In inclusive agribusiness projects, companies and their suppliers face various challenges. Companies are often concerned about the fulfilment of contractual commitments by their suppliers with regard to timing, quality and quantity of delivered products. Small-scale farmers for their part are not familiar with the requirements and processes of bigger companies. They often lack access to finance and to relevant information such as market prices for their products or weather forecasts, and do not have sufficient business and negotiating experience to interact successfully with larger companies or intermediaries . Therefore, it is important to share success factors of companies and initiatives tackling these challenges.
The Jollibee Foods Corporation (JFC), the largest food service company in the Philippines, is one example. JFC’s core business is the development and operation of quick-service restaurants through a franchise system. Its flagship restaurant is “Jollibee” which serves burgers and fried chicken amongst others. It started its operations with five branches in 1978 and has gradually expanded its network to include other restaurant brands with over 3,000 stores worldwide. Faced with the opportunity to promote rural development while meeting its daily need for raw ingredients, the company decided to provide access to its supply chain so small farmers can become direct suppliers of Jollibee, thus empowering them to be more productive and profitable.
Although companies in the agri-foods sector may be willing to conduct business directly with farmers or farmer organizations, the farmers themselves may not be ready to deal with big companies. They need additional support in terms of training, partnership building, social mobilization, and other competencies that the company may not be able to provide. JFC resolved this issue by tapping its corporate social responsibility arm, Jollibee Group Foundation (JGF). One of the programs of the foundation, the ‘Farmer Entrepreneurship Program’ (FEP), was introduced with the objective to help small scale-farmers to improve their income by providing education and vocational training in farming as an enterprise. Moreover, the program aimed at providing farmers with access to institutional markets thus creating additional economic opportunities. The FEP was implemented in partnership with the Catholic Relief Services Philippines (CRS), a humanitarian aid organization promoting market-driven strategies that facilitate farmers’ active participation in modern markets, and the National Livelihood Development Corporation, a government corporation mandated to meet the credit needs of farmers through their accredited microfinance institutions.
The program consists of three key components which were carefully designed to provide the best possible assistance to farmers. The first component ‘Agro-Enterprise Capacity-Building’ provides training to farmers to enable them to develop, grow and sustain their small farming business. The second component ‘Partnership Management’ assists farmers in organizational development and partnership management in order to ensure the sustainability of the links established between the farmers and their institutional buyers. The third component ‘Advocacy and Promotion’ enables knowledge management and dissemination of lessons learned. In collaboration with academic institutions, program observations and insights are documented through case studies and audio-visual presentations. Materials are packaged for wider circulation to those who want to learn from the program.
Following an assessment, the JFC Purchasing Group identified the following crops to be purchased from small-scale farmers: onions, green bell peppers, chilli and Philippine lemons. The company practised deep procurement wherein purchasing agreements were negotiated before planting, allowing the farmers sound planning of their resources. The farmer groups commit themselves to comply with certain quality of their produce and the company, in return, guarantees that it will accept the agreed volume of the produced crops if these meet the set quality standards. The clear communication of JFC’s product standards and the commitment to purchase pre-defined quantities reduces the risk for both farmers and purchaser. This provides a stable sales channel for farmers and constitutes the basis for a trustful cooperation. During the last season [in 2015], out of the 81 onion deliveries only 1 was not accepted by JFC and the reasons for the rejection were well understood by the farmers.
In 2015, JGF enhanced the cooperation with 11 farmer groups from 5 provinces that were supplying products to JFC. As peeled onions fetch a 20% higher price than unpeeled onions, farmers were encouraged to peel the onions before delivering them to JFC, allowing farmers to benefit from additional value-creation in the value chain. Currently, 25% of JFC’s daily need of raw vegetables is met by smallholder suppliers and there is still potential to increase the supply.
The program has yielded positive results. Between 2008 and 2014, the JGF and its partners trained more than 1,800 farmers on how to access markets. The program trained farmers regardless whether they could supply input for JFC or would sell their produce to other purchasers. By 2014 the program assisted 27 farmer groups from Luzon, Visayas, and Mindanao. From these, 20 groups had delivered products to various institutional buyers such as restaurants, supermarkets, and food producers. In addition, 20 institutional markets sourced directly from smallholder farmers for their vegetable material requirements through FEP. These companies practice inclusive business by offering the farmers opportunities to be directly part of the supply chain. The Farmer Entrepreneurship Program had partnered with 85 local institutions to train and develop farmers from 15 provinces nationwide.
The case of JFC and JGF demonstrates that through well designed projects and the selection of the right partners, programs like the FEP can help to overcome the challenges companies and farmers face in their business relationships. Combining the elements of market, finance and agro-enterprise clustering proved to be a valuable approach to enable farmers to meet the volume, quality and timeline requirements of institutional buyers. This shows that effective market linkages can create opportunities for value addition leading to benefits for all actors of the value chain.
Authored by Sarah Schaefer (Inclusive Business Action Network) in cooperation with Joanna T. la’O and Ruth Ramirez (Jollibee Group Foundation).
 Cf. Young African Leaders Initiative: Small Farmers Face Opportunuities and Challenges, https://yali.state.gov/small-farmers-face-opportunities-and-challen… (accessed 16 June 2016) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH: Growing Business with Smallholders. A Guide to Inclusive Agribusiness, p. 25-29
 GIZ (GIZ) GmbH: Growing Business with Smallholders. A Guide to Inclusive Agribusiness, p. 55
 Cf. Jollibee Foods Corporation: http://www.jollibee.com.ph/investors/jollibee-foods-corporation/ and
Cf. Jollibee Group Foundation: Farmer Entrepreneurship Program, http://jollibeefoundation.org/farmer-entrepreneurship-program/
Monika Sopov (2015) The Story of Jolibee Foods Corporation. Sourcing strategy for a quick service restaurant (Phillipines)
This blog is part of the July 2016 series from the Practitioner Hub and Seas of Change on Inclusive Agribusiness. Download the PDF for more insight, updates and opinion.