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Liberation CIC Evaluation

Liberation CIC Evaluation. Dr Bob Doherty Head of the Business School Liverpool Hope University. Overview. Research process Competitive Context & Challenge Impact on UK Market Impact on Producers Impact of INPC Governance Lessons Learnt. Governance of Liberation CIC. Background.

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Liberation CIC Evaluation

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  1. Liberation CIC Evaluation Dr Bob Doherty Head of the Business School Liverpool Hope University

  2. Overview Research process Competitive Context & Challenge Impact on UK Market Impact on Producers Impact of INPC Governance Lessons Learnt

  3. Governance of Liberation CIC

  4. Background Set-up in May 2007 to develop market access for small-holder nut farmers 42% shares owned by 12 producer coops from 3 continents called INPC Investment provided by Comic Relief and Hunter Foundation Southern Africa share of global groundnut market had declined from 77% in 1970s to <4% by 2005

  5. Research Process • 20 interviews • Range of 20 informants from supermarkets to producer representatives • 4 group discussions Review of secondary documents • Internal meeting minutes and annual reports • Market reports • Academic sources

  6. Competitive Context • UK Nut market the supermarket own-label figure is a significant 73% of total nut market share (Mintel 2009b) • Major brands struggling • Some nut traders cross subsidising price of FT nuts • Launched at a time of economic recession and devaluation of £

  7. Forces against Anti-competitive activity from major players Highly competitive market Severe price cutting Economic recession Lots of competitive activity and NPD in nuts since launch of Liberation Devaluation of the £ Volatile commodity prices Weak position of nut farmers Liberations competitive position Educating supermarket buyers Improvements in quality Positioned as the FT nut specialist Stakeholder coalition Liberations FT nut supply Producer representatives in key meetings with retailers (strong integrated supply chain) INPC working together to prevent larger players securing FT nuts Working with Sainsbury’s to add value in country of origin Restraining Forces

  8. Impact on UK Market (20) Established strong business (19) Performance Improvement (18) Strengthened producer Market position (13) High quality reputation (12) Sainsbury's relationship (16) Positioning of branded products (14) Listings in top 4 supermarkets (16) Good media coverage(4) Direct role with UK retailers (12) Changed supermarket practice (7) INPC leaders international Reputation (10) World leader in FT own-label nuts- one stop shop (9)

  9. Strong Liberation Business? • Number 1, fair trade nut company T/O =£3.5m2009/2010 • Product listings in four of the five largest supermarkets in the UK. • Informant G comments “Supermarkets know we are the one-stop shop for FT nuts”! (Interview, informant G) • One of Liberation’s key customers informant L, “To gain listings in all the leading supermarket retailers against some very powerful competitors should not be underestimated and what’s more they have managed to hold onto these contracts despite a very competitive annual tendering process” (interview, informant L, 2010)

  10. Strong Liberation Business • According to informant R Liberations products compete because • “Liberation have got the balance just right in the modern business environment, they are a competitive supplier from both an excellent quality and cost perspective. Plus they benefit the growers which for our supermarket is crucial. There passion for farmers comes through very strongly. Don’t forget this market is very competitive” (interview informant R, 2010)

  11. Impact on UK Market Executive of Liberation comments; “You are always starting off on the back foot with buyers due to Liberation’s higher prices. However, doing meetings with supermarket buyers as a team with Dyborn Chibonga or Tomy Matthews just works incredibly well. I remember one meeting with one supermarket when Tomy came along to talk to the buyer about the difference that Liberation makes to his farming community in Kerala, India, the buyers eyes did really light-up!, Normally this buyer is just interested in profit but this was something different, this joint representation gives Liberation a lot of weight in the market” (interview, informant P)

  12. Strong Liberation Business Very good supermarket store distribution including Tesco Express Very good press coverage reaching 30 m consumers (appendix 3) Established a number of business supply chains

  13. The Liberation Business Dried Apricots/Pakistan Dried Mango/Burkina Fasso Other Dried Fruits Raisins/Sultanas South Africa/Chile Mozambique/peanuts & cashews Malawi/Peanuts-Macadamia Nicaragua/peanuts Brazil/Bolivia & Peru- Brazil Nuts India/Cashews Twin Trading Fullwell Mill Traidcraft = Liberation managed relationship Liberation (takes ownership and pays import and logistics fees to TT) Liberation (Buys fruit delivered to warehouse in UK = Relation with customer managed by others Fairtrade BULK SALES Comercio Alternativo Traidcraft Altromercato., EEX, The Roast Co, etc Simmonds UK Warehouse NL Warehouse Vebero Blanch & Ship UK Snacks (process Harry’s Nuts and store Lib nuts for WR TAZ (pack & ship O/L) Trigon (Pack & ship Lib lines) & Sell O/L to Morrisons Duerrs (UK Peanut Butter) Swartberg (EU Peanut Butter) Eddie Stobart (O/L) Fradley (O/L) Profresh (Xmas O/L) Pindar HH Co-op Suisse Be Fair DEK Fair Mary (Finnish) Pakka (Swiss) Ethiquable (France) Tesco JS Waitrose (Lib&HH), Peros , Simply D FTO Gepa Ethiquable Oxfam Belgium EZA Traidcraft (margin share) Oxfam (Liberation lines) Morrisons (O/L) Key Supplier Raw Material Warehouse Processor Warehouse/consolidator/distributor Customer

  14. Areas for Improvement (20) Commercial Management (14) Staff team balance (11) Focus mainly on social (12) Marketing over spend (14) Poor balance sales vs social(8) Business plan untested assumptions (5) poor focus on sales (14) Staged release of investment (3) No distribution(5) Poor margins (4) Too many changes(8)

  15. Impact on Producers (20) Adding value At origin (15) Sense of Pride (8) Development of Producer communities (13) Quality improvement (14) Joint representation (7) Growth in FT Producer groups (5) quality of life (6) Guardian shelter(5) Seeing nuts in final packaging (4) Development in Sub-Saharan Africa(7) Sainsbury's Partnership (10) Women’s empowerment (6) New producer Groups to FT (3)

  16. Producer Impact • FT premium total =$251,000 up to end of 2009 • Community projects have brought improvements in the quality of life and well being for 440,000 people • Transformative change in adding value in Sub-Saharan Africa, with revival of Malawi nut industry • No one else bringing FT nuts from Sub-Saharan Africa

  17. Producer Impact NASFAM in 2008/2009 exported 576 tonnes of groundnuts generating income $527 and $58k FT premium= 10,709 farmers RTU ‘Plumpy nut’ relationship with Sainsbury's Catalyst in raising £1.75m of further funds for producer partnership programmes

  18. Producer Impact • 6 informants also identified the impact of Liberation in enhancing the role of women in their producer communities. Informant B explains; • “Fair trade has been a real plus for women as the price is even and stable. This really does encourage women to get involved in groundnut farming because the price is even and constant. Remember women are the stabilisers in the community. Our FT certified group is 2,000 farmers strong and now 40% of them are women, ten years ago the percentage was only 15-20% women in the group maximum. The MASFA Board has 5 women and 7 men giving a total of 12 members, while the Premium Committee also has 12 members 3 of which are women and 9 are men” (interview, informant B)

  19. Impact of INPC (20) Unique producer partnership(13) Advocacy work (10) Strengthened producer Market position (13) Retailers (10) Kerala AGM assembly(9) FLO (7) Impressive governance (4) Cashew exchange (6) Influencing FLO (6) Growing international reputation(10) Sourcing board (5) Across 3 continents, 3 languages (11)

  20. “There is no question that Liberation and INPC is working. It is a key instrument to gain greater value for producers in the value chain. The ownership is substantially tangible”! (interview, informant C) Impact of the INPC • Unique producer partnership • Remko Komjin (formerly of Cordaid in the Netherlands) commented; “ I have never seen democracy in action with producers quite like in Kerala”(source :Liberation Annual Report 2008/2009)

  21. Governance (20) Conflicts of interest (12) Sense of participation (14) Legal Form CIC (10) Fiduciary responsibility(8) Solidarity (8) Problem solving (8) Untested (4) Not appropriate for farmer ownership(6)

  22. Governance More financial experience on board in early stages Hunter Foundation taking a seat on the board Investment being released in tranches

  23. Community Interest Companies Pros Specific for social enterprise Asset lock protects social mission Company can appreciate like any ordinary company Brand and credibility Easy to set-up Cons Can’t sell shares to public INPC collective ownership makes it complicated to borrow money against the capital asset

  24. Lessons Learnt (20) Commercial focus weak in 2007/2008(16) Governance (15) Ownership(9) Conflicts of interest (12) Fiduciary responsibility (8) Imbalance of objectives(11) Legal structure (9) Access to capital (3) Money paid upfront (3) No listings and high marketing spend (12)

  25. Lessons learnt • Producer expectations to be managed more effectively • Dual aspect of FT marketing • Focus more on low cost marketing options such as using activist groups • Hunter Foundation seat on board • Important work of TWIN • Comic Relief in future perhaps provide grant in tranches against key performance indicators

  26. Conclusions • Findings support focus on own-label • Created whole new FT category • Delivered the right quality nuts and the right price for some very demanding customers • Work of TWIN and NASFAM in Malawi is truly transformative • INPC has strengthened the position of nut producers and influenced practice and policy

  27. Conclusions • At the outset need to get the balance of objectives right • Catalytic effect to gain more funding • (See table 9 in report for summary)

  28. Recommendations • Agreement at the outset to be clear about conflicts of interest • Get the balance right • Build stronger links with fair trade activists • Continue to build the partnership with Sainsbury’s

  29. Recommendations • Further development of Latin American relationships • Further business to be developed with local South African market and via developing links with new producer groups who add to the variety of nuts on offer • Further work on climate change projects

  30. Recommendations Test assumptions in business plan Also use the Liberation story with other business opportunities with larger players Investigate how collective ownership can be used to raise capital Further education of supermarkets in the nut cycle

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