Fostering Co-ownership in Sustainable International Value Chains

In the past two decades the international food retail sector has been dominated by two major trends: a) increasing consumer concerns about the sustainability of production and trading practices from a human, ecologic and economic point of view, and b) a process of enlargement of scale in production and trade and a rapid spread of supermarkets around the globe. As the supermarket sector develops, leading chains are rapidly adopting technological, organisational, and institutional changes in their product procurement systems. These changes alter the market that farmers face, and have the potential to substantially transform the nature, composition, and volume of trade. These trends in turn present both opportunities and challenges for development, especially of less advanced and small producer organisations in the third world. There has been growing evidence that small producer organisations risk being excluded from the markets. AgroFair applies a business model that provides an answer to gaining market access for smallholder producers. One of AgroFair’s central pillars is the concept of co-ownership in a vertically integrated supply chain. The credentials are embedded in its vision statement : A Fair Price, A Fair Say and a Fair Share. Fifty percent of the shares of the company are in the hands of the international producer cooperative CPAF (Cooperative Producers AgroFair) while the other fifty percent is in the hands of European NGOs and sustainable venture capitalists. Based on its business model it has reached the status of preferred supplier to leading retailer COOP Swiss which has enabled it to capture 40% of the Swiss banana market with its fair trade certified products. Recently Finnish SIWA made a similar choice due to AgroFair being a company that explicitly proliferates the co-ownership of Latin American and African producers and the development impact on communities of smallholder producers and workers. Since 2004, AgroFair’s turnover has been growing with double digit figures; in 2006 it reached EUR 66 million with a net profit of more than EUR1 million. This chapter describes the history of the AgroFair business model and analyzes the crucial elements that contributed to its success.