Délice Group is a Tunisian company specialized in the production of UHT milk, fermented milk and butter. It sources milk from around 60,000 small-scale dairy farmers (52% of total Tunisian dairy farmers), possessing on average four cows each and who are linked through a network made up of 140 milk collecting centers.
Délice Group is aiming to ensure its milk supply chain durability, to offer a higher quality product to its consumers. On the other end of the supply chain, the focus is to ensure a sustainable income and better life conditions for small-scale dairy farmers. To achieve these goals, Délice Group has to face some problems with milk production at the level of the small-scale dairy farmers. Limited herd size, lack of technical and managerial skills and lack of access to funding are the main constraints to the development of the small-scale dairy farmers.
As a solution, Délice Group has established two main partnerships. The first one is with the micro finance institution “Zitouna Tamkeen”. It is a business model for the small-scale dairy farmers based on training and framing that would be provided by Délice Group for free. It includes also an easier access to funding to facilitate purchasing dairy heifers and milk cooling tanks, as well as negotiating the insurance and other equipment. This business model will permit small-scale dairy farmers to move from a herd size of 4 cows to 8 cows. In addition, by setting-up a milk-cooling tank, small-scale dairy farmers will benefit of an extra payment for cooling and for milk quality improvement.
The second partnership is a Public Private Partnership (PPP) with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. It aims to promote the milk value chain in two specific disadvantaged areas; the North-West and the Central-West of Tunisia. The partnership is based on the implementation of the “Farmer Business School” (FBS) Training, an entrepreneurial skills training approach which enables dairy cattle owners to calculate their profit, to manage their cash flow and plan investments. Furthermore, it raises awareness on the relevance of good livestock practices and self-organization of producers. It is important to note that via the partnership, the FBS approach has been adapted and implemented to dairy sector for the first time ever – a real innovation.
The training builds the capacities of a pool of 10 trainers from Délice Group, who apply the entrepreneurship skills training to dairy farmers in the project region. In addition, Partners have planned multiple training sessions on best livestock keeping practices for the targeted group. They also provided and set up innovative equipment at some dairy cooperatives, which will permit to increase milk production and thus the income of small-scale dairy farmers.
The implementation of these business models faces certain socioeconomic and legislative challenges. Indeed the low profit margins in case of non-optimization of production methods and the resistance to change of dairy farmers in disadvantaged zones as well as the non-liberalization of the sale prices both in upstream and downstream of the value chain are the main challenges limiting the possibilities of added value creation. Délice Group is strongly fighting to meet the above mentioned challenges.
By Nejib AJILI & Ramzi Najahi
This blog is a part of the March 2017 series on how businesses in the FMCG sector are including the BoP in their value chain. Read more here.