AGGREGATION AND DISTRIBUTION
This model is derived from the business model of the Potato Producers and Marketing Association in Plateau State of Nigeria. The Association has memberships of 120 potato farmers from whom potatoes are procured, stored, and sold to customers. It provides a market for the farmers and is able to make profit in selling the potatoes to buyers who are also assured of obtaining the quantities they want from a known source. The Association has the ability to procure over 540 MT of potatoes per annum from the already linked group of 120 farmers. The proposed value chain linking this aggregation and distribution business model is shown in the image below. Input dealers will supply the requisite inputs to the farmers. The aggregator will have to enhance the relationship with farmers and also with the customers. In order to increase its operating capacity, additional farmer groups can be coopted into the existing arrangement. For the farmers, there is the need to have a binding agreement on the volume of supply, which can be 80% or more of their output.
A major issue here is side selling which occurs if the price on the open market is more attractive than the one paid to the farmers. In return, the business operator will finance either training in good agricultural practices (GAP) or supply quality potato seeds to the farmers. This arrangement will also require further collaborations with seed potato producers and extension service providers. The collaboration between the business operator and financial institutions is necessary, in order to facilitate access to financial resources to finance the purchase and distribution of potato seeds or payment for the extension services. The financial resources will also be needed to pay for the costs of expected higher volumes of potatoes to be procured, associated cost of delivery, maintenance, and remuneration. On the marketing side, the aggregator will have formalized linkages with the customers. The value proposition of the business model of the aggregator is to supply quality potatoes to its customers.
It will have collation and marketing as its core activities. Apart from the farmer groups, the aggregator will also have to engage with service providers and a financial service provider. Using the Potato Producers and Marketing Association as an example, the aggregator will have formal relationships with 120 farmers who are supported to produce an average yield of about 10 MT/ha, for three production cycles in a year. This will translate to a total volume of 3,600 MT per annum. In addition to the cost of mobilizing the 3,600 MT of potatoes, the aggregator will have to pay remuneration for its staff which will include a manager, a marketing officer, and a clerk. Other costs will be in the form of depreciated costs of assets, maintaining the facility, and transportation costs. In order to improve the quality of the produce delivered, the aggregator may have to brand its packaging materials which will come with additional costs. The revenue stream will only include the sale of fresh potatoes.