Assessment of Cooperatives in the Poultry Industry - 2013.pdf - Seda

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Research Report: Addressing the Needs, Opportunities and Challenges of Cooperatives and Collectively Owned Enterprises in the Poultry and Related Industries through distribution from producer laying farms. The large-scale egg cooperative interviewed was formed with the goal of bringing small-scale egg producers together in order to access the formal retail market in a co-ordinated way. The cooperative conducts the packaging and selling of eggs, while a network of over 40 farms provide eggs to this cooperative. While the cooperative does expand membership over time, there are many standards in place. Thus, more than an opportunity to partner, this cooperative is representative of a successful business model. In many areas where poultry cooperatives are dense, there may be opportunity for a similar initiative in order to gain access to bulk discounts and larger markets. Egg Producer 2 in Table 4-10 is a private family business. While they are one of the dominant players in the industry, this business remains very inwardly oriented and ensures that all functions along the value chain are owned by their business. Thus, there is not scope for small-scale farmers to interact in the production process. Due to the entire value chain being internal, there is not even scope for cooperatives to sell support services such as manure removal and sale or the selling of spent hens; everything is done by the business itself. When asked whether broiler farming or egg laying would be superior business options for a new cooperative, a member of the DPFO stated that egg laying may offer better opportunity. The reason behind this being that egg laying is a less risky process and is likely to produce returns more easily. The equipment required is not as specialised and the time to market is not as vital as it is in the A member of the DPFO stated that egg laying may offer better opportunity broiler farming industry. Thus, although more cooperatives operate in the broiler market, there may be scope for egg laying cooperatives to develop further. Interaction with willing suppliers would provide an easy point of sale and with less advanced equipment and a less delicate process; there is a higher likelihood of success even if profit margins are lower. 4.2.2.3. Retailers Every large-scale retailer supplies a number of different brands of broiler meat and eggs. A number of large retailers were approached and interviewed on their buying process and potential involvement of developing poultry farmers. Based on the responses, there appear to be greater barriers to entry in obtaining contracts with large retailers than there are to obtaining contracts with large producers. Additionally, there are more opportunities available along the value chain concerning large producers. With large suppliers the product must be ready to go to market and the supplier must provide transport for their saleable product. The table below indicates whether or not retailers see potential to work with developing farmers. It also highlights constraints identified by the retailers. 73 | P a g e U r b a n - E c o n : D e v e l o p m e n t E c o n o m i s t s
Research Report: Addressing the Needs, Opportunities and Challenges of Cooperatives and Collectively Owned Enterprises in the Poultry and Related Industries Table 4-11: Interactions of Large Retailers with Developing Farmers Business Large Retailer 1 Large Retailer 2 Large Retailer 3 Work with developing farmers? and Main Function (if yes)/ Reason why (if no) Buyers operate per province and suppliers must be able to supply the entire province. Cannot buy from different farmers for different stores as this is not logistically viable. Independent farmers are encouraged, however, they must be able to supply on a relatively large scale. Relationships exist with suppliers and these are slow to change Only have corporate suppliers. Distribution and quantity are problems with smaller farmers. The above table identifies that of the three producers contacted, two do not work with developing farmers. One retailer does work with independent farmers; however, this relationship has been built over many years and requires a certain level of production to be in place. Retailer 2 identified in Table 4-11 above provided additional information concerning the business and partnering with developing farmers. The retailer stated that their business is geared towards working with developing farmers. They recommended that cooperatives would be in a better position to do business with the store if they find a niche and supply to that; such as organic chicken and organic eggs, quail, pheasant, etc. The store also stated that they have an Enterprise Development Department that works towards assisting small businesses. There are certain criteria which need to be met and in order to supply to the store, international standards, legislation, and DNA quality testing must be met. Thus, although this business is the most open to buying the products of developing farmers, their quality standards pose a significant barrier to entry. The remaining two retailers indicated that although they do not discriminate against any particular business type, small-scale farmers are not able to meet the demands they set for suppliers. Retailer 1, identified in Table 4-11 above, stated that suppliers must be able to produce sufficient quantities for all stores in a province. Small-scale farmers are not able to meet the demands set for suppliers Retailer 3 reasoned that although they would like to work with developing farmers, two main challenges are faced with this. The first is distribution; small producers do not have the fleets of trucks necessary to deliver their products to all stores in a region. Large numbers of refrigerated trucks are required to deliver broilers. The second concern is quantity; small producers simply cannot meet the demands of an entire region of stores. The store contact person also noted that quality is a concern regarding eggs. Many small-scale egg producers place their eggs in refrigerated storage when in fact this depletes the shelf life of the eggs. Based on these constraints; Retailer 3 currently only has large corporate suppliers on their suppliers list for broilers and eggs. 74 | P a g e U r b a n - E c o n : D e v e l o p m e n t E c o n o m i s t s
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