Kajou is an agri-food venture that seeks to transform the cashew value chain in Côte d’Ivoire by bringing more value to smallholder farmers. By processing the cashew nut and fruit directly in Côte d’Ivoire with local cooperatives, Kajou aims to offer a socially sourced product to key markets, while providing sustainable opportunities to improve the livelihoods and social outcomes of smallholder farmers. The venture addresses undernourishment globally by repurposing the current waste from the cashew nut and fruit and reduces the carbon footprint in global trade by serving key markets directly. Key team members are from McGill University and include three Desautels MBA students (from Côte d’Ivoire, Colombia and Brazil), a Bio resources PhD student (Queen Elizabeth Scholar from Ghana), and an undergraduate International Development Studies (IDS) student (from Bahrain).
Ours is a B2B and B2C business where in the B2B we will have two business lines, and our target customers are companies. In our first business line, our customers will be responsible Consumer Packaged Goods in key markets in Canada, US and Europe. Their consumers are millennials both men and women with upper to university education that are working. In our second business line, our customers are development actors that are fighting undernourishment across the globe. Their beneficiaries will be mostly children in undernourishment conditions, both boys and girls, but depending on the type of project, the target population could change, and our product will accommodate to that.
On the B2C business, which will be target local population. We will be repurposing the current fruit waste onto derivatives cashew fruit product (juice, jelly, liquor) and our nutritional supplement. Our customers will be local families including the farmers themselves. The value proposition for them will be the price point which should be low and the intersection between price and nutrition value since this population are mainly BOP and they particularly looking to get the energy from their meal. Our main opportunity here is the fact that our input the cashew fruit marginal cost is zero since we are using the current waste, allowing us to have a low price point.
The current value chain of the cashew nut industry not only poses a great burden on the environment due to extensive shipping, but also implies a huge economic imbalance that primary affects 300,000 farmers in Cote D'Ivoire and 2.5 million in West Africa. According to our research, we found that a farmer in the country only receives 1 dollar per Kg compared to 10 dollars that the end consumer is paying. Additional to this, the current value chain leaves behind huge waste from the cashew fruit apple that is not currently part of the industrial process. By processing directly in the Cote D'Ivoire, which is the largest cashew producer around the world, and selling directly to key markets instead of exporting to intermediaries in India and Vietnam, we will reduce the carbon footprint, correct the economic imbalance, allowing the farmers to earn close to 4 dollars per kg, and allowing for responsible CPGs companies to have access to competitive prices through a responsible and fair supplier.
Our idea doesn't stop at establishing a processing plant in North Cote D'Ivoire. After talking to different farmers, we identified 5 key issues farmers are facing (i) Daily logistics of how to bring product to market, (ii) Education, how to improve the farming yield, (iii) Contract enforcement - how to get paid what was promises, (iv) Safety - how to bring safely money home, and (v) Quality control - how to certify the product. In order to address these issues, we will develop a mobile solution, partnering with existing local players in which we can create a two-sided market, connecting our farmers to different solutions, including education services, market information and supplies, fleet management and mobile banking. This ecosystem aims to help address our farmers issues while supporting our partners to manage risks and pool the demand so as to have incentives to invest and support our farmers.
Ours is a B2B business and our target customers are companies. In our first business line, our customers will be responsible Consumer Packaged Goods in key markets in Canada, US and Europe. We are already in advance discussion with XXX and they are looking forward to get closer to the small farmers by building a business relation with us. Their consumers are millennials both men and women with upper to university education that are working. In our second business line, our customers are development actors that are fighting undernourishment across the globe. Their beneficiaries will be mostly children in undernourishment conditions, both boys and girls, but depending on the type of project, the target population could change, and our product will accommodate to that.
The key activities of our business are the following:
• Cashew nut processing: our key activity is linked to the processing of the raw cashew nut directly in the Ivory Coast. We aim to build a processing plant in the north of Cote D’Ivoire through which we will process the raw cashew nut and turn it into kernel. Afterwards, we aim to serve international markets in the premium cashew nut business by exporting directly the kernel to responsible CPGs. This first business line will be market driven and highly profitable. The success will depend on the business development activities we undertake in key international markets like Canada, US and Europe in order to secure clients that are looking for responsible sourced cashews.
• Nutritional Supplement Processing: The current cashew nut processing leaves behind a considerable amount of food waste in the forms of the cashew fruit (which is thrown away) and the broken cashew nut that cannot be sold to clients. Our second activity will turn this waste into a highly nutritional supplement, in the form of flour, that we could sell at cost to international development actors that are fighting undernourishment around the world. This business line will be subsidize by our first business line and we aim to provide development actors with complementary inputs to fight hunger. We will not be responsible of the development projects per se, but we will be working directly with key development actors in developing the best nutritional supplement to better serve their projects.
• Ecosystem building: Our third key activity is to enhance the exiting cashew nut cluster in Cote D’Ivoire through mobile solutions. Most of the problems identified by our key stakeholders are not solved by processing directly in the country. In order to have a real social impact, we would require to build on one side partnerships with key services partners. We identified Santores routiers for logistics, Veritas for quality certification, Orange for mobile banking, African Cashew Alliance for education and on the other side, our farmers in order to create a two-side markets that benefit both ends. By partnering with existing local players, we can connect our farmers to different solutions including education services, market information and supplies, fleet management and mobile banking. As a result, we will be able to help our farmers to address their key issues while supporting our partners to manage risks and pool the demand so as to have incentives to invest and support our farmers.
Partners: We have a Farmer cooperatives partner in Odienne(North-West of Cote d’Ivoire) producing close to 5000 tons of raw cashew annually, Mobile banking provider(Orange) , Government agency (Conseil cotton-anacarde, Anader, CEPICI), Agriculture Bank(BFA), Fleet company (Santores,TRAMOCI) , University and School of farming( McGill faculty of agriculture, INPHB )
Suppliers: Farmer cooperatives
As we have mentioned, one of our objectives is to develop a nutritional supplement using the food waste that results from the cashew nut processing. With this nutritional supplement, we aim to serve development actors across the world, in the likes of World Vision, in order to provide them with complementary inputs to help fight undernourishment around the world. Even thought that is our idea, we still are defining what is the best product and what nutritional and technical requirements it needs in order to be advantageous to use.
In this sense, an organization like World Vision can help us to identify the technical and nutritional specifications that the product needs to have in order to be helpful and cost effective in their development projects. World Vision’s expertise in this area can add a lot of value as their inputs will define one of our business lines and the required resources we need to deploy in order to make it happen.
We will invest in total $300 000. With this amount, we expect to cover the current financing needs without anticipating any cash flow problems. Moving forward with our plan, we are anticipating sales of about 1,2 million in the first year, 1,8 million in the second year, and 2,5 million in the third year. Even though we are operating in a heavy capital industry, we should break even by the fourth year of our operations as we steadily increase our sales. We are expecting to generate profits in year 2 amounting approximately $97 000 and reaching about $153 000 by year 3, and $274,000 by year 4.Initial Investment
-Plant equipment ($200 000): We already have a pledge of investment of $100 000 from XXX owner of YYY. We are looking for bank financing or seller financing for the balance. Our strategy is to process the cashew nut locally. If we are not able to process, we are not relevant. When breaking the raw cashew to get the kernel, there is poison in the skin so to produce the consumable cashew kernel, we need to follow a safe industrial process.
The center piece of the strategy is to co-owned with local cooperatives a processing plant.
-Cashew Fruit Processing ($20 000): We could start the cashew fruit processing independently of the nut processing. We will not be able to produce the ready to consume supplement using both the nutrition benefit of the nuts and the one of the fruit. But we could exploit the full potential of the fruit to produce juice and a highly nutritious flour. The flour will be an interesting product for development actors and the local market, addressing directly the food security issue in the poor northern region of Cote d’Ivoire.
If we have the opportunity to win the world vision challenge, the fund will be use to start this business line which will have a direct impact in reducing the fruit waste, addressing undernourishment in the city of Odienné and creating job opportunity for more than 50 women.
- Ecosystem Building, Training and Contract ($30 000): We are basing our business model on partnership. We want to work together with farmers and have them engage. On the others sides we want to partner with our service providers to create an ecosystem around the plant that will benefit to all the stakeholder, pooling demand and managing risks.
To achieve this objective, we need to invest in technology development, training, mentoring and contract enforcement.
-Raw material Inventory ($25 000): Processing cashew require buying the raw nuts from the farmer it is a revolving process where we should at least be able to finance one month of processing. This is where our capital engineering team is seeing an opportunity to grant a shareholder participation to the small farmers cooperatives. Instead of mobilizing capital for this initial processing raw material, the raw material will come from the cooperatives
-Working Capital ($25 000): From our experiences, investing in Africa. We know that we should have a contingency plan, as sometimes the rules are not clearly defined. It is part of the know-how to operate in the region, we should budget it.
Through our social venture, we aim to redesign the existing cashew nut value chain that, under its current conditions, is undermining the lives of close to 300.000 farmers in Cote D’Ivoire and 2.5 million in West Africa while leaving behind a large carbon footprint in the environment due to food waste and shipping distances. By redesigning this value chain, we aim to create new socio-economic structures that replace the existing one, which will positively affect both ends of the value chains. Benefiting both farmers, by increasing their household income and creating positive conditions for the development of alternative job opportunities within an enhanced local cluster and by providing solution to a different set of pain points through mobile solutions, and benefitting end consumers, by providing a responsible sourced cashew nut at competitive prices. Additionally, as a consequence of our operations, we will be able to positively affect the environment by reducing the amount of food waste that the current value chain structure implies which in turn, we can utilize to help development actors to fight undernourishment around the world and by reducing the carbon footprint by tumbling the shipping distance of the cashew from the farmer to the end consumer.
We are focusing on the harvesting to market challenge because our business model innovation aims to bring efficiencies to the existing value chain in order to improve the well-being of our key partners, the farmers. By processing directly in Cote D’Ivoire, we will be able to transfer a better price to the farmers while creating alternative job opportunities for other household members either in the plant’s operations or in an enhanced cashew nut cluster resulting from our mobile solution. By increasing the household income, we will be addressing a food security challenge in the region by allowing to have more disposable income to be used for this matter. Additionally, to this, our support to the farmers will lead to better use of natural resources to increase crops yields while promoting crops diversification.
XXX: Processing cashew and selling to international CPG. Due to the market potential and the need in the market. They are successful in processing locally and profitable. They are still not able to secure constant supply. The opportunity for them is to build a relationship with the farmer beyond the price offering.
This where we got a strategic advantage if we are able to co-owned the facility with the farmers. It will allow us to increase dramatically the small farmers revenue by having to revenue line (fair price on the product + shareholder profit on the processing unit) and secure a constant production since suppliers are also owners.
YYY: The YYY multinational built a processing plant in Bouake in the center of Cote d’ivoire. With a high capacity of processing 30 000 tons but still less than 5% of the country production. Having this processing capacity is a plus, but they are not in the farming zone which is more on the North which limit the social impact on the small farmers life.
We will measure our social metric using, but not limited, to the following metrics:
•Increased revenue by farmer
•Increased revenue by farmer’s household
• Percent increase in women working in processing plant
• Women working in network partners
•Number of beneficiaries from nutritional supplement
• Reduction of crime rate (%)
•Fruit waste reduction (tons)
•Increased in Financial literacy (%)
Strengths & Weaknesses
• Skills and drive: Our team is a multi-disciplinary team with different areas of expertise. Within our team we count with 2 MBAs, one with existing entrepreneurship experience and finance acumen, the other one with existing international development experience and social innovation expertise. Additional to them, we have in our team two food engineer experts, one an MBA with a BA in food engineer and a PhD in bio resources engineering from McGill University that are supporting us in the R&D efforts of our venture. In terms of drive, we are young minds with higher aspirations in terms of the impact that the private sector has on the environment and communities where it operates.
In addition to the technical skills, we are all from developing countries Colombia, Brazil, Ghana and Cote d’ivoire.
An advantage for us since our business will be operating in Cote d’ivoire with a logic expansion plan to the neighbor country Ghana.
• Feet on two sides of the value chain: Our team knows very well the Ivorian market as our CEO is originally from there. We have had the opportunity to know from first-hand the needs in order to make this project successful. Additional to this, our North American experience, resulting from more than 15 years -combined- of professional and academic experiences, gives us with an idea of the potential opportunities to serve this market with our social venture.
• Seed capital: Even though we are aware of the potential of our social venture and the business opportunity, in order to make it happen, we will require an amount of initial investment that we require to raise from different investors including friends and families, banks, responsible investors and local cooperatives. Even though are only now developing experience in raising capital, we have committed to present across different competitions and pitching to potential investors to start building the required capital, while receiving essential feedback to improve our solution.
• Processing capabilities: Even though our team has complimentary skillsets, we will require to incorporate in our team someone that has deeper expertise in processing the cashew nut. We are currently in the process of getting to know the market and recruiting someone that provides the best in depth knowledge to have an efficient-running plant whenever we require to start our venture.
• CPGs in international market: this companies need to care for responsible sourcing and care for sustainability. Corporations should become more sustainable oriented and look for more fair trade and sustainable suppliers that will require for certification. They also will require to communicate how their suppliers are positively impacting societies and the environment.
• International donors: will require to decide to use alternative nutritional supplement that is based on cashew nuts and fruits and foresee the benefits of switching or complementing their portfolio of products with ours.
• Farmers: our key partners have the skills, resources and capabilities to serve the cashew premium industry while are willing to accept and use a mobile solution to have access to different services that they were having before through other means.
• Cooperatives: Our focal point in order to impact the farmers will be to work with local cooperatives which we require to be interested in working through our business model. We will require not only the commitment but the financial resources to co-own the plant.
• Platform partners: our platform partners are willing to be part of the mobile app and be ready to serve our farmer’s needs. We will require that they share market information and data in order to create the efficiencies that the cluster needs.
• Government support: We expect that the government will support agri business ventures in the cashew nut industry and create the regulatory framework to protect national processing plants and capacities.
Most Significant Challenge
• price dumping from existing players: Existing players can drop the prices below our cost curve in order to take us out of the market. As there are big players we could foresee them taking this decision. Nevertheless, our target customers are niche CPGs that are looking for other features beside pricing which will help us to manage the risk.
• Radical change of commodity price: due to climate risk, the price of the cashew nut may vary drastically affecting our financial model. We will work closely with our farmers in order to provide better farming techniques to counter climate change effects and guarantee a sustainable production of the cashew.
• Lack of skills and capabilities from the farmers: Our target CPG customer is expecting a specific type of cashew quality that most likely smallholder farmers currently can't achieve. This is part of the issue that we tackle. We will be working closely with our farmers, through the cooperatives, to provide them with better education and technology at a lower cost by pooling the demand.