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Creating Companies | Creating Wealth | Creating Jobs October 2012

Aflasafe Commercialization Strategy Improving the Health and Securing the Income of Nigeria’s Small Holder Farmers. Creating Companies | Creating Wealth | Creating Jobs October 2012.

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Creating Companies | Creating Wealth | Creating Jobs October 2012

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  1. CONFIDENTIAL Aflasafe Commercialization StrategyImproving the Health and Securing the Income of Nigeria’s Small Holder Farmers Creating Companies | Creating Wealth | Creating Jobs October 2012

  2. Aflatoxin: A very dangerous food toxin present in over 40% of household grains across sub Saharan Africa. Impacting the health and incomes of millions of farmers • Type 1 Carcinogen • Stunts the growth in children by 25% - 35% • Massive immunosuppressant Source: IITA

  3. Aflatoxin problem starts in the field Aflatoxin Levels in various fields Farmer with harvested grain 160 309 792 140 120 100 80 Aflatoxin (ppb) 60 40 20 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Farmers 64% fields above 20 ppb at harvest in northern Nigeria Increases in stores; interventions required in field and stores Source: IITA

  4. The Solution USDA / IITA Technology that naturally and cost effectively reduces Aflatoxin levels by 80% to 99%

  5. How does Aflasafe work Aflasafe in 5 kg Boxes Broadcast at 10kg/hectare Sporulation on moist soil Reduced levels of Aflatoxins Spores in the wind and via insects Soil Colonization

  6. Extent of Aflasafe use by farmers belonging to various organizations in Nigeria, 2011 CADP = Commercial Agriculture Development Project MVP = Millennium Village Project of the United Nations

  7. Farmers treating maize and groundnut in field Key Takeaways • Aflatoxin reduction in corn • Harvest: 2009 (80%), 2010 (89%) • Storage: 2009 (90%), 2010 (96%) • Duration • 71% and 52% carry over of innoculum 1 and 2 years earlier • Aflatoxin reduction of peanut at harvest • 2009 (96%), 2010 (98%)

  8. Impact of Aflasafe on Trade and Health Aflasafe • Productivity increased of communities in aflasafe-treated areas • DALYs saved: 103,000 - 184,000 • Cost-effectiveness ratio: 5.1 - 24.8 • Source: Felicia Wu, Pittsburgh Univ. 100 untreated 100 80 60 40 20 0 94 75 73 farmers' fields (%) 39 27 3 0 <4 <10 <20 >20 EU WFP US unsafe maximum allowable aflatoxin level (ppb) Source: IITA

  9. Aflasafe Commercial Strategy • Three Strategic Question • Who is the target market for low aflatoxin maize? • What premium can this market afford and does the premium provide sufficient economic incentive to sustain farmer adoption? • How will the commercial plan to be implemented? • “Establish a sustainable premium market for low aflatoxin maize and ensure this premium creates sufficient economic incentive to sustain farmers adoption”

  10. Who is the market for low Aflatoxin Maize?

  11. Target Market for Aflasafe MaizePoultry Industry… Key Driver of Domestic Maize Production Correlated Growth In Maize and Poultry Production in Nigeria Drivers • 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 Nigerian Government Bans Poultry Imports * Doreo Analysis, FAO

  12. Is Aflatoxin an issue for the poultry industry?

  13. Aflatoxin has a significant economic impact on poultry production Impact of Toxic Feed Majority of Poultry Feed in Nigeria Toxic Poultry fed with Safe Feed ( < 20 PPB) Poultry fed with Contaminated Feed ( >500 PPB) Percentage of Toxic Poultry Feed * Measure: % with levels of Aflatoxin over 20 PPB • Significant increased mortality • Dramatic reduction in live weight / Feed efficiency (40% less in IITA trails) • Drop in egg production rate • Additional IITA trails in progress *IITA

  14. Is the poultry industry currently paying a premium for low aflatoxin maize?

  15. Target Farm gate Price of Aflasafe $15 USD per Ha with Target Yields of Aflasafe Maize Farmer of 3.5 MT /Ha Poultry Industry Current Premium by Customer Segment* ($ per Metric Ton of Maize) Economically Sustainable Farm Gate Price of Aflasafe by Customer Segment and Farmer Yield* Tier 2 Customers Tier 1 Customers Tier 3 Customers Target Yield Target Price Toxin Binder Cost Low Low High High Toxin Binder Concentration Low High Low High • Price of toxin binders vary from $2 - $4 per kg • Concentration of use varies from 1kg – 2kg per metric ton of feed. • 600kg of maize per 1000kg of feed • Assumes farmer makes 33% profit on use of Aflasafe * Doreo Analysis

  16. Analysis Aligns with Farmer Willingness To Pay Study Conducted by IITA Target Farm Gate Price Range Source: IITA Analysis

  17. Babban Gona: Agricultural Franchise ModelEnabling Aflasafe farmers to double their yield utilizing a sustainable private sector mechanism Small Holder Farmer Members Small Holder Farmer Members Small Holder Farmer Members Services Services Services

  18. BabbanGona: Trust Group Service Delivery Model

  19. Impact of BabbanGona: Doubling Farmer Incomes Babban Gona Field Expected Yield 4 MT per Hectare Non Babban Gona Field Expected Yield 1.5 MT per Hectare

  20. Phase 1 Aflasafe Pilot Commercialization 1 4 5 2 3 6 7 In addition, Piloting Proof of Purchase Option

  21. How cheap can you produce Alfasafe?

  22. Significant Product Development Investment to Reduce COGsReduced from $20 per Ha to $7 per Ha Analysis of Ex Factory Price and End Farmer Cost Key Takeaways • 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 Aflasafe Estimated Price ex Factory* Measure: USD per Ha Substrate (Sorghum) Inoculum Labor/OH Packaging SG&A EBITDA Margin Ex Factory Price Aflasafe Estimated Farm Gate Price* Measure: USD per Ha • 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. Ex Factory Price Transport to DP DP Margin Retailer Margin Farm Gate Price * Doreo Analysis

  23. How will the commercial plan be implemented?

  24. Strategic Plan to Drive Sustainability Leverage Strong Regulatory Enforcement to Sustain Premium Market for Aflasafe maize 1 Generate Supply of Cost Effective Low Aflatoxin Maize PACA and Pull Mechanism 2 Enforce Regulatory Policy Policy: Build Regulators Capacity Policy: Develop regulatory framework Policy: Phased in regulatory enforcement mechanism 3 Enable Market Forces to Drive Sustainability Market Forces 4 Promote Health Awareness to Value Chain Actors Health Awareness: Farmer Focus Health Awareness: Industry Focus Health Awareness: End Consumer 1 2 3 4 5 Year

  25. Ownership and advocacy by the Nigerian Government B Billboards Interactive Forum A commercialization strategy for distribution and adoption being piloted Consider Aflasafe as public health intervention for aflatoxin

  26. Contact Details Lagos 3B Baajiki Close Lekki Phase I Lagos, Nigeria London 11 Mount Pleasant London, England SE27 9PU Kola Masha Managing Director kola.masha@doreopartners.com +234-(0)-805-5000-350 www.doreopartners.com Doreo

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