The vast majority of FPOs (a term that includes both co-operatives and producer companies) continue to struggle to establish viable and sustainable business models and achieve significant revenues and returns to their members primarily due to lack of business planning, poor management and faulty organisational structure and processes.
The key aim of this project is to use the creditworthiness assessment to identify the ways and means of supporting producer companies in becoming creditworthy in the long run. The project assesses and diagnoses the existing organisational capabilities and business approach and thereafter guiding the organisation so as to provide sound strategic direction. Formulating right strategy and business plan with translate into profitability of the company and raise funds.
A collaborative business planning process would be followed in order to ensure complete a buy-in from the professional management and the board of producer companies. At present, the team from CIIE working on this project, led by Salim Vali and supported by the guidance and invaluable contribution of distinguished IIM-A professors Sukhpal Singh and Vaibhav Bhamoriya, is actively engaged in analysing the highest priority improvement opportunities and identifying the best possible solutions for achieving the desired outcomes.
Four Producer Companies were selected from a pool of 20 producer companies provided by ICCO Cooperation. The selection was done on the basis of area of focus of ICCO and performance rating given by SCOPEInsight, a Dutch rating agency.
PROFILES OF PRODUCER COMPANIES
The profiles of selected Producer Companies are as follows:
- Healing Heritage Producer Company, Bhubaneswar: This Company has 1170 members and operates across 14 districts of Orissa. The members are traditional healers (doctors) who provide raw materials for production and buy the finished products from the Producer Company. The company requires support in marketing strategy for entering urban markets, scaling up their operations and fund-raising.
- Orissa Producer Company Limited: The producer company started in 2009 to procure spices grown in the region and sell processed spice products in Kalahandi district. Current portfolio of products includes various spices sold under the brand ‘Swaraj’. Their products are sold to rural retail shops across 3 districts of Orissa directly through OPCL sales representatives. They require support in building distribution channel, increasing sales and entering B2B market for organic turmeric procured from their members.
- Bhanjabhumi Produer Company Limited: This Producer Company is promoted by the NGO SPARDA and operates in Mayurbhanj district of Orissa. The company was incorprated in February, 2014 has 990 members as its shareholders. The company currently deals in trading of Sal leaves and Sabai ropes. This company requires support in diagnosing their current business, scoping their area of operations to identify other profitable business opportunities that it can venture into, and fund-raising.
- Tagore Agri Horti Producer Company: This Company is newly formed with 146 members and has begun its operations from December, 2014. The company plans to deal in selling tomatoes to institutional buyers which are bought directly from its members. In the current financial year, the producer company has plans to sell paddy seeds grown by its members in the local market. The producer company is supported by Tagore Society for Rural Development in Patamda, Jharkhand.
KEY PROJECT MILESTONES
Business Orientation Workshop for Producer Companies
The 3-days workshop was organized at CIIE from 31st July, 2014 to 2nd August, 2014. Four participants from each Producer Company attended the workshop. The sessions covered include business model canvas, legal and governance related compliance for Producer Companies. Prof. Sukhpal Singh and Prof. Vaibhav Bhamoriya (from IIM-A) facilitated a few sessions and interacted with the companies. The teams got valuable inputs regarding legal compliances and governance in Producer Companies from experts during the workshop.
Joint Field Visit to Healing Heritage Producer Company Limited (HHPCL)
CIIE team along with the aforementioned Professors from IIM-A and a representative from ICCO Cooperation visited HHPCL and meticulously diagnosed their current business strategy and operations. The purpose of this visit was to develop and test out common hypotheses with regard to business planning for the four producer companies, to arrive at a common methodology that can be replicated across all the four companies to analyze their businesses in depth and to obtain information on the various components required to prepare a business plan for the producer companies.
Field Visit to Producer Companies
The main field visit to all the 4 companies was to study in detail the current operations of the companies, scoping for possible alternatives of business that the companies could take up and streamlining their current portfolio of activities. The field visit assessment would feed into preparing Business Plan for the producer companies, and design small scale interventions into their operations which in future will help the companies become more profitable and creditworthy.
Capacity Building Workshop: 2nd workshop for the producer companies is planned during the 3rd week of February, 2015. This workshop would focus on customized capacity building exercise based on each company’s needs and organize a platform to map and initiate business relationships in the form of potential market linkages and connections to funding agencies for the four producer companies.
Strategic Interventions for implementation: Based on CIIE’s assessment during field visit and secondary research, the team will suggest interventions (strategic and operational) that can be implemented by the companies with immediate effect The team will then monitor the change in the company’s business over the next 6 months to identify the interventions with positive results which will be incorporated in the final Business Plan.
The project is expected to provide important insights on one of the key problems plaguing the producer companies in the country – access to capital and attainment of creditworthiness by farmer owned companies. The research could provide valuable inputs for developing curriculum for training professional managers to manage such organisations. The lessons from the project would be shared through case studies and/or white papers written on various relevant topics out of this initiative.