities for Rural Smallholder Producers SECTION 3

Assessing and Selecting Market Options

General Objective

Orienting Questions

After studying this section, the reader or trainee

1. What are the main social and economic

will be able to assess, characterize and select

differences between smallholder rural

market options for a given area, with input from

producers and large, commercial rural

the rural community.

producers?

2. Why is it important to take social and

Specific Objectives

economic profiling into consideration when

The reader or trainee will be able to:

designing a marketing strategy?

·

3. What aspects make a crop or product

Establish appropriate evaluation criteria for

more attractive to a smallholder rural

· screening market options.

producer?

Design and prepare characterization

4. What types of information should be

· matrices for screening market options.

gathered to determine whether a crop or

Use a profitability model and interpret the

product is feasible and economically

· results.

attractive for smallholder rural producers?

Explain valid reasons for discarding market

5. In what ways can the rationale or point of

· options.

view of a technician or rural development

Conduct a final evaluation of market options

expert differ from that of a smallholder rural

· with the rural community.

producer?

Design instruments to evaluate market

options.

52

Assessing and Selecting Market Options

3.1. Establishing Appropriate Evaluation Criteria The previous section presented a method for

first filter can be used to reduce numbers of

identifying a “long list” of products with market

potential products from 20+ down to 5-10,

potential through a Rapid Market Survey. The

which are more difficult to discard and need

“long list” of products was then reduced to

to be studied in more detail. This is a rapid

those options considered more appropriate for

process undertaken through consensus

smallholder producers. This first method,

selection and discard by the marketing team.

however, did not prioritize the remaining

This method was described in Section 2

market options.

of this guide.

(ii) Discards based on the comparison of

This section provides an objective method for

standardized data. This process collects

comparing and prioritizing across different

detailed information on the (i) production,

types of products, such as crops and livestock,

(ii) marketing and (iii) financial performance

or forest and processed products. This method

of products to enable different types of

also enables the research team to adjust the

options, i.e., “apples and pears” to be

selection critieria to meet the needs of clients at

compared in an objective manner. This

different wealth levels or groups having different

proces will reduce the 5-10 promising

skills and assets. The ability to maket these

products, down to 2-3 products for

types of decisions is achieved by comparing

discussion with the client groups, i.e., the

standardized information about different

investors.

products that has been organizing into

(iii)Preference of the producers. This final

structured tables or matrices, based on their

selection process is made by the client group

(i) agronomic, (ii) livestock, agroindustrial,

based on a discussion of options with the

(iii) marketing and (iv) financial performance.

research team. The client group have the

casting vote on which is the most suitable

In summary the selection process has three

option. This final process should reduce the

elements:

product focus down from 2-3 options down

to 1 product for subsequent development and

(i) Obvious discards based on overriding

investment into a new or improved

constraints. This method removes products

agroenterprise.

that are clearly unsuitable for the client

group, for reasons such as: product cannot

This section deals with the last two selection

be grown in the area, initial investment too

methods. Much of the information required,

high, time to first payment too long, etc. This

especially the marketing information, will have

53

Identifying Market Opportunities for Rural Smallholder Producers been collected through the Rapid Market Survey;

The application of this criterion is closely

however, this characterization phase will require

related to official local policy regarding rural

additional information, related to agronomic,

development, because the feasibility of a rural

livestock, agroindustrial and financial aspects.

business or production project will depend on

the availability of local basic infrastructure and

In the final stage, results for the most promising

support services, including business coaching,

market options are presented to the rural

technical assistance and credit. In this case, we

community by the research team. The salient

assume that the government or service provider

characteristics of each market option are

will offer modest support to the smallholder

described to the rural audience (with the aid of

rural production sector.

summary sheets), and then a sample of

smallholder rural producers proceed to rank by

Attractiveness from a business and

preference. This procedure is based on ‘concept

financial perspective

testing’, a method commonly used in the fields

Smallholder rural producers can be segmented

of market research and new product

according to their degree of market orientation;

development. The final product portfolio is the

(i) commercial producers who sell all they

main output of this guide.

produce; (ii) semi-commercial producers, who

consume and sell what they produce; and

Defining selection criteria

(iii) near-subsistence producers, who consume

Having made the first evaluation and selection of

most of their produce. This method is focusing

products, the research team begins the second

on the needs of the first two categories of

and more detailed analysis of the product

smallholder producers, i.e., those who sell a

options. In this stage, selections can include

percentage of their production. We believe that

more detailed evaluation criteria such as:

these groups require particular support, as

·

their future economic prospects will be related

Feasibility of the product in the economic

to their ability to engage in markets more

· context of smallholder producers.

effectively.

Attractiveness of the market option from a

· business and financial perspective.

Regardless of the degree of commercialization,

Contribution to, or at least, lack of, harmful

all small farm and business enterprises have

· effects on production sustainability.

many points in common. They (a) sell products

Potential impact in terms of numbers of

and/or services, (b) use and manage human

rural producers that could benefit from

resources, including family labor, (c) use

support to a market option, through

natural resources, raw materials or inputs to

· increased income and employment.

generate products, (d) make investments and

· Potential for value addition.

(e) demand support services, such as technical

Ability to achieve marketing gains within a

assistance and credit, and are (f) linked into

· short-term period.

business networks. Consequently, when

Maturity of private sector actors for this

selecting market options, it is essential to

· product.

characterize options from a business viewpoint

Compliance or fit with the social and

and analyze opportunities with a view to

cultural context and traditions.

matching market options with client profiles,

i.e., risk against levels of assets, skills,

Feasibility in the social and economic

competitiveness, growth trends, profitability

context of the smallholder producer

levels, degree of price stability, purchasing

Smallholder producers can be distinguished

conditions, competition (quantity, type and

from large and intermediate scale producers

strategies), etc.

because they have less land, smaller risk

capacity and less working capital, less access to

Contribution to production

infrastructure, support services, credit and use

sustainability

of family labor. The market options selected,

A high percentage of smallholder rural

therefore, must be relatively simple to

producers live in hillside areas and in humid

implement, the technological level should be low

tropical lowlands, both fragile ecosystems that

to intermediate, and initial investment and

are highly susceptible to degradation. Therefore,

production costs should be affordable.

studying the possible impact of the market

options relative to sustainability is important.

54

Assessing and Selecting Market Options

3.2. Characterizing Market Options Using Summary Matrices The second level of analysis is based on the

business plans, a key activity for market chain

collection of pertinent information related to

strengthening10.

product options based on their agronomic,

livestock, agroindustrial, marketing and

Proposals for these matrices are explained below.

economic characteristics. To enable

The research team should feel free to change

comparisons to be made, this information is

and improve these matrix models. Once

summarized into data tables, hereafter termed

characterized, market options can be assessed

“matrices”.

according to the defined criteria.

Matrices facilitate the comparison of different

Agronomic characterization

market options, there are three basic

Agronomic characterization is used to determine

matrices, (i) production, (ii) marketing and

whether a given market option is viable

(iii) financial. In testing of this guide, it was

according to biophysical conditions of the target

found that clients were also working with

region, under smallholder conditions. For

livestock and processed goods, and therefore,

example, if a region were characterized by low-

the production matrix was divided into

fertility soils, developing agricultural alternatives agronomic, livestock or agroindustrial, to

requiring fertile soils may be difficult or

taken on these additional option types.

expensive. If a region has limited rainfall and

lacks infrastructure for irrigation, then

This characterization process has many

production alternatives must be adapted to this

similarities with the pre-feasibility analysis

climatic situation. The data requirements in

commonly used for business projects. Pre-

Table 12 present an agronomic characterization

feasibility analysis focus on determining

matrix. The research group should fill in these

technical, economic, managerial,

data boxes for each product. Some components

environmental and social requirements for the

of the matrix are explained on next page.

success of a given project. After identifying

these project parameters, a key output will be

10. The development of new enterprise planning and

integration into competitive market chains is the

to conclude if the project is viable. Likewise,

topic of the next, or third module of the Participatory market-option characterization will provide

and Area-based Approach to Rural Agroenterprise

many inputs for the development of future

Development.

55

Identifying Market Opportunities for Rural Smallholder Producers Table 12. Agronomic characterization matrix.

Market option

Complete

Pre-production

Technical

Soil

pH

Water

cycle

cycle

demand

requirement

requirement

(years)

(months or years)

(low, average,

(mm/year)

or high)

Altitude

Labor

Planting

Need for

Major pests

Planting

Annual

requirement

requirement

period

irrigation

and diseases

density

yield

(m.a.s.l.)

(yes or no)

(no./ha)

(t/ha)

Complete cycle: is the cropping period from agricultural sector. Different regions may have

planting to when productivity falls below 30%

to be visited to gather information on

of the crop’s maximum production potential.

experiences with targeted crops, or experts can

For short-cycle crops such as maize and beans,

be contacted to provide such information.

the complete and pre-production cycles are the

same.

Also, secondary information available on

planting density and productivity frequently

Pre-production cycle: is the cropping period refers to experiences of large commercial

from planting to when productivity reaches at

producers or experimental farms, which practice

least 30% of the crop’s maximum potential.

input-intensive agriculture. Accordingly, for

production on small farms, information should

Technical demand: indicates whether the be obtained from the producers themselves, or

crop is tolerant (low), or requires improved

estimated as a percentage of commercial yields,

technology, considerable management, and a

even to as low as 10% or less, depending on the

high level of inputs (high).

yields of the rural economy. In this way, false

expectations of profitability are avoided.

Labor requirement: is the number of

mandays11 required per year or per cycle. It is

Livestock characterization

used to determine if the market option is labor-

This matrix is used when the market option

intensive, or not.

consists of livestock production, including cattle,

poultry, turkeys, pigs, sheep, rabbits, guinea

Need for irrigation: indicates whether the pigs, or fish, such as tilapia in small water

crop requires irrigation to reach production

tanks. Table 13 presents a model of a livestock

potential.

characterization matrix. Some components of

this matrix are explained below.

Some sources of information on crop agronomy

include institutions involved in training and/or

Market option: is the principal product of the technical assistance; agricultural publications

livestock enterprise, such as live animals, meat,

such as books, technical guides, and technical

milk, eggs, etc.

journals; key informants (people with specialist

knowledge/experience), for example,

By-product: is a secondary good that is derived producers; and professionals within the

from the production of the principal product; for

example, organic fertilizer, skins, gelatin, etc.

Installed capacity: is the maximum number of 11. Manday = One man working 8 hours.

animals that can be sold in a given unit of time.

56

Assessing and Selecting Market Options

Table 13. Livestock characterization matrix.

Market option

By-products

Technical demand

Capacity

Number of

Period of growth

(low, average,

breeders

or high)

Nutritional

Inputs

Main pests

Infrastructure

Working capital

Investment

Annual sales

system

and diseases

and equipment

required

Number of breeders: refers to the number of presents an agroindustrial characterization

animals used for reproduction purposes to

matrix. Some of its components are explained

generate young animals. If the livestock system

below.

is meant to purchase young animals externally,

this must be specified.

Market option: is the reason why the

agroindustrial plant is established.

Period of growth: place the time between

By-product: is generally a residue generated conception and birth and also the time required

during the operation of obtaining the main

from birth until the animal has reached the

product. Agricultural by-products can be sold

appropriate selling weight.

also, and are commonly used for animal feed or

as organic fertilizer.

Agroindustrial characterization

As agroindustrial products tend to be more

Conversion factor: is a ratio or proportion that complex than agriculture, the agroindustrial

indicates the amount of raw material required

matrix is very useful to gather, organize and

to produce a given unit of the principal

synthesize necessary information. Table 14

agroindustrial product. For example, in the

Table 14. Agroindustrial characterization matrix.

Market option

By-products

Raw materials

Other inputs

Technical

Conversion factor

demand

(low, average,

or high)

Capacity

Machinery and

Method for

Working capital

Investment

Annual sales

equipment

quality control

57

Identifying Market Opportunities for Rural Smallholder Producers case of the dried-cassava agroindustry, the

data on trends in product demand, competition,

ration 2.5:1 means that 2.5 kg of fresh cassava

product characteristics, markets and purchasing

roots are needed to produce one kg of dried

requirements of clients. Table 15 presents the

cassava chips.

marketing characterization matrix. Some matrix

components are explained below.

Installed capacity: is the maximum volume that can be produced in an agroindustrial plant

Current marketing: indicates whether the in a given period; generally the period used is

targeted region already produces and sells the

one month or one year.

mentioned product.

Working capital: refers to the amount of cash,

Competitors: describes the number, types and in addition to the initial investment needed to

strategies of the potential competition in the

operate the agroindustry (infrastructure,

business related to the market option.

machinery, equipment, etc.). Working capital is

used to finance the variable costs and fixed

Type of client: specifies the kind of buyer costs12 of producing or purchasing a product

identified for the market option. Services to the

that is sold. When the company receives

client explains whether the client offers some

payment for these products, the working capital

type of service to his suppliers, such as credit or

returns to the company, and so on. The working

technical assistance.

capital requirement is a function of the variable

cost and fixed cost per unit of product produced,

Scope of market: specifies whether the market the sales volume and the method of payment.

is local, regional, national, or export.

Marketing characterization

Growth of demand: classifies the market option A great deal of marketing information will have

according to its estimated annual growth rate. It

been gathered in the previous stage, the Rapid

is high if this parameter is above 6%; medium if

Market Survey. Market information includes

it’s 4% to 6% and low if it’s 1% to 3%.

Minimum volume purchased: is the least 12. Variable costs are those that vary directly with the amount purchased per delivery by the buyer.

volume produced; for example, raw material,

This information is key for smallholder rural

packaging, or fuel. Fixed costs are those that do not vary with the volume of production, but remain

producers, who generally offer smaller amounts

relatively stable, such as administration expenses.

of products.

Table 15. Marketing characterization matrix.

Market option

Current

Competitors

Type of client

Services to

Scope of

marketing

(number, types

clients

market

(yes or no)

and strategies)

SM = supermarket

TA = technical

L = local

FI = food industry

assistance

R = regional

I = industry

Cr = credit

N = national

Res = restaurant

Exp = export

Growth of

Minimum

Quality

Packaging

Delivery

Business

demand

volume

requirements

requirements

requirements

relationship

(high, medium,

purchased

(high,

or low)

intermediate,

PA = delivered at

AG = agreement

or low)

zone

PA = partnership

PW = delivered at

CO = contract

warehouse

58

Assessing and Selecting Market Options

Quality requirements: rates the level of quality will require some mathematics or the use of a

demanded, as high, medium or low; it should

computer. The team must ensure that the

also specify key quality aspects demanded by

information they are providing to clients on

the buyer.

profit is accurate and the facilitator should

ensure that all calculations are performed

Packaging requirements: indicates whether correctly. Much of the information gathered at

the client wants the product to be delivered in

the market can be used in the analysis of profit,

some type of presentation or packaging; for

but production costs will need to be determined

example, a plastic or cardboard box or in bags.

with the client group.

Delivery requirements informs: whether the

Basic profit/margin analysis: The simplest client wants the product to be delivered to the

method to evaluate and compare profitability of

farm, warehouse, or marketplace, etc.

different product within an enterprise is by

using methods such as gross margin analysis,

Business relationship: describes the type of net margin, or cost-benefit analysis. “Gross

commercial relationship that the client is

margin” is the final income paid to the producer

willing to establish with rural producers. Three

after all production costs have been subtracted

types exist: (a) an informal ‘agreement’ whereby

from the sales income (see example in Figure 5

satisfactory product quality, price, and volume

and Table 16). Gross margin can also be

effect the negotiation; (b) a ‘partnership’, which

presented as a percentage that is calculated by

is more formal, and implies greater commitment

first subtracting total variable or direct costs

between both parties; and (c) a ‘contract’, which

from total sales income. This result is then

is a formal relationship supported by a legal

divided by total sales income. Net margin is

document. A commercial relationship can evolve

calculated similarly, but fixed, or indirect costs

from one type to another.

and marketing costs and variable or direct costs

are subtracted from the total sales income. This

Financial characterization (profit)

result is divided by total sales income to give a

Assessing the profitability of a market option is

more accurate idea of the actual profit.

one of the most important selection criteria for

comparing products for smallholder rural

These methods require some practice in order to

producers. This selection process provides a

get accurate figures and it should be noted that

standard way to compare different types of

in many cases farmers, who do not have records

products and to evaluate risk. Economic

of their production costs, are likely to guess and

characterization reveals (a) conventional

often overestimate costs and underestimate

financial parameters such as investment level

incomes. In many cases, smallholders do not

and profitability, and (b) financial ratios which

cost their labor or that of family labor.

can be chosen and designed according to client

Therefore, the team may need to make some

needs.

assumptions in regard to a standard labor costs

that should be applied across all products,

Although smallholder rural producers may have

based on mandays to produce the product.

different rationale or perspectives to that of a

Take great care not to overestimate costs and be

typical businessman, they are undoubtedly

aware that farmers tend to inflate costs, so, the

interested in increasing their income. Income

research team will need to interview several

generation is now considered a key strategy for

clients, individually, to gather accurate

improving both well-being and food security of

information.

farm families. In addition, the promise of

profitability is a great motivator for collective

One of the limitations of the gross margin

action among smallholder producers, involving

analysis is that it only provides profit over one

the creation of economic organizations and

season and is therefore of most use for annual

marketing activities.

crops. The evaluation of profitability over a

longer period will require more complicated

Evaluating the profitability of small

forms of profit analysis. This may, however, be

agroenterprises is probably the most

required as some enterprises only show profit

demanding piece of work for the research team.

after 2 or 3 years.

To undertake this task effectively, the team will

need to gather appropriate data and may need

Multi year financial models: To develop to develop financial profitability models. This

financial models that provide information on

59

Identifying Market Opportunities for Rural Smallholder Producers Figure 5. Profitability analysis: “gross margin” for beans in Uganda.

profitability over a number of years, information

worksheets and scant business and financial

from both production and/or processing

background to prepare accurate financial

systems needs to be identified or proposed. To

models and work out profitability parameters

simplify the explanation, production systems

and ratios. This software will be available in

and financial profitability models will be

Spanish and English and can be downloaded

discussed in two parts. The part on financial

from both language versions of the Web site

models will also explain basic profitability

(Spanish: www.ciat.cgiar.org/agroempresas/

concepts, such as the Financial Rate of Return

espanol/inicio.htm;

(FRR) or Internal Rate of Return (IRR), and Net

English: www.ciat.cgiar.org/agroempresas/

Present Value (NPV). The Glossary also

ingles/index.htm).

contains many business and financial

definitions.

RentAgro also assists users in the calculation of

the amount of working capital required, interest

The use of the FRR or IRR and NPV parameters

payments, and in the execution of sensitivity

are recommended for all agroindustrial projects

analyzes. It may also be comforting to know

and, in perennial crops, when the project life is

that most spreadsheets such as Lotus 1-2-3

3 or more years. To make this evaluation easier,

and Microsoft Excel also have pre-programed

CIAT has developed a software, RentAgro, that

macros that can be used to calculate

facilitates the development of financial

profitability parameters such as IRR and NPV,

profitability models for all types of products.

with detailed help guides and tutorials.

RentAgro acts as a bridge between the user and

an electronic worksheet, requesting data from

The outline in Table 17 presents a proposed

the user step-by-step, while internally

economic characterization matrix. The research

constructing the financial model. This allows

team can design its own financial ratios.

users with little knowledge of electronic

Economic variables are explained on next page.

60

Assessing and Selecting Market Options

Table 16. Profitability gross margin analysis for cassava processing in Ghana.

Analysis of profitability

$ per annum

$ per ton

% of

of product

revenue

Operating costs - variable

Raw material - $25/ton

21,060

62.50

54

Fuel - $650 per machine per year

1,300

3.86

3

Direct labor

4,536

13.46

12

Transport from field

3

per ton

2,527

7.50

6

Packaging

2

per dry ton

674

2.00

2

Transport to market

9.5

per dry ton

3,201

9.50

8

Subtotal variable costs

33,298

98.82

85

Operating costs - fixed

Management ($150/month)

1,800

5.34

5

Shed lease

72

0.21

0

Drying facilities

122

0.36

0

Blade

42

0.12

0

Maintenance of machines

500

1.48

1

Subtotal fixed costs

2,536

7.53

6

Subtotal operating costs

35,835

106.35

91

Contingency - 5%

1,792

5.32

5

Total operating costs

37,626

111.66

96

Capital costs

850

2.52

2

Total annual costs

38,476

114.19

98

Annual revenue

39,200

116.33

100

Profit (loss) before tax

724

2.15

SOURCE: C. Collinson, NRI economic analysis.

Table 17. Financial characterization matrix ($ = national currency).

Market option

Level of

Price stability

Pre-production

Break-even

Average no. of

technology

(high,

investment

point

workdays per year

(high, medium,

intermediate,

($ thousands/ha)

($)

or low)

or low)

Sales per

Cash flow per

FRR without

FRR with

NPV without

NPV with

workday

workday

financing

financing

financing

financing

($)

(%)

(%)

($ thousands)

($ thousands)

Level of technology: is used to classify the

Price stability: classifies the market option market option according to the technological

according to its price stability index, which is

complexity needed to develop it.

equal to the standard deviation of a deflated

61

Identifying Market Opportunities for Rural Smallholder Producers series of at least 18 monthly prices.

appropriate technological level depends on

Agroindustrial products exhibit prices that are

several factors, such as crop requirements

more stable than those of unprocessed fruits

(i.e., its hardiness), soil and climatic conditions

and vegetables.

of the targeted region, socioeconomic conditions

of the smallholder rural producers, and market

Pre-production investment: is an estimate of requirements. For example, if a market option

the funds needed until the crop’s first harvest,

such as a high value fruit or vegetable is being

or the first livestock sale, or the introduction of

proposed for a buyer in the fresh market who is

the agroindustrial product into the market.

demanding strict quality conditions, the use of

chemical or organic pesticides will probably be

Breakeven point: can be expressed as either essential.

the sales volume in units or currency, in which

total income is equal to total production costs,

Sources of information on this topic include key

or the sum of variable and fixed costs . At this informants such as small- and medium-scale

point, the enterprise has neither profits nor

rural producers and processors, rural

losses. Clearly in terms of cash flow, this is

agroindustries, professionals of the agricultural

important as it means the project is no longer

and agroindustrial sectors, institutions involved

consuming investment capital.

in agricultural and agroindustrial training and

technical assistance; and publications, such as

Average no. of workdays per year: is the guides and technical journals. Where possible,

estimated number of workdays required during

however, smallholder production and

the project’s life, and divide it by the number of

processing systems should be based on primary

years of the project.

information, such as field observations and

interviews with smallholder producers and

Sales per workday: is a ratio that calculates processors, sometimes, it maybe necessary to

the total value of sales during the project’s life

visit other regions where the target product is

divided by the total amount of wages.

being grown by other smallholder producers

and processors.

Cash flow per workday: is another ratio that estimates total cash flow or net margin during

If only secondary information is available, the

the project’s life, divided by the total number of

research team should be aware that crop data

workdays.

on planting density, amount of inputs, and

productivity will often refer to trials conducted

FRR without financing: refers to the Financial on experimental farms or by large commercial

Rate of Return (FRR), a common profitability

producers, who practice input-intensive

parameter similar to the Internal Rate of Return

agriculture. These figures must therefore be

(IRR) that is calculated by the financial model.

adapted to the reality of the rural economy,

In this case, the FRR is an absolute measure of

meaning that the use of inputs and productivity

profitability because it excludes financial costs.

will be lower. Moreover, sophisticated

technological components should be avoided

FRR with financing: is the same previous and emphasis placed on inputs already being

parameter, but including credit costs.

used in the target area.

NPV without financing: refers to the Net Yields per unit area of crops can vary widely. A

Present Value (NPV), a similar profitability

useful exercise for determining an intermediate

parameter that is calculated by the financial

yield parameter is to write down the minimum

model and excludes financing expenditures.

and maximum yields for each production item.

For example, a crop grown with high-input

NPV with financing: is the same previous technology may yield up to 30 times more than

parameter, but including financing costs.

a crop under semi-subsistence conditions.

However, the idea is to propose production

Proposing appropriate production and

systems that will produce yields of an

processing systems

intermediate level on the production scale.

The definition of realistic production and

processing systems, related to the market

A similar situation occurs with agroindustry,

options, is required to develop financial

where conversion factors (amount of raw

profitability models. The selection of the

material needed to produce a unit of the

62

Assessing and Selecting Market Options

agroindustrial product) in smallholder

FRR, IRR, NPV, or gross and net margin so that

processing units are usually less efficient than

the research team can classify the market options

in larger, more sophisticated agroindustrial

in profitability categories (high, medium, low,

plants. The research team will also need to

negative). This financial categorization is more define production capacity, investment level

important than obtaining precise profitability

(infrastructure, equipment, machinery and

parameters. The financial information generated supplies), inputs and labor requirements,

by the model is transferred to the economic

conversion factors, and by-products.

characterization matrix.

The information obtained during this

Theoretical information

technological exploration process also helps

Many profitability parameters exist, but one of

complete both the agronomic and agroindustrial

the most common is the Internal Rate of Return

characterization matrices. Appendix 1 contains

(IRR), which has two versions: the Economic Rate

a special format that can be used to facilitate

of Return (ERR) and the Financial Rate of Return

the collection and organization of information

(FRR). For the purposes of this guide, the second

pertinent to the production system. This format

one is used because the FRR includes the

comprises five parts:

entrepreneurial viewpoint, together with market

prices and costs. The FRR is defined as the

Part 1. Identifies the product and the

interest rate that discounts a series of annual

technological level, and estimates

cash flows in such a way that the present value

productivity.

of the series is equal to the initial investment

Part 2. Documents the activities carried out

(Figure 6).

before and during planting.

Part 3. Specifies the number of applications or

As shown in Figure 6, the investment for this

repetitions of each task during

example project is assumed to cover 4 years. In

production.

Year 0, an investment is made and each year this

Part 4. Documents the rates of each different

investment generates a cash flow, positive or

type of input applied per plant or per

negative, which is represented by the net profits

tree.

or losses. However, the value of money depends

Part 5. Provides a timetable of production

on the ‘time’ variable; that is affected by inflation, activities.

i.e., $100 now will cost more than $100 within

2 years. Therefore, the series of cash flows should

Developing financial models

be discounted towards Year 0 to compare their

Once the production and processing systems

value with the initial investment. As expressed in

are defined, the models of financial profitability

the previous definition, the value of the initial

can be developed, using an electronic

investment and the present value of the cash flow

worksheet, such as Excel, or with the aid of

should be equal.

RentAgro, the user-friendly profitability

software developed by CIAT’s Agroenterprise

The rate of discount or interest rate used to

project.

discount the series of cash flows is the same FRR.

For the project to be economically appealing to

The objective of the financial model is to

the investor, the FRR should be greater than the

calculate profitability parameters such as the

opportunity cost of capital or money. The

Year 0

Year 1

Year 2

Year 3

Year 4

Initial investment

Cash flow

Cash flow

Cash flow

Cash flow

Present value of

cash flow

Discount rate or financial rate of return

Figure 6. Graphic interpretation of the financial rate of return.

63

Identifying Market Opportunities for Rural Smallholder Producers opportunity cost of capital is the interest rate

Components of the financial model: The that the financial system recognizes for savings;

information given in Appendix 2 presents a

for example, fixed time deposits (FTD), that are

typical financial model for a given crop, as it

placed into a bank, or the rate of inflation. If the

would appear on the computer screen. The model

FRR is lower than the opportunity cost of capital,

consists of five main parts, namely: prices,

then the investor is better off leaving his/her

quantity matrix, costs and income matrix,

money producing income in a bank account or

analysis of profitability without financing and

other investment option in the financial system.

analysis of profitability with financing.

The NPV is another profitability parameter that is

The prices section includes information on

commonly used, and is related to the FRR. The

amount and breakdown of the initial investment,

NPV is the value in Year 0 of the series of cash

the cost of the different inputs used the cost of

flows that is discounted, using an interest rate

the daily wage and sale prices of different

equal to the opportunity cost of capital. For a

product qualities offered to the market. The

project to be financially appealing to an investor,

quantity matrix quantifies the elements of

the NPV should be greater than the initial

investment, inputs, workdays and production

investment. If it is smaller, then the investor is

volume. The costs and income matrix uses

better off leaving the money in the financial

information from the two previous matrices to

system to produce income.

develop a simplified financial statement, similar

to a profit-and-loss statement, to obtain the

Financial models may or may not include

series of annual cash flows.

inflation. If they do not, then they are deflated

models and, in this case, the FRR should be

The component ‘profitability analysis without

greater than the opportunity cost of capital

financing’ contains the formulae used to

minus the annual rate of inflation. Depreciation

calculate the different parameters and financial-

should not be considered when calculating the

statement ratios. The FRR and the NPV are

FRR because this item does not represent a cash

estimated using the series of annual cash flows.

disbursement. When estimating profitability,

Other financial ratios, already described in

depreciation is only considered when calculating

Table 17 (financial characterization matrix), are

the amount of taxes to pay; producer

also calculated. The component ‘profitability

associations or cooperatives are usually exempt

analysis with financing’ is similar, but credit cost

from taxes.

is included.

To summarize, the FRR and the NPV are the

The financial model described can be used for

most suitable parameters to analyze the

agroindustrial products, but this will be more

profitability of medium- and long-term projects

complicated because it will have to model the

(e.g., from 3 to 20 years). For short-term projects

processing technology adequately. A separate

(from 1 to 24 months), other parameters can be

section will be needed for parameters such as

used for financial analysis; for example, the time

conversion factors, capacity utilization and input

needed to recover the initial investment

requirements. RentAgro can be used for

(payback), gross margin or a cost-benefit

developing financial models for agroindustrial

analysis.

projects.

Assumptions: To simplify financial models, two

Preparing and using the financial model: The unusual assumptions are made in this

financial models are executed on electronic

procedure, that the planted area is one hectare

spread-sheets and organized in components. The

and that the crop is planted as a monocrop.

electronic sheets consist of cells, where figures,

Small producers are known to plant in lots

formulae, or functions are keyed in. All cells in

smaller than 1 ha because of the lack of land and

the financial model should be linked so that any

working capital. They also usually plant crops in

change of a figure or formula will change the

association, as a strategy to reduce risk and

financial parameters estimated by the model. For

increase the regularity of cash flow. These

example, if the sale price of a product increases,

assumptions do not reduce the validity of the

then the FRR should increase automatically.

models because the exercise does not aim to

provide precise financial parameters, but as a

The financial model serves many uses, but above

means to classify different market options

all, it can be used to estimate levels of

according to ‘levels of profitability’.

profitability and other financial parameters of

64

Assessing and Selecting Market Options

interest. It can also help carry out sensitivity

will be able to explain the basic concepts to

analyses, which aim to determine which

variables affect a given financial parameter,

· you.

Microsoft Excel has special copy and paste

the most. A third use is to estimate minimum

calculations in their tools section that you

sale prices and maximum purchase prices.

Finally, financial models serve as support for

· can use to do this analysis.

Rent-Agro is a CIAT RAeD product that has

decision-making on credit and strategies to

been specifically designed for use by people

reduce production costs.

who do not have business skills, and this

N.B.: We appreciate that for some users this

· can be downloaded from our Web site free.

If this financial model is too detailed for your

section may appear difficult and we know that

needs in which case you can adapt this

many people avoid difficulties, in the hope that

section and simply compare gross margin

it will not be important. Unfortunately, the

analysis, based on required costs and

finance side is important, but help is at hand expected sales values, to compare options for

and you should think about the following

different products based on a standard unit

options if this part has made you nervous.

area of production or unit of investment. For

·

projects and enterprise options that are one

Ask for assistance from friends or other

season activities, gross margin analysis may

service providers if this section seems too

also be the only financial analysis that is

difficult. For the uninitiated, the terms

required.

NPV, fixed costs, etc., can appear as a new

and incomprehensible language. It is at

If you are still in doubt, visit the CIAT Rural

first, but there are several ways of doing

Agroenterprise Development Web site for

this type of analysis and any accountant,

examples and exercises (www.ciat.cgiar.org/

business college student or local bank clerk

agroempresas/espanol/inicio.htm).

3.3. Defining the Second Market Option Portfolio

Based on the information generated by the

the information to prioritize and discard some

characterization of market options and

products. All options that do not respond to one

considering the three evaluation criteria

of the evaluation criteria should be discarded,

originally proposed, the research team can use

thus increasing the probability of proposing

65

Identifying Market Opportunities for Rural Smallholder Producers market options that are really attractive for

When the market option is demonstrated to

·

small producers. To illustrate this issue see

“discard” options below:

· have detrimental effects on the environment.

When the sale price shows high fluctuations

· When the level of profitability is negative or

· throughout the year.

When the market demands quality levels

· null.

that are exaggerated or too strict for

When the technology or infrastructure is too

smallholder rural producers.

sophisticated, expensive, or not available in

· the region.

Those market options not discarded can then

When the required soil and climatic

continue to the next and final stage of the

· conditions do not exist in the region.

marketing opportunity identification

When the initial investment is too high for

methodology: the final evaluation of market

most smallholder producer associations.

options by the rural community.

3.4. Final Evaluation of Market Options by the Rural Community Objectives

·

· Set up facilitated meetings to rank and

Review decision criteria of smallholders for

select products for investment into

selecting new products and use these

agroenterprise projects.

· criteria in selection processes.

Summarize and present information in easily

Local input into preparing

understood formats so that that

information for product selection

smallholders can understand the

To ensure that important perspectives of the

information, discuss and make informed

smallholder’s are taken into account, it is useful

· decisions on appropriate products.

to discuss investment criteria with them prior to

Evaluate opportunities for segmenting

summarizing data. This will allow the views of

smallholder producers and hold separate

the clients to be taken fully into account when

meetings to allow for different groups to

preparing the information to be presented. In a

select products according to their needs,

survey conducted in hillside areas of southern

skills and risk management strategies.

Colombia, smallholders indicated that their

66

Assessing and Selecting Market Options

most important criteria when selecting a crop

The product card consists of two main sections.

for planting were:

The first section is for identification, where a

·

photo or illustration and the name of the

The producer knows the crop and has

product appear. The second section is

· experience cultivating it.

informative and contains data related to degree

The crop is adapted to the region and is

of adaptation, production cycle, annual yield,

· hardy.

investment expenses (including number of

The crop has a short or intermediate growth

workdays) and profitability.

· cycle.

· Product prices are stable.

All of this information is taken from the

The product has a market and an attractive

characterization matrices. A drawing or symbol

profit.

accompanies each type of information. To

facilitate the handling of data and comparison,

These criteria were used in the presentation of

planting area is standardized to the local unit of

data and whilst this was useful in Colombia,

measure, such as a monoculture plot of

the research team should prepare themselves

1600 m2 in the case of Colombia, but this unit

based on local ideas.

can be varied according to local measures, such

as an acre or hectare. The later is a typical

Preparing summarized product

cultivated area, in the context of smallholder

information

producers in the region. An example of a

Having gathered and assembled the product

product card used in Colombia is presented in

information and discussed key selection criteria

Figure 8.

with representatives of the client groups, the

next task is to present the product options to

Using flip charts and plenary

the smallholder producers. This process is made

discussions

easier by presenting the information to

An alternative method is to present the product

smallholders in a simple summarized form,

information on flip chart. The image in

using “flip charts” or “product cards”. In some

Figure 9 shows Robinah Nyapendi, discussing

cases, farmers may not read well, and therefore

the results from a market opportunities

information should be as pictorial where

identification process in Kampala, Uganda. The

possible.

product information is written onto large

sheets, in English but this could also be in a

Designing product cards

local language if required.

The product card should be designed to achieve

a balance between ease of comprehension and

Segmenting smallholders to tailor

informative content. A simplified scheme of a

selections to local needs

product card prepared in Colombia is presented

Within a project area, it is likely that there will

in Figure 7. This card refers to a crop, but the

be smallholders with different skills, assets and

product card scheme or format can be used for

business goals. These different categories of

any livestock, forest, and agroindustrial

producers are termed a “segment” which refers

product, with variations in content.

to a group of similar people. Typical marketing

segments include, rural/rich, rural/urban poor,

infants, women, young people, old people. All of

Sub-

Product’s

Cultivated area or

these segments have different marketing

region

name

capacity

strategies that aim to meet their particular

needs. To take local variability into account,

and avoid the temptation to apply one selection

Symbols

process or outcome to all farmers, the

related to

Key

facilitating organization should explore the

Photo or drawing

information

information

possibilities of presenting the information to

on the

for the

different smallholder segments. This will enable

right

producer

different groups to make decisions based on

their degree of market orientation, level of well-

being, type of economic activity, investment

Figure 7. Format of a product card with information on possibilities and local conditions. When this

a market option.

exercise was conducted in Pucallpa, a hillside

67

Identifying Market Opportunities for Rural Smallholder Producers K

Uchuva (TM)

Fruit

Unit of land area (1600 m2) – Monocrop

Cape gooseberry

640 plants

Z - A

( Physalis

Information

peruviana)

Adaptation

Regular

Whether the option

More than 800

tolerates drought, pests

to 1200 mm

and lack of fertilization.

Cycle

Time between planting

6 months

and first harvest.

Yield

Amount of product

3200 kg or

produced per year.

6400 pounds

Expenses until the first

harvest

$763,000;

What is spent in inputs

no. of mandays:

and wages.

53

Profit

Amount of money free for

$66

every Col$100 spent.

Figure 8. Product card for uchuva (cape gooseberry).

Figure 9. Market facilitator, discussing product options with farmers.

68

Assessing and Selecting Market Options

site in southwestern Colombia, smallholder

supported, product evaluation meetings can be

producers were classified according to their

planned for the entire region or for each

degree of market orientation. Three categories

subregion of the targeted region separately.

were established: (i) commercial, (ii) semi-

Each meeting should be carried out with a

commercial and (iii) subsistence. Producers can

minimum of 20 producers, representing all

also be classified by level of well-being into

producer categories proposed.

high, intermediate and low. In a study carried

out in 1996 by CIAT, the strong correlation

The meeting will require two to three people,

between level of well-being (wealth) and degree

capable of performing one or more of the

of market orientation was confirmed.

following tasks:

Product evaluation by subregion

·

In some cases, such as hillside areas, where

· Act as facilitator of the event.

farmers produce in the valley bottoms, mid

· Present market options.

Answer business and technical questions

slopes and at high altitude, certain market

options are not viable in all areas. In this case,

· about market options.

Interview and fill out preference format (at

each subregion, or climatic zone, may require

least three people).

its own portfolio of market options. If possible,

a list of at least 3 to 5 products should be

Process for ranking product

prepared for each subregion.

preferences

After discussing the product options, the

For example, the same market options cannot

meeting participants need to rank and select

be offered to producers located at widely

products. The prioritization and selection of a

different altitudes (e.g., 1800 versus

product option can be achieved by a show of

1100 m.a.s.l.). In the case of lowland areas,

hands, or by placing pebbles onto images of the

such as the Amazons, riverside farmers may

selected product. After selections have been

differ from roadside farmers in their

made, these should be thoroughly discussed

requirements for market options. However,

before a final decision is made to proceed to

several crops or market alternatives may be

investment.

common to several subregions.

In Colombia, products are typically selected by

Planning and conducting evaluation

organizing product cards in order of preference.

meetings

After the presentations on the market options,

This part describes how to plan an evaluation

the invited smallholder producers are asked to

meeting (Table 18), and offers a checklist

separate the cards into three groups, good, bad

(Table 19) of the necessary resources.

and intermediate, according to their preferences.

Depending on the variability of the area being

The producers are then asked to order the

Table 18. List of activities for planning and conducting an evaluation meeting.

· Prepare everything beforehand and wait until most of the invited producers have arrived to start the meeting, which usually lasts 3 hours. Preferably, the meeting should start at 10:00 a.m. or at 2:00 p.m.

· The meeting should be facilitated by one of the research team members.

· Begin the meeting with a general introduction, the facilitator should take time to explain the results of the product research findings, covering background information and assumptions.

· The facilitator should then present each market option and explain the product card. Use any other type of material that you consider appropriate. You can use posters, photos, opaque or overhead projectors, or PowerPoint for the presentation. If possible, take physical samples of the products.

· After presenting each product, leave enough time for questions and answers.

· Explain how each participant should rank the product cards (market options) that he/she has received. You can use photocopies of the product cards.

· On an individual basis, each participant then organizes his/her set of product cards.

· Participants are then grouped by type of producer, and the options ranked again.

· Give some sort of feedback to the producers for all their work and time.

· Thank the producers for their collaboration and invite them to refreshments or a light meal.

· Those producers who were promised transportation are taken back.

69

Identifying Market Opportunities for Rural Smallholder Producers Table 19. Checklist for conducting an evaluation

Scheduling evaluation meetings

meeting.

Planning evaluation meetings involves the

Add a tick

Resources

adequate scheduling of activities. Meeting sites

when done

should have the minimum services and

1. Human resources

equipment necessary, and should be easy to

1.1 A representative sample of rural

access for both organizers and producers.

producers

Because each meeting will require considerable

1.2 A facilitator for the meeting

coordination and solid logistic support, no more

1.3 A presenter of market options

than one meeting per week should be

1.4 One or two consultants of market

programed where required. One meeting

options

1.5 Three interviewers

should be planed per subregion, and

1.6 One or two drivers with vehicles

representatives of all categories of smallholder

rural producers should participate. The

2. Infrastructure

producers should be invited 1 week in advance,

2.1 A sheltered meeting place, with

and a reminder sent 1 or 2 days before the

electricity and projection facilities

scheduled date.

2.2 Tables and chairs

2.3 Bathrooms

3. Tools

Inviting the smallholder rural

producers

3.1 Three sets of full-color product

cards for interviewers

To increase the likelihood of success at the

3.2 Photocopies of product cards

meeting, the facilitator or local agent should

to hand out to producers

make sure that a representative sample of

3.3 Answer formats

producers and farming communities is invited,

3.4 Pencils

3.5 Badges for producers

from each subregion. Where mixed groups are

3.6 Samples of products

being invited, producers representing each of

several predetermined categories should be

4. Materials and equipment

clearly identified, using either data from

4.1 Opaque, overhead, or slide

previous surveys or key informants, in each

projector

4.2 Flip chart and magic markers

selected farming community. The sample

(optional)

should include women. The same number of

4.3 Adhesive tape

people per type of producer should be invited;

4.4 Gasoline-powered electric

for example, if each meeting is going to be

generator if no electricity in area

carried out with 21 producers, then seven

4.5 Light meal, snacks, or

producers per category should be invited.

refreshments

4.6 If necessary, black cloth or paper

to darken the room

Data processing and analysis

After the meetings, the completed preference-

ranking formats will be available, at both the

product cards within each group. When they

individual level and by type of producer

have finished, they are asked why they placed

(Appendix 3). These formats contain

certain cards in the first (most preferred) and

information that should be processed and

last (least preferred) positions. Finally, to

analyzed. Calculations should be done

determine the “ideotype” or concept of ‘ideal

manually at the meeting.

product’, the producer is asked what condition is

missing in the alternative he/she has chosen to

Information should be presented by subregion,

improve it even more.

in different tables that show frequency and

percentage of occurrence. These parameters

Appendix 3 presents the format used in this

refer to the number of times a market option

exercise. The interviewer is responsible for filling

was classified in the ‘good’ group or in first

out the format. The category or type of producer

place, or in the ‘bad’ group. Frequencies and

should be properly identified. This procedure

percentages are presented for the entire sample

should be implemented with individual

for each subregion and also by type of

producers and by type of producer. Materials

producer. Titles of suggested tables are listed

required are a set of product cards per producer,

on next page.

and answer sheets and pencils for interviewers.

70

Assessing and Selecting Market Options

For individual ranking by subregion, the

· What the preferred option lacks to be an

following titles can be used:

“ideotype” or ideal type (overall).

· Number of times the option appears in the

For group ranking by subregion and producer

‘good’ group (overall and by type or segment

type, these titles can be used:

· of producer).

Number of times the option appears in first

·

· place (overall and by type of producer).

· Most preferred options.

Reasons for choosing the first two options

· Reasons for preference.

· (overall and by type of producer).

· Least preferred options.

Reasons for rejection.

Reasons for choosing the most preferred

· option (overall).

Data presentation

Number of times the option appears in the

The information in Table 20 shows an example

· ‘bad’ group (overall).

of the final selection table or presentation

Number of times the option appears in the

format. By organizing information in a series of

last two places, that is, is least preferred

tables, the initial objectives of participatory

· (overall).

evaluation are met, that is, to determine the

Reasons for rejecting the last two options

preferences and decision criteria of rural

(overall).

producers by subregion and by segment or type

of producer.

Table 20. Example of a table used to present results of an evaluation meeting.

High altitude zone

Number of times classified in ‘good’ group

Product

General

%

Commercial

%

Semi-

%

Subsistence

%

commercial

Blackberry

17

100

6

100

6

100

5

100

Naranjilla

15

88

6

100

5

83

4

80

Native strawberry

11

65

5

80

2

33

4

80

Cauliflower

6

35

3

50

2

33

1

20

Uchuva

6

35

2

33

3

50

1

20

Anthurium

5

29

0

0

1

33

3

60

3.5. Defining the Final Market Option Portfolio

After processing the evaluation formats and

(ii) A maximum of 10 products has been

organizing the results in summary tables, the

screened or refined after the characterization

research team can identify which market

process.

options were preferred and which were rejected,

(iii) The final evaluation with the rural

with the corresponding reasons. The options

community will produce a market option

rejected by most smallholder producers should

portfolio with three to five products.

be discarded.

At this stage, the only remaining products are

By now the market-option portfolio obtained

those being considered suitable for investment

after the Rapid Market Survey, has been

by specific smallholder segments. These are the

screened three times:

products that you will now develop into new

enterprise activities.

(i) Obvious discards are removed by the

analytical team.

71

Identifying Market Opportunities for Rural Smallholder Producers 3.6. Preparing the Final Report

The final report is a document that aims to

1. Background.

make explicit the results of the final

2. Objectives.

participatory evaluation with the rural

3. Methodology.

community, in terms of the original objectives.

4. Results.

It must also provide background information

4.1 Preferred options.

and indicate work methodology. Results can be

4.2 Reasons for preferring them.

presented in two ways:

4.3 Options rejected.

4.4 Reasons for rejecting them.

1. As a text document, making reference to

4.5 “Ideotypes” or ideal products.

different tables included in Appendix 1.

4.6 Conclusions and recommendations.

2. As a combined text and table document that

includes a section on conclusions and

Appendix 1. Tables numbers.

recommendations. In addition, the different

Appendix 2. Cards of the most preferred

instruments and formats can be included as

products.

appendices.

Appendix 3. Questionnaire used.

Appendix 4. Guidelines for final market-option

To illustrate, the table of contents of the final

evaluation meetings.

report prepared for the final participatory

evaluation of market options with the rural

This final document should be held by the

community, conducted in the hillsides reference

faciltating organization and local research

site of Colombia was as follows:

teams as a record of how the process was

conducted and results. The final selections

I. Prologue.

should now be developed into an investment

II. Acknowledgements.

option.

III. Executive Summary.

3.7. Preparing for Enterprise Development

At the end of the rapid survey and evaluation of

commonly will need to make plans for group or

products with client groups, the research team

collective marketing in order to increase sales,

will have selected specific products and

volumes.

discussed options for investment with clients.

As part of the market survey work, the research

All of these issues require a degree of

team will also have located interested buyers

organization and the smallholders working with

and collated information on buying conditions.

the service providers need to consider how best

In many cases, this is sufficient information to

they can address some of these issues. Some

begin the process of establishing a new

important areas to discuss include:

business venture, by applying this information

to new business relations such as collectively

(i) Are the smallholder producer groups already

marketing, higher volumes of higher quality

sufficiently interested and or motivated to

produce to a new buyer.

test market sales of one of the identified

market products, based on current results?

At this stage, there are several new issues to

(ii) Do the groups have sufficient financial

consider, and in many cases new market

capital to invest in one of the new enterprise

opportunities are associated with considerable

options that the market studies have

increases in quality, volume, distance to meet

revealed?

more attractive buying conditions and prices.

(iii) If not, can the group obtain credit from a

To engage in such markets, smallholders

local service provider, micro-credit

generally need to make changes in production

organization or do they need to start a

systems, varieties, planting times, and very

savings and loans scheme.

72

Assessing and Selecting Market Options

(iv) Do the conditions set by the buyers require

appropriate skills set outlined in one of the

any significant changes from the group in

following guides from the Agroenterprise

terms of new selling strategies such as

Development series:

collective marketing, i.e., selling produce as

a group as opposed to selling small amounts

· Strategies to Improve the Competitiveness of

of produce as individuals?

(v) Is the existing group structure appropriate

· Market Chains for Smallholder Producers.

Evaluating and Strengthening Rural

to meet the new buying conditions now? Or

will the group need to consider upgrading

· Business Development Services.

A Market Facilitator’s Guide to Participatory

their organizations, and or linking to other

groups in order to enter the new market?

· Agroenterprise Development.

Collective Marketing for Smallholder

Producers.

If after discussions with the service providers, a

smallholder producer group(s) is interested to

The service providers, research team and

pursue a new market opportunity, and would

representatives of interested smallholder

be interested to invest their time and resources

producer groups, should evaluate which

into building a new business relationship, then

methods are most appropriate in their next

we advise that the new team continue onto the

steps and then begin the process of upgrading

next step in CIAT’s Agroenterprise Development

their skills and investing in more lucrative

Strategy. Depending on the strategy selected,

agricultural opportunities.

the farmer group should work with the most

3.8. Conclusions

Undertaking the Market Opportunities

on similar aspects which evaluate their current

Identification method is a major step towards

practices and examine what needs to be

shifting towards a market orientation for

improved, changed or expanded in order to

smallholder producers. The skills gained

supply identified market options.

through the rapid market survey and the

subsequent analysis of market options is an

In virtually all cases, areas to focus on for

extremely useful learning process, not only for

upgrading from existing market options to more

the service provider but especially for the

attractive market linkages, will include

representatives from the rural community, who

upgrading basic stages in the production to

can begin to use these skills in their future

sales process including improvements in the

business plans.

following areas:

Although this first marketing evaluation is only

(i)

Organization at the farmer level.

the starting point in a series of methods used in

(ii)

Marketing options and trends.

successful enterprise development, it provides a

(iii) Finance.

sound basis to start engaging in marketing and

(iv)

Technology.

for developing skills in systematic information

(v)

Pre-production.

gathering, analysis and decision making. These

(vi)

Production.

are all vital skills for the subsequent stages in

(vii) Post harvest.

agroenterprise development.

(viii) Expansion and better business relations.

Depending on the assets and capacities of the

These issues are the basic components

clients, the different groups will have opted to

contained in the other CIAT Agroenterprise

focus on either upgrading of existing crops or

Guides and we hope that these methods and

diversification into new, higher value product

tools will further assist you in your future

options. However, in both cases, the next steps

agroenterprise development plans.

in planning for enterprise investment will focus

73

Identifying Market Opportunities for Rural Smallholder Producers Exercise 3.1

Agronomic Characterization of a Crop

Objective

· The trainee will fill out an agronomic characterization matrix for a crop considered important in the region.

Instructions for the Facilitator and Trainee

1. Form groups of four trainees and name a coordinator.

2. Choose a crop that is important in the area and on which one or more members of the group has good agronomic knowledge.

3. Use the agronomic characterization format appearing in the Worksheet for this exercise.

4. Relevant information for this exercise is found in Section 3.2 (page 55). If some data are unknown, the team should make an intelligent assumption.

5. Once finished, the group will copy the format on a large paper or transparency for presentation in a plenary session by the group’s coordinator.

·Resources needed

· Worksheet for Exercise 3.1.

· Section 3.2 (page 55) of the guide.

· Flip chart or overhead projector and transparencies.

· Paper and pencils.

Magic markers or markers for transparencies.

Time required: 1.5 hours.

Exercise 3.1

Agronomic Characterization of a Crop – Worksheet

Agronomic Characterization Matrix

Market

Complete

Pre-production

Technical

Soil

Water

option

cycle

cycle

demand

requirement

pH

requirement

(years)

(months or

(low, average,

(mm/year)

years)

or high)

Altitude

Labor

Planting

Need for

Major pests

Planting

Annual

requirement

requirement

period

irrigation

and diseases

density

yield

(m.a.s.l.)

(yes or no)

(no./ha)

(t/ha)

74

Assessing and Selecting Market Options

Exercise 3.2

Marketing Characterization of a Product

Objective

· The trainee will fill out a marketing characterization matrix for a product considered important in the region.

Instructions for the Facilitator and Trainee

1. Form groups of four trainees and name a coordinator.

2. Choose a product that is important in the area and which one or more group members are familiar with.

3. Use the marketing characterization format appearing in the Worksheet for this exercise.

4. Relevant information for this exercise is found in Section 3.2 (page 58). If some data are unknown, the team should make an intelligent assumption.

5. Once finished, the group will copy the format on a large paper or transparency for presentation in a plenary session by the group’s coordinator.

Resources needed

·· Worksheet for Exercise 3.2.

· Section 3.2 (page 58) of the guide.

· Flip chart or overhead projector and transparencies.

· Paper and pencils.

Magic markers or markers for transparencies.

Time required: 1.5 hours.

75

Identifying Market Opportunities for Rural Smallholder Producers Exercise 3.2

Marketing Characterization of a Product – Worksheet

Marketing Characterization Matrix

Market

Current

Competitors

Type of client

Services to

Scope of market

option

marketing (number, types

clients

(yes or no)

and strategies)

SM = supermarket TA = technical

L = local

FI = food industry

assistance

R = regional

I = industry

Cr = credit

N = national

Res = restaurant

Exp = export

Growth of

Minimum

Quality

Packaging

Delivery

Business

demand

volume

requirements

requirements

requirements

relationship

(high,

purchased

(high,

PA = delivered at

AG = agreement

medium,

intermediate,

zone

PA = partnership

or low)

or low)

PW = delivered at

CO = contract

warehouse

76

Assessing and Selecting Market Options

Exercise 3.3

Agroindustrial Characterization for a Processed Product Objective

· The trainee will fill out an agroindustrial characterization matrix for a product considered important in the region.

Instructions for the Facilitator and Trainee

1. Form groups of four trainees and name a coordinator.

2. Choose an agroindustrial product (processed or transformed) that is important in the area and which one or more group members are familiar with.

3. Use the agroindustrial characterization format appearing in the Worksheet for this exercise.

4. Relevant information for this exercise is found in Section 3.2 (page 57). If some data are unknown, the team should make an intelligent assumption.

5. Once finished, the group will copy the format on a large paper or transparency for presentation in a plenary session by the group’s coordinator.

Resources needed

·· Worksheet for Exercise 3.3.

· Section 3.2 (page 57) of the guide.

· Flip chart or overhead projector and transparencies.

· Paper and pencils.

Magic markers or markers for transparencies.

Time required: 2 hours.

77

Identifying Market Opportunities for Rural Smallholder Producers Exercise 3.3

Agroindustrial Characterization for a Processed Product – Worksheet Agroindustrial Characterization Matrix

Market

By-products

Raw materials

Other inputs

Technical demand

Conversion

option

(low, average,

factor

or high)

Capacity

Machinery and

Method for

Working

Investment

Annual sales

equipment

quality control

capital

78

Assessing and Selecting Market Options

Exercise 3.4

Designing a Product Card

Objective

· The trainee will develop a product card for a given agricultural, livestock, forest, or agroindustrial product that is important in a given region.

Instructions for the Facilitator and Trainee

1. Form a group of four trainees and name a coordinator.

2. Choose a product that is important in the region and on which one or more members of the group has good knowledge.

3. Use the product card format appearing in the Worksheet for Exercise 3.4.

4. Pertinent information for this exercise is found in Section 3.4 (page 67) and in Figures 7 and 8.

5. If some data are unknown, the team should make an intelligent assumption.

6. When finished, the group will copy the format onto a large paper or transparency for the presentation in a plenary session by the group’s coordinator.

Resources needed

·· Worksheet for Exercise 3.4.

· Section 3.4 (page 67) and Figures 7 and 8 of the guide.

· Flip chart or overhead projector and transparencies.

· Paper and pencils.

Magic markers or markers for transparencies.

Time required: 1.5 hours.

79

Identifying Market Opportunities for Rural Smallholder Producers Exercise 3.4

Designing a Product Card – Worksheet

Format for Product Card

80

Assessing and Selecting Market Options

Exercise 3.4

Designing a Product Card – Feedback

Each group will present different product cards, depending on the crop selected. An example developed for the Colombian case is given.

Fig tree

Mid-altitude

Fruit tree

1600 m2 – Monocrop

zone

46 trees

2 harvests

Adaptation

Regular

Whether the option

tolerates drought, pests

Water: 700 mm

and lack of fertilization.

Cycle

Time between planting

2 years

and first harvest.

Yield

Amount of product

640 kg

produced per year.

Expenses until the first

Col$770,000;

harvest

no. of workdays: 28

What is spent in inputs

and wages.

Profit

Col$35

Amount of money free for

every Col$100 spent.

81

Identifying Market Opportunities for Rural Smallholder Producers Exercise 3.5

Preparing a Timetable for Final Evaluation with a Rural Community Objective

· The trainee will prepare a timetable for the final evaluation meeting of the market options with the rural community.

Instructions for the Facilitator and Trainee

1. Form groups of four trainees and name a coordinator.

2. The groups will use the format appearing in the Worksheet for Exercise 3.5. The number of activities appearing in the format is merely a suggestion.

3. Under the ‘Date’ column, the group should begin with Week 1 and continue to work in terms of weeks. Some activities may take more than one week. Several activities can be carried out simultaneously and the order is important because some activities are prerequisites for others.

4. The groups should first prepare a draft timetable before copying it onto the worksheet format.

5. Pertinent information is found in Section 3.4 of the guide.

6. The group will prepare a transparency with the completed Worksheet.

7. The coordinator of each group will present the group’s work in a plenary session.

·Resources needed

· Worksheet for Exercise 3.5.

· Section 3.4 of the guide.

· Overhead projector and transparencies.

· Paper and pencils.

Markers for transparencies.

Time required: 2 hours.

82

Assessing and Selecting Market Options

Exercise 3.5

Preparing a Timetable for Final Evaluation with a Rural Community – Worksheet no.

Activity

Person

Termination

responsible

date

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

83

Identifying Market Opportunities for Rural Smallholder Producers Exercise 3.5

Preparing a Timetable for Final Evaluation with a Rural Community – Feedback Timetables can vary, but it is important to list major activities in the correct order. Activities 15-17 (shaded) are the same for each meeting.

The others are general activities.

no.

Activity

Person

Implementation

responsible

time

1

Ensure funding of final evaluation of market options

Coordinator

Week 1

2

Establish work teams

Coordinator

Week 2

3

Subdivide targeted region

Team

Week 2

4

Select market options per subregion

Team

Week 2

5

Collect information on options

Team

Week 3

6

Define smallholder producer categories

Team

Week 4

7

Select sample of farming communities

Team

Week 4

8

Conduct survey on smallholder producer’s decision

Team member

Week 5

criteria

9

Prepare survey report

Team member

Week 6

10

Design and prepare product cards

Team

Week 8

11

Define evaluation meeting sites

Team

Week 8

12

Plan evaluation meetings

Team

Week 8

13

Prepare invitation cards for meetings

Team member

Week 9

14

Train relevant personnel

Team

Week 9

15

Invite smallholder producers

Team member

Weeks 10-13

16

Coordinate logistics of the meetings

Team

Weeks 11-14

17

Conduct evaluation meetings

Team

Weeks 12-15

18

Process and analyze data

Team

Week 17

19

Prepare final report with conclusions

Team

Week 19

84

Assessing and Selecting Market Options

Practice 3.1

Survey of Decision Criteria for Crop Selection

Objective

· The trainee will identify key decision criteria of small producers when selecting a crop for planting.

Instructions for the Facilitator and Trainee

1. Form a team of four trainees and name a coordinator.

2. Worksheets no. 1 and 2 include interview guidelines and a format for reporting.

3. Pertinent information to this practice is found in Section 3.4.

4. This practice takes 2 days, divided into three sessions, as follows:

Planning session

· If not done already, the team will choose four farming communities that are representative of the

· region and define smallholder producer segments or types.

Then, follow through with the interview guidelines or questionnaire, which is the research tool to be

· used with rural producers. Remember the objective of the survey of decision criteria.

During the interview try to corroborate the type of producer being interviewed. Remember to use simple language.

Fieldwork session

· A sample of eight producers is interviewed in a single farming community. The sample should

· include all types of producers.

One team member can conduct the interview, while another completes the format. (If necessary, a farming community can be served by more than one team.)

Reporting and presentation session

Each team prepares a report and its coordinator will present it in a plenary session.

Resources needed

·· Transportation to and from the rural area.

· Refreshments.

· Worksheets no. 1 and 2 for Practice 3.1.

· Section 3.4 of the guide.

· Flip chart or overhead projector and transparencies.

· Paper and pencils.

Magic markers or markers for transparencies.

Time required: 2 days.

85

Identifying Market Opportunities for Rural Smallholder Producers Practice 3.1

Survey of Decision Criteria for Crop Selection – Worksheet no. 1

Interview Guidelines for the Survey on “Smallholder Producers’ Decision Criteria for Selecting Crops for Planting”

1. Greet the producer and explain the objective of your visit, for example:

‘Good morning ( or Good afternoon), we are from Organization and we would like to

know whether we could talk to you about a subject that really interests everybody.’

2. Ask a question to corroborate the type of producer, such as:

‘Do you sell most of what you produce or do you use it yourself?’

Note: This question is pertinent only if it were decided that smallholder producers should be classified according to their degree of market orientation (commercial, semi-commercial, subsistence).

3. Write down the producer’s name, the type of producer he/she is, the farming community, and the name of the survey group.

4. Ask about selection criteria used to choose traditional crops, for example:

‘What aspects do you think about when choosing a traditional crop for planting?’

5. Write down the answers.

6. Ask about selection criteria when choosing new crops, for example:

‘What aspects do you think about when choosing a new crop for planting?’

7. Write down the answers.

8. Thank the producer for his/her collaboration.

86

Assessing and Selecting Market Options

Practice 3.1

Survey of Decision Criteria for Crop Selection – Worksheet no. 2

Report Format for the Survey on “Smallholder Producers’ Decision Criteria for Selecting Crops for Planting”

Group:

Farming community:

Number of producers interviewed:

no.

Decision criteria to select traditional crops

Frequency

%

1

2

3

4

5

no.

Decision criteria to select new crops

Frequency

%

1

2

3

4

5

Differences found in criteria among producer types:

87

Identifying Market Opportunities for Rural Smallholder Producers Practice 3.1

Survey of Decision Criteria for Crop Selection – Feedback This is an example of a final report:

Survey on “Smallholder Producers’ Decision Criteria for Selecting Crops for Planting”

Group: no. 5

Farming community: La Torre

Number of producers interviewed: 8

no.

Decision criteria to select traditional crops

Frequency

%

1

Knowledge/expertise

8

36

2

Does not require inputs/easy to plant

5

23

3

Short or intermediate growth cycle

4

18

4

Stable price

3

14

5

Has a market

2

9

no.

Decision criteria to select new crops

Frequency

%

1

Does not require inputs/easy to plant

8

32

2

Good price

6

24

3

Has a market

5

20

4

Short or intermediate growth cycle

4

16

5

Stable price

2

1

Differences found in criteria among producer types:

Subsistence producers were more interested in hardy, short-cycle crops.

88

Appendices

APPENDIX 1

Format for Preparing a Production System

for a Crop

Product:

Technology:

Low

Intermediate

Optimal

Total cycle:

Production cycle:

Is irrigation necessary?

Yes

No

Planting density:

/ha

Range of productivity:

Low:

t/ha High:

/ha

Estimate for low technology:

t/ha

Estimate for intermediate technology:

t/ha

1. Initial investment

2. Pre-planting and planting

Days required to:

( ) Prepare the land

( ) Place posts, trellises, and fastenings

( ) Prepare the seedbed

( ) Make holes

( ) Design plot, dig holes and plant

Others:

( )

( )

( )

89

Identifying Market Opportunities for Rural Smallholder Producers 3. Production activities (applications)

Activity

no. of applications per month (or year)

0-1

1-2

2-3

3-4

4-5

5-6

6-7

7-8

8-9

9-10

Weed control

Fertilization

Organic

Chemical

Foliar

Lime amendments

Pruning

Irrigation

Sanitary control

Insecticides

Fungicides

Others

90

Appendices

4. Inputs

Activity

no. of doses per plant (or tree) per month or year

0

1

2

3

4

5

6

7

8

Fertilization

Organic

Chemical

Foliar

Lime amendments

Sanitary control

Insecticides

Others

91

Identifying Market Opportunities for Rural Smallholder Producers 5. Production activities (timetable)

Activity

Scheduling within program (month)

0-1

1-2

2-3

3-4

4-5

Weed control

Fertilization

Organic

Chemical

Foliar

Lime amendments

Pruning

Irrigation

Sanitary control

Insecticides

Fungicides

Others

92

Appendices

APPENDIX 2

Financial Profitability Model for a Product:

Example of Lulo (Naranjilla – Solanum quitoense

Lam.)

Main details

Date: February 1996

Calculation of internal rate of return:

1 ha

Product: Naranjilla (lulo),

not hardy and is well known

Technology:

Intermediate

Planting density per hectare:

2,200 plants

Wage per workday:

5,500 Colombian pesos

Pre-production period:

12 months

Model’s time span:

3 years

Part 1. Unit costs and prices.

Item

Unit

Value (Col$)

· Investment

Pond and accessories

Unit

300,000

Seedbed

Unit

50,000

Hoses

m

300,000

Fumigator

Unit

70,000

Tools

Unit

5,000

Plastic baskets

Unit

7,200

· Inputs (placed on site)

Ca + P (‘calfos’)

kg

91

Chicken manure

kg

70

Fertilizers

kg

430

Green manure

kg

75

Foliar fertilizers

lt

3,587

Insecticides

lt

5,500

Fungicides

kg

7,000

Traps

Unit

300

· Prices

First grade

kg

1,400

Second grade

kg

750

Transport costs

kg

50

93

Identifying Market Opportunities for Rural Smallholder Producers Part 2. Quantity matrix.

Item

Unit

Month

Total

0

0-1

1-2

2-3

Investments

· Pond and accessories

Unit

1

Seedbed

Unit

1

Hoses

m

130

Fumigator

Unit

1

Tools

Unit

10

Plastic baskets

Unit

25

Labor

· Preparing the land

Workday

15

0

0

0

Preparing the seedbed

Workday

5

0

0

0

Laying out, digging holes, and planting

Workday

42

0

0

0

Weed control

Workday

0

30

15

15

Fertilization

Workday

11

33

33

33

Sanitary control

Workday

10

10

10

10

Debudding

Workday

0

15

15

15

Watering

Workday

0

30

20

20

Harvesting

Workday

0

14

69

69

Cleaning and selection

Workday

0

5

23

23

Packaging

Workday

0

1

6

6

Total labor

Workday

83

138

191

191

602

Amounts of inputs

· Ca + P (‘calfos’)

kg

660

0

0

0

Chicken manure

kg

1,320

880

880

880

Fertilizers

kg

0

44

44

44

Green manure

kg

1,100

1,100

1,100

1,100

Foliar fertilizers

kg

0

4

4

4

Insecticides

kg

8

5

5

5

Fungicides

kg

0

2

2

2

Traps

Unit

110

0

0

0

Yields

· First grade

70% kg

0

1,120

5,600

5,600

Second grade

25% kg

0

400

2,000

2,000

Losses

5% kg

0

80

400

400

Total

100% kg

0

1,600

8,000

8,000

94

Appendices

Part 3. Cost and income matrix.

Item

Month

Total

0

0-1

1-2

2-3

1. Investments

Pond and accessories

300,000

0

0

0

Seedbed

50,000

0

0

0

Hoses

39,000

0

0

0

Fumigator

70,000

0

0

0

Tools

50,000

0

0

0

Plastic baskets

180,000

0

0

0

Subtotal ‘Investments’

689,000

0

0

0

689,000

2. Variable costs

a. Labor

456,500

756,667

1,049,833

1,049,833

3,312,833

b. Inputs

Ca + P (‘calfos’)

60,060

0

0

Chicken manure

92,400

61,600

61,600

61,600

Fertilizers

0

18,920

18,920

18,920

Green manure

82,500

82,500

82,500

82,500

Foliar fertilizer

0

15,783

15,783

15,783

Insecticides

44,000

27,500

27,500

27,500

Fungicides

0

14,000

14,000

14,000

Traps

Subtotal ‘Inputs’

278,960

220,303

220,303

220,303

939,868

c. Transportation to city

0

76,000

380,000

380,000

836,000

Total ‘Variable costs’

735,460

1,052,969

1,650,136

1,650,136

5,088,702

3. Administrative costs

Administrationa

73,546

73,546

127,014

127,014

Technical assistanceb

50,000

50,000

50,000

50,000

Subtotal ‘Fixed charges’

123,546

147,697

177,014

177,014

625,270

4. Total operational costs (2+3)

859,006

1,200,666

1,827,150

1,827,150

5,713,972

5. Subtotal ‘Investments’ +

‘Operational costs’ (1+4)

1,548,006

1,200,666

1,827,150

1,827,150

6,402,972

6. Sales

First grade

0

1,568,000

7,840,000

7,840,000

Second grade

0

300,000

1,500,000

1,500,000

Total ‘Sales’

0

1,868.000

9.340.000

9.340.000

20,548,000

a.

Administration expenditures are calculated as unit percentage (10%) of investment in labor and inputs.

b.

Three levels of costs for technical assistance are proposed: crop is hardy and well known: $25,000; crop is hardy and new, and crop is not hardy but is well known: $50,000; and crop is not hardy and is new: $150,000.

95

Identifying Market Opportunities for Rural Smallholder Producers Part 4. Cash flow without financing and calculation of profitability.

Financial parameters

Item

Month

Total

0

0-1

0-2

2-3

Net flow

(1,548,006)

667,334

7,512,850

7,512,850

14,145,028

Financial rate of return:

67.09%

Minimum acceptable: 12%

Net present value:

7,730,642

Minimum acceptable: 0

Discount rate:

12%

Pre-production investmenta:

2,548,561

Ratio of sales to no. of workdaysb:

34,114

Ratio of cash flow to no. of workdaysc:

23,484

Average no. of workdays per yeard:

201

a.

Total amount of investments in assets and required expenditures during pre-production period.

b.

Sum of sales obtained per paid workday during complete cycle.

c.

Sum of cash flow per paid workday during complete cycle.

d.

Average no. of workdays per year.

Part 5. Cash flow with financing and calculation of profitability.

Item

Month

0

0-1

1-2

2-3

Flow without credit

(1,548,006)

667,334

7,512,850

7,512,850

Financial plana

2,548,561

0

(1,587,659)

(1,587,659)

Net flow with financing

(2,548,561)

1,667,889

5,925,191

5,925,191

Financial rate of return:

48.18%

Minimum acceptable: 12%

Net present value:

5,821,582

Minimum acceptable: 0

Discount rate:

12%

a.

Unit deflated interest rate assumed to be 16% per year.

96

Appendices

APPENDIX 3

Format for Ranking Market Options

Producer:

Code:

Area:

Interviewer:

Date:

Good market options

Name of option

Order

Explanation of first two positions

1.

2.

Moderately good market options

Name of option

Order

Poor market options

Name of option

Order

Explanation of last two positions

Last

Penultimate

Can the option you like best be made even better? Yes No

If yes, what do you think would make it even better?

If no, why can’t it be made better?

97

Identifying Market Opportunities for Rural Smallholder Producers 98

Appendices

Glossary

Ad valorem

Annual cash flow

Latin expression that means ‘according

For the financial model, this represents the net

to its value’.

gain or loss generated by the project. The

series of these flows is used to calculate

Advertising

financial parameters.

Any form of marketing communication in the

paid media.

Appellation

System by which a product is legally protected

Agent

to support marketplace differentiation based

A channel institution which represents one or

on its place or origin or method of processing.

more suppliers for a fee.

Arbitrage

Aggregate value

The simultaneous purchase and sale of a

The result of a post harvest or processing

commodity in two different markets to take

activity, in this case, at the rural level, that

advantage of differences in prices of that

can vary in complexity from levels I to III.

commodity in the markets.

Level I refers to simple operations such as

washing, cleaning, clearing, roasting,

Asset

classification, baling and storage. Level II

Items of money value owned by a business or

includes more complicated processes such as

person, including items suchs as land,

cooling, milling, cutting, mixing, dehydrating,

buildings, machinery, tools, etc.

cooking and canning. Level III operations are

more sophisticated, such as extraction,

Average no. of workdays per year

distillation, freezing, fermentation, extrusion

The total number of workdays required during

and enzymatic processes.

the duration of the project divided by the

number of years of the project.

Agri-business

Involves the manufacture and distribution of

Barter

farm supplies, production operation on the

The direct exchange of goods and services

farm and the storage, processing, and

between two parties, often without cash

distribution of farm commodities and items

considerations.

made from them.

Benchmarking

Agricultural extensification

The process of comparing the company’s

Using more land or animals to increase

products and processes to those of a

agricultural output.

competitor or leading firm in other industries

to find ways to improve quality and

Agricultural intensification

performance.

Increased agricultural output from increased

productivity or yield per unit of land.

Biodegradable products

Products made from biological materials that

Agricultural or livestock product

break down within a relatively short period of

Product with little aggregate value.

time when disposed of or left to degrade under

natural conditions. These products are not

Agroenterprise

considered harmful to the environment as they

A business or firm, typically small-scale in

break down into non noxious products.

nature, often based on a rural location that

produces and sells agriculturally based

Biomedicines

products or services.

Medicinal products produced from plants and

animal products.

Agroindustrial product

Product with some degree of aggregate value,

Biophysical and socioeconomic profile

in this case, at the rural level.

A brief document that summarizes the

physical, social, economic, and institutional

aspects of a given region under study.

99

Identifying Market Opportunities for Rural Smallholder Producers Biotechnology

Collusion

New area of biological science pertaining to

Process through which traders artificially fix

propagation, transformation and the

prices above the price they would achieve in a

recombination of genetic materials that is

situation of perfect competition.

conducted in controlled, sterile conditions.

This technology often uses sophisticated non

Commercial phase

traditional methods for enabling genetic

Stage of an integrated production project that

propagation and genetic manipulation is used

follows a successful pilot phase. The

to produce genetically modified organisms,

operational scale is expanded according to the

(GMO’s).

estimated demand potential.

Brand

Commodity

A name, term, sign, symbol, logo, phrase

Product for sale in the marketplace. Term

intended to identify the goods or services of

originally coined to differentiate products that

one seller, which differentiates them from

were essential, termed utilities, with new

those of competitors. A recognized brand is

products such as coffee and cocoa that was

one which has strong customer loyalty.

considered to be exotic and desirable.

Nowadays, commodities tend to be used for

Broker

products in high volume trading.

A channel institution which puts a specific

buyer(s) and seller(s) in contact with one

Comparative advantage

another in one or more commodity(ies) or

Competitive condition of an individual,

service(s) with a view to achieving a sale or

organization, or region that allows it to offer a

benefit.

product or service of better quality or at a

lower price than others. Or one country

Budget

enjoying a lower production ratio (input to

An amount of money set aside to cover the

outputs) than another country under total

total cost of a communication campaign or

specialization.

other marketing activity.

Comparative analysis

Business Development Service (BDS)

Comparing the same set of statistics within a

Any business or business entity that offers

category of one country with another for the

information and activities in the marketing

purpose of estimating potential demand.

system that facilitates a second business

thereby improving its operational and pricing

Competition

efficiency. In some cases the term BDS is

A product, organization or individual, in either

used to capture all of those business services

the same or another category which can be

other than financial services, such as input

directly substituted one for the other in

supply, processing, advisory services.

fulfilling the same needs or wants.

Capital

Competitive strategy

Productive resources, (goods) that are

The adoption of a specific target market and

available, as a result of past human decisions,

marketing mix stance in the marketplace.

to produce other want-satisfying goods.

Convenience sample

Ceteris paribus

Procedure in which sample components are

Holding some variables constant, whilst

selected according to the ease of obtaining

letting specific variables change.

information.

C.I.F.

Conversion factor

A contract of sale “cost, insurance freight” of

The ratio or proportion relative to the amount

the documents of title, not the goods, whereby

of final products, or by-products, obtained

the buyer is under an obligation to pay

from a given unit of raw material. For

against the shipping documents irrespective

example, if we obtain 0.4 kg of dried cassava

of the arrival of the goods.

chips from each kilogram of fresh cassava

roots, then the conversion factor would be 0.4.

Closed questions

Questions that include all possible answers,

Cooperative

of which one or several will be selected by the

A collection of organizations or individuals,

interviewee. Examples of closed questions are

pooling their resources in order to gain

multiple choice and rankings.

commercial or non-commercial advantage in

buying, selling or processing goods and/or

Collective action

services.

Term used to describe group activities, used

to increase economies of scale.

100

Appendices

Customer satisfaction

Effective cash flow per workday

The extent to which a product’s perceived

The sum of cash flows during a project’s life is

performance matches a buyer’s expectation. If

divided by the total number of workdays.

the product’s performance falls short of

expectations, the buyer is dissatisfied. If

Effective market demand

performance matches or exceeds expectations,

When needs and desires are supported by the

the buyer is satisfied or delighted.

ability to pay.

Decision-making criteria

Elastic supply

In the context of this manual, these refer to

A supply elasticity coefficient of more than

aspects that the small rural producer takes

one indicates an elastic supply, the

into account when selecting a crop to plant.

percentage increase in supply being greater

than the percentage increase in price.

Demand

The quantity of products that the consumers

Entrepreneur

can buy.

Person who organizes resources to produce

and market goods and services.

Differentiated product

A product that has undergone some form of

Evaluation criteria

value addition to distinguish it from other

In the context of this manual, the aspects

similar products, through means such as

analyzed when selecting or discarding

grading, sorting, packaging, branding,

elements, as in the case of market options.

specialized marketing such that it attracts a

The criteria used are feasibility for

higher price and targets a more specialized

smallholders, attractiveness as business, and

market.

contribution to production sustainability.

Discount

Exchange

A reduction in price on purchases during a

The act of obtaining a desired object by

stated period of time.

offering something in return.

Discount rate

Exchange rate

The interest rate used to convert a series of

The ratio of exchange of one currency to

annual flows to a single present value (year 0).

another.

Distribution

Exporting

Marketing variable that defines the channels

The marketing of surplus goods produced in

through which the product or service reaches

one country into another country.

the client.

Financial rate of return (FRR)

Distribution channel

An interest rate that discounts a series of

An institution through which goods or

annual cash flows in such a way that the

services are marketed, giving time and place

present value of the series is equal to the

utilities to users.

initial investment.

Diversification

Firm

Business growth strategy to produce new

A decision-making business entity that uses

products for new markets.

resources hired from households to produce

goods and services for sale to households or

Dumping

other consuming units.

The selling of goods or services in a buying

country at less than the production unit price

Fixed costs

in the selling country, or the difference

Costs that do not vary with production

between normal domestic price and the price

volume and remain relatively stable, for

at which the product leaves the exporting

example, administration and surveillance.

country.

F.O.B.

Duty

A contract of sale “free on board” whereby the

The actual custom duty based on an imported

seller undertakes to place the goods on board

good either on an ad valorem, or a specified

a named ship at a named port and berth and

amount per unit or combination of these two.

carry all charges up to delivery over the ship’s

rail.

Economic rent

Return in excess of opportunity cost, often

enabled through political protection.

101

Identifying Market Opportunities for Rural Smallholder Producers Focus group

Hedging

A small sample of typical consumers (or an

A mechanism to avoid the risk of a decline in

interest group) under the direction of group

the future market of a commodity, usually by

leader who elicits their reaction to stimulus

entering into futures markets.

such as an advertisement, an idea, a question

or concept.

Horizontal integration

The combination of two or more enterprises or

Foreign exchange

firms operating at the same point in the

Facilities’ business across national

market chain.

boundaries, usually expressed in foreign

currency bought or sold on the foreign

Human capital

exchange market.

The educational investment that improves the

knowledge and productivity of people.

FRR with financing

The FRR calculated and including financing

Human need

expenditures.

A state of deprivation that can be addressed

or reduced by a product.

FRR without financing

The FRR calculated as a parameter of net

Human wants

profitability because it excludes financing

The form that a human needs takes as shaped

expenditures.

by culture and individual personality.

Futures option

Ideotype

A legally binding contract to deliver/take

The concept that small rural producers have

delivery on a specified date of a given quality

of an ideal product. It is used in participatory

and quantity of a commodity at an agreed

evaluation.

price.

Income elasticity measurements

Gatekeepers

A description of the relationship between the

People in the organizations buying center, or

demand for goods and changes in income.

point in a market chain, who control the flow

of information to others.

Income elasticity of demand

The responsiveness of quality purchased to a

Global products

1% change in income, ceteris paribus.

Products designed to meet global market

segments.

Income per capita

The market value of all goods and services

Globalization

outputted by a country divided by the total

The integration of international transport,

number of residents of that country.

finance and communications systems and

services to enable transnational trading of

Inelastic supply

goods and services.

Products that have a supply elasticity between

zero and one the supply elasticity is

Gross domestic product (GDP)

considered to be inelastic. The percentage

The value of all goods and services produced

change in supply is less than the percentage

by a country’s domestic economy in one year.

change in price.

Gross margin

Inflation

Accounting term equivalent to sales minus

A condition where demand outstrips supply or

variable costs. It can be expressed as a

costs escalate, affecting an upward change in

percentage or as a sum of money.

prices.

Gross marketing margin

Information system

The sum of all marketing costs plus profits.

A system for gathering, analyzing and

reporting data aimed at reducing uncertainty

Gross national product (GNP)

in business decision making.

The market value of all goods and services

outputted by residents of a country in one

Innovation

year including income from aboard.

An idea, service, product, or technology that

has been developed and marketed to a

Growth rate

consumer who perceive it as novel or new. It

The growth in the sales of a product that is

is a process of identifying creating and

measured as a percentage of annual increase

delivering new product or service values that

of demand. Growth can be high (more than

did not exist before in the marketplace.

6% per year); average (4%-6%); low (1%-3%,

and similar to the population growth rate);

null; or negative.

102

Appendices

Input markets

Licensing

Markets where inputs such as seeds, tools,

A method of foreign operation cooperation

fertilizers, agrochemicals are sold, generally

whereby an organization in one country agrees

through specialized dealers that only trade in

to permit a firm in another country to use the

input supplies.

manufacturing, processing, trademark, know-

how or some other skill provided by the

Integrated production project

licensor.

Rural development project that takes into

account the system elements of the targeted

Local products

product, for example, agricultural and

Goods or services seen only suitable in one

livestock production, post harvest handling or

single market.

processing, marketing and entrepreneurial

organization. Important project components

Logo

are research and development.

Symbol or emblem used to identify a specific

product and for marketing purposes to

Interest

differentiate a specific product from similar

The charge made for borrowed money. The

items.

rate at which we discount future economic

goods.

Mark of origin (appellation)

System by which producers and processors

Interest rate

can legally register their products such that

The price of borrowed money.

no other producers or processors can use this

name, title or logo, unless they produce the

Intermediaries

product within a legally recognized area or

Distribution channel firms or persons, that

territory and use specifically laid down

help to find the customer or make sales to

methods of production and or processing.

them, including bulking agents, wholesalers

and retailers that buy and resell goods.

Market

The group of consumers, industries and

International products

institutions who can buy a product or service.

Goods or services seen as having extended

potential into other markets.

Market chain

Term used to describe the multiple market

Joint ventures

channels through which a product or service

An enterprise in which two or more investors

moves until reaching the consumer.

share ownership and control over property

rights and operations.

Market development

A business growth strategy to identify and

Key informants

develop new market segments for current

Active and leading members of the market

products. New market segments can comprise

chain.

new clients, institutional markets, other

geographical areas, and export.

Key observers

People who are knowledgeable about a market

Market efficiency

chain but are not directly involved in the

A comparison of the value of output to the

business operations of the market chain.

value of inputs used in the marketing process.

Letter of credit

Market entry

A method of international payment whereby

The way in which an organization enters

the buyer instructs his own country bank to

foreign markets either by direct or indirect

open a credit with the seller’s own country

export or production in a foreign country.

bank specifying the documents which the

seller has to deliver to the bank for him/her to

Market holding price

receive payment.

The charging of a price at what the market

can bear in order to hold market share.

Level of technology

Degree of technological complexity needed to

Market information services (MIS)

adequately develop a crop. It is similar to

People, equipment and procedures to gather,

‘technical requirement’.

sort, analyze, evaluate and distribute needed,

timely and accurate information to marketing

Levy

decision makers.

A tax imposed by government, to meet a

specific objective.

Market mix

The set of controllable tactical marketing

variables including: product, price, place and

promotion, that a firm blends to produce the

response it wants in the target marketplace.

103

Identifying Market Opportunities for Rural Smallholder Producers Market opportunity

Marketing costs

A given product or service presenting high

Agricultural marketing refers to the activities

growth or for which the levels of demand

involved in taking a product from the farm

exceeds supply, and an organization or region

gate and delivering it in the form, at the time

can produce profitably.

and to the place that the buyer requires. Such

costs are therefore incurred through handling,

Market penetration

transport, storage, processing, packaging,

A business growth strategy to increase the

market fees, risk management, brokerage,

sale of products in current market segments

export handling and others.

without changing the product offered. This

can be done by lowering prices, enhancing

Marketing process

promotion and increasing distribution.

The process of analyzing market

opportunities, selecting target markets,

Market positioning

developing a marketing mix and managing the

The adoption of a specific market stance,

marketing effort.

leader, challenger, follower, flanker or

adopter, vis a vis competition.

Marketing strategy

The marketing logic by which the business

Market research

unit hopes to achieve its marketing objectives.

Entrepreneurial discipline that not only

identifies market trends and opportunities

Media

but also reveals the opinions and preferences

Any paid for communication channel

of clients and consumers. Data are obtained

including television, radio, posters, etc., thus

by consulting primary and secondary

providing an immediate idea of the

information sources.

microregion’s system.

Market segment

Middleman

A group of consumers who respond in a

Person who trades in goods, a buyer and seller

similar way to a given set of marketing

of goods and services.

stimuli.

Net margin

Market segmentation

Accounting term equivalent to net gain, that

Dividing a market into distinct groups of

is, sales minus both variable and fixed costs.

buyers with different needs, characteristics or

behavior, who might require separate

Net marketing margin

products or marketing mixes.

Excludes normal marketing costs, thereby

providing a measure of the profit realized. Net

Market speculation

marketing margins may however also include

A marketing strategy whereby buyers hold

the remuneration of the trader or processor’s

stocks of a product in the hope that prices

labor, in which case it is not an exact profit

will increase so that they can maximize

indicator.

profits when they decide to sell. Physical

speculation requires that a lot or amount of

Net present value (NPV)

produce is purchased and stored. There are

The value in year 0 of a series of annual cash

costs associated with storage and for a

flows generated by a project if discounted

speculation to be profitable, the final sales

using an interest rate equal to the opportunity

value must be more than the costs of storage.

cost for capital.

Market shed

Niche marketing

The area that covers production, processing

Adapting a company’s offerings and products

and marketing of a product.

to more closely match the needs of one or

more subsegments where there is often little

Market supply

competition.

The quantity of products that is offered for

sale.

Non tariff barriers

Measures, public or private, that cause

Marketing

intentionally traded goods or services to be

A business activity that focuses on identifying

allocated in such a way as to reduce potential

and satisfying market needs through a

real world income.

profitable offer of products and services.

NPV with financing

The calculated net present value, but

including financing expenditures.

NPV without financing

The calculated net present value, but

excluding financing expenditures.

104

Appendices

Nutracueticals

Physical distribution

Products that have medicinal/pharmaceutical

The act and functions of physically

and or nutritional value, that are derived from

distributing goods and services including the

plant or animal products. Examples include

elements of transport, warehousing and order

high iron producing beans, bananas that

processing.

contain insulin.

Pilot phase

Open questions

Strategy to minimize the risks involved in

Questions that allow the interviewee to answer

commercializing an integrated production

in his or her own words.

project. Entrepreneurial activities are carried

out on a small scale, but under real market

Opportunity cost

conditions.

The value of other opportunities given up in

order to produce or consume any good.

Place

All the company/firm activities that make the

Opportunity cost of capital

product or service available to the target

Interest that the financial system

customer.

acknowledges for savings, for example, the

interest for fixed-term deposits.

Pre-production cycle

Period of a crop between planting and 30% of

Option

the crop’s maximum production potential.

A bilateral contract giving its holder the right,

but not the obligation to buy or sell a specified

Pre-production investment

asset at a specific price, at or up to, a specific

The amount of money spent before the first

date. Type of financial instrument that gives

crop is harvested.

the holder the right to buy or sell futures

contracts.

Price ceiling

The maximum price which can be charged

Output markets

bearing in mind competition and what the

Markets where harvested products are sold—

market can bear.

these are the more traditional assembly,

wholesale and retail markets.

Price elasticity of supply

Is defined as a measure of the percentage

Packaging

change in quantity supplied in response to a

Activities involved designing and producing

percent change in price. A supply elasticity of

the container or wrapper for a product.

0.4 for cotton in the short run means that

the quantity supplied increases 0.4% for a

Participatory

1% increase in the price of cotton.

Adjective that refers to anything that takes the

viewpoints of users, beneficiaries, or partner

Price escalation

organizations or projects into account when

The difference between the domestic price and

making decisions.

the target price in foreign markets due to the

application of duties, dealer margins and/or

Participatory evaluation

other transaction costs.

Methodology, inspired by concept tests used

in product research, which allows small rural

Price floor

producers to express their preferences for

The minimum price which can be charged

market options presented to them.

bounded by product cost.

Patenting

Price stability

Legal mechanism used to protect products

Degree of variability of product prices, which

from being copied by other entrepreneurs. The

can be measured with an index equivalent to

patent scheme usually lasts for a designated

the standard deviation of a deflated series of

period of time, 10 years, after which time the

at least 18 monthly prices.

scheme either elapses or the inventor or owner

provides evidence of innovation to renew the

Price

patent to protect the value of the given

The amount of money charged for a product or

intellectual property.

service, or the sum of the values that

consumers exchange for the benefits of having

Penetration price

or using a product or service.

The charging of a low price in order to gain

volume sales conducted under conditions of

Primary data

little product uniqueness and elastic demand

That data which is collected and generated as

patterns.

part of a survey. Unpublished data from

individuals or organizations.

105

Identifying Market Opportunities for Rural Smallholder Producers Primary information

Relationship marketing

In market research, this is the information

The process of creating maintaining and

obtained firsthand by using several

enhancing strong value laden relationships

communication methods, for example,

with customers and other stakeholders.

personal interviews and group sessions.

Research and development

Probability sample

Entrepreneurial term that refers to two

Procedure in which the elements of a sample

complementary activities that must be carried

are chosen at random.

out for product development. It encompasses

research on markets, products and processes;

Product

development of brands and packaging.

Anything that can be offered to a market for

Research and development is an important

attention, acquisition, use of consumption

component of integrated production projects.

that might satisfy a want or need. It includes

physical objects, services, persons, places,

Retailer

organizations and ideas.

A channel institution which acts as an

intermediary between other channel

Product card

institutions and the end user and who usually

A format that is especially designed for

breaks bulk, charging a margin for its

participatory evaluation. Each format

services.

comprises a card that represents the concept

of one market option. The cards are then

Rural agroindustry

organized according to preferences of small

Economic activity that generates aggregate

rural producers.

value for agricultural and livestock products

in the field.

Product development

A business growth strategy for offering new or

Sales per workday

modified products to current market

Total value of sales during the project’s life,

segments. The products can be improved or

divided by the total number of workdays.

differently packaged or labelled.

Sample

Product strategy

A part or segment of a population selected as

A set of decisions regarding alternatives to the

representative of the targeted population.

target market and the marketing mix given a

set of market conditions.

Sample unit

In market research, the contact person.

Project

A series of activities planned and carried out

Sampling procedure

to achieve an objective within a defined period

Method used to choose a population sample.

of time and with predetermined resources.

Secondary data

Promotion

That data which already exists in other texts.

Activities that communicate the product of

Published accessible data from a variety of

service and its merits to target consumers

sources.

and persuade them to buy. The offer of an

inducement to purchase, over and above the

Secondary information

intrinsic value or price of a good service.

In market research, this is the information

obtained secondhand, that is, from

Quality

documents or Internet.

The totality of features and characteristics of

a product or service that bear on its ability to

Sector

satisfy stated or implied needs.

Relates to the all activities under the mandate

of one government ministry, such agriculture,

Quota

health, education, justice.

A specific imported amount imposed by one

country on another, when once filled cannot

Sensitivity analysis

be exceeded within a given time. When a

Study that uses a profitability model to

quota is in force, the price mechanism is not

determine those variables that most affect a

allowed to operate.

given financial parameter.

Quota sample

Services

Procedure in which a specific number of

Activities, benefits or satisfactions that are

elements of each group or segment of a given

offered for sale.

population is included in the sample.

SMS

Short message service, text used to transfer

information via mobile phones.

106

Appendices

Speculation

Tariff

The purchase or sale of title to goods or

An instrument of terms of access normally the

financial obligations in the expectation of

imposition of a single or multiple excise rate

favorable price movements.

on a imported good.

Standardization

Technical requirement

Same goods or services marketed in either

Term indicating the characteristics that a crop

product, distribution or advertising form,

needs to cope with the prevailing soil and

unchanged in any country.

climatic conditions of a targeted region, for

example, whether it is hardy and tolerant, or

Strategic business unit

whether it requires sophisticated technologies

A self contained grouping of organizations,

and large amounts of inputs for its successful

products or technologies which serve an

production.

identified market and competes with identified

competitors.

Test-market

A business strategy to minimize risks when a

Strategic plan

new product or service is being introduced. It

A plan that describes how a firm will adapt to

consists of releasing it into a restricted market

take advantage of opportunities in its

to assess the degree of success.

constantly changing environment, thereby

maintaining a strategic fit between the firms

Timetable

goals and capabilities and its changing market

A tool to plan and organize projects that

opportunities.

defines the sequence of activities, their

duration and the person or institution

Structured survey

responsible for activities.

Research tool consisting of a questionnaire

that is applied to all interviewees alike.

Total cycle

Period of a crop between planting and the

Subsector

point where productivity decreases to below

A part of a sector, which can mean, within

30% of the crop’s maximum potential.

agriculture that a subsector focuses on one

area, such as grains, fish, livestock, etc., or

Traceability

can be more detailed to all that relates to one

System by which a product is tagged, such

particular commodity, such as the maize, rice,

that it can be traced from source of origin to

cassava, beef subsectors.

final user. This process may become

mandatory in formalized food markets.

Substitutes

Two different goods or resources between

Trademark

which a choice is made to satisfy human

Legally recognized name, symbol or title,

wants (or to produce a product).

which can only be used for marketing

purposes by the originating or owning

Super Brand

company.

A product that has world renowned

reputation, for providing customer satisfaction

Transaction

and delight, e.g., the soft drink Coca-Cola, the

A trade between two parties that involves at

NIKE sports shoe.

least two things of value, agreed upon

conditions, a time agreement and a place of

Support services

agreement.

In the context of this manual and of rural

development, these are sustainable or

Transaction costs

permanent complementary services that

Transaction costs relate to the non-price costs

facilitate the dynamics of the economy and

of making a commercial exchange. These are

rural organizations. These services include

expenses incurred in finding someone to trade

savings and credit, technical assistance,

with, time spent negotiating a deal and the

commercial information, transportation and

costs involved in ensuring that contracts are

communications.

honored, all fall under the general category of

transaction cost.

Sustainability

Permanence of any condition, for example, the

Type of producer

productive capacity of the agricultural sector.

Classification of small rural producers

It is also applied to the continued existence

according to a given variable of interest, for

over time of any economic activity or

example, the degree of market orientation or

organization.

level of well-being.

System

A series or grouping of related or connected

elements so that they form a unit or a whole.

107

Identifying Market Opportunities for Rural Smallholder Producers Unstructured survey

Variable costs

Research tool consisting of a series of

Costs that vary directly with the volume

interview guidelines that allows the

produced, for example, raw materials,

interviewer to question interviewees and direct

packaging and fuel .

each interview according to the answers given.

Vertical integration

Value

The linkage of firms (enterprises) in different

The consumer’s assessment of the product’s

stages of producing and or marketing under

overall capacity to satisfy his or her needs.

the ownership of a single firm.

Value added

Wholesaler

The contribution to final produce value by

A channel institution which purchases and

each stage in the production, delivery and

sells in bulk from either original suppliers

marketing process. Also, includes

and/or other channel intermediaries,

transformation processing of goods from

charging a margin for its services.

primary to final state offered to a consumer.

108

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110

About the Partners

ASARECA FOODNET (Association for Strengthening Agricultural Research in Eastern and Central Africa) FOODNET is ASARECA’s post harvest and market research network for East and Central Africa. The network was established in 1999 and focuses on market analysis studies, market information, agroenterprise development, and related business development support services. FOODNET works in collaborative partnerships with research and development partners from the public and private sector.

Catholic Relief Services

Catholic Relief Services was founded in 1943 by the Catholic Bishops of the United States. Their mission is to assist the poor and disadvantaged and promote development of all people and to foster charity and justice throughout the world.

CRS operates on 5 continents and in over 90 countries. CRS aids the poor by first providing direct assistance then encouraging these people to help with their own development.

CIPASLA

Cipasla, an inter-institutional consortium that fosters sustainable agriculture in hillsides, was founded in 1993 and is based in Pescador, a village in northern Cauca department, located in south-western Colombia. In its first phase, Cipasla included twelve public and private agencies and its structure involved a support committee consisting of community representatives. Cipasla’s agenda encompasses community organization, environmental education, soil and water conservation, integrated crop management, marketing and agro-industry. Several CIAT projects have implemented research activities in this region, which is considered to be a pilot site.

About the Donors

CIDA

Canadian International Development Agency’s mandate is to support sustainable development in developing countries to reduce poverty and contribute to a more secure, equitable, and prosperous world. The Agency’s work is concentrated in the poorest countries in Africa, Asia, and Latin America. CIDA’s program is based on the Millennium Development Goals, to which it contributes through four key areas: social development, economic well-being, protection, conservation, and management of the environment and governance.

DFID

The Department for International Development (DFID) is the part of the UK Government that manages Britain’s aid to poor countries and works to reduce extreme poverty. DFID’s work aims to bring people out of poverty through programs that settle conflicts, increase trade and improve health and education.

IDB

The Inter-America’s Development Bank was established in 1959 as a development institution with novel mandates and tools. The IDB is the oldest and largest regional development bank. It is the main source of multilateral financing for economic, social and institutional development projects as well as trade and regional integration programs in Latin America and the Caribbean.

IDRC

The International Development Research Centre (IDRC) is a public corporation created by the Parliament of Canada in 1970 to help developing countries use science and technology to find practical, long-term solutions to the social, economic, and environmental problems they face. Support is directed toward developing an indigenous research capacity to sustain policies and technologies that developing countries need to build healthier, more equitable, and more prosperous societies.

SDC

The Swiss Agency for Development and Cooperation (SDC) is organized and funded by the Swiss government and operates by financing programs both directly, and in partnership with, other agencies to countries around the world.

USAID

The United States Agency for International Development is an independent federal government agency that aims to further America’s foreign policy interests in expanding democracy and free markets while improving the lives of the citizens of the developing world. USAID supports long-term and equitable economic growth and advances U.S. foreign policy objectives by supporting: economic growth, agriculture and trade; global health; and democracy, conflict prevention and humanitarian assistance.

228 W. Lexington Street

Baltimore, MD 21201-3413 USA

Tel: 410.625.2220 • www.crs.org

ISBN 0-945356-42-0

Table of Contents

Part 2: International markets