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Agribusiness Incubator Assessment:
Impact and Lessons Learned.
4th
Global Forum for Innovation and EntrepreneurshipHelsinki, 31 May 2011
Agrifood Consulting International (ACI)
Economic Transformation Group (ETG)
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In most of the developing world, agriculture is abusiness of $2/day.
In many cases agriculture is not sustainable.
How to make agriculture in developing countries
more productive and sustainable?
The Context
Develop Sustainable Agribusiness
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Outline
Paths
• Incubators are one path for agribusiness development
Types
• There are different types of incubators and they evolveover time.
BusinessModels
• Successful incubators learn how to fund themselves asthey mature.
Impact
• Incubators have a significant impact in growingsustainable agribusiness SMEs.
Lessons• What have we learned?
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10 Case Studies …
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0
10
20
30
40
50
60
70
80
90
100
Years of
Operation
Initial Capital Number of
Graduate
Sales Operating Budget
(normalized indicators Max = 100)
Differing in many dimensions
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But with Something in Common
They fill a gap among alternative
approaches that pursue growth of commercial agriculture.
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3 Approaches for Growth of Commercial Agriculture
Starting Point• Inefficient Farm-to-Market linkages
• Slow Technology Absorption
• Very limited Incentives to Invest
Target Point• Efficient Farm-to-Market linkages
• Rapid Technology Absorption
•
Incentives to Invest
Facilitate Large-scaleAgribusiness Investment
Invest in Farm-level Organizations
AgribusinessIncubators
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Several Types of AgribusinessIncubators
5 Types observed
“OneStop”
AgribusinessSector
Developer(eg Fundacion
Chile)
UniversityAnd
Research-based
AgribusinessIncubators
(eg IAA-IPB)
AgribusinessValueChain
Integrators(eg Timbali)
GrassRoots
AgribusinessInnovation
Incubators(eg Villgro)
Trans-nationalStrategicAlliance
Incubators (egMLSVCF)
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Providing Many Services but….
Two Services Specific to Agribusiness
Many Services
Infrastructure and facilities Business development services Access to finance
Access to government programs Training and Capacity Building Strategic advice Technology advice Investment Linkages and networking Consulting services Matchmaking Product development
Agribusiness Incubatorsare Different
1. Reduce risks for theirclients
2. Help build the valuechain
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• Successful agribusiness incubators self-financean increasing share of their operation budget
as they mature.
Business Models for AgribusinessIncubators
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0%10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% Operation Budget funded by Fees, ConsultingServices, Profit Sharing, Capital Gains
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Advanced incubators replicate and scale
up through:
incubation of new incubators
•
Fundación Chile incubating: – Fundación Jalisco, Fundación Sonora, Fundación Peru
• ABI-ICRISAT incubating:
– 10 incubators in India
Moving towards Replication….
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Incubator
Incubator
SMEs
SMEs
SMEs
SMEs
Incubator
SMEs
SMEs
SMEs
SMEs
Incubator
SMEs
SMEs
SMEs
SMEs
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Impact
Creation of sustainable agro-enterprisesgenerating value added and profits
Facilitatecommercializationand modernization of
agricultural system
High social returnon investment
Diffusion of innovation
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• Subsector level and medium large companies
(Fundación Chile)
• Small and medium enterprises (IAA-IPB)
• Small farm enterprises headed by poor
women (Timbali)
Impact – 3 examples
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REGIÓN XIISalmotec
Subsidiary
REGIÓN IXCentec Subsidiary
(furniture parts and
pieces)
M R.
Asparagus Program
REGION IVAgronova subsidiary
(citrus fruits)
Olive oil
American Subsidiary
American Impressions (USA)
Constructora e Inmobiliaria
2000 Subsidiary
Tecnagro
Tecnofrío
(berries) Introduction of halibut
REGION IIntroduction of
hirameREGION V
Ignisterra Subsidiary
(lenga furniture)
REGION VIIITecnoplant Subsidiary
(Radiata pine nursery)
REGION XBerries La Unión
Subsidiary
Esmeralda
Subsidiary
(citrus fruits)
Granjanova Subsidiary
Punto Verde (vegetables)Carpe Diem Subsidiary
(premium wines)
Procarne
Subsidiary
Granjasur Subsidiary
(apples)
Salmones Antártica
Subsidiary
Salmones Huilinco
Subsidiary
Cultivos Achao
Subsidiary (oysters)
Incubator of Multiple AgribusinessValue Chains
Asparagus
Berries
Fruits
Salmon
Oysters
Olive Oil
Wine
Canola Oil
Forestry
Cheese
Main Projects andCompanies Developed
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Fundación Chile’s Salmon Program
Industry Production
Year Tons
1983 3472005 383.000
US$ 2.2 billion in exports for 2006
23,6% of Chile’s total food exports
+35.000 direct and indirect jobs created
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• Primary focus on startup small enterprises
• Help them to grow into sustainable medium
enteprises
IAA-IPB (Indonesia) Incubator of SMEsin Multiple Sectors
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Fresh Vegetables Coops Selling toSupermarkets and Fast Food Chains
Production Sorting Cool Storage
Packaging Transporting
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Handicrafts from Local Fibers to Exports
Fibers from farmers
Weaving Handicrafts for exports
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• Starting from scratch: initial investment of
Ms. Aprisusi in 1995 = $1,200, manualfilling.
Coconut-based Drink
• To Success: Ms. Aprisusi Sales in 2010 =
over$2.4 million, employing 32 people,
selling all over Indonesia, 8 automatic
filling lines.
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Impact of Timbali (South Africa):Working with Women Farmers
• Graduates since 2004 = 140 small farm
enterprises
• Creating franchises and full integration with
cut flower value chain
• Poor women becoming assertive and
economically independent smallentrepreneurs
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23
Creation of Brand
Line of Credit
Investment in
Nursery
Training & TA
Crops
FARMERS
Products
Nursery
Packaging
Inputs
MarketsIntervening in the Cut Flower Value Chain
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Lessons Learned
My Success is the Success of My Clients.Incubators breed success, success meaning growth of sustainable
agribusiness enterprises.
1
RiskManagement
The mosteffective
agribusinessincubators
help
mitigating risk.
2
Value ChainIntegration
Successfulagribusinessincubators
integrate actorsalong the value
chain.
3
DemonstrationEffect
Successfulagribusiness
incubators showways to do
innovations.
4
AdaptiveScaling up
Advancedagribusinessincubators
move towardsreplicability
K M 1
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Successful incubators help clients to reduce these risks
through a combination of technology, institutional, and
networking strategies.
Key Message 1:Manage Risk
Successful agribusiness incubators help clientsreducing the risk inherent to agriculturalproduction and distribution.
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Risk Mitigation
Strategies
Technology(eg. Drought tolerant seed at ABI-ICRISAT)
Institutions(eg. Franchising to ensure price and marketat Timbali or Fundación Jalisco)
Policy Networking(eg. Improving access to finance andgovernment programs at IAA-IPB; changingsector policy at TnsMz or Fundación Chile)
K M 2 I t t
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Key Message 2 – IntegrateActors in the Value Chain
Successful agribusiness incubators overcomecoordination failures within a value chain and by doingso they are more likely to achieve industry or sectorimpact.
Successful integration implies finding incentives
for collaborating and linking previously
disconnected farmers and consumers in urbanand global markets.
Ke Message 3
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Key Message 3:Demonstration Effects
Successful Agribusiness incubators have a powerfuldemonstration effect:
previously untried ventures become possible and apositive energy for change becomes diffused.
ey essage :
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ey essage :Adaptive Scaling up
Scaling up and replicability are the real test of the efficacyof the incubating approach to agribusiness development.
The evidence reviewed so far shows promise.
Equally important, the evidence shows adaptivereplicability through the incubation of incubators.
l
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Agribusiness Incubators are the New Path
for Agribusiness Development in the
developing world.
Their success will require a concerted
effort of global institutions and strongpolicy support of national governments.
Conclusions