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SBCC X AC 2024 Case Booklet
SBCC X AC 2024 Case Booklet
SBCC X AC 2024 Case Booklet
SELF-SUFFICIENCY
Paving Olam Agri’s way forward in Ghana’s Rice Industry
ACKNOWLEDGEMENTS
CASE WRITERS
Khoo An Xian
Travis Tan Hai Shuo
Soon Jian En Samuel
THANKS TO
On behalf of SBCC 2024, the team would like to thank the following people for
the valuable input throughout the case writing process:
Olam Agri
Business Solutions Case Club
Dr Daniel Siew Hoi Kok
DISCLAIMER
The information presented within this case is the responsibility of the writers
alone. Olam Agri is subsequently not responsible for any statements, data or
citations put forward in this case document. This document cannot be used
as a supporting source outside of the Singapore Business Case Competition
2024 and may not be publicly quoted without the written consent of the
authors.
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TABLE OF CONTENTS
Prelude 4
Looking Ahead 22
Appendixes 23
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PRELUDE
Rice forms the lifeblood of countless Ghanaian meals. However, despite fertile lands
and a long agricultural history, Ghana remains a heavy importer of rice. With
domestically produced rice meeting only a third of its domestic demand, Ghana
exposes its population to volatility in global prices and supply disruptions, and this
persistent import dependence creates severe impacts on the country’s food security
and its economy.
As a leading player in the Ghanaian rice industry, Olam Agri aims to support the
overarching goal of self-sufficiency in rice, and in doing so, enhance the livelihoods of
smallholder farmers who make up a significant proportion of Ghana’s population.
However, the road to self-sufficiency is an uphill battle, with challenges such as low
yield, farmers’ limited access to knowledge and resources, and unfavourable customer
preferences standing in the way. Hence, Olam Agri has decided to hire consultants like
yourselves to create a multi-pronged approach that addresses the underlying
challenges in the rice value chain and pave the way for a more prosperous future for
locally-cultivated rice community.
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INTRODUCTION TO THE FIRM
INTRODUCTION TO OLAM AGRI
Olam Agri is a leading global agri-business focused on high growth markets and is one
of the three core operating groups of Olam Group. With over 33 years of experience in
agricultural supply chains, it holds leading market positions across grains and oilseeds,
animal feed and proteins, edible oils, rice, speciality grains and seeds, cotton, wood
products, rubber and commodity financial services. (See Appendix A for financials)
Olam Agri has a deep understanding of market needs, built through its on-the-ground
presence in Asia and Africa, alongside its strong operating capabilities that span across
global origination, processing, trading, logistics, distribution, and risk management.
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Purpose and Values
Guided by its purpose of transforming food feed and fibre for a more sustainable future,
Olam Agri is dedicated to cultivating a world where food and agriculture positively
contributes to conserving the environment, strengthening communities, and increasing
global food security.
Olam Agri strives to achieve this goal through embodying its 5 core values of
Entrepreneurial, Agile, Resourceful, Collaborative and Sustainable.1 A key example of
how these values are demonstrated is the firm’s enduring partnerships with
stakeholders across the supply chain. Olam Agri works closely together with producers,
customers and various organisations to innovate, conduct its business sustainably,
make a positive impact on the planet and enable farming communities to prosper.
Olam Agri is turning its priorities into action by implementing sustainability initiatives
across its value chain to effect tangible change and advance the United Nations
Sustainable Development Goals (SDGs).
1 In Sourcing Landscapes
• Advance regenerative
agriculture in operations
and direct supply chains
2Agricultural
& Food Sustainability | Olam Agri. (n.d.).
https://www.olamagri.com/sustainability.html
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3 In Processing Facilities
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INTRODUCTION TO GHANAIAN
RICE INDUSTRY
OVERVIEW AND KEY TRENDS
Ghana's rice industry holds immense potential but faces crucial challenges in its quest
for market stability and self-sufficiency. Population growth, urbanisation and shifting
dietary preferences have driven increased rice consumption. This resulted in domestic
production struggling to catch up with the demand. Despite government
initiatives, Ghana currently produces only around 43% of its rice consumption, relying
on imports for the remaining 57%. This exposes the country to external price
fluctuations and potential supply disruptions while leaving vast economic
opportunities untapped. (See Appendix B for macroeconomic breakdown)
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STAKEHOLDERS IN RICE FARMING
The rice production landscape features two distinct types of players: smallholder
farmers and commercial farmers. While the number of large, commercially oriented
farms is increasing, around 80% of rice production still originates from smallholders.
Direct Stakeholders
Smallholder farmers
Smallholder farmers are the main stakeholder that Olam Agri works with when sourcing
locally produced rice. Managing smaller plots of land (below 8 acres in size), these
farmers are mostly unorganised and rely on rudimentary agricultural practices.
Financial capital, agricultural extension services, as well as farming inputs such as
quality seeds, fertilisers and equipment, are highly inaccessible. Additionally, when
funds dry up, farmers are often forced to enter agreements with millers and money
lenders who purchase their produce at prices lower than the market price.
For these farmers, organisation comes in the form of their communities as they are
governed by the community leaders. These communities are potential partners for
millers or agricultural companies who are willing to bring benefit to the farmers and
assure good purchase rates for the paddy.
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Commercial farmers
Defined as farmers who own farmland in excess of over 200 acres, commercial farmers
are mostly associated with commercial firms. Strongly driven by profit maximisation
and efficient production, these farmers focus on achieving economies of scale and are
more cognisant about the methods to achieve high yield and quality. Additionally, these
farmers frequently own their own mills or are closely associated with mills. Thus, they
are interested in launching and selling their own rice with their own bag marks and are
potential competitors to Olam Agri.
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Indirect Stakeholders
Corporate entities
Increased agricultural productivity creates jobs along the value chain, generates
income for farmers, and stimulates overall economic development vital for corporate
entities. Hence, corporate entities have an incentive to improve the scale of paddy
procurement while maintaining minimum standards of quality.
Government
In Ghana’s journey towards self-sufficiency in rice, the government plays an important
role. A key aspect of its involvement is the formulation of national strategies such as
the National Rice Development Strategy (see Appendix E for details). Through such
initiatives, the government aims to increase access to quality seeds and subsidised
inputs, set up infrastructure to improve the paddy-to-milled-rice value chain, and
incentivise marketers and millers to actively promote local rice. Although progress is
slow, the government’s deep commitment to the national goal makes it an important
partner that corporate entities should keep in mind when striving to promote local rice
adoption.
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RICE PRODUCTION VALUE CHAIN
In Ghana’s rice production, the value chain consists of 5 different aspects. Each step is
critical to the eventual final quality of the paddy produced by the farmer. For local rice
in Ghana to improve its reputation, there is pressure on the farmers to improve all
aspects of the value chain.
Farming Methodology
At this step of the value chain, farmers must employ cultivation techniques to
maximise the yield and quality of their paddy. However, they must also strike a balance
between the benefits to the paddy obtained and the economic costs to achieve it.
Some examples of cultivation practices include proper irrigation channels, maintaining
soil quality and pruning of sub-optimal branches.
Procurement
Following the harvest of their paddy, farmers then engage with buyers to sell their rice.
For many small-scale farmers, they often engage aggregators to sell their rice due to the
smaller yields they produce. In this process, the farmers will agree with the buyers on
the price and quantity of rice sold.
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Harvest Evacuation
After the price and quantity of rice to be sold is decided, the harvested paddy must then
be transported from the farm to processing facilities in preparation for sale to
consumers. This step of the process is critical for small-scale farmers as harvested
paddy spoils quickly and poor road infrastructure could result in a loss of paddy for
these farmers.
Packaging
As the final stage in the value chain for rice, packaging involves the proper storage of
rice for sale. The packaging affects the quality of rice as proper storage would protect
the rice and prevent the quality of rice from degrading. Furthermore, packaging
influences customers’ perception via the attractiveness of packaging along with the
information present on the labels, ranging from nutritional information to expiration
dates.
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COMPETITIVE LANDSCAPE
The surge in rice consumption in Ghana has led to heightened competition between
imported and local rice, driven by factors such as the consistent quality, pricing, and
appearance of imported varieties.
Salazar K - 75
Wilmar Fortune
GADCO COPA
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OLAM AGRI IN GHANA
PRESENCE IN GHANA
Over the span of 29 years, Olam Agri has established a strong presence in Ghana and
built relationships with partners, millers, distributers and consumers. As a leading agri-
food company, it specialises in importing and processing grains and rice to create a
variety of nutritious packaged foods for Ghanaian consumers. To date, it supports 628
employees and owns 2 manufacturing and processing facilities.
In the Ghanaian rice industry, Olam Agri is a trusted name. In 2020, following the launch
of its award-winning Mama Gold brand, Olam Agri gave new life and credibility to
grown-in-Ghana rice that was traditionally unbranded and associated with subpar
quality. Since then, it has doubled down on its efforts to unlocks market access for
Ghanaian farmers by connecting them with its network of millers to process, package
and distribute high quality locally cultivated rice.
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INVOLVEMENT IN FARMING VALUE CHAIN
Overview
Smallholders account for a large majority of all farmers Olam Agri engages with. This
engagement occurs via a structured aggregator model, with one aggregator assigned to
each farmer cluster in a given locality. Acting as Olam Agri’s points of contact, the
aggregators coordinate harvest collection and communicate Olam Agri’s feedback on
harvest quality to their respective group. To date, Olam Agri has reached out to around
4000 farmers through its aggregator network and partnership with other farm input
providers.
Beyond offering these smallholder farmers access to market opportunities, Olam Agri
strives to go one step further in farmer empowerment. Below is a summary of Olam
Agri’s empowerment initiatives that aim to help smallholder farmers overcome the
challenges they face in the access to capital, knowledge and resources.
While Olam Agri does not directly provide farming inputs, it connects farmers with
providers of quality seeds or fertiliser that produce better yields. Some examples
include reputable seed breeding companies and the Council for Scientific and
Industrial Research (CSIR) Ghana which developed seeds that are more drought
resistant or fragrant.
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Farming Methodologies
Ineffective farming techniques, untimely harvesting and poor storage and management
are major contributors of food loss in rice farming. To overcome this, Olam Agri plans to
introduce agronomists on the field to inspect the paddies and guide smallholder
farmers on their cultivation practices. Olam Agri further incentivises these farmers to
adopt best practices by linking the price paid to the quality of rice sold. Through this
emphasis, farmers are encouraged to improve and ensure they maintain a high-quality
rice yield.
Procurement
Olam Agri offers upfront payment to farmers to provide them with the capital to buy
quality inputs ahead of the planting season. Additionally, it promises farmers
transparency and fair prices for their produce. This is especially important given that in
Ghana, crop prices are predominantly counted in baskets and sacks, and buyers often
take advantage of this system by bringing large bags and demanding their bags be filled
to the brim. Olam Agri is a pioneer in enforcing the use of weighing scales and
consistent measures for the sale of rice, eliminating a sale process riddled with
opportunities for abuse. By giving farmers a secure outlet for their food, this service
may lessen the risk and uncertainty involved in selling their goods on the open market.
Harvest Evacuation
Timely evacuation of paddy is crucial in maintaining the quality of the harvest as wet
paddy could spoil in as short as seven days. However, transportation is difficult and
expensive to arrange for individual farmers as contiguous farms are not harvested
simultaneously. Hence, the volume of paddy to be loaded is always insufficient to
justify the transport cost. To mitigate this issue, Olam Agri has engaged in a long-term
contract with a transportation company to ensure that trucks are always available when
paddy harvests are ready for collection.
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Other involvement
Contract Milling
Currently Olam Agri does not operate its own mills in Ghana, instead they rely on
contract millers, who are paid a commission based on the volume milled. While
farmers are not directly involved in the milling process, the quality of milling plays a
critical role in determining the final quality of rice produced, hence affecting the overall
value of local rice in Ghana.
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CHALLENGES FACED
Incentivising behaviour change
Even with the existing initiatives promoting access to resources, Olam Agri faces
difficulties in incentivising small-scale farmers to change their entrenched practices.
Farmers may not be convinced about the need for new cultivation practices or may be
hesitant to invest capital to purchase quality seeds. Additionally, as compared to
commercial farmers who will be able to see improvements in yield on a large scale,
smallholder farmers may not be able to easily witness the impacts of enhanced
practices in the short run. Hence, convincing farmers to make use of the resources
Olam Agri provides and change their methods remains a challenge.
Financial risk
Olam Agri incurs significant risk in choosing to pay farmers in advance, as the farmers
may not be able to produce the agreed quantity of rice due to circumstances such as
poor planning, crop disease or extreme weather events. These farmers would have
already spent the entirety of the money paid to them upfront on resources such as
seeds and fertilisers, resulting in them being unable to return the payment to Olam Agri.
Consequently, Olam Agri can only recoup the losses incurred by waiting for the farmer’s
next harvest cycle, and consistently faces a risk of default.
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Consumer perception
In its journey of promoting locally grown rice, Olam Agri also faces the challenge of
overcoming the local population's preference for imported rice, with sales for branded
local rice being restricted to festive seasons. This preference stems, in part, from the
fact that locally produced rice has often been sold unbranded and with inferior
polishing quality. As a result, Ghanaian consumers have come to view imported rice
brands as being both cheaper and of higher quality. (See Appendix D) This deeply
ingrained perception of domestic rice suppresses demand and acts as a significant
obstacle to Ghana's efforts to achieve self-sufficiency in rice production. Olam Agri is
therefore facing the mission of changing consumer perceptions of locally produced rice
in order to stimulate domestic demand.
While Olam Agri currently engages only in contract procurement and milling, it has
considered the possibility of developing its own infrastructure. For a corporate house
like Olam Agri, setting up its own infrastructure (ie. paddy fields and mills) can
potentially provide greater assurance on the quality and yield of rice produced and
mitigate several risks that the company is currently facing.
However, the potential upsides would come with exorbitant infrastructure costs.
Setting up their own paddies and mills would require much higher investment as
compared to contract procurement and milling which are commission based and need
no initial investment. Especially in Ghana, where interest rates for working capital
finance is high, any investments in infrastructure would be economically strenuous.
Weighing these costs against the potential benefits is a difficult task for Olam Agri.
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LOOKING AHEAD
In alignment with Ghana’s national objectives and the firm’s sustainability goals, Olam
Agri is committed to supporting local farmers and advancing self-sufficiency within the
Ghanaian rice industry. Now, Olam Agri faces several critical questions that require
thoughtful consideration and strategic planning. This brings us to the main question of
the case: As Olam Agri advances self-sufficiency in the Ghanaian rice industry, how
can the company further empower its stakeholders, especially farmers, to allow
high quality and sustainable rice production?
1. How can Olam set up a scalable yet quality-led paddy procurement system to bring
about sustainable improvement in the lives of more farmers?
2. How can Olam Agri convince farmers to adopt the best farming practices and
increase the yield and quality of rice?
3. How can Olam Agri enhance consumer perception and increase the acceptability of
locally farmed rice?
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APPENDIXES
Appendix A: Olam Agri’s Invested Capital Breakdown (Olam,
“2022 Annual Report”)
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Appendix B: Ghana’s Macroeconomic State
When the new government, led by President Nana Akufo-Addo took over in 2017, Ghana
experienced a surge in economic growth, bringing inflation down from 15.4% in 2016 to
7.9% by the end of 2019. Ghana was even dubbed the “shining star” of Africa by the
World Bank, having doubled its economic growth to become the fastest growing
economy in 2019.3 However, this economic success would not last. As the COVID-19
pandemic hit, coupled with Russia’s invasion of Ukraine, the cracks in Ghana’s
economic policy began to show. Now, Ghana is faced with one of its worst financial
crises in decades, with consumer inflation rising to 50.3% in Nov 2022. As a country
heavily reliant on imports for many food staples such as grains, poultry and meat, costs
of living in Ghana have soared.
Wilmar
Wilmar International is the world’s leading integrated multinational Agribusiness group. It
launched a brand of local rice, Fortune, in Ghana 2020. Wilmar Africa Ltd, with its
manufacturing arm in Ghana, is one of the largest manufacturing business entities and an
importer of Fortune Rice brands among others.
Westco
Westco Investments imports and exports goods and products and engages in various related
services. Westco Investments initially started its business with the bulk importation of
cooking oil, sardine, sugar and baked beans and now has expanded into the rice sector.
Westco have sales distributors in almost the 10 regions in Ghana with excellent business
support.
Spring Agro
Spring Agro is a natural farming company in Ghana with expertise in rice and paddy
cultivation. Established in 2019, it holds the objective of contributing to Ghana’s self-reliance
in paddy production and rice processing.
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Brazil Agrobusiness Group
Brazil Agrobusiness Group is a company that specialises only in rice cultivation in Kpenu,
Ghana, because the area has the ideal humidity, soil, and climate conditions. Currently, the
company harvests 2,220 hectares of rice annually. It has the capacity to produce up to
155,400 tonnes of rice, with an average yield of more than 2MT per acre.
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Simavi Ghana
Simavi Ghana is a pioneer in Ghanaian rice imports, stands out for its unique focus on
Jasmine rice. Since 1990, they have been the first importers of this fragrant variety, offering
it under their Phoenix Jewel and Diamond brands. Simavi caters to diverse preferences by
offering various Jasmine rice options and making them readily available through both their
own retail outlets and a wider network of wholesalers and retailers across Ghana.
Avnash Industries
Avnash Industries is a fast-growing brand, premising its rise on key investments in the
refining of palm oil, soap manufacturing and rice milling. Their branded product for rice
milling is called Royal Farmers and has a paddy heartland situated in Tamale, producing up to
500MT of rice mill per day which provides a ready market for 29,000 farmers within its
catchment area. Currently, Royal Farmers is distributed across all ten regions of Ghana. As
they are registered under ECOWAS, they can offer customs duty advantage, and now have
existing export markets in Burkina Faso, Niger, Mali, Benin, Senegal, and Nigeria.
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Appendix D: Local vs Imported Rice in Ghana
Paddy and Milling costs in Ghana is substantially higher than Vietnam and Thailand,
making the product economically unviable in Ghana. Additionally, the quality of double
polished rice in Ghana is significantly inferior to the double polished rice from Thailand
and Vietnam.
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Appendix E: Ghana’s Sustainable Agriculture Initiatives
The project will support lowland rice production of up to 6,000 hectares in the
Northern, Upper East, Upper West Regions and northern parts of the Volta Region of
Ghana. By the project completion date, a total of 16,250 metric tons of milled rice
would be produced annually to add to the existing production.
The overall objective of the project is to improve the livelihood of poor farmers in the
targeted regions through the development of a sustainable economic activity based on
the natural potential of the region.
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3) Other relevant initiatives
Ghana Climate-Smart Agriculture and Food Security Project (GCAFSP): This project,
supported by the World Bank, promotes climate-resilient agricultural practices,
including potential benefits for rice production.
Agricultural Value Chain Financing Support Project (AVCFSP): This project aims to
improve access to financing for smallholder farmers, which could indirectly support the
adoption of sustainable rice production practices.
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