CASE 3: GERES Cambodia IcoProDac/ New Lao Stove Program
Sandra Romero Ruiz May 27th, 2014 -‐ Phnom Penh
How we adapted the Methodology • Development of quesAonnaires (Value Chain Analysis) ✓ • Individual interviews (program managers, business units of the value chain) ✓ • Visits to the field ✓ • Focus group discussions ✓ • Desk review ✓ • Preliminary findings presentaAon ✓
INTERVIEWS & FIELD VISITS Where?
GERES Cambodia main office in Phnom Penh & stove producAon sites in Kampong Chhnang province
When?
Throughout the month of April 2014
What kind of interviewees?
Program managers Stove producers and distributers
INTRODUCTION & HISTORY What is IcoProDac?
The Improved Cookstove Producer and Distributor AssociaGon in Cambodia (IcoProDac) is a business associaAon established in 2004 by GERES Cambodia. It was developed through GERES Cambodia’s New Lao Stove (NLS) Program.
STUDY FINDINGS 1. OrganizaAonal CharacterisAcs 2. Business Strategies Employed a) EssenAal elements of the NLS Value Chain b) NLS Value Chain modaliAes 3. Financial Model 4. Market access and trends 5. DistribuAon Channel Strategy
ORGANIZATIONAL CHARACTERISTICS
• •
Type of organizaGon: Business AssociaAon, registered in 2004 by GERES 270 members
•
Subsidiary of GERES (100%)
•
Specialized in Improved Cookstove sector
•
Social purpose (social return to the members – who are for profit)
ORGANIZATIONAL CHARACTERISTICS OWNERSHIP OF THE MEMBERS – Business Units
At the output/ac,vity level:
• Few of them report 100% revenue from ICS, some side acAviAes, poeery, tradiAonal stoves, farming etc. • Micro – small enterprises (non registered businesses, home-‐based in high percentage) • Limited Financial capital registered • Limited access to finance
ORGANIZATIONAL CHARACTERISTICS COORDINATION AND GOVERNANCE
EXECUTIVE BOARD ICOPRODAC
PRODUCERS
PRODUCERS
PRODUCERS
DISTRIBUTORS
DISTRIBUTORS
WHOLESALER
• Formal AssociaGon – network (270 associates)
ORGANIZATIONAL CHARACTERISTICS Appendix XXXX Organigram ICoProDAC Steering Committee
Chief of Executive Committee
Deputy Chief of Executive Committee
Secretary
Treasurer
Members
ORGANIZATIONAL CHARACTERISTICS IcoProDac • Specialized in Improved Cookstove Sector • Business AssociaGon
WHERE THEY WORK
• Centralized producAon in Kampong Chhnang Province • 41% of the HHs naAon wide • Distributed all over the country – main urban areas
BUSINESS STRATEGIES EMPLOYED ESSENTIAL ELEMENTS OF NLS VALUE CHAIN Inputs
Production
Distribution & Commercialization
PRODUCTION FLOW FINANCIAL FLOW INFORMATION FLOW
GOVERNANCE MEASURES
End User
BUSINESS STRATEGIES EMPLOYED NLS VALUE CHAIN MODALITIES
Micro/ Suppliers small Producers
Wholesalers
Distributors
Retailers
Micro/ Suppliers small Producers
Distributors
Retailers
End Users
End Users
BUSINESS STRATEGIES EMPLOYED NLS VALUE CHAIN MODALITIES (Cont…)
Suppliers
Micro/ small Producers
Suppliers
Retailers
End Users
Micro/small Producers
End Users
FINANCIAL MODEL ACCESS TO FINANCIAL CAPITAL • • • •
•
Carbon Finance – VCS Fund (May 2003 – June 2013 under GERES) ODA – EU & AFD (under GERES) Stove pricing strategy – Fixed at producAon IcoProDac – Price for the end user Market price Limited access to Working capital: • Economic pillar under GERES – build in house mechanism -‐ (producers and distributors) Microcredit max. 1,000 USD (savings/credit) • Local MFIs & commercial loans End user finance – No system in place, some informal ways along the value chain business units
FINANCIAL MODEL INVESTMENTS GERES • • • • •
Quality control and Assurance systems (VCS) Monitoring and EvaluaAon systems (VCS) Training for ProducAon units (VCS & ODA) Equipment and tools (VCS & ODA) MarkeAng and awareness raising campaigns (ODA)
Business UNITS – SMEs • •
Profit from sales: Re-‐invested in the VC (payment of salaries, supplies and equipment, upgrade in transport) Credit: • Economic Pillar • Commercial credits & Local MFIs
FINANCIAL MODEL RETURN ON INVESTMENTS • • • • •
Margins are made along the Value Chain (higher sales margins at distribuAon and wholesaler level) Turnover revenues mainly spent for social and family needs (more than business scaling) Lot of room for improvement at the distribuAon level “tradi,onal system” “Lost of investment at the ProducAon Level -‐ Very high Drop-‐out (>40%)” “IcoProDac & members -‐ biggest market player in Cambodia” – they absorb >40% of the naAonal market
MARKET ACCESS & TRENDS •
Same distribuAon channel – selling points as the tradiAonal cookstove
•
Low level of partnerships with private sector, NGOs, CBOs, etc.
• •
IcoProDac does not parAcipate in naAonal mechanisms Low level of investment in adverAsing – only related to donor demand (EU) • Some cooking demonstraAons, billboards, word-‐of-‐mouth, TV/radio ads, etc.
MARKET ACCESS & TRENDS MARKET SHARE Stove type Number of Households % of the Total (HHs) – rounded up to Cambodian the nearest thousand HHs NLS NKS NLS + NKS Total
763,000 397,000 114,000 1,274,000
25% 13% 4% 41%
CHANNEL STRATEGY • “No incenAves for the distribuAon network”. “Same system as tradiAonal cookstove (piggy backing)”
•
“TradiAonal distribuAon network – low cost, low efficiency – when there is an upgrade at the distribuAon unit the operaAonal cost increases
•
Decentralized channel
•
No aper-‐sales support strategy (no maintenance, no repairs, no warranty, etc…)
SWOT ANALYSIS
STRENGHTS
WEAKNESSES
NLS GERES OPPORTUNITIES
THREATS
EMERGING ISSUES GENDER Not present in design of the program, but it is a reality of the Business Model INTERVENTION LOGIC • Centralized understanding of purpose (GERES management level) • Lacking clear informaAon on model of intervenAon • Theory of change of IcoProDac is different from members’ one • “Deeper private sector understanding and market perspecAve needed”
RECOMMENDATIONS
RECOMMENDATIONS “Bring addiAonal financial support to the Value Chain”
“Review areas of investment &
intervenAon (more efficiency in producAon, increase number of producers, widen geographical areas, distribuAon mechanism, etc…)”
RECOMMENDATIONS • “Invest in organizaAonal development providing IcoProDac’s governing body with more insAtuAonal support” • “Strengthen markeAng and awareness (explore outsourcing services…)” • “Improve networking at local, naAonal, regional levels” • “Private sector and business analysis & perspecAve needed”
RECOMMENDATIONS • “ Access to financial capital (improve access to working capital for Business Units, strategic partnerships with MFIs) ” • “ Improve technology and experAse t r a n s f e r f r o m G E R E S -‐ m o r e experienced staff ” • “ Access to financial services for end users (partnerships with MFIs and savings and credits groups) ”
May 27th, 2014 -‐ Phnom Penh