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Aflasafe Commercialization StrategyImproving the Health and Securing the Income of Nigeria’s Small Holder Farmers
Creating Companies | Creating Wealth | Creating Jobs
January 2013
CONFIDENTIAL
Partners:
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USDA / IITA Technology that naturally and cost effectively reduces Aflatoxin levels
by 80% to 99%
The Solution
Aflasafe Commercial Strategy
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“Establish a sustainable premium market for low aflatoxin maize and ensure this premium creates sufficient economic incentive to sustain farmers adoption with the buyer and seller sharing the economic benefits equally”
Three Strategic Question
I. Who is the target market for low aflatoxin maize?
II. What premium can this market afford and does the premium provide sufficient economic incentive to sustain farmer adoption?
III. How will the commercial plan to be implemented?
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Who is the market for low Aflatoxin Maize?
Target Market for Aflasafe MaizePoultry Industry… Key Driver of Domestic Maize Production
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Nigerian Government Bans Poultry Imports
Nigerian poultry production has grown from 113 Million birds in 2000 to 192 million birds in 2010
Nigerian maize production has grown from 4 million metric tons in 2000 to a 7.3 million metric tons in 2010
Each sector has grown on average 5% per year.
Poultry feed is approximately 60% maize.
Index of growth in production for maize and poultry relative to Nigeria’s production in 1961*Measure: Relative growth in production
DriversCorrelated Growth In Maize and Poultry Production in Nigeria
* Doreo Analysis, FAO
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Is Aflatoxin an issue for the poultry industry?
Safe38%
Toxic62%
Aflatoxin has a significant economic impact on poultry production
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Poultry fed with Contaminated Feed ( >500 PPB)
Poultry fed with Safe Feed ( < 20 PPB) Percentage of Toxic Poultry Feed *
Measure: % with levels of Aflatoxin over 20 PPB
Impact of Toxic FeedMajority of Poultry Feed in Nigeria Toxic
Significant increased mortality Dramatic reduction in live weight / Feed efficiency (40% less in IITA trails)
Drop in egg production rateAdditional IITA trails in progress*IITA
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Is the poultry industry currently paying a premium for low aflatoxin maize?
Target Farm gate Price of Aflasafe $15 USD per Ha with Target Yields of Aflasafe Maize Farmer of 3.5 MT /Ha
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36 6
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Toxin Binder Cost
Toxin Binder Concentration
Low Low
Low LowHigh
High High
High 2 2.5 3 3.5 4 4.5 50
10
20
30
40
50
60Teir 1 Tier 2 Teir 3
Yield Per Ha (MT/Ha)
Farm
Gat
e Pr
ice
of A
flasa
fe ($
/Ha)Tier 2
Customers Tier 1
Customers Tier 3
Customers
Poultry Industry Current Premium by Customer Segment*
($ per Metric Ton of Maize)
Price of toxin binders vary from $2 - $4 per kgConcentration of use varies from 1kg – 2kg per metric ton of feed.
600kg of maize per 1000kg of feed
Economically Sustainable Farm Gate Price of Aflasafe by Customer Segment and Farmer Yield*
Assumes farmer makes 33% profit on use of Aflasafe
Target Price
Target Yield
* Doreo Analysis
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What incentive will farmers have to adopt Aflasafe?
Purchase Aflasafe
Repackage Aflasafe
Farmer Purchase
Aflasafe for $15.60/ha
Farmer Produces
Maize with Yields above
3.5MT/ha
Babban Gona Test Maize at Harvest
Maize passes test farmer
receives $6.25/mt premium
Babban Gona
markets maize for +
$6.25 premium
Phase 1 Aflasafe Pilot Commercialization
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Modest Premium of $6.25/mt (Approximately 2% premium) Works if Farmer Attains Yields of Over 3MT/Ha
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How do you get farmer yields above 3MT/Ha?
Small Holder Farmer Members
Small Holder Farmer Members
Small Holder Farmer Members
Babban Gona: Agricultural Franchise Model
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Trust Group 1
Trust Group 2
Trust Group n
Services
Services
Services
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Training
Credit
AgricInputs
Good Markets
Babban Gona Services Provided
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Babban Gona Impact
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Babban Gona Field Yield Up to 4.6 MT per Hectare
Non Babban Gona Field Expected Yield Less than 1.5 MT per Hectare
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Babban Gona Impact
Ibrahim MustaphaAttained yields of 4.6MT/ha i.e. 3X the National Average and almost 6X the average yield in the community.
4.6 MT/Ha
Achieved an economic value net of all loans of over $1,250 from his small 1.1 Hectare farm. From a GDP per capita standpoint he moves from poverty into a lower middle income bracket..
$1,250
Samaila Haruna Achieved an economic value net of all loans of over $2,500 from his small 2.5 Hectare farm. From a GDP per capita standpoint he moves from poverty into a lower middle income bracket.
$2,500
With his earning from his first season in Babban Gona he bought a car.
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How cheap can you produce Alfasafe?
6.88 8.75
12.19
3.13
3.44
0.632.5 0.63
1.88
12.2
15.61.90.90.6
Significant Product Development Investment to Reduce COGsReduced from $20 per Ha to $7 per Ha
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Aflasafe Estimated Price ex Factory*Measure: USD per Ha
Substrate (Sorghum)
SG&APackaging Ex Factory Price
Final ex factory price assumes an EBITDA margin of 28% (55 Naira / kg) applied to product to enable factory to be sustainable.
Simple, low-cost formulation and manufacturing process developed for use in this manufacturing plant
Process amenable to seed processing companies
Discussions underway with 2 seed processing companies for manufacturing aflasafe in Nigeria
Analysis of Ex Factory Price and End Farmer Cost
Inoculum Labor/OH EBITDA Margin
Aflasafe Estimated Farm Gate Price*Measure: USD per Ha
Ex Factory
Price
Retailer Margin
Farm Gate Price
Transport to DP
DP Margin
Key actors in distribution are the Distribution Partners (DPs) and Retailers.
As product is new and requires addition work by the value chain actors i.e. marketing and education, margins are set slightly higher than normal to encourage effective distribution.
Cost to farmer includes labor cost to apply assuming half day at 800 naira per day.
Key Takeaways
* Doreo Analysis
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How high can the premium for Aflasafe maize go?
Poultry Industry Currently Paying an Implied Premium in Lost ProfitsAflasafe Treated Maize Dramatically Increases Profitability by up to $0.72/ Broiler Started
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Lost Gross Profit ($/Broiler Started) of Not Using Aflasafe Treated Maize*
Assumptions 2kg live weight Conservative low cost finisher feed mix:
$0.50/kg Average bird dies at 4weeks weighing 1kg Price of dressed weight bird: ₦650/kg Cost of day old chick: $1/Chick
* Doreo Analysis
The Recommended Premium For Aflasafe Treated Maize is $56/MT vs. $6.25/MTThe Poultry Industry Makes Money… the Farmer Makes Money
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How will the commercial plan be implemented?
Strategic Plan to Drive Sustainability Leverage Strong Regulatory Enforcement to Sustain Premium Market for Aflasafe maize
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1Year
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PACA and Pull MechanismGenerate Supply of Cost Effective Low
Aflatoxin Maize
Enforce Regulatory Policy
Enable Market Forces to Drive Sustainability
Promote Health Awareness to Value
Chain Actors
Policy: Build Regulators Capacity
Policy: Develop
regulatory framework
Policy: Phased in regulatory enforcement mechanism
Market Forces
Health Awareness: Farmer Focus
Health Awareness: Industry Focus
Health Awareness: End Consumer
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Contact Details
25
Lagos
3B Baajiki Close
Lekki Phase I
Lagos, Nigeria
London
11 Mount Pleasant
London, England
SE27 9PU
Kola Masha
Managing Director
+234-(0)-805-5000-350
www.doreopartners.com
Doreo