Mango pulp and juice
Supply chain development
Agrofruits is a new mango pulping factory, owned by Kiren, a Senegalese company bottling a range of drinks under CocaCola license as well as own brands. The mango pulp is sold to the mother company for MinuteMaid and Pressea juice, an own brand. The remainder of the pulp is exported to the EU and African market.
Agrofruit’s main challenge is to find enough mango for the plant at affordable prices that allow it to compete with pulp from other countries. Senegal is home to some of the largest and best managed commercial as well as smallholder plantations in Africa, but most fruit is exported, while the remainder fetches high prices on the domestic fresh market. Farm gate prices for non-export fruit are three to five times as high as in Mali, Burkina Faso or Ivory Coast. Agrofruits can therefore not compete with local market traders on price.
Nearby Mali and Casamance (Senegal south of the Gambia) produce a lot of mango and have substantially lower prices, but getting the mango cost effectively to Dakar is also a challenge.
Sense was asked to develop a supply chain strategy, and figure out where Agrofruits can find the quality and quantity of mango it needs at a competitive price, and what is needed to secure this supply.
Step 1: visiting orchards and value chain analyses
Sense visited a large number of exporters, small and large farmers, harvester-traders, cross border traders and transporters in Senegal and Mali to understand farming practices, production volumes, varieties, seasons, the organization of the value chain and transport cost. Working sessions were also held with Agofruit’s management.
Based on this fieldwork we managed to identify across the various farming systems in the countries:
- The key areas for improvement in farming practices
- The buyers competing with Agrofruits, and their advantages and disadvantages vis-à-vis Agrofruits from a seller’s perspective
- Varieties and production seasons
- Estimated production volumes for the various grades (export, local fresh market, processing)
- Farm gate prices
- Expected quantities that Agrofruits can expect to source
“Investing in small farmers in Niayes will not increase supply, because they are far better off selling to fresh market traders. For small farmer impact we need to go to Casamance and Mali”
Step 2: Calculating the target sourcing price and target volumes
Based on our knowledge of the international mango juice and pulp market as well as the cost structure of mango processing we developed a simple economic model for the Agrofruits Factory in the Business Sense Analyser.
We used this model to calculate what the maximum price is that Agrofruit can pay per kg on average for Mango at factory gate for conventional and organic mango. We also calculated the total volumes the factory needs to process per season to break even and get to a decent profit.
We than translated this into daily, weekly, monthly and annual production targets over the next five years, broken down per destination (Senegal Centre-Niayes region, Senegal-Casamance and Mali).
Step 3: Defining activities to increase supply and calculating the cost per kg of additional mango.
The final analytical step involved defining a detailed list of activities that can help increase supply, and their cost-effectiveness. Per activity we estimated the number of tons of additional supply that can be expected, as well as the cost per activity. We then used this to calculate the cost per ton of additional supply and choose the most promising activities.
For Mali and Casamance this involved calculating various alternative scenarios:
- Using intermediaries such as cross-border traders versus direct sourcing
- Using a central warehouse versus loading 40 ton trucks in orchards
- Using own trucks versus renting trucks
- Packing trucks in bulk versus using 500kg bulk crates or 20kg harvest crates
- Using one central warehouse versus decentralized warehouses.
Step 4: Access to Finance
Several banks and MFIs were visited to assess the potential of suppliers to Agrofruits to obtain investment capital for expansion into Mali and Casamance, and loan conditions.
The report remains confidential, but nevertheless there are some key insights we can share. Small producers in Senegal have only a limited quantity of mango they can easily sell to one local fresh market trader for a far better price than Agrofruits can offer. Hence investing in supporting small farmers or exporters are not likely to lead to higher volumes.
Large plantations on the other hand have so much non-export mango that they need 5 to 10 traders each day to get rid of it. Many traders however don’t come regularly and are not able to pay cash all the time. These companies rather sell in bulk to Agrofruits than dealing with 20 traders, and focus their efforts on exports where they earn most of their money.
The large commercial plantations are thus likely to remain the backbone of supply, but they cannot supply nearly enough to let the factory run at full capacity of 80tons per day. This will require Agrofruits to source large quantities from smallholder farmers in Casamance. This in turn will require the company to invest in a packhouse and transport facilities in the region, and possibly organizing cooperatives and training far
Another key insight was that if Agrofruits can organize supply from Mali, it can lengthen the production season with at least 2 months. Like in Casamance, the main challenge is how to get mangos cost effective from the orchard to the factory, and this will require investments in logistics.
Sense has been hired by IFC and Agrofruits for a 3 year project to develop the mango supply chain in Casamance and Senegal. This will include strengthening and support of Agrofruits suppliers willing to invest in the region, farmer training and support for cooperatives.
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