Amid the natural beauty of Cartagena’s Caribbean coast there exists an alarming level of wealth disparity in Colombia’s most notable tourist destination – with a large percent of the population living in poverty.
Despite the city’s thriving hospitality and tourism industry, the local residents are unable to tap into this growing industry because they do not have the market relationships to approach these high-end restaurants, five star hotels or supermarkets. Furthermore, they lack the necessary skills and business expertise to meet the rigorous market standards of these establishments. Therefore, most are forced to live as subsistence farmers or fishermen, requiring a stable cash product to enable them to meet the basic needs of their family.
The city’s hospitality industry is growing at an impressive rate and having reliable supply chains is a critical requirement for the success of this touristic city. Therefore, a majority of the industry procures their products, including seafood and fresh produce, from reliable establishments in Bogotá (located over 600 miles away), as local infrastructure for sourcing, refrigeration, and transportation is usually inadequate. The local smallholder farmers and fishermen have been unable to meet the quality and quantity standards of these fine establishments.
Together with Fundación Carlos Slim, Fondo Acceso SAS, one of our Acceso Funds, launched its first social enterprise business in Cartagena – Acceso Oferta Local Productos del Caribe (Acceso Local Offer – Products of the Caribbean) – it was the perfect fit for the growing tourism sector in Cartagena.
This enterprise operates on a for-profit basis – it will buy, consolidate, and sell agriculture products, seafood, and processed goods from over 1,000 smallholder farmers and fishermen to five star hotels, local supermarkets chains, and catering companies.
However, as a first step, prior to creating the enterprise, we carried out a diagnostic to identify the demand requirements for several products and services. We sought cooperation from various hotels, restaurants, and supermarkets to provide us with their purchasing history of products, their specifications for each product category, their order placement schedule, their quality standards, and their anticipated growth requirements for each product line.
Next, we carried out a supply diagnostic to identify the current state of production for each identified product and service with respect to demand. When gaps between supply and demand were discovered we saw this as an opportunity to help the city’s underserved population.
After doing a thorough market analysis, we asked for a soft commitment from the various establishments to procure from selected suppliers that we felt could be trained to meet their specifications. We worked with other local NGO groups to identify suppliers that were most ready to receive capacity building, that were open to change, and those that embraced the rigor and discipline needed to be a viable commercial provider.
To prevent supply shortages our production plan supplies the hotels, restaurants, and supermarkets with a limited volume per week in order to maintain a more consistent supply. The hotels agreed to procure 20% of all goods and services over a 3-year period. During this period, the first 30 supplier associations we worked with were able to generate almost $3 million USD in sales. The hotels have since asked to scale the number of products they source locally and we have deployed our Supply Chain Enterprise model to achieve this scale-up.
A state-of-the-art warehouse was created: it provides distribution, warehousing, processing, and logistics in order to reduce costs, and broaden market opportunities. By helping these smallholder farmers and fishermen improve their productivity and ensuring they receive a fair price for their products, we are empowering them to work themselves out of poverty.
Our enterprise will provide skills training, business resources and technologies to over 4,000 household members of smallholder farmers and fishermen while improving their yield and productivity, consolidating their harvest, reducing the number of value chain intermediaries, and substantially increasing their income.
Six buyer groups, consisting of hotels, restaurants, and supermarkets, support our enterprise and, as a result of these buying commitments we have generated over USD $3 million in sales and we expect to achieve approximately USD $6 million in sales over the next five years.
About Supply Chain Enterprises
For smallholder farmers and producers in developing countries, supplying goods to regional and multinational markets can prove to be a daunting task to accomplish on their own. They often lack the skills needed to deal with the high standards of regional or international markets; they have limited or no access to capital, and are uneducated in basic business skills. Market buyers are unable to reliably source the quality and quantity of products they want and it is also expensive and impractical for buyers to source directly from highly fragmented producer base. These factors are traditional obstacles that stand between large regional and international markets and smallholder farmers and producers.
Demand exists for both traditional products as well as specialty products such as organic or fair-trade certified. The difficulty lies in meeting the rigorous market standards and identifying which product’s demand outweighs the supply.
Our Supply Chain Enterprises removes the obstacles that traditionally prevented such relationships from developing. We bridge the gaps between regional and international markets and smallholder farmers and producers. Our enterprises bring real economic value to supply chains through efficiently consolidating and rapidly developing fragmented producer bases and linking them to quality buyers.
We accomplish this by understanding the demand and specifications required of buying partners and forming alliances with them usually in the form of a buying commitment once the demand is identified.
Based on these commitments and specifications, we create the enterprise necessary to identify the potential supplier base, provide training and inputs, and work directly with the producers to improve their quality and yield. The enterprise provides working capital, quality control, aggregation, and consolidates efficient logistics solutions including the development of collection hubs and centralized, dry and cold storage warehouses, as well as transportation of goods. Through this integration, the enterprises we form provide scalable, reliable supply chains for high value buyers.
By working directly with producers to ensure the quality and yield of their produce is improved over time, we develop loyal, mutually beneficial, and long-term relationships with our beneficiaries.
Our for-profit Supply Chain Enterprises bridge the gap between the producers and market buyers and eliminate the multiple tiers of intermediaries which traditionally reduce income to farmers and drive up prices to buyers. The resulting enterprises allow us to increase farmer income, reduce poverty at the farm level and deliver commercial returns to high value retail buyers such as five star hotels, regional supermarket chains, and leading international food and beverage companies. And as a market driven, for-profit solution, these become sustainable enterprises.
We provide a business opportunity & create shared value for all stakeholders.
Promoting sustainable Supply Chains through “Impact Investing” aims to provide a framework through which investors can play a critical role in poverty alleviation and create greater impact while receiving a market return. However, investment opportunities in these types of value chains must be designed and built – they will not manifest without the input from our partners and retail buyers, and the hard work of our team.
We provide business opportunities for corporations, such as food and beverage companies, hotels and national supermarket chains who, through our Supply Chain Enterprises, are able to reliably source quality produce from local smallholder farmers.
In addition to corporate market buyers, these Supply Chain Enterprises create opportunities for both global and local investors to become shareholders in the individual enterprises. Additionally, donors can sponsor skills training or make a direct contribution to support the enterprises’ assets, such as warehouses, or delivery vehicles. All such forms of participation will help to scale the number of producers we are able to include, magnifying these businesses’ social impact.