CASC 28 May Copyright Presentation by Claudia Sanchez Bajo 2014

Transcription

1 * CASC 28 May 2014 Copyright Presentation by Claudia Sanchez Bajo 2014

2 The Global economy today is made of integrated supply chains more than 50% of total manufactured imports more than 70 %of total service imports, are intermediate goods or services. A typical manufacturing company uses inputs from more than 35 different contractors across the world Chains of organizations that create value by involving co-operatives has been on the increase in many countries around the world. Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

3 Coffee is the world's second largest traded commodity. 1) most coffee is purchased in the commodity market and coffee prices are subject to high volatility and speculation. (Coffee C price) 2) quality coffee is usually purchased on a negotiated basis at a substantial premium above commodity coffees, depending on supply and demand at the time of purchase Two main recent phases in the coffee industry (1988 to to 2014) Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

4 Research questions: 1. Are cooperative-led value chains different from conventional enterpriseled ones? 2. Do chains led by co-operatives generate different outcomes from those led by conventional enterprises? 3. What is the role of cooperatives in value chains? Is there such a solidarity chain? Methodology : to focus on how chains led by cooperatives may differ in terms of their structure, governance mechanisms, business models, strategies and practices. Methodology is based on the GVC framework (Gereffi) plus grounded theory (Strauss), having evolved beyond pure financial concerns as follows: social bottom line (with UK DFID and Swiss ADC) In considering the triple bottom line. (Mayer & Gereffi) actors of a single industry, the roles they play in developed and developing countries alike (Gereffi and Fernandez-Stark) Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

5 how these value chains differ from traditional value chains in terms of their structure, governance mechanisms, business models, strategies and practices. GAP because research mainly focused on national (regional) level output or on Fairtrade. NOT on value chain leading entity, design, decision-making processes and management strategies (Katz and Boland, 2002). Little comparative research on the scope, operations and impact of Fairtrade and co-operatives in developing countries (Pollet and Develtere, 2004, p.20). Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

6 Basic assumptions on why cooperatives take part of value chains: 1) Co-operatives can act as important mechanisms for poverty alleviation, social inclusion, and regional/ national development. 2) Co-operatives, by providing the appropriate mind-set, infrastructure, business support and training, facilitate the organization of local entrepreneurs 3) Thus enabling small farmers to access markets 4) While enhancing local and community development. Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo ) These co-operatives work as part of value chains that operate nationally and internationally, in both developing and developed countries.

7 * Grounded theory approach and case study method will explore case studies through: 20 in-depth semi-structured interviews with key informants, literature survey and data collection (Coop Norge, Pachamama, Starbucks, Cooperatives Coffee and Thrive) To understand how chains operate, advancing the co-operative and solidarity literature streams. Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

8 * Source: CGGC ( More Information: Global Value Chains ( ) Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

9 Typical way of seeing Co-operatives role in the chain value Example of ANACAFE Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

10 900 co-operatives in Guatemala 43 % women 7.3% of Guatemala s GDP USD 3.4 billion, each year. Of 61 organizations (all have various types of production) There are 43 of coffee producers (largest : Fedecocagua) CABEI - BCIE (2009) Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

11 Coffee is Guatemala first export product, providing employment for people or 9% of the economically active population. It is the 2nd most redistributive economic activity in the country with 95% exports being specialty coffee. There are producers which 80% are associated to cooperatives and the rest in associations. (CBI, 2010, Dutch Foreign Ministry) But. Sargent, using information from the Neumann Group (NKG), says organized producers in Guatemala do not reach 40%. Such a blatant divergence calls for more research. * Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

12 Cooperatives can play a significant role in the value chain, in 5 areas that turn competitive advantage into market competitiveness: 1. Vertical linkages and cooperation 2. Horizontal linkages and cooperation, 3. The common storyline 4. Supporting markets 5. Enabling environment 1. Cooperative Vertical Linkages (operations efficiency, communication, marketing, auctions, certifications) 2. Cooperative Horizontal Linkages The cooperative structure of member ownership and participation allows for specific cooperation: a) At the cooperatives level (econ. of scale, traceability, cupping, contacts, loans) b) At the firm level upgrading (through institutional building, training) Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

13 Cooperatives can play critical pillar leading to sustainable development along the coffee chain in different parts of the chain: 1. Cooperatives in developing countries: as producer organizations, and exporters. Some have entered developed markets directly, incorporating as a coop. 2. Cooperatives in developed countries: as importers and consumers. 3. Sustainability: using water treatment and capturing methane from coffee pulp through bio-digestors. 4. In support of farmers organization and self-help: All cooperatives in the North and South buy coffee from both organised coffee farmers and co-operatives. 5. They help in dealing with the impact of existing standards, quality and sustainability requirements, with a heavy cost for farmers while increasing export companies added value and profit margin. Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

14 ICA President Pauline Green acknowledged the importance of building supply chains: making sure that farmers own both cooperatives and the supply chains, so that they not only produce food but ensure that the value remains in the hands of farmers, families and communities, through the ancillary benefits of cooperation. * Cooperatives in the coffee value chain have been leaders in Fairtrade and sustainability initiatives Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

15 Sustainable coffees Organic coffee Fair Trade coffee - directly from cooperatives of small farmers at a guaranteed minimum contract price. - Local co-ops collect and process the beans at a premium, (2013 US $ 20 cents), for social services like scholarships and health care for farmers and their families. Giovannucci 2001 Survey, largest ever survey on coffee trade, global coffee industry did not meet the two other bottom lines of sustainability, civil society organized to change things. Shade coffee Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014 Challenges: 1. Direct Trade 2. US away from fairtrade: inclusion of large farmers / plantations 3. Black market emerging

16 Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

17 Business models how firms and chains of firms and organizations position themselves in the marketplace to sustain a revenue stream over time (Stewart and Zhao, 2000). Traditional targets the value chain economic efficiency, where indicators and actions are solely based on and motivated by financial benefits and rewards. Sustainable targets a more balanced set of indicators and actions, where the value chain goals consider all three dimensions of the triple bottom line, i.e., economic, environmental and social (Elkington, 1999). Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

18 Governance type governance is ultimately concerned with creating the conditions for ordered rule and collective action. Stoker (1998) Value chains governance mechanisms can be designed 1. to be led by one single firm/organization or 2. can be planned to be manage jointly by all or several firms/organizations operating on that value chain. Siggelkow and Levinthal s (2003) Centralized decisions are made only by a focal firm/organization, i.e., the firm with more bargain power within the chain. Decentralized decision making is disaggregated into a number of firms/organizations, including the adoption of dialogue-based approaches and joint decision making processes Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

19 Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

20 Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014

21 Research by Claudia Sanchez Bajo and Bruno Silvestre. Copyright Presentation by Claudia Sanchez Bajo 2014 Examples of each of the chains products mentioned in the previous slide number 20