Kiribati Agritourism Policy Setting Workshop 2019 - Agricultural value-chain guide for the Pacific Islands

I
Andrew McGregor & Kyle Stice
Koko Siga Pacific
May 2014
Making value chain analysis
a useful tool in the hands of
farmers, traders and policy makers.
Agricultural Value Chain Guide
for the Pacific Islands

II
Produced by Koko Siga Pacific with funding assisstance provided by The EU-ACP
Technical Centre for Agricultural and Rural Cooperation (CTA).
Graphics by Tim Ralulu.
Layout by Jonathan Teddy Veisa.
About CTA
The Technical Centre for Agricultural and Rural Cooperation (CTA) is a joint international institution of the
African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). Its mission is to advance
food and nutritional security, increase prosperity and encourage sound natural resource management in ACP
countries. It provides access to information and knowledge, facilitates policy dialogue and strengthens the
capacity of agricultural and rural development institutions and communities.
CTA operates under the framework of the Cotonou Agreement and is funded by the EU.
For more information on CTA, visit www.cta.int

III
Foreword
Acknowledgements
List of acronyms
Chapter 1: Introduction to Agricultural Value
Chains
Chapter 2: Why another guide and how can this
guide be used?
Chapter 3: The steps in value chain analysis

Chapter 4: Key lessons from Pacific Island value
chain studies
Chapter 5: Key messages for Pacific value chain
training
Chapter 6: Some tools, resources and things to
look out for in undertaking value chain
analysis
Bibliography
Annexes
Contents
59
36
20
13
02
VI
IV
V
70
79
81

IV
In 2011, the Technical Centre for Agricultural and Rural Cooperation (CTA)
developed a new Strategic Plan, 2011-2015, which refocused our work in
African, Caribbean and Pacific (ACP) countries on several priority topics,
one of which was value chain development.
As a first step in this process, we carried out what we called a “Mapping
Study”, to fully assess the value chain support needs of our ACP partners.
This study not only confirmed to us that we had made the right choice to
emphasise value chain issues but also highlighted several areas of work that
required immediate attention.
One of these was the suitability for ACP countries of the existing guides on
how to analyse and upgrade value chains. The Mapping Study found out
that most of our partners considered these guides to be too complex and
insufficiently tailored to the needs of the individual ACP regions, such as the
Pacific. They also felt the guides were too orientated to the requirements
of donors and insufficiently focused on the needs of those actually involved
in operating value chains. This publication, therefore, is designed to address
those perceived weaknesses, by offering a guide that can be used both
by Pacific Island value chains and by organisations that work to assist their
development.
I should like to thank Koko Siga (Pacific) for its work in preparing this guide.
I should also like to acknowledge the valued partnership of the Secretariat
of the Pacific Community (SPC) in implementing the value chains project,
supported by CTA, that has not only resulted in this guide but also in the
excellent regional value chains conference in 2013 and in a valuable new
web site (http://www.aglinks.net/) that we hope will become an important
tool in promoting the exchange of value chain information within the
region.
CTA looks forward to continued cooperation with SPC and our many other
partners in the Pacific region.
Michael Hailu
Director, CTA
Foreword

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The contribution of Heiko Bammann, Enterprise Development Officer
with FAO’s Rural Infrastructure and Agro-Industries Division (AGS) at FAO
headquarters in Rome, is particularly acknowledged. For a decade Heiko
was Farming Systems Development and Marketing Officer in the FAO
Sub-Regional Office for the Pacific. While he was based in Samoa, Heiko
energetically encouraged interest in agricultural value chain analysis and
development throughout the region. This manual is a direct product of
these efforts. The support and encouragement of Andrew Shepherd (CTA)
and Tevita Kete (SPC) is gratefully acknowledged. The final version of the
manual incorporates inputs and suggestions made by participants at an
SPC/CTA workshop where an earlier draft was discussed. The production
of the manual in its final form would not have been possible without the
contribution of numerous Pacific Island value chain actors. These key
drivers freely shared their knowledge and informed us of what they wanted
from the manual. A number of these people are mentioned by name
in the manual itself and we hope that we have been able to meet their
expectations.
Acknowledgements

VI
ADB Asian Development Bank
AGS Rural Infrastructure and Agro-Industries Division

AusAID Australian Agency for International Development
AVRDC The World Vegetable Centre
BAF Biosecurity Authority of Fiji
BQA Bilateral Quarantine Agreement
CBA Cost Benefit Analysis
CGA Cocoa Growers Association of Vanuatu
CIP International Potato Centre
CTA Technical Centre for Agricultural and Rural Cooperation
DIIS Danish Institute for International Studies
FACT Facilitating Agricultural Commodity Trade Project (EU funded)

GM Gross Margin
GTZ German Agency for Technical Cooperation
HACCP Hazard Analysis and Critical Control Points
HTFA High Temperature Forced Air Quarantine Treatment
Technology
ICRAF World Agroforestry Centre
IFAD International Fund for Agricultural Development
ILO International Labour Organization
ISHS International Society for Horticultural Science
ITC International Trade Centre
List of acronyms

1
List of acronyms
M4P Making markets work for the poor
MA Main Actor

NGOs Non-governmental organizations
NMA National Marketing Authority (Fiji)
NPK Nitrogen Phosphorous Potassium based Fertilizer
NWC Nature’s Way Cooperative (Fiji) Ltd.
NZAID New Zealand Agency for International Development
PICs Pacific Island Countries
PITIC Pacific Islands Trade and Investment Commission

PPP Public Private Partnership
SA Supporting Actor
SDC Swiss Agency for Development and Cooperation
SFA Samoa Famers Association
SWOT Analysis
S (Strength) W (Weakness) O (Opportunities) and T (Threats)
TLB Taro Leaf Blight
UNDP United Nations Development Programme
UNCTAD United Nations Conference on Trade and Development
USAID United States Agency for International Development
VCD Value Chain Development
VCO Virgin coconut oil
VOCGA Vanuatu Organic Cocoa Growers Association

2
Introduction
to Agricultural
Value Chains
There have been numerous studies of Pacific Island
agricultural value chains. Shepherd et.al (2012),
in reviewing these studies, highlighted the often
short-term successes but frequent unsustainability
of many horticultural and other high-value product
developments in the Pacific. The reasons for the lack of
sustainability include location, transport linkages and
high costs, poor economies of scale, natural disasters,
plant disease and market access barriers.
Despite constraints, significant opportunities exist to
reduce failures and to expand successes through
identifying ways to improve the value chains for Pacific
Island products. Improvements are measured in terms
of the sustainable increase in the income earned
by those participating in the value chain. This guide
endeavours to make a practical contribution to this
process.
chapter ONE

3
Key definitions
for the user
What is a value chain?
Who are value chain ‘actors’?
The concept of agricultural value chains has been in use
since the turn of the millennium, primarily by those doing
agricultural development work. However, there is no
commonly agreed definition of what is actually meant by
agricultural value chains. Stamm and Drachenfels (2011),
in reporting on the value chain approaches of no less
than seven (7) UN agencies, concluded that some
agencies are using the term without having a
workable definition and some organisations
have simply redefined ongoing activities as
“value chain” work when the term came
into vogue. For the purpose of this practical
guide the following definition
will be used:
At the heart of the agricultural value chain concept is the
idea of actors connected along a chain, producing and
delivering goods to consumers through a sequence of
activities (Henriksen et.al 2010).
An agricultural value chain is a way of
describing the different ‘links’ required
to take a product from the farm to the
end consumer.
Definition of an agricultural value chain

4
Value chain actors are the people at each link
along the chain required to move a product
from the farm to the consumer.
Definition of value chain actors
Definition of value chain
analysis
Value chain analysis
is a tool for looking
at every step and
actor along the
value to identify
both weaknesses
to be resolved and
opportunities for
increasing profits for all
involved in the chain.
It can be said that there are really two categories of actors in
the value chain. These are:
Main actors - those who buy and sell the product as it moves along
the chain.
Supporting actors - those who provide services help move the product
along the chain.
What is value chain analysis?
Value chain analysis is simply a tool that can assist people
involved in the chain to better understand the business
world in which they operate.

5
Exporter What the exporter contributes
to the final product (value
added)
The exporter’s share of the final
selling price to the consumer
Exporter risk assessment
Transports, packs and grades,
arranges and pays for quaran-
tine treatment, finds markets and
arranges air freight, etc.
The price of papaya loaded on the
aircraft (fob price) minus the farm
gate price of the papaya.
Estimated export share of con-
sumer purchase price: 12.6%
High: Post-harvest losses; importer
claims for poor quality, delay in
payments from importer; product
offloaded due to lack of airline
space; market access problems,
etc.
Why is value chain
analysis important?
The value chain approach is orientated toward the market and what consumers want.
By analysing the value chain, information is obtained that should lead to better decision
making by both those involved (farmers, traders, etc.) and those wanting to support the
value chain (policy makers, donors, etc.). The result of better decisions is higher and
more sustainable income for those participating in the chain.
a) Value chain analysis can identify
all of the people (actors) involved in
getting the product from the farm to
the consumer
b) Value chain analysis can identify the contribution, (the share
of value added) and the risks faced by each actor involved.
Farmers and other actors along
the chain often do not realise how
many people are involved, and
what they do, in getting the final
product to the consumer. A simple
value chain map can illustrate this:
Example: “Fiji Red” papaya from
the seedling nursery to consumers in
Auckland.
Individual actors along the value chain, and policy makers, often don’t appreciate:
• The contribution each actor makes in getting the final product (value added) to the
consumer;
• The share (reward) each actor receives from the value of final product in the hands of
the consumer (share of retail price);
• The risk each actor takes in trying to obtain their share of the value of the final
product.
The actors need this information to get the most from and contribute most to the value
chain.
Example: “Fiji Red” papaya exports to Auckland: exporter contribution, reward and risk

6
Example: Fresh breadfruit exports to New Zealand.
The value chain analysis undertaken by Natures Way Cooperative showed:
Situation: Large market exists, lots of breadfruit trees but very little breadfruit exported.
Weakness in chain: Breadfruit wild harvested – not possible to maintain quality and keep
costs low.
Action to be taken: A project to assist moving from “wild” harvest to orchard production
(the Pacific Breadfruit Project).
c) Value chain analysis can identify weaknesses
that prevent progress and suggest actions that
can be taken
“WILD” HARVEST TO ORCHARD PRODUCTION

7
Farmers
Accurate and understandable value chain analysis equips farmers to
make business decisions that are in their best interest and helps them to
decide where to focus their limited resources(time, land & $s).
Example: A value chain analysis of Fiji taro exports to New Zealand
shows that the exporters gross margin (the difference between the
export selling price and the direct cost of marketing the taro – including
the cost of buying the taro from the farmer) is 9.5% of the fob price (the
price of the taro on the ship at the Suva wharf) (page 74). In assessing
this level of profitability consideration has to be given to the exporter’s
contribution: costs incured , investment made, expertise required and
risks involved.
Using value chain analysis, taro farmers can make better business
decisions, including:
Do
• Focus your effort and limited resources on what is most likely to
increase and maintain your income taro - increase production,
reduce costs and adopt more sustainable production practices.
• Consider alternative crops and land use activities.
Don’t
• Don’t withhold supplies from exporters in an effort to
secure a higher price.
• Don’t sell to “fly by night” buyers who offer unrealistic
prices and then disappear and spoil your relationship with long
standing reliable buyers.
• Don’t lobby government to impose minimum prices which
would make your product uncompetitive to consumers in the
export market.
• Don’t try to become an exporter with other farmers when no
one has any experience of exporting.
Who benefits from quality
value chain analysis and how?
Those that benefit from value chain analysis are: farmers; traders;
consumers; policy makers and aid donors.

8
Accurate and understandable value chain
analysis helps
traders
understand the
requirements
of their buyers
and needs of
their suppliers and
therefore enables them
to perform better in the
value chain.
Example: The Samoa taro export value chain.
The Samoan taro industry was decimated by taro
leaf blight (TLB) in 1993. Over the following twenty (20) years, considerable
resources were devoted to the breeding of TLB resistant varieties. As a
result, Samoa now has numerous taro varieties resistant to TLB. The target
consumers in New Zealand like some of these new varieties but don’t like
others. The taste panel based market study undertaken as part of the
value chain analysis identified which varieties consumers like and which
they do not like.
Appropriate business decisions for taro exporters resulting from the value
chain analysis could include:
Do
• Only export those varieties that have been identified by the market
study as ‘acceptable’ to consumers.
• Clearly label consignments to identify the varieties for consumers.
Don’t
• Don’t export varieties just because you think they taste good.
Traders
Numerous taro
varieties resulting
from the breeding
program for TLB
resistance

9
Consumers
Value chain analysis is focused on the market and what consumers
want. Thus accurate and understandable analysis of the value chain
should lead to information on what the consumers of the product want
being passed on to the actors in the chain. If the actors act on this
information, the result is satisfied consumers spending more money on
the product being produced by the value chain.
Example: Fiji papaya value chain analysis found that the consumers in
target markets (NZ, Australia, US and Japan) preferred fruit that was red
fleshed, around 600 gms and bell shaped and had high brix (sweetness)
count. If papaya exports were to earn maximum income it was
necessary for the value chain to supply to the market such a product.

10
Aid donors
Accurate analysis of the value chain and the identification of bottlenecks can assist
donors to identify appropriate programs and projects that enhance rather than hinder the
performance of the value chain.
Example: Fiji taro export value chain analysis found:
• The Fiji taro industry is characterized by a large number of marketing agents, traders
and exporters resulting in quite narrow marketing margins.
• Environmental vulnerability is reflected in declining soil fertility and the The Ministry of
Agriculture has limited capability to address this problem.
• The vulnerability of Pacific Island taro to taro leaf blight.
Do
• Support farmer organisations together with the Ministry of Agriculture, to promote
sustainable production practices.
• Facilitate the manufacture of low cost local lime manufacture to reduce soil acidity.
• Support taro breeding programs to develop varieties that are resistant to taro leaf
blight.
Don’t
• Don’t support farmer groups wanting to get involved in taro marketing.
Policy makers
Accurate analysis of the value chain and the identification of bottlenecks will assist
government policy makers to introduce policies and programs that enhance rather than
hinder the performance of the value chain.
Example: Fiji taro export value chain analysis found:
• The Fiji taro industry is characterized by a large number of marketing agents, traders
and exporters, resulting in narrow marketing margins.
• Environmental vulnerability resulting in declining soil fertility.
• Market access vulnerability resulting in declining exports to Australia.
The appropriate response from policy makers resulting from the value chain analysis:
Do
• Promote sustainable agricultural practices in commercial taro production.
• Negotiate improved market access with importing countries.
Don’t
• Don’t try to set minimum farm gate prices for taro.
• Don’t promote government agency involvement in taro marketing.
• Don’t encourage farmers to become involved in taro marketing.

13
Why
another
guide
and how
can this
guide
be used?

Participatory

value
chain

analysis????

Inclusive

value

chains???

Upgrading

strategy???

Pacific farmer: “All this talk about value
chains gives me a headache. What
I want is more $$$ from my papaya
to pay my rent, paint my house, pay
school fees and pay for my daughter’s
wedding…………….!. Yes, if it helps me
with these things than I am interested in
this value chain thing”

Inclusive

value

chains???

Upgrading

strategy???

chapter TWO

14
Other Value
Chain Guides
Target
audience for
this guide
There are a wide range of value chain guides/resources that have been
written to help people understand and apply the value chain concept.
A recent report prepared for CTA “Guides for value chain development:
A comparative review” analysed twelve of these guides (Table 1) and
concluded:.
“All of the guides intend that their direct users, that is, those who collect
and analyse data, will be development practitioners from government
agencies, donor-funded projects, or NGOs. No guide is elaborated
for implementation specifically for the private sector or for farmer
groups, although many suggest that representatives of these be invited
to participate during specific steps in the implementation process.
Without exception, the guides are designed to be implemented by the
organizations that sponsored the development of the guide and by other
organizations.” (Donovan et. al 2013)
The production of these various guides has taken place in an environment
where key conceptual and methodological elements of value chain
analysis are still evolving. Many of these guides include not only detailed
procedures that require experts to carry out the analysis but also use
detailed quasi-academic methodologies (Henriksen et.al. 2010).
Existing value chain manuals and guides usually don’t take sufficient
account of the context of Pacific Islands agriculture – with its small volumes,
high transport costs, remote producers and markets, etc. Furthermore,
existing guides are also usually excessively complex and designed for use by
those outside value chains, not by people who are actually working in them.
Thus, in essence, they have been of very limited practical value. This guide
endeavours to redress this shortcoming from the view point of Pacific Island
farmers, traders and policy makers.
This guide is intended to be practical and usable by the
actors in Pacific Island value chains. It draws on the
experience of actual Pacific Island value chains. The
intended users include:
• Market orientated farmers, most of
whom in the Pacific Islands are smallholders
• Input suppliers
• Marketing enterprises (traders, market vendors,
exporters)
• Agro-processors
• Farmer organisations and industry associations
• Government departments (responsible for
extension, economic planning, trade)
• Politicians
• Aid donors supporting agriculture and
enterprise development
• Consultants, university academics and students
(agriculture, business and economics)

15
In the development of this guide we asked our target
users what they really wanted and needed from a value
chain guide and these were some of their responses:
What do you want
from a value chain
guide? “The papaya export
business is very
competitive and costs are
going up every year. I
want to know where I can
drive out some of these
costs and make more
money for me and my
network of farmers. I also
want to know what we
can do to help our buyer
in NZ to sell more organic
papaya so we can expand
our farms.”
Livai Tora
– Commercial organic papaya
farmer from Nadi, Fiji Islands
“From Tonga one of our biggest
issues is logistics, we are a small
island in the middle of the ocean
with very limited linkages to our
main markets in NZ. I want to
make my export company more
efficient using the best available
information and resources.”
Minoru Nishi
– Managing Director of Nishi
Trading, Growers and Exporters of
fresh produce, Tonga
Lasa Aiono
- Extension Manager for SamoaFarmers Association (SFA)managing the export of Tahitianlime, foliage and crops
“One of the primarygoals of the SFA is toimprove linkages betweenfarmers and marketing/processing enterprises.We would like a valuechain guide to helpexplain to our membersthe importance of theseenterprises and thecontribution they make.”

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Aileen Burness
- Managing Director of South
Sea Orchids, Grower, Outgrower
Manager and Chairperson
of the Flower Grower Support
Organisation, Fiji.
“For the small business people who are our
members, it is very important for them to
know how much time and money they spend
on selling their products and understand
other businesses selling prices. Many smallfloriculture businesses in Fiji sell their
products at too high a price, which then limits
the number of products sold. They could make
more money if they lowered their prices and
sold a lot more. I would like this guide toillustrate this point.”
“I really believe that the only (relatively)
successful agribusinesses in the islands are
the ones that started ‘slo-slo nomo’, gaining
experience on the way and targeting the
local market at the beginning. All the ones
blabbering about millions of $ went or will
go kaput. A useful value chain guide needs to
illustrate this to investors, policy makers and
the large number of aid donors in operation.”
Piero Bianchessi
– Managing Director of VenuiVanilla, Grower, Processor andMarketer of spices, Vanuatu.
Basile Malili
- Manager of Cocoa Growers
Association (CGA) of Vanuatu
“CGA members need to understandthe requirements of the marketin terms of quality – whichmeans better fermentation anddrying that is not contaminatedby smoke. It would be good ifvalue chain analysis helped ourmembers to understand that thisis what our market requires.”

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Sant Kumar
- Managing Director of Bula Agro
Enterprise, Fruit and Vegetable
Seedling Suppliers
Cema Bolabola
- Local Consultant, UNDP Pacific
Centre, Millennium Market Project
on economic security and rights
of women market vendors and
their economic empowerment
Uate Logapila
- Second largest market vendor at
Rakiraki Municipal Market, Fiji.
“I have had my stall at the market for the last
12 years. However this is a very small municipal
market. I would like to start supplying hotels
with my produce but I really don’t know much
about that business. I would like a guide that
can help me expand my business into new
markets.”
“People need to understand that
profitable agriculture starts
with quality seed and seedlings.
If you don’t get this first step
right you will not succeed even
if you have a good market and
do everything else right. I would
like a value chain guide to help
explain that your business is only
as strong as the weakest link.”
“I have heard so much about value chains from
numerous organisations and many development
project staff but all the talk really didn’t make
sense to me. I would like a value chain guide to
demystify the concept and the practice of value
chain and just explain to me in simple terms what
this ‘value chain’ is all about, how it can be used to
inform and empower our women market vendors
to make business decisions to improve their
livelihoods.”

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The steps in
value chain
analysis
There are many approaches to value chain analysis
and numerous tools to help make this analysis
meaningful. This guide outlines the six recommended
steps for practical value chain analysis. These are:
Step1: Drawing a value chain map
Step 2: Putting real and accurate
information into the map
Step 3: Identifying the services each
actor provides and returns
received for these services
Step 4: Assessing the market
Step 5: Assessing strengths and
weaknesses for all actors
along the chain and ways to
capitalise on strengths and
minimise weaknesses
Step 6: Developing a plan to improve
the value chain
CHAPTERchapter THREE

21
In support of each of these steps is a list of helpful tools that can be
used by those analysing the value chain.
We have used the example of the ‘Fiji Red’ papaya export value
chain to New Zealand as an example for each of these steps.
The steps for value chain analysis are best carried out by a group of
the actors who are themselves involved in various links of the value
chain.
This is called a ‘participatory value chain approach’. In this
approach, it is often helpful to assign someone to be the ‘facilitator’
which involves the writing up of all of the information drawn
out from the different steps above. It is usually desirable for the
facilitator to have some experience and training in value chains.
This facilitator can also be tasked with chasing up additional
information the group require to finalise their work. More than one
meeting of the group is usually required.
Stakeholders discussing fresh produce the value chain from PNG’s Central Province to a
Port Moresby supermarket chain

22
Step 1:
Drawing a value chain map
What’s involved
Example from ‘Fiji Red’ papaya
export value chain to New Zealand
1. List down all of the people involved in getting the product from the
farm to the plate of the consumer. The people you have listed can
also be called ‘actors’. You may decide to divide your list into main
actors and supporting actors, with the main actors being those who
buy and sell the product as it moves along the chain and the support
actors being those who provide services to facilitate the movement of
the product along the chain.
2. Arrange these people in order of how the product moves (the map)
starting from the farm all the way through to the consumer.
The secondary value chain is the papaya being sold on the local market
Main actors - (those who buy and sell the
product as it moves along the chain)
Supporting actors - those who provide
services to facilitate the movement of the
product along the chain
Farmers Input suppliers (nursery operators, farm supply
companies)
Traders/Exporters (selling export reject fruit on
the local market)
Extension officers
Market vendor/other retailers/hotels Transport operators
Consumers
Part 1:
List of actors involved in the value chain
The main value chain for the papaya being exported to New Zealand
Main actors - (those who buy and sell the
product as it moves along the chain)
Supporting actors - (those who provide
services to facilitate the movement of the
product along the chain)
Farmers Input suppliers (nursery operators, farm
supply companies)
Exporters Extension officers (Nature’s Way Cooperative
and Ag Department)
New Zealand importer/wholesaler Nature’s Way Cooperative (Quarantine
treatment)
Retailer BAF (the Fiji Quarantine Service)
Consumers

23
Part 2:
Drawing a map of how the product flows and placing each actor in
their correct place along the chain
Tools and tips
• Appoint a good facilitator –
preferably with some experience and basic
training.
• This exercise is best done with a very specific
value chain, that is, a real product from a
specific location to a specific customer
(wholesaler, retailer or hotel). More general
value chain maps can be quite difficult.
• This exercise is best done with a group of
people who are directly involved in the
supply chain.
• Using a whiteboard or butcher paper for
‘brainstorming’ is useful.
• When drawing your map, you should start
with placing all of your ‘main actors’ in their
places and then adding in your supporting
actors.

24
Step 2:
Putting facts and figures
into the map
What’s involved
This step involves adding as much ‘relevant’ information as possible to your
value chain map in the form of real and accurate facts and figures. This
step can also be called ‘quantification of the chain’ or adding numbers to
the value chain map.
Some things to think about at each step of the chain are: How many people
are involved, what is the cost of the activity, what is the transport distance,
pricing, margins, losses or wastage and risks.

25
Example of populating the value chain map
from ‘Fiji Red’ papaya export value chain to New
Zealand
Tools and tips
This step is best done with a group
of stakeholders gathered together
because different people will have
different bits of information.
After a group has filled in as much
information as they can, one person
could be assigned to try and find
missing information.
Some pricing and statistics can
sometimes be sourced from
government agencies such as the
Ministry of Agriculture or Trade.

26
Actor
(participant in the
value chain)
Main actor (MA)
Support actor (SA)
What the actor
contributes to the
final product
The cost of
the actor’s
contribution
The reward the
actor receives
(share of the final
selling price to the
consumer)
Actor risk
Seedling supplier
(SA)
Certified seedlings
that provide the
sweet “Fiji Red”
papaya that
overseas consumers
look for at their local
supermarket
Cost of certified
seed, potting mix,
nursery operators’
time
The selling price of the
certified seedlings to
the farmer.
Estimated seedling
supplier share of the
consumer purchase
price: 0.02%
Moderate: Natural
disasters such as floods
or cyclones
Farmer (MA) Takes the certified
seedlings and
combines with other
inputs to produce
papaya to sell at the
farm gate. Farmers
contribute their land,
labour and expertise,
etc.
Cost of land
preparation, fertiliser,
farmers’ time
The farm gate selling
price of a kg of
exportable papaya
minus the cost of
seedlings and other
inputs.
Estimated farmer
share of the consumer
purchase price: 11.0%
High: Natural disasters,
weather, disease, theft,
etc.
Step 3:
Identifying what each actor
contributes to the final product and
the returns they receive
What’s involved
• Create a table that starts with a list of the actors in
the value chain. List what each actor specifically
does to produce the final product.
• List the cost of (and where possible quantify) each
actor’s contribution to the final product.
• Calculate the return the actor receives (the
difference between the actor’s buying and selling
price).
• Consider (and where possible quantify) the risks (the
chances of things going wrong) faced by each
actor.
Tools and tips
• Formal questionnaires
and interviews
• Group “brain storming”
with actors along chain
• Make full use of any
available price and
cost information

27
Exporter (MA) Transports, grades,
washes, arranges and
pays for quarantine
treatment, finds
markets, arranges air
freight , etc.
Cost of operating
packing facility and
operating trucks.
Cost of cartons and
packaging, paying
for quarantine
treatment, pack
house labour, etc.
The price of papaya
loaded on the aircraft
(fob price) minus the
farm gate price of the
papaya
Estimated exporter
share of consumer
High: Post-harvest
losses; importer claims;
delay in payments
from importer; product
offloaded due to lack
of airline space; market
access problems.
Quarantine
treatment (SA)
Provides quarantine
treatment required
to conform to
bilateral quarantine
agreement (BQA)
with importing
country. Provides
grading and packing
services.
Cost of energy,
cost of labour and
management, repair
and maintenance,
“rainy day” reserves,
BAF charges, etc.
The cost incurred for
quarantine treatment
Estimated quarantine
treatment share of
consumer purchase
price: 8.0%
Low to moderate:
Natural disasters
Biosecurity (SA)
To ensure the
requirements of the
BQA are met
Contribution to BAF
overheads, time of
BAF officers
The cost incurred to
obtain the quarantine
certification required
by the importing
country
Estimated BAF share
of consumer purchase
price: 0.04%
None
Air freight (SA)
To transport the
papaya from Nadi
airport to Auckland
airport
Fuel, labour and
management, etc.
The cost incurred to
transport the papaya
from the Nadi airport
to the Auckland
airport
Estimated air freight
company share of
consumer purchase
price: 13.8%
None
Importer/Wholesaler
(MA)
Clears, stores, ripens
and distributes the
product to retailers
Clearance
charges, ripening
charges, labour,
cost of operating
and maintaining
storage facilities,
transportation
The difference
between the price of
the papaya landed at
Auckland airport and
the wholesale price
paid by the papaya
retailers
Estimated importer/
wholesaler share
of the consumer
Moderate: post
shipment losses,
claims and delayed
payments from retailers
Retailer (MA)
Makes the papaya
conveniently
available to the final
buyer – displays,
promotes and serves
Cost of operating
the supermarket,
advertising, etc.
Cost of produce that
cannot be sold
The difference
between the
wholesale and retail
price
Estimated retailers
share of the consumer
High to very high: not
being able to sell
a highly perishable
product that must be
disposed of in a very
limited time. Post rots
are most prevalent at
the retail stage. Price
undercutting from
competitors.
Consumer (MA)
The “Queen” at the
end of the chain
Insignificant: If the
customer doesn’t like
the product she won’t
buy again and will tell
her friends.
Actor
(participant in the
value chain)
Main actor (MA)
Support actor (SA)
What the actor
contributes to the
final product
The cost of
the actor’s
contribution
The reward the
actor receives
(share of the final
selling price to the
consumer)
Actor risk

28
Step 4:
Assessing the market
This step is sometimes
called market research
or market analysis
What’s involved
Write down what you understand the consumer cares about the most and
try to score the performance of the value chain in meeting these demands
and why.
Depending on how close you are to the consumers (whether it is a local or
export product), you will either need to interview consumers or try to get in
contact with someone who deals with end consumers often and can help
you list down what the consumers really care about.
If you have sufficient funding, formal taste testing of consumers by experts
can provide very useful information (see example above for Samoan taro
sold to New Zealand)
• This step can best be done if you have access to a recent market study to draw
information from.
• Market studies tend to be far more useful if you already have a product to discuss
with buyers rather than just an idea or a concept.
• Market studies are often undertaken by consultants. It can be far more useful if the
exporter is also involved which allows actual buyers and sellers to meet.
• Good to have somebody involved in this step who regularly handles the product
at the retail side – deals with customers.
• If you don’t have a recent market study or access to a retailer, you may try
sending a questionnaire to the wholesaler or retailer asking them to provide
the information for the table above.
• Try sending what you have already worked on to the wholesaler and retailer to
provide their comments. Sometimes you will have to send them several requests in
order to get a response – be persistent.
• Some Pacific Island exporters have found repeated participation in trade and fine
food fares to be very useful. However, for small niche markets such participation
may not be profitable unless sponsored by donors.
• Formal consumer taste panel tests undertaken by professionals can be very useful.
• In-store promotions can also provide useful information – but these can be
expensive.
Tools and tips
See Shepherd, Andrew, 2003. Market research for agroprocessors. Marketing Extension
Guide No. 3, FAO. ftp://ftp.fao.org/docrep/fao/007/y4532e/y4532e00.pdf

29
What consumers care about Performance of value chain in meeting demand
(score from 1 – 10) and why
Fruit taste 9 – Feedback is that consumers in New Zealand
love the taste of ‘Fiji Red’ papaya and it is
superior to other products on the market.
However, there are some cases where seed
purity has been lost and the consumers get a
less tasty and yellowish fruit.
Quality (disease and physical
damage)
7 – Physical damage is a problem for Fiji
papaya because there are so many steps
in the chain where the fruit is handled and
generally it has more marks on the fruit than
the competition. Disease in the form of post-
harvest rots can be a problem in Fiji’s wet
season (November –April).
Health benefits 10 – Fiji papaya is a healthy product like all
papaya. However, Fiji papaya has the added
advantage that consumers often envision that it
is produced in a healthy, “pristine” environment.
Price 7 – Fiji papaya in New Zealand is more
expensive than the competition.
Packaging and labelling 5 – Most exporters do not use any fruit stickers
and retailers do not use special labelling or
displays that indicate it is a ‘Fiji Red’ product.
VC analysis has identified the need to patent
the “Fiji Red” brand.

30
Step 5:
Assessing strengths and weaknesses
along the chain and identifying
actions required.
This step is sometimes referred to as SWOT Analysis -
S (Strengths) W (Weaknesses) O (Opportunities) and T (Threats)
What’s involved?
• Examine each link along the value chain to
find out what is done well and what is not done
so well in terms of producing the final product
and getting it into the hands of the consumer.
Consider, where possible, potential threats and
risks along the chain.
• Consider what more can be done to take
greater advantage of what is being done
well and make recommendations for the
appropriate action.
• Consider what can be done to reduce the
weaknesses and make recommendations
for the appropriate action. This would take
account of threats and risks along the chain.
Actor (participant in
the value chain)
Strengths and opportunities Weaknesses and threats Action needed
Seedling supplier
(SA)
• Competent private
nurseries in place to supply
high quality seedlings at a
competitive price
• The availability of selected
“Fiji Red” seed
• A reserve stock of quality
seed now in place
• No longer necessary to
import seed from Hawaii or
elsewhere.
• Poor cross-pollinated seed
being used by some farmers
and seedling suppliers.
• The implementation of a
seed certification scheme.
• The importance of high
quality “Fiji Red” seed
promoted to farmers
• First undertake a
preliminary analysis
before working in a
group.
• Present preliminary draft
findings to meetings with
actors along the chain
for verification and
refinement.
• To be completed with an
industry-wide meeting
for endorsement of
findings and ownership
of recommendations
that forms the basis of
developing the plan to
improve the value chain
(step 6).
Tools and tips

31
Actor (participant in
the value chain)
Strengths and opportunities Weaknesses and threats Action needed
Farmer (MA) • Relatively high level
of entrepreneurship by
farmers growing papaya
(particularly in the Sigatoka
Valley).
• Excellent inherent
agronomic conditions for
growing “Fiji Red” papaya.
• Ability to produce high
quality organic papaya at a
competitive price.
• Vulnerability to natural
disasters
• Most farmers don’t have
access to irrigation
• Inadequate attention
given to drainage.
• Some farmers not using
selected “Fiji Red” papaya
seed.
• A susceptibility to post-
harvest rots
• A concentration of
papaya farming in one
location – increasing disaster
risk.
• The risk of future incursion
of pest and diseases of
quarantine significance
• A more focused extension
effort
• Expanding papaya
production areas
• The implementation of
measures to reduce post-
harvest rots
• Implementation of a
certified seed scheme
Exporter (MA) • A number of long-standing
exporters that provide
competition
• Mainly purchasing fruit
from one geographical area
• Under-developed
contract farming
• No track record in
developing mainstream
supermarket markets
• Incentives to link exporters
to farmers in new areas
• Patent and certify the “Fiji
Red” brand
Quarantine treatment
(SA)
• A longstanding highly
reliable quarantine
treatment in place
• A non-chemical
quarantine treatments
allows for organic papaya
exports
• The high cost of
quarantine treatment
• Support for measures to
reduce energy costs
• Support for market access
requests to reduce the
necessary treatment time
• Support for programs
to increase treatment
throughput to reduce unit
costs
Biosecurity (SA)
• Fiji Quarantine
involvement only regulatory
– government now not
involved in treatment
• High cost of biosecurity
certification due to user
pays policy
• Slow pace of securing and
reforming market access
agreements. No market
access to the remunerative
US market
• Reform of BAF to reduce
costs and increase
efficiency.
• A concerted effort
required to secure long
outstanding US market
access
Freight (SA) • Daily flights to Auckland • Limited air freight capacity
on new Fiji Airways aircraft
• High air freight charges
• Working with Fiji Airways
and other companies
to improve air freight
availability.
• Priority given to
undertaking sea freight trials
Importer/Wholesaler
(MA)
• A number of wholesalers/
importers keen to import “Fiji
Red” papaya
• Insufficient consistent
supply at a competitive
price available to expand
the market.
• Not supplying the major
supermarket chains yet.
• Fiji papaya not price
competitive with sea freight
imports from the Philippines.
• Seasonal problem with
post-shipment rots
• Improve competiveness –
quantity, consistency, quality
and price
Retailer (MA)
• Fiji papaya has superior
flavour and flesh colour.
• The Fijian environment and
people have good image in
the market
• Not found in major
supermarkets
• Not taking full advantage
of superior attributes of Fiji
papaya
• A campaign to promote
superior attributes of Fiji
papaya
• Development of niche
premium markets (certified
organic)

32
Step 6:
Developing a plan to improve
the value chain
In this step we are converting our
value chain analysis to real value
chain development. This step leads
to what is often referred to as the
upgrading strategy.
What’s involved?
Take the findings from Step 5 to develop a plan to improve the value chain.
This should involve both short-term and longer-term plans.
There can be plans for the individual actors and plans for the entire value
chain.
• Short-term plans (things to be done that will have a quick
impact – to take advantage of “low hanging fruit”).

• Longer-term plans (things to be done, the impact of which will
be felt further into the future)

It is important to identify a key driver in the value chain that can take a
leading role in implementing the value chain improvements.
• In developing plans, set priorities taking into account what is achievable and what
are the costs and expected benefits. Cost-benefit analysis is an important tool in
setting priorities (see 6.1).
• Present draft plan to actors along the chain for their verification and inputs.
• Present plan(s) to industry-wide meeting for endorsement and ownership.
• Remember what is being proposed may require external funding assistance. This
could involve a bank loan, being part of a public private sector partnership with
the government or aid donor assistance. If so, you will need to take
into account the requirements of these external entities in preparing your plan.
Tools and tips

33
Actor Short term plan Longer term plan
Seedling supplier (SA) • The training of selected
farmers in “best practice” seed
collection techniques.
• Facilitating the establishment
of seed and seedling supply
enterprises.
• Papaya planting material
only to be supplied by certified
private nurseries.
Farmer (MA) • A concerted extension
effort advising farmers of the
adverse consequences of
collecting their own seed but
to instead purchase seedlings
from recommended nurseries.
• Introduce improved field
practices to reduce rots.
• The development of papaya
production “best practice” for
disaster and climate change
mitigation.
Exporter (MA) • The adoption of wrapping
fruit in newspaper to reduce
costs.
• Development of appropriate
contract farming in new
production areas.
Quarantine treatment
(SA)
• Negotiate reduced
treatment holding time with
New Zealand quarantine
authorities.
• Install equipment to reduce
post-harvest rots.
• Increasing throughput to
reduce unit treatment costs.
Biosecurity (SA)
• Industry negotiating with BAF
and Ministry of Agriculture to
reduce treatment charges.
• Focus attention on
improving market access
and the Bilateral Quarantine
Agreement ( BQA).
• Reform of the Biosecurity
Authority of Fiji (BAF) to
improve service, reduce cost
and improve efficiency.
Freight (SA) • Industry negotiations with Fiji
Airways and other airlines, to
reduce freight charges.
• Undertake applied sea
freight research.
Wholesaler/Retailer
(SA)
• Develop an industry
marketing plan for “Fiji Red”
papaya to be sold in major
supermarket chains (how to
compete with Dole papaya
from the Philippines).
• Develop an industry
marketing plan for niche
speciality “red” papaya
(organic/speciality markets).
• The implementation of the
industry market plans.

36
Key lessons from
Pacific Island value
chain studiesThere are a number of key lessons that can be drawn from the
experience of value chain development in the Pacific Islands which
are incorporated into practical messages for value chain training.
Twelve (12) key lessons are summarised below and discussed in
the detailed case studies presented in annex 1.
The key lessons are:
• The most successful value chains have been built around
niche markets and/or seasonality.
• Gradual stepwise development is a feature of successful
niche market value chains.
• Bulk commodities are now shifting slowly toward niche
market exports.
• Premium quality products are imperative for the commercial
viability of niche market exports from small remote locations.
• In successful value chains, agribusinesses “pull” the products
through the chain.
• There is a need to respond to the “tyranny of isolation” and
diseconomies of scale, if farmers from outer-island and interior
locations are to benefit from value chains.
• Technology plays an important role in providing market access
and improving efficiency.
• There is a need to provide smallholder farmers with the
necessary information and technical skills.
• Market access constraints for export market value chain
development are very difficult to resolve.
• There is a role for public-private partnerships in value chain
development.
• Longer term financial viability can depend on more sustainable
production practices being adopted.
• Continuing donor and technical assistance is likely to be needed for
many chains to reach sustainable profitability.
chapter FOUR

37
Smallholders from the outer islands of Vanuatu can produce premium
quality pepper. However, they cannot compete in European markets
with bulk pepper producers from Kerala in India or Sri Lanka.
Volumes from Vanuatu are too low and costs are too high to compete in
the pepper commodity market. For the Vanuatu pepper value chain to
survive, it requires a selling price three (3) times higher than bulk pepper
from Sri Lanka and India.
To compete, Vanuatu’s pepper exporters must offer a small part of the
pepper market something special that enables them to secure a much
higher price for the small volume of pepper supplied.
To achieve this, Vanuatu offers selected buyers a premium quality
product that is beautifully packaged and certified (organically grown,
food-safe pepper sourced from the romantic islands of Vanuatu).
Key lesson #1:
The most successful value
chains in the Pacific Islands
are likely to be built around
niche markets and/or
seasonality.
A niche market is a small but different
part of the overall market for the
product.
Example 1:
Vanuatu pepper exports to Europe
(Case Study 4)

38
Bulk pepper from
Sri Lanka
VS
Example 1:
Vanuatu pepper exports to
Europe (Case Study 4)

39
Imported Tahitian limes selling in an Auckland supermarket in September for an
exceptionally high price.
Example 2:
Samoan lime exports to New Zealand
based on seasonality
(Case Study 5)
From September to March, New Zealand cannot produce Tahitian limes
– thus the local price is very high during this period. Samoa can produce
quality limes all year round. During the September to March window,
they are exported to New Zealand when the price is sufficient to offset
the high cost of air freighting small volumes.

40
Fiji mature ginger curing
in August, destined for Los
Angeles
Hawaii mature ginger curing
in February, destined for Los
Angeles
Example 3:
Fiji built a major export industry
around exporting ginger to the US
during the Hawaii “off season”
In Fiji, (southern hemisphere) ginger is harvested between July and
October which is the off season for Hawaii ginger (northern hemisphere).
Thus US ginger importers combined Hawaii and Fiji ginger value chains to
secure year round supply

41
Premium quality
“Fiji Red” papaya
Non-chemical quarantine
treatment at Nature’s Way
Cooperative
Example 4:
Fiji Red papaya
(Case Study 2)
Fiji Red papaya, with its unique quality characteristics, has been able to
develop niche markets in New Zealand, Australia, Japan and hopefully
in the future, the United States. The development of these markets was
facilitated by the establishment of a non-chemical quarantine treatment
facility owned and operated by the industry. Premium quality provides
the basis for establishing and expanding these markets.

42
Example 5:
Solomon Islands cut flowers
(Case Study 6)
The large increase in the expatriate community in the Solomon Islands
following the crisis of 2001 substantially increased the demand for high
price cut flowers in the Honiara municipal market.
Flower growers make a good return
from selling cut flowers at the Honiara
market.
The large donor community in Honiara
regularly buy flowers to decorate their
homes.

43
Where it all began 20 years ago
in a kitchen in South Santo
The first packaged products
sold to tourists in Vanuatu
Key lesson #2:
Gradual stepwise
progression a key feature of
successful niche market value
chain development.
Most successful Pacific Island agricultural value chains have developed in a gradual
progression. These chains often start with an entrepreneurial investor with a concept.
Vanuatu spice exports (Case Study 4) and Fiji fresh ginger exports (McGregor 1988)
provide examples. The key lessons from these examples are:
• Building products and markets is an incremental step-by-step process involving
continuous feed-back between seller and buyer.
• The importance of long-term exporter/buyer relationships – a close relationship
based on trust must be developed.
• Successful value chains need to be market driven, but you first need a product
to develop a market. The skill of the entrepreneur is to be able to first identify and
finance products that the market will want. These products can then be tested in
the market and adjusted and developed accordingly.
• The role of the local market (particularly tourism based) in developing and testing
products that can later be exported.
• The role of smaller nearby export markets such as New Zealand in serving as a
learning process before venturing to larger and more difficult markets such as
Australia, United States or Japan.
• The importance of participatory marketing studies where the actual marketing
entrepreneur takes the product to actual buyers.
• The value of repeat participation of small Pacific exporters in appropriate industry
networking events such as Fine Food Fairs.
• Third-party consultant market studies are of limited value. However, organisations
such as PITIC (based in Auckland and Sydney) play an important “marriage broker”
role placing Pacific Island exporters and potential buyers together.
Today –
premium
Vanuatu
vanilla
is sold
around
the world

44
Key lesson # 3:
Pacific Island bulk commodities
are now slowly shifting toward
niche market exports.
Pacific Islands commodities such as cocoa, coffee and coconut products have been
traditionally sold on bulk international markets. On these markets it is the interaction of
numerous anonymous buyers and sellers that determines the price. If you supply the
minimum quality (usually a sea freight container load – 10 tonnes), you receive the price
that has been determined at that time for a specified quality standard (different quality
standards receive different prices).
If you have the product, you deal with a commodity trader (not the end user) and
you get the international market determined price on offer. The marketing study
requirements are limited to knowing who the traders are, where they are located, their
shipping requirements and the quality requirements of the market. For such bulk markets,
an incremental growth strategy for the value chain is not relevant. The quicker the
exporter can move from supplying one container (10 tonnes) to 100 containers (1,000
tonnes) the better. The market can absorb all that can be shipped at the prevailing
market determined price.
The price for bulk traded cocoa is determined by numerous buyers and sellers
trading in New York. It is not necessary for a cocoa exporter based in Bougainville
or Malekula to establish a relationship with these traders.
Bougainville cocoa being
shipped to the world market
EXAMPLE 1:
BOUGAINVILLE COCOA SOLD ON WORLD MARKET
Coffee, Sugar and Cocoa
Exchange in Manhattan

45
Recent years have seen a shift in some Pacific Island commodity chains
toward extending through to the end user to obtain a higher price for
the relatively small volumes exported. Niche markets are created by
differentiating Pacific Island products for final consumers through origin, fair
trade and organic certification, and further processing or packaging, such
as producing Pacific Island chocolate from Pacific Island cocoa or packing
beans in individual packets.
By selling directly to end users, significant value can be added. This should
flow on to all the actors in the value chain. However, unlike bulk commodity
markets, success depends on establishing and maintaining long-term
relationships with the buyer who markets your product at the end of the
value chain. For example, the French organic chocolate brand, Kaoka,
had established a long-term relationship with the Vanuatu Organic Cocoa
Cooperative Association (VOCCA) to supply organically certified cocoa
beans.
These beans were manufactured into Vanuatu origin chocolate – with the
name Vanuatu featuring prominently on the retail label (McGregor, Wotas
and Tora 2009). At its peak, over 200 tonnes of organically certified cocoa
were exported to France. Regrettably, the Vanuatu organic cocoa value
chain collapsed when this relationship broke down, which in turn led to the
collapse of the Cooperative. Vanuatu has now returned to selling its cocoa
on bulk commodity markets at significantly lower prices.
Organically certified cocoa beans from Malekula
Vanuatu ready for shipment to French chocolate
maker
French chocolate maker selling the
Vanuatu ‘name’ directly to the retailer
and the final customer
EXAMPLE 2:
NICHE MARKET COCOA FROM MALEKULA VANUATU

46
Key lesson # 4:
Premium quality products are
imperative for the commercial
viability of niche market exports
from small remote locations.
Transport costs for Pacific Island products are high along the entire value
chain due to factors such as isolation, poor infrastructure, diseconomies of
scale and lack of competition. These costs tend to be the same regardless of
the quality of the shipped product. The only way profits can be made along
the value chain is to sell high quality products that can secure the highest
possible price. Profitability can be further enhanced by adding value through
such things as packaging and various forms of certification (organic, fair
trade, origin, food safety) sought by the market.

47
Key lesson # 5:
In successful value chains,
agribusinesses “pull” the
products through the chain.
Farmers or farmer groups have not been successful in “pushing” products
through the value chain.
A successful agribusiness is linked to the market and knows what the consumer
wants. The consumer, via the agribusiness, that is said to “pull” the product
through the chain. This compares with farmers who are removed from the
market but still think they know what the market wants, and try to “push” the
product through the chain.
Donors and NGOs have nearly always focused their attention at the farmer
end of the value chain ignoring the needs of the businesses that buy the
product and pull it through the chain. This can be to the detriment of the
entire chain including the farmers.
Successful value chains are “pulled” by the consumer

48
Key lesson # 6:
There is a need to respond to
the “tyranny” of isolation and
diseconomies of scale if farmers from
outer-island and interior locations are
to benefit from value chains.
In countries like PNG, Solomon Islands and Vanuatu, a high percentage of the
people are isolated from the main urban centres and international ports and
airports. The “tyranny of isolation” means that many of these people do not
participate in agricultural value chains. The Vanuatu spices value chain case
study (Case Study 4) has shown that it is possible to overcome this “tyranny of
isolation” provided the following three necessary conditions are met:
• the right product (high unit value and non-perishable);
• the right type of marketing and processing enterprise (“pulling” the
product through the value chain) and,
• the right support mechanism (providing correct and appropriate
information to farmers).
The right support – Venui Vanilla and
CTA training materials and a market
outlet for remote farmers on the
islands of Vanuatu.
Vanilla Handbook
Piero Bianchessi
The right product – shelf stable high value
vanilla from Tanna, Vanuatu

49
Key lesson # 7:
The role of technology in
providing market access and
improving efficiency.
New technologies and processes have been fundamental in the development
of Pacific Island value chains. A prominent example was the introduction of High
Temperature Forced Air (HTFA) quarantine treatment technology in Fiji. HTFA was
the catalyst for the current papaya and breadfruit export value chains (Case
Studies 2 and 3).
Key features of the introduction and operation of this technology were:
• Donor technical assistance.
• Operation by the private sector (the industry) – a major departure from
past arrangements.
• A public private sector partnership to mobilize the necessary resources.
Samoan lime exports (Case Study 5) have also been based on the introduction
of a new quarantine technology/process (the New Zealand non-fruit fly host
quarantine treatment protocol).
In Fiji, further down the value chain, the ready availability of plastic field crates
has substantially reduced post-harvest losses and increased the returns from the
growing and marketing of papaya (Case Study 2). The adoption of this simple
technology would benefit all fresh produce industries throughout the region –
including those servicing domestic markets.
In Fiji, the access to air freight capacity sharply deteriorated in 2013 and costs rose,
threatening the viability of fresh export industries. Applied collaborative research
has illustrated that it is technically and economically feasible to sea freight papaya
to New Zealand and the research focus has now shifted to sea freight to Australia
(Case Study 2). Reliance on air freight for exports is always risky when flights are
used primarily for tourists. Natural disasters or political disruptions can affect the
number of visitors and reduce the number of flights and, hence, cargo space
availability.
The development of the Fiji breadfruit value chain requires technology to move
from wild harvesting to fruit grown in small commercial orchards (Case Study 3).
In-field and mass propagation techniques are being developed together with
appropriate orchard management systems.
The introduction of new sustainable land management technologies has been
necessary for the Fiji taro value chain in the face of deteriorating soil fertility.
The viability of Vanuatu’s spice exports has depended on the introduction of
state-of-the-art value adding and packaging technology for vanilla that is being
sourced from village-based farmers in the remotest locations.

50
The introduction of plastic field crates by
Nature’s Way Cooperative has led to a
significant uptake in this technology and an
improvement in quality.
Pallets of ‘Fiji Red’ papaya
ready for a sea freight trial
to New Zealand.

51
Key lesson # 8:
The need to provide smallholder
farmers with the necessary
information and technical skills.
Pacific Island value chains all involve smallholder farmers, who are usually village based.
Such farmers invariably have poor access to the technology required to meet market
requirements. This limits their ability to effectively participate in value chains. Some
key information and skill areas identified include: pest and disease control, soil fertility
maintenance, post-harvest handling of produce and food technology.
Government research and extension entities have faced difficulty in providing technical
information and skills required by farmers to produce high value horticultural and spice
products. Yet there has been an unwillingness on the part of agribusinesses to provide
these essential services – because of the small number of farmers.
In Vanuatu, the value chain for high value spices is able to reach village farmers in the
remotest locations via the “Spices Network” that provides the necessary technical skill and
information (Case Study 4). This successful outreach has been based on a long standing
relationship between a processing and marketing company and a farmers’ organisation.
Without these, the value chain would not exist.
The Samoa Farmers Association (SFA) is playing a similar role in the development of lime
exports by providing high quality planting material, tree husbandry and post-harvest
handling advice (Case Study 5).
In the Fiji papaya and breadfruit case studies, NWC has stepped in to start providing
extension and applied research services on behalf of the industry as a whole. This has
been through the adoption of a public private partnership (PPP) approach. Donor
assistance was necessary to facilitate the process.
The taro case study showed that the most critical information required by Taveuni farmers
was to understand the management of their soils to ensure sustainable production. This
involved the introduction of innovative extension models driven by farmer organisations
within the value chain itself. Targeted donor assistance in support of the process has been
critical.
Marcotting breadfruit: A skill necessary for the commercial propagation of breadfruit

52
Key Lesson # 9:
Market access constraints for export
market value chain development are
very difficult to resolve.
The problem of access for Fiji taro, papaya and ginger to the Australian
market illustrates the difficulty in developing value chains based on exporting
to large neighbouring countries that have domestic industries producing the
same product or other products that might be susceptible to pests or diseases
found in the exporting country. Substantial and appropriate technical
assistance is required to allow for even a modest degree of “playing field
levelling” in dealing with quarantine related market access issues.
The Vanuatu spices value
chain study shows that
in the realm of food
safety certification, small
PIC agro-processing
enterprises are increasingly
facing similar barriers
to entry, although
these are not based on
protectionism. Certification
involves considerable costs
that are best shared by
large numbers of farmers,
which is often lacking in
most PICs.

53
Key Lesson # 10:
The role of public private
partnerships in Pacific Island value
chain development.
Sustainable successful value chains in the Pacific Islands have been without
exception, private sector driven. However, the Fiji papaya and breadfruit
value chains illustrate the need for effective public-private sector partnerships.
In the context of the Pacific Islands, the public sector includes both national
governments and donor agencies. Public sector involvement has been
necessary due to large capital and resource requirements relative to the size
of the agribusiness entities involved. The example of quarantine treatment
facilities is highlighted in the case studies.
A public private partnership (PPP) was required to establish Fiji’s industry operated
quarantine treatment facility which now provides state of the art quarantine, grading
and packing facilities to the industry

54
Vetiver grass being planted
along the contour using rows
for soil conservation
Key Lesson #11:
The need to adopt more
sustainable production practices
to stay in business.
Some of the initially successful Pacific Island value chains have floundered
because of environmentally unsustainable production practices. Prominent
examples are Fiji ginger and taro, Samoan taro and Tongan squash. The
adoption of a “green growth” approach by the value chain has become an
imperative for long run commercial survival. The Fiji taro value chain study
shows how these industry driven “green growth” adjustments are being made.
In contrast, the Fiji breadfruit, Samoan lime and Solomon Islands floriculture
value chains are all based on an environmentally sustainable development
path from the outset.
Land being prepared
in the 1980s for ginger
planting in Fiji: to achieve
good drainage,and to
minimise labour inputs,
farmers grew ginger on
steep land planting up
the slope. The result was
severe soil erosion with the
land becoming unsuitable
for agriculture”

55
Key lesson # 12:
The continuing role of aid and
technical assistance in Pacific
Island value chain development.
In the early 1990s, the Pacific Islands Development Program (PIDP) at the East West Centre
undertook a study of the impact of aid and development assistance of agricultural
development in the Pacific Islands (McGregor et.al. 1993). The report concluded:
The provision of aid in the Pacific Islands is a complex and vexatious issue. Despite
the increasing, numerous policy pronouncements from donors, aid had done little to
accelerate private sector development in agriculture. At worst, project aid has actually
weakened the position of the private sector by requiring the direct involvement of
government agencies in production and marketing activities. Redesigned foreign aid has
a crucial role in facilitating horticultural development in the region.
Two decades on, a significant amount of the aid to the sector continues to be
misdirected and ineffectual. However, there is now some willingness amongst donors
to directly support the private sector, particularly if it involves an industry organisation.
Focused aid and technical assistance has played a critical role in all the value chain case
studies. In varying degrees, their very existence has depended on this support.
Fiji would not be exporting fruit fly host products (papaya, mango, eggplant and
breadfruit) had not USAID transferred the HTFA quarantine treatment technology to
the fresh produce exporting industry. Samoa would not be exporting limes to New
Zealand had not the Regional Fruit Fly Project transferred the technology to the Pacific
for determining no fruit fly host status for products and assisted with market access
submissions.
Fiji’s taro export value chain was initiated and thrived for nearly two decades without
any donor assistance. However, in recent years the industry has faced major problems
associated with declining soil fertility and market access. Technical assistance, supplied
through various agencies, is now making a major contribution to meeting the industry’s
identified need for environmentally sustainable production practices. Without this
assistance, it is difficult to see how this value chain could be sustained.
The Vanuatu spices value chain has depended less on outside assistance. However,
even here, key focused inputs have been critical in the development of the chain. The
case study cites the importance of the support for the involvement of the agribusiness in
Fine Food Fairs. This company could not have met the initial overhead costs of organic
certification without donor assistance. The “Spices Network”, created by a farmer
organisation, the Farm Support Association (FSA), has been critical in extending the value
chain to farmers of remote locations. The FSA has depended over the years on obtaining
modest injections from various external funding sources.
The biggest market access challenge facing small agro-processing exporting enterprise is
food safety (HACCP) certification. Because of the high overhead costs and the technical
requirements of obtaining such a certification, it is unlikely that this can be achieved
without significant donor assistance.

56
Some lessons from the
consolidated experience of
Pacific Island and Caribbean
value chain development.
The Pacific Islands and the Caribbean have a lot in common, terms of scale,
numbers of farmers and the type of agricultural products involved. Westlake
(2014), in synthesising CTA’s Pacific and Caribbean value chain studies,
concluded:
The case studies demonstrate that value chains for agricultural commodities
can function more efficiently and effectively when small-scale farmers
develop relationships with suppliers of inputs and services and with entities
which market and process their output. The integration of farmers into
value chains can have mutually beneficial outcomes both for the farmers
themselves and for other value chain participants. Farmers can aim to supply
a product that is suited to the requirements of processors and end users, both
in terms of physical characteristics and the reliability and timing of supply.
Processors, traders and other chain participants, in turn, can provide farmers
with information, finance and training (p, viii).
This guide makes practical recommendations on how this lesson can be
incorporated into training messages for mutually beneficial outcomes for
Pacific Island value chains.
Caribbean and Pacific value chains have many similarities

chapter FIVE
Key
messages
for Pacific
value chain
training

KEYMESSAGES
FORPACIFICVALUE
CHAINTRAINING
Seven(7)keymessagesareidentifiedforpracticalvaluechaintraining.
Thesecomeoutfromtheexperiencedescribedintheprecedingchapter.
Theseare:
• THENEEDFORAGRIBUSINESSESTO“PULL”PRODUCTSTHROUGHTHEVALUECHAIN
RATHERTHANFARMERSORFARMERGROUPS“PUSHING”PRODUCTSTHROUGHTHE
CHAIN
• RELATIONSHIPSANDINFORMATIONFLOWSALONGTHEVALUECHAINARECRITICAL
TOESTABLISHTRUST.
• UNDERSTANDINGYOURCUSTOMERISPARAMOUNT
• AVALUECHAINISONLYASSTRONGASITSWEAKESTLINK–EACHLINKHASTOBE
PROFITABLEFORTHECHAINTOSURVIVE
• ALLLINKSINTHEVALUECHAINHAVEACRITICALROLEANDMUSTHAVEA
SUFFICIENTMARGINTOSTAYINBUSINESS
• THENEEDTOWORKTOGETHERTOENABLEALLACTORSGETABIGGERPIECEOF
“PIE”–BETTERTOFOCUSONTHEBIGGEROVERALL“PIE”THANCOMPETINGFORA
BIGGERSHAREOFASMALL“PIE”.
• COMMERCIALANDENVIRONMENTALSUSTAINABILITYARECLOSELYLINKED

Theneedforagribusinessesto“pull”productsthrough
thevaluechain,ratherthanfarmersorfarmergroups
“pushing”productsthroughthechain
KEY
TRAINING
MESSAGE
#1:
Theprimarydifferencebetweenasupplychainanda
valuechainisafundamentalshiftinfocusfromthe
supplybaseandproducerstothecustomerbaseand
consumers.
Asustainablevaluechainpullsproductsthroughthechain
ratherthanpushproductsthroughthechainandaddsvalue
ateachstep.Itstartswithknowingwhattheconsumer
actuallywantswiththeproductmovingalongthechaintotry
andbestsatisfythatwant.
Traditionalsupplychain(supplypush)–weare
focusingonthefarmersproducingaproductand
thenpushingthisthroughthechain
Sustainablevaluechain(demandpull)–we
arefocusingondeliveringexactlywhatthe
consumerwants

KEY
TRAINING
MESSAGE
#2:
‘Walkingthechain’
basicallyinvolvesanactor
fromanywherealongthe
chainfollowingaproductfrom
whereitstartsthroughallof
theprocessesuntilitreaches
theconsumerandhopefully
talkingtolotsofpeoplealong
theway.
Relationships&informationflowsalongthevalue
chainarecritical
Anagriculturalvaluechainisnotlikea
factorywhereaproductpassesthrougha
seriesofmachines.
Ateachsteporlinkonthechaintherearereal
people.
Themostsuccessfulvaluechainsarethosethatinvest
inrelationships,takingthetimetounderstandthe
situationandmotivatingfactorsofthenextperson
alongthechain.Whenyouhaveagoodrelationship
withsomeoneitiseasiertoworkwiththem.
Alloftheactorsinthevaluechainhavecertainrequirementsfrom
theotheractorsinthechain(thingsthattheywantorneed).
Ofteninformationabouttheserequirementsonlytravelsbetween
thetwoactorswhoaredirectlylinked.
Themostsuccessfulvaluechainsarethosewhereinformationtravelsupanddown
thechainandbetweenalloftheactors.
Goodinformationleadstobetterdecisionmaking.
Apracticalwaytobuildrelationshipsandshareinformationisthroughatoolcalled
‘walkingthechain’.

Understandingyourcustomerisparamount
KEY
TRAINING
MESSAGE
#3:
Themarketwants
acertainproduct
withparticular
qualityfeaturesat
amaximumprice
andyoumustsupply
themwiththat.
Notunderstanding
yourmarketislike
tryingtoforcea
squarepegintoa
roundhole.
Ifyoutrytogivethemsomething
elseitisliketryingtofitasquare
peginaroundhole.
Findoutexactlywhatyourmarket
wantsandthenworkwiththeactors
inthevaluechaintoprovidethis.

KEY
TRAINING
MESSAGE
#4:
Avaluechainisonlyasstrongasitsweakestlink–
eachlinkhastobeprofitableforthechaintosurvive
LookingatthevaluechaincarefullycanallowalloftheactorstoseetheCRITICALrolethateach
playsindeliveringaproducttotheconsumer.
Avaluechainisonlystrongandsustainablewheneachlinkismakingaprofit.
Inasuccessfulvaluechain,eachactorisworkingtogethertostrengthenthewholevaluechain.
Ifthereisaweaklinkinthechain,thenthishasthepotentialtoaffectalloftheactorsinthechain
andthereforealloftheactorsshouldbeconcerned.

Alllinksinthevaluechainhaveacriticalroleandmust
haveasufficientmargintostayinbusiness
KEY
TRAINING
MESSAGE
#5:

KEY
TRAINING
MESSAGE
#6:
Theneedtoworktogethertoenableallactorsgeta
biggerpieceofthe“pie”
Itisbettertofocusonabiggeroverall“pie”ratherthancompetingforabiggershareofasmaller
“pie”.Itisthesizeofyoursliceandnotyourshareofthepiethatisimportant.

Commercialandenvironmentalsustainabilityare
closelylinked
KEY
TRAINING
MESSAGE
#7:
Youmightmakemoremoneyintheshortrunifyoudon’tfollowenvironmentallysustainable
practicesbutyouwillbeoutofbusinessinthelongerterm,yourfarmandfamilywillsufferandthe
valuechainwillnotsurvive.
SUSTAINABLETAROPRODUCTIONPRACTICES
Usingtraditionalmixedcroppingandagroforestrysystems.
Usingsoilteststoidentifynutrientdeficiencies.
Usingcroprotationsandfallow(restperiods)onthefarm.
Usingnitrogenfixingplantsforgreenmanuring,mucunaetc.
Usingsoilconservationmeasuressuchascontourfarming.
Additionoflimeandotherorganicinputsontotheland.
Overallimpactofthesepracticesovertimeistheabilitytomaintain
goodyields,improvequalityandmakemoremoneyforthefarmer.
UNSUSTAINABLETAROPRODUCTIONPRACTICES
Clearingforestsformonoculturetaroproduction.
Useofburningforlandclearing.
Repeatedplantingoftarowithnofallow(rest)periodfortheland.
Continuedhighapplicationsofinorganicmineralfertilisers(NPK).
Overallimpactofthesepracticesovertimeisalossofsoilfertility
resultinginhigherfertilisercosts,smallertaro,higherrejectsand
lessmoneyforthefarmer.
FormoreinformationseecaseStudy1:FijiTaroExports-AdjustingtoEnvironmentalandMarketAccessImperatives

70
Some tools,
resources
and things
to look
out for in
undertaking
value chain
analysis
chapter SIX

71
Tools for analysing
margins and profitability
Gross margins for farm enterprises
The key training message: A value chain is only
as strong as its weakest link – each link has to be
profitable for the chain to survive.
What is a gross margin (GM): A gross margin refers to gross income (i.e. value of
production) minus the variable cost of that production.
Gross margin = Gross income - Variable costs
Variable costs are those cost that vary according to how much is produced (e.g. how
many seedlings are purchased, how labour is hired etc). Whereas, fixed costs are the
same regardless of how much is produced (e.g. rent for the land you are leasing, or
repayment on a bank loan is the same regardless of how much is produced). Fixed costs
are not included in measuring the GM for a particular enterprise – but should be included
when considering the profitability of the total farm.
Farm management manuals often suggest that gross margins are expressed in terms of
unit of land area (e.g. GM/hectare). However, remember Pacific Island smallholders are
probably more concerned with the returns from the work effort of the household (if the
household does so much work on the production of a particular farm product how much
money will we earn?). Thus a better measure of “profitability” of a particular farming
activity is the GM per unit of household labour effort (e.g. GM/day of household labour).
This can then be compared with alternative uses of the farmers time (including leisure and
meeting cultural obligations).
An example of the gross margin existing farm enterprise in value chain:
A smallholder growing export quality black pepper on the island of Malo, Vanuatu.

72
An example of the gross margin existing farm enterprise in value chain:
Key points to consider when undertaking grower gross margin analysis
A farmer looking to plant 50 breadfruit trees for export.
• Realistic and accurate input-output estimates are essential (yields, inputs used to
produce the product). This is often not the case with generic gross margin reports
which results in a misleading picture of profitability. Projects and companies trying
to encourage farmers to grow new crops also have a tendency to exaggerate
potential yields.
• Product and input prices are always changing so GM calculations must be
updated regularly.
• Returns to labour are the most important consideration for smallholder farmers
in the Pacific Islands (if I do so much work how much money will I make for my
household compared with what else can I be doing with my time?).
• For some products, you will need to incorporate risk (eg. some years vanilla won’t
flower, in some years there will be no papaya sales because of a cyclone or a
flood).
• Is the enterprise profitable to the farmer when prices are low? Are the profits in the
high price years sufficient to offset the low profits (or losses) in the low price years?
See the following example of PNG vanilla.

73
The PNG vanilla example.
The average world market price for vanilla in 2003 reached USD 170,000 (fob
Madagascar) per tonne, up from only USD 18,000 per tonne in 1998. As a consequence,
there was an unprecedented boom in smallholder-based vanilla production in Papua
New Guinea (McGregor 2004).
The price paid to PNG growers increased from Kina 60/kg in 1998 to as high as Kina 750 –
800/kg in Sept 2003. World prices then collapsed. The PNG grower price is now around
Kina 200 – 300 Kina kg, depending on quality.
At the time of the price peak
in 2003 there were over
50,000 people growing vanilla
country wide in PNG. Today
there are probably less than
1,000 growers remaining and
these are located in areas
most agronomically suited
to vanilla. Most growers left
the industry when they found
growing vanilla only gave a
sufficient return to their effort
when prices were extremely
high.
• Total marketing margin: The difference between the average price paid by consumers
for the finished produce (retail price) and the price received by farmers for the equivalent
quantity of the raw material of the product (farm gate price). This is expressed as a
percentage.
• Exporter marketing margin for the product: The difference between the fob price (the
price loaded on the aircraft or vessel) and the price paid to farmers for the equivalent
quantity of the raw material of the product (farm gate price). This is often expressed as a
percentage of the retail price.
• Exporter “profit” for the product: The exporting marketing margin less the cost of getting
the product from the farmer onto aircraft or vessel. This is the equivalent to farmer’s gross
margin and is sometimes called the exporters’ marketing gross margin.
• Wholesaler/importer marketing margin for the product: The difference between the
price the product is sold to the retailer (the wholesale price) and the fob price for the
product. This is often expressed as a percentage of the retail price.
• Wholesaler/importer “profit” for the product: The wholesaler/importer marketing margin
less the cost of getting the product from the exporting port (airport) to the retailer.
• Retailers marketing margin for the product: The difference between the retail price and
the price paid to the wholesaler/importer. This is often expressed as a percentage of the
retail price.
• Retailers “profit” for the product: The retailer marketing margin less the cost of getting
the products from the wholesaler into the hands of the final consumer.
Some definitions
World vanilla prices (average annual Madagascar
fob price – Source: Public Ledger)
Marketing margins and profits

74
Example of taro export from Taveuni, Fiji to New Zealand
Key points to consider in analysing marketing margins
• The need to provide an accurate picture of the services and cost involved.
Often growers hear of the final selling price for their product and compare it with the farm
gate price they receive. Because the gap between the two is often large (particularly for
export crops) it is common for farmers to feel as if they are being “ripped off” by traders
and marketers. This view is also often held and encouraged by government officials,
politicians and NGO staff. As a result it is often argued, and sometimes implemented, that
government bodies and NGOs should become directly involved in marketing to protect
farmers from this “exploitation”. Alternatively, minimum price controls are advocated to
protect the interest of farmers. If a competitive environment prevails, such accusations
are not supported by facts but this perception prevails, often to the damage of all
participants in the value chain.
For example, the South Pacific Trade Office previously widely distributed the wholesale
price for Pacific Islands products sold in Auckland. The wholesale price of taro was usually
some three times what farmers were being paid at farm gate on Taveuni. This caused
considerable disquiet amongst farmers and government officials. However, the marketing
gross margin table above shows a marketing margin of less than 10% (if the importer pays
the freight) when all marketing services and costs are taken into account. Unlike the
farmer who was paid immediately, it will be at least a month before the exporter receives
payment, from which claims might be deducted. Such rates of return certainly cannot
be regarded as excessive, given the risk involved and the expertise required to be a
successful exporter. This type of transparent cost information makes the players along the
value chain more content, which in turn enhances the performance of the value chain.
• The need to provide an accurate picture of the risks involved.
Account needs to be taken of the perishability of fresh produce. For example, Pacific
Islands taro to be imported into Australia must be devitalised to ensure it can’t be grown
(Case Study 1). The physical damage inflicted transforms the product from a relatively
non-perishable product to a highly perishable product. The increase in perishability
precludes sea freighting taro as a realistic marketing option and substantially increases
costs. Even with air freighting, devitalisation can result in complete rejection of shipments
- the cost entirely borne by the exporter.

75
Interpreting marketing
margins and “profits”
Cost-benefit analysis
The key training message: The margin for each actor in the chain must be sufficient to
cover the cost involved in transferring the product from one stage of the chain to the next
and provide a reasonable return for those providing this service. The presentation of a
trader’s share of the final price can give a misleading impression unless you know the
costs involved.
“High” margins at any stage in the value chain suggest that the industry might be
improved (increased total income and more equitable distribution of the income
generated by the chain) by the entry of more participants at that particular stage. But
what does ‘high’ mean?
Remember, a margin needs to sufficiently compensate the value chain actor (the farmer,
marketing agent, exporter, wholesaler, etc.) for the costs incurred and the investment
made. Other things being equal, margins need to be larger:
• the higher the cost incurred;
• the larger the investment made;
• the longer the time lag between the time of the investment and the income
received;
• the bigger the risks involved;
• the greater the expertise and skills involved.
A cost benefit analysis (CBA) identifies and puts $ values (quantifies) all the positive
factors resulting from an investment in the value chain. All these positive factors are then
added up and called the benefits (B). The CBA identifies, quantifies, and subtracts all
the negatives- the costs (C). The difference between the benefits (B) and the costs (C)
indicates whether the planned investment or change in the value chain is worthwhile.
Remember a $ earned or spent in the future is worth less than $ earned or spent now.
Thus benefits and costs can be expressed in present value terms to allow for better
comparison (this is called discounting to allow for time value of money). The discount rate
(interest rate – (i)) reflects what the value chain actor could earn by investing the money
elsewhere (e.g. putting the money in a bank savings account). It suggested that 5% is a
good discount rate to use when undertaking a CBA for Pacific Island value chain analysis.
An example of a value chain CBA: A Fijian papaya farmer looking to invest in plastic crates to transport his
product from the field to the exporter’s packing shed.

76
Useful resources
Objective: To reduce post-harvest damage to the farmer’s papaya and thereby reduce
the rate of rejects at the exporter’s packing shed.
The cost of the investment: The purchase of 40 plastic crates @ a cost of $40/crate =
$1,600. This is a fixed capital cost – there are no other costs involved.
Benefits: The farmer currently has four (4) tonnes of fruit rejected annually due to post-
harvest damage (bruising, cuts etc.). This fruit would otherwise be suitable for export
and could have been sold to the exporter for $0.90/kg ($900/tonne). Thus, his annual
loss (income foregone) is $3,600. By investing in plastic crates it is estimated that the
annual loss due to post harvest damage can be reduced to only 1 tonne. Thus, the
annual benefit from investing in the plastic crates is $2,700. The expected life of the crate
is 5-years. Thus, the total benefit arising from the investment in the crates is $13,500. The
present value (PV) of this benefit (discounted at an interest rate (i) of 5%) is $11,373.
Comparing the benefits with the costs: A cash flow table is prepared to compare the
benefits and costs of investing in 40 plastic crates. Over the 5-years the benefit (B) – cost
(C) is $9,900. If the cash flow is discounted by 5% the net present value (NPV) (discounted
benefits minus discounted costs) is $7,773. A better picture of how worthwhile the
investment is to calculate the benefit cost ratio (B divided by C; B/C). In our example of
the farmers investment in plastic crates the B/C is 3.75 and if we discount the benefits to
obtain their present value the B/C is 3.16. Thus for the farmer, purchasing plastic crates
is seen as a very worthwhile investment with the benefits being more than three (3) times
the cost.
SPC/CTA Value chain portal. http://www.aglinks.net/
Shepherd, Andrew, 2003. Market research for agroprocessors. Marketing Extension Guide
No. 3, FAO. ftp://ftp.fao.org/docrep/fao/007/y4532e/y4532e00.pdf
FAO 2004. Helping Small Farms Think About Better Growing and Marketing: A Reference
Manual. FAO Pacific Farm Management and Market Series No 3. FAOSA Apia
McGregor, A.M. 1999. Linking market development to farming systems in the Pacific
IslandPacific Islands. FAO Sub-Regional Office for the Pacific, Apia
Shepher, Andrew (1993, revised 2007) A guide to MARKETING COSTS and how to calculate
them. FAO Rome
UK Department of International Development (DFID) (2008). Making Value Chains Work
Better for the Poor: A Toolbook for Practitioners of Value Chain Analysis.

77
What to look for when analysing
vulnerability and sustainability
of the value chain
Some things you need to look out for in assessing vulnerability and sustainability of the
value chain, include:
• Keyperson dependency
• Dependency on a single market
• Input supply weaknesses
• Environmental vulnerability
A major problem with small Pacific Island agro industries can be keyperson dependency
(KPD) at critical points along the value chain. This is particularly the case with specialized
niche businesses involving value added processing, where a small investor with the
required expertise, capital and motivation established the business. The business is usually
too small and unsuitable for corporate investors. Larger corporate investors are usually
less subject to KPD. However, these larger corporate entities are seldom interested in
investing in Pacific agriculture, with the exception of crops like oil palm that can be grown
on a large scale. Value chain analysis can help identify points of KPD and help inform
practical solutions. The Vanuatu spice value chain case study provides an example
(Case Study 4).
Westlake (2014) notes that agricultural value chains in Pacific Island countries may
depend on a single foreign market or on export markets with similar sanitary and
phytosanitary requirements. Such chains are vulnerable to a single unpredictable event
which results in the loss of that market. For example in the 1980s, substantial investment
was made into an improved variety mango plantation adjacent to the Nadi airport
targeting the New Zealand market. However, at the time the mangoes started to come
into production, New Zealand began importing bananas from Ecuador. Ecuador has
the same mango season as Fiji and was able to ship high quality mangoes together with
the bananas at low freight rates. This “piggy backing” meant that Fiji’s improved variety
mangoes were no longer competitive.
Input supply is often a major weakness in Pacific Island value chains. Some weaknesses to
look out for:
• The availability of high quality seeds and seedlings that produce the product required
by the market and well suited to the growing conditions faced by farmers.
• The availability of suitable containers to transport produce from the field to the
packing shed.
• The availability of high quality packaging material at affordable prices.
Keyperson dependency along the value chain
Dependency on a single market
Input supply weakness

78
• Bulk imported plastic field crates and made these available to farmers and
exporters at a reasonable price
Example of the Fiji papaya export value chain.
Problem: A market study undertaken as part of the value chain analysis identified a
substantial market in New Zealand, Australia, US and Japan for Fijian papaya that has
a high level of sweetness and the flesh is red in colour. However, to satisfy and sustain
this market it was essential for farmers to plant the correct seedlings and for fruit to be
transported from the field to exporters packing shed in plastic crates to ensure the fruit
was not damaged.
Solutions: Natures Way Cooperative:
• Introduced the “Fiji Red” certified seed scheme
Farmer packing fresh fruit in
buckets and sacks.
Farmer packing fresh fruit in crates sourced
from Nature’s Way Cooperative.
L

79
A farmer at Waibau, Fiji in 1988 with land prepared to plant ginger for the remunerative
export market. Due to the resulting soil erosion most of this area is now obsolete for
ginger and other root crops and farmers are out of business.
A value chain analysis may find that a particular value chain is profitable for all the actors.
However, you need to determine if parts of the chain are environmentally vulnerable and
what are the implications for long term sustainability of the value chain.
The example of the Fiji fresh ginger export value chain.
A Pacific Island Development Program (PIDP) study of the Fiji fresh ginger export
industry found this to be a highly successful value chain that provided an example of
the successful development of a non-traditional export industry (McGregor 1988). All
actors along the chain received a good return from their participation. The farmer’s
gross margin was over $35/person per day of household labour used in growing this short
term crop. This exceeded the returns from growing most other crops at the time. The
exporter’s gross margin usually exceed 20% of the fob price of ginger (the price of ginger
loaded on the ship in Suva). However, the PIDP study identified a major weakness in the
value chain that threatened its long term sustainability. To ensure adequate drainage
and to minimise labour inputs, farmers grew ginger on steep land planting up the slope
(rather than planting along the contour with rows of soil conserving vetiver grass). This
farming system initially provided the farmer a very high return to labour. However, within
two (2) to three (3) plantings, yields fell dramatically due to soil erosion and many of these
farmers are now out of business.
Environmental vulnerability

80
The market is the consumers who purchase the product. Marketing is the process of
getting the product from the farmers to the consumers.
For the purposes of this guide, the term “market” has two components (drawing on
Shepherd 2003): – one deals with consumers themselves and the other deals with
competitors who also supply the market :
• The term market embraces the characteristics consumers want from a product
and the requirements of the retail shops and their wholesalers who service these
consumers.
• Component 2 (competitors): The term “market” also embraces the actions of
competitors, such as how they set their prices, organize their distribution and decide
on promotion. Understanding competitors is just as important as understanding
consumers.
Market research is the process of investigating a market in order to find out the sales
prospects for a product and how to achieve success with selling the product. We need to
find out about the consumers of the product and the competitors who are also supplying
the product.
Andrew Shepherd (2003) provides the following useful hints:
Arrange for research results to be written down even if you are only carrying out a small
study.
Presenting research results in an organized way makes it easier to evaluate the findings
of the research and enables you to easily identify inconsistencies or contradictions that
require further research. The structure of a report, which does not have to be very long,
will vary according to the product and market and the amount of detail required. A
suggested format is:
• Brief background and description of proposed product.
• Existing products and consumer attitudes to those products.
• Strengths and weaknesses of competitors.
• Existing market size in target area, by type of outlet, by product, by container or
package size, etc. with estimates of the potential market for new product(s).
• Important characteristics of the market, such as price, quality and packaging, and
your ability to compete.
• Consumer response to tasting panels.
• Distribution methods recommended for your product and costs of distribution.
• Promotional techniques used by competitors.
• Promotional tools preferred by the distribution chain.
• Conclusions regarding suitability of your product for the market, with
recommendations of the best ways to price, promote and distribute it.

What is a market?
What is market research?
Presenting market research findings
Assessing markets

81
Published market data
Published market data is a good starting point for undertaking market studies.
Examples of published market data:
• Trade statistics.
This can tell you how much is being imported and for what value, (the landed price of
the product in the country) and from where is it being supplied. Monthly data will provide
an indication of the seasonality of the product (see case study 5: Samoan lime exports to
New Zealand). This provides basic information about your competitors. Trade statistics
are usually available on-line and often for free. The Forum Secretariat’s Trade and
Investment Offices in Auckland and Sydney can help you obtain trade statistics.
- www.forum.org/pages.../forum-trade-offices
• Commodity trade statistics. These are available on a user pay basis from
companies such as the Public Ledger that supply accurate prices of commodities that
have a readily identified international market (eg. coffee, cocoa, coconut oil, sugar).
They are not useful in supplying data for niche markets which are the interest of most
Pacific Island value chains.
Consultant studies
Marketing consultants are often hired to undertake market studies. Consultants are
usually hired by donor entities to undertake market studies on behalf of the entire industry.
For example the EU funded Facilitating Agricultural Trade (FACT) project funded the New
Zealand, Australian, US and Japan papaya market studies on behalf of Fiji and other
future Pacific Island papaya industries. A particular value chain or individual exporter
may hire a consultant to undertake a market study. However, this rarely happens in the
Pacific Islands because of the high costs relative to the size of the enterprises involved.
Remember: A high quality consultant’s report can provide a very useful guide to the
market that is being targeted by the value chain. However, a consultant’s study is no
substitute for exporter(s) going to the market with an actual product in “hand”. It can
enhance the credibility and the value of a consultant’s study if people who will be
actually involved in selling the product are involved.
Exporters visiting market
A good consultant’s market study can be a useful start and guide. However, there is
no substitute for actual sellers going to the market and talking to actual buyers. An
exporter can find out first-hand what the importer/wholesaler wants and can see what
the competitors are doing. The importer/wholesaler can see that there is a real person
with an actual product. If at all possible, give potential buyers the opportunity to see and
sample your product. This personal contact is how the all-important long term relationship
between buyers and sellers is created.
Some information and tools for undertaking
market studies

82
Remember: The Pacific Islands has a long standing reputation of being the “Land of
Samples” in our traditional Pacific Rim markets. The exporter needs to establish credibility
in a somewhat sceptical market. Face-to-face contact between buyer and seller can be
an important first step in creating this credibility and for the exporter to be taken seriously.
The Forum Secretariat’s Trade and Investment Offices in Auckland, Sydney, Tokyo and
Beijing can be helpful in identifying potential buyers and arranging meetings (www.
forumsec.org/pages.../forum-trade-offices) .
Trade missions and trade fairs
Government and regional agencies often organise trade mission to existing and potential
markets. Such missions are usually led by Ministers of Trade or Foreign Affairs and even
Prime Ministers, with senior civil servants participating. It is common for business leaders
and other representatives of the private sector to participate. A broad range of industries
is usually covered in these missions. Participation in such missions can be useful in terms of
“networking” and making contracts. However, they tend to be too generalised and too
politically orientated to be of much value for most niche market orientated Pacific Island
value chains.
On the contrary, participation in industry and product focussed trade fairs can be
particularly useful in evaluating and establishing a market. The value of these business
orientated trade fairs is that they assemble in one place the type of business who will buy
your product. As illustrated by Case Study 4 (Vanuatu Spices) participation in the annual
Australian Fine Food Fair has been important for emerging Pacific Island niche market
exporters wishing to penetrate the Australian market (www.finefoodaustralia.com.au/
about.asp?id=53). As Jeremy Grennel, Export Services Manager for the Pacific Islands
Trade and Invest notes “Such fairs are a very cost effective sales and marketing platform.
With their tightly focused profiles and carefully targeted audiences they represent an
ideal opportunity to match the needs of buyers and sellers (Fiji Times May 27 2014).
The Vanuatu spices experience has shown that repeated involvement in such fairs is
necessary to have sustained impact.
Consumer taste panels
Once you have a reasonably good idea about what you think consumers want in your
product it can sometimes be useful to conduct consumer taste panel tests to determine
more precisely:
• who are your most likely buyers;
• what are they looking for in the product; and,
• how does your product compare with that of competitors.
Taste panel tests are undertaken by specialist experts following clearly defined scientific
and statistical procedures. While yielding valuable information, such studies can be
expensive relative to the size of small Pacific island industries. Thus its important to
consider the benefits and costs of such studies. The box shows the example of the use of
a consumer taste panel to evaluate the potential market for Samoan rambutan in New
Zealand.

83
The taste panel test of the potential market
for Samoan rambutan in New Zealand
In the 1990s the Samoan Fruit Tree Development Project
introduced an improved variety of rambutan into Samoa.
In terms of New Zealand quarantine standards, rambutan
was shown to be a non-fruit fly host and was likely to be
granted market access if a formal market access request
was made. In advance of a request being made, formal
consumer taste panel tests were undertaken to determine
the actual nature of the market. (Samoa Ministry of
Agriculture Forestry and Meteorology 2001).
It was expected that Samoan rambutan would be a luxury
fruit sold to consumers with higher disposable income.
These were identified:
HortResearch (NZ)’s Sensory and Consumer Science Unit
were commissioned to undertake a consumer acceptance assessment of Samoan rambutan amongst
higher income consumers. In February 2001, 15kgs of various Samoan rambutan varieties were sent to
HortResearch in Auckland under a special quarantine arrangement. The consumer acceptance panel
involved 62 consumers from the Auckland area. These were mostly of European descent, of whom 21%
had previously tried rambutan.
The results: Those that had previously eaten rambutan judged the samples to be “be about the same
quality as previous rambutans they had experienced”. Overall, rambutan received a score lying
between “like slightly” and “like moderately”. The opinion of the colour, appearance, flavour and
texture all scored between “like slightly” and “like moderately”. Most of the consumers found rambutan
inconvenient to eat. These reactions would suggest that it would take time to develop the market for
this new exotic fruit.
More significantly, 80% of the consumer panel indicated they would like to purchase rambutan. The
major reason for purchasing rambutan would be for special occasions and most consumers would use
rambutan on a “fruit platter or cheese board or as garnish/decoration”. The majority of these consumers
indicated that they would expect to purchase rambutan from an Asian fruit and vegetable store and
would expect to pay $NZ3.50 for a punnet of 5 rambutans (approximately $NZ17.5/kg).
Clive Wickham of Carter and Spencer International (CSI) thought a wholesale price of $NZ4-5/kg (retailing
at $NZ12.95/kg) would be a reasonable price for planning purposes. Wickham observed the Samoan
rambutan sent to HortResearch for market testing, and commented: “The variety that is popular is the
one where the seeds come away from the meat easy. Given that the market should be good”. The
Samoan rambutan industry now had basic price information for planning export market development.
In-store promotions
Once you are confident you have a product that that meets the requirements of the
consumers you are targeting in the market, consideration can be given to in store
promotion to boost the demand for your product. This should be done in collaboration
with your wholesaler and retailer.

84
There are two types of competitive advantage for value chain producing a particular
product when compared with other value chains producing the same product:
• Type 1: Being able to offer consumers a differentiated/better product. If customers
perceive a product or service as superior or more desirable, they become more
willing to pay a premium price relative to the price they will pay for
competing offerings.
• Type 2: Being able to offer consumers a lower price because of a relatively lower-cost
advantage.
The competitive advantage of Pacific Islands value chains are usually based on
type 1 considerations. They tend to have a disadvantage when it comes to type 2
considerations – their costs are usually higher than competing value chains. However,
both type 1 and 2 factors need to be taken into account in determining the overall
competitivess of the value chain.
For bulk commodity exports, where the going market price is received, the
competitiveness of the value chain will depend entirely on cost- provided the quality
requirements of the market are met.
The competive advantage of the Pacific Island agricultural value chains targeting
niche export markets is often based on unique agro-climatic, physical and cultural
characteristics that permit the receipt of prices that are sufficiently high for the value
chain to be competitive despite other constraints that might exist.
Remember:
• You need to be confident of the quality of your product, including labelling and
packaging. A negative reaction from consumers will be a serious set-back for the
development of the value chain.
• You must have the supply to meet the jump in demand that will result from a
successful in-store promotion. Not being able to meet the orders that you hope will
arise, will undermine your credibility and will be a set back for the development of the
value chain.
You should err of the side of caution and delay in-store promotions until you are really
ready, even if donors are willing to provide funding support.
Useful resource on the subject
Defining the competitive advantage of a
particular value chain
Examples of type 1 competitive advantage
What to look out for in
assessing competitiveness
of the value chain

85
Some key type 1 factors that Pacific Island exporters have or could base their
competiveness on are:
• Seasonality – For example Samoan lime exports to New Zealand (case study 5). Fiji’s
ginger exports to the United States and Tonga squash exports to Japan are or were
built around seasonality.
• Suitable agronomic/environmental conditions that enable the production of a
premium quality product – For example Fiji papaya (case study 2)
• Exotic and/or desirable product origin – The classic example for the Pacific Islands is
Fiji Water For agricultural products examples include Vanuatu spice, (case study 4),
Tanna coffee and Tahitian noni
Remember: Being able to take advantage of exotic and/or desirable origin usually
requires considerable investments in certification (origin, organic,”fair trade”, etc.),
promotion, labelling and packaging. In your value chain analysis you need to consider if
the benefits of this investment are sufficient to justify the costs (benefit cost analysis).

86
Examples of type 2 competitive advantage
Solomon Islands virgin coconut oil (VCO).
Most PICs are developing value chains for virigin coconut oil targeting niche export
markets based on premium quality and exotic product origin. Solomon islands also has
had a type 2 competitive advantage compared with other Pacific Island exporters based
on lower labour costs, and thus VCO producers have been willing to accept a lower price
for oil (AusAID 2006).
Samoan taro exports to New Zealand before taro leaf blight.
Samoa dominated the New Zealand market in taro prior to the arrival of taro leaf blight
in 1993. Samoa produced a variety preferred by the market. However, Fiji could also
produce the same variety. Samoa dominated the market because it is a lower cost
producer and could offer the product to the market at a lower price. The arrival of
taro leaf blight in Samoa meant that Samoa could not produce this particular variety,
enabling Fiji to take over the market.
The Pacific has a long history of value chain developments that have not been
sustainable (see Shepherd et.al 2013). A number started out successfully with rapid
expansion only to contract just as rapidly and in some cases to go of business altogether.
Some prominent examples are:
• Fiji fresh ginger exports to the US (competitive advantage based on seasonality –
competive advantage lost due the entry of lower cost ginger becoming available in
Thailand and China and disease problems in Fiji. Fiji no longer exports fresh mature
ginger to the US)
• Tongan squash exports to Japan (competive advantage based on seasonality – this
was substantially reduced due largely to production problem in Tonga. A minimal
amount of Tongan squash now exported to Japan)
• PNG vanilla exports (During 2003-04 PNG became the 3rd largest vanilla exporter in
the world. World price collapsed and most growers left the industry and PNG is now
an insignificant exporter)
• Samoan taro exports (competitive advantage based on product quality in terms of
market requirements and costs of production was lost by taro leaf blight).
• Vanuatu organic cocoa exports to France (competive advantage based on exotic
and/or desirable product origin). The value chain collapsed when the relationship
between the importer and cooperative collapsed and Vanuatu now only exports
cocoa to the bulk markets.
Risks you need to consider in value chain analysis
This section will discuss some of the potential risks that need to be taken into account in
analysing value chains and how these factors can be incorporated into the profitability
analysis and enterprise planning strategies for the various actor’s.
• Market risks. Over dependence on a single market or buyer
What to look out for in assessing
risks in the value chain

87
Example - Fiji improved-variety mango exports to New Zealand:
Fiji previously had a market for improved-variety mangoes in New Zealand based on
seasonality. Fiji mangoes are available for export to New Zealand between Nov and
Dec, when no other mangoes are available in New Zealand. Up until the late 1990s this
provided a good market niche for Fijian exporters and a substantial investment was made
in an orchard to take advantage of this seasonal niche market. From January through
March mangoes were imported from the Philippines shipped in with bananas. Fiji could
not compete with mangoes from the Philippines. However, Fiji lost its niche market in
New Zealand when New Zealand began importing bananas from Ecuador. Ecuador
also ships mangoes with bananas – but unfortunately Ecuadorian mangoes are available
in November and December and Fiji lost its niche market and the investor went out of
business.
• Supply risks (including disease and climate extremes).
Example - Samoa’s taro exports:
Prior to 1993 Samoan taro dominated the New Zealand market and taro was by far
Samoa’s biggest export earner. However, the arrival of the disease of taro leaf blight in
1993 saw the cessation of taro exports for more than 2 years.
• Market access risks (establishing and maintaining markets).
Example - Fijian papaya market access to the United States:
A 2009 market study identified a remunerative market for organic papaya from Fiji in
the US. As a result of this study investment was made in organic papaya production to
exploit this market on the understanding that market access for Fijian papaya into the US
would be quickly obtained. Fiji already had market access for papaya into New Zealand
and Australia, using a US-developed quarantine treatment technology. However 5 years
on market access is yet to be obtained and this investment and the organic papaya
export value chain is at risk.
• Keyperson dependency risks.
Example - Vanuatu spices export value chain (Case Study 4)
• Climate change and other long-term trends.
Example - vulnerability of Vanuatu and Fiji taro production to taro leaf blight as the result
of increasing minimum night time temperature.
Vanuatu and Fiji and some other Pacific island countries currently do not have the disease
taro leaf blight that decimated taro production in Samoa, Solomon Islands and parts
of PNG. It has been show that the incidence of the disease is highly correlated with
minimum night time temperature. Thus, with climate change there is increasing risk of this
devastating disease becoming established in those countries that currently don’t have
the disease.
Useful resource on the subject
Taylor, Mary, McGregor, Andrew and Dawson, Brian, (2014) Vulnerability of Pacific
Agriculture and Forestry to Climate Change. Secretariat of the Pacific Community,
Noumea, New Caledonia.

88
• Political instability.
Example - Solomon Island cocoa and coconut oil and Bougainville cocoa exports during
their respective “crises”
Strategies you need to consider to reduce risk
There are various types of strategies that can be considered. These include:
• “No regrets” investments to minimise the impact of a future calamity. Some
examples:
- Fiji papaya export value chain (Case Study 2), farmers investment in climate
change mitigation measures.
- Support for the Fiji taro export value chain (Case Study 1) in breeding of taro
leaf blight resistance.
A benefit cost analysis should consider such strategies that take into account the
likelihood of the future event occurring, the consequences to the value chain and the
cost of the investment.
• Diversification of markets and buyers
• Succession plans to minimise keyperson dependency

89
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Annexes
Annex 1: The CTA Sponsored Value Chain Development Case Studies
Case Study 1: Fiji Taro Exports - Adjusting to Environmental and Market Access
Imperatives
Case Study 2: Fiji papaya exports - The flagship of the Pacific Island participation in the
horticultural export revolution
Case Study 3: Fiji Breadfruit Commercialization - Environmental Sustainability through the
Commercializing of a Traditional Food Crop
Case Study 4: Vanuatu Spices - Reconciling Traditional Production and the Tyranny of
Isolation with the Quality Demands of International Markets
Case Study 5: Samoan Fresh Lime Exports- An Emerging Value Chain Exploiting
Seasonality and Favourable Quarantine Status.
Case Study 6: Solomon Islands Floriculture - Exploiting Post Conflict Opportunities
Annex 2: Key terms and definitions
Annex 3: A selection of other value chain guides/resources

92
Annex 1:
The CTA Sponsored Value Chain
Development Case Studies
Case study 1: FIJI TARO EXPORTS - Adjusting to
Environmental and Market Access Imperatives
Source: Pacific Island Development Program, East West Center, Hawaii

93
Industry background
Taro is Fiji’s largest agricultural export after sugar. Annual taro exports over the last few
years have hovered around 10,000 tonnes, with about 65% going to New Zealand and
30% going to Australia, and the balance to the US. The annual value of these exports is
around FJD 19 – 20 million.
Until recent times, taro was a subsistence crop that was also traded on the local market.
This all changed dramatically in 1993, when the Samoan taro industry was decimated by
taro leaf blight and the New Zealand market suddenly became available for Fiji.
Table 4: Monthly exports of taro from Taveuni (tonnes)*

94
Starting from 1994, Fiji’s taro exports grew rapidly. Nearly 70% of Fiji taro exports originate
from the island of Taveuni. The taro from Taveuni is the pink Tausala ni Samoa variety.
This is the same traditional Samoa cultivar (Taro Niue) favoured by the Samoan diaspora.
After years of steady growth, exports from Taveuni have declined in recent years, in the
face of declining land productivity, increasing costs and market access issues (Table 4).
In the context of Fiji, this is a significant value chain. There are an estimated 3,700 Taveuni
taro farmers, with around 17,000 people directly or indirectly dependent on taro for
their livelihood. The majority of these farmers (some 2,000) fall into the semi-subsistence
category (5,000 -15,000 plants). There are about 750 taro farmers classified as fully
commercial.
How the taro export value chain was initiated, is driven and is now evolving
The rapid response to a large export market suddenly becoming available came from
private exporters Most of the initial taro exporters were involved in the then flourishing
ginger export trade. Efforts of the government’s marketing body the National Marketing
Authority (NMA), and its successor parastatal entities, to become involved failed.
Root crop marketing in Fiji is characterized by a large number of marketing agents,
traders and exporters. In the late 1990s, there were 12 exporters operating, supported by
30 agents and sub-agents operating on Taveuni alone. Since that time, there has been a
shakeout with about half that number now operating.
The taro marketing system is well supported by a good supply of carriers, trucks and
shipping to Suva. There is also more than adequate sea freight capacity to export
markets from the Suva and Lautoka ports.
An outline of the taro value chain from Taveuni farmers to Samoan consumers in New
Zealand is presented in figure 2, along with a pictorial representation in figure 3.

95
Taro farmers
Both commercial and semi-commercial
Marketing agents
Marketing agents make arrangements to purchase taro from farmers
on behalf of exporters
Agents collect from the farmer (or farmer delivers the taro to the
agent). Taro is graded and the farmer is paid cash. The taro is
carted to the agents packing facility, usually in close proximity to the
wharf. The taro is then sorted and held for shipment to the exporter
in Suva. The taro is placed in polybags and loaded on a 10 tonne
truck for shipment to SUVA
Logistics
Taro is shipped to the exporter
Labelling, storage and transport
The exporter washes and grades taro and packs into a cooler
container for export. On average an exporter requires a purchase of
15 tonnes of taro to export 12 tonnes (a full container load). The
exporter arranges for shipment, customs documentation, and
quarantine inspection and container movement to vessel.
Airfreight via Air NZ
The container is shipped to Auckland, where on arrival it is subject to
Customs and Quarantine clearance. If a live insect is found (now a
frequent occurrence with mites) the consignment is fumigated.
The costs of all these activities add up to the landed price of taro.
As a norm, the wholesaler will add a 10% margin and a retailer a
further 20 to 30% above the wholesale price
Consumers
The taro is retailed from stores and “flea markets” services the
Pacific islanders particularly the Samoan community
Figure 2: An outline of the value chain for Taveuni taro sold in New Zealand.

96
Fiji’s highly competitive root crop marketing system has provided growers with access
to markets at maximum prices, at least in the short term. A similar situation exists for Fiji’s
other fresh produce industries. This contrasts markedly with the situation in other PICs,
where the absence of intermediaries is a major weakness in the fresh produce marketing
chain (McGregor 1999). The competitiveness of the system is reflected in the relatively
narrow marketing margins of exporters and traders. While the highly competitive
marketing system has served root crop growers well in terms of obtaining maximum
prices, there is a degree of market failure in terms of produce quality McGregor and
Gonemaituba 2002).
Major themes and lessons learnt from the Fiji taro value chain
Fiji’s taro exports have been declining in recent years. The very survival of these exports
now depends on the value chain’s ability to respond to environmental and market
access imperatives. These are:
• declining soil fertility – leading to decreasing productivity and escalating production
costs;
• climate change and the threat of catastrophic disease; and,
• quarantine related market access impediments relating to quarantine.
Adaptation to these threats is requiring significant external technical assistance inputs.
However, the identification of these external assistance needs has in varying degrees
come from within the value chain itself. The value chain’s response to these imperatives is
discussed briefly below and is dealt with in detail in case study 1.
Figure 3:
A pictorial
representation of the
taro export value chain

97
Environmental vulnerability - declining soil fertility
The problem
Within a few years taro production on Taveuni changed from a largely subsistence activity
to a major export industry. The high returns on offer to growers saw a transformation of
a subsistence garden-based cropping systems into intensive monoculture production
involving land clearing and high application of chemical fertilizers. Taveuni has volcanic
soils that were generally thought to be highly robust. . However, under the pressure of
intensive yields soon began to fall. To maintain production (corm size) there was a need
to apply ever increasing amounts of chemical fertilizer or the shifting of cultivation to new
locations in higher elevation forested areas.
The experience of Eric and Magerat Narayan at Waimaqara Southern Taveuni is seen as
typical.
The couple own a 5 acre freehold farm that was purchased when a large copra estate
was subdivided in 1986. They started to plant Tausala taro for export in 1993, when the
market became available. Eric is regarded as one of the best farmers in the area. He
plants dalo in rotation with yaqona (kava), which allows for a 1 ½ year fallow period
for taro. For the first decade of taro operation, he harvested 1,000 taro corms a month
yielding 1.5 tonnes, of which there were virtually no rejects. However, in recent years his
production from 1,000 corms has fallen to ¾ tonne of which 25% are rejected due to size.
He applies the full regime of recommended inorganic (mineral) fertilizer, yet his yields
continue to fall.
The value chain response to the problem
Remedial action to address the problem of declining soil fertility is now being initiated
at the grower end of the value chain. A group of lead farmers are adopting radical
changes in production practices and are receiving technical support from a range of
government and non-government agencies.
A changing mind-set within the farming community has been directly driven by two
Taveuni- based grower organizations (Teitei Taveuni and Marist Tutu Rural Training Centre).
Teitei Taveuni (TT) is group of farmers who have joined together to advocate sustainable
production practices. TT has secured applied research support from the Australian
Centre of International Agriculture (ACIAR)’s Soil Health Project. An Australian soil
science volunteer is now coordinating the TT program. Based on the farmer field school
methodology, a program of “soil schools”, utilizing the services of the Australian based
Organic Matters Foundation (www.organicmatters.org.au), has been initiated.
The Tutu Rural Training Centre (TRTC) provides an extension and training outreach for
the sustainable farming practices (McGregor and Tora 2011). The TRTC has been at the
vanguard of the “soils schools” program, with financial support from Caritas Australia.
Young farmers and farming couples are trained to do their own soil tests and to evaluate
the results and to design corrective action. The “soil school” program is starting to
empower Taveuni farmers to understand the problem and to realise they can do
something about solving it.
The particular focus for the rehabilitation of depleted acid soils has been on the
introduction of the legume mucuna bean (Mucuna pruriens) and the application of lime.
The promotion of mucuna was based on the experience in Tonga where it was shown to

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be successful in restoring and building up organic soil matter (Ali and Kaitu’u 2009) .
Taro farmers participating in this sustainable agriculture program are now realising the
benefits in terms of increased yields and lower rejects. To report again the experience of
the farming couple, Eric and Magerat Narayan.
We joined the first Tutu “soil school” in 2010. The soil testing we did showed our soil had
low pH and was deficient in calcium and phosphorus. We embarked on a program of
planting mucuna bean prior to planting dalo. We were taught how to make compost
utilising coconut husks, sea weed and poultry manure as the main raw material. A
handful of compost was added to the dalo planting hole. Lime was also added to the
planting hole at a rate of 30gm per hole and another application after 6 weeks. In
between, we make a foliar application of “bio brew’. Lime is costing us $1/kg in Taveuni.
This is very expensive – but we still found it financially worthwhile to apply. Other farmers
find this too expensive and are not willing to apply lime. Prior to joining the “soil school”
program we were on the brink of abandoning taro production. Our average corm size
was only 600 gms (the minimum size for export taro is 900 gm). From 2,000 plants, we
could only produce 3 bags of export taro. This was after applying 45 gm NPK per planting
hole. Our average corm size is now 1.2 to 1.5 kgs and we have reject rates of only 20%.
We are now producing 8 to 10 tonnes of export taro annually – up from 2 to 3 tonnes 18
months ago (per com. June 2012).
Progress in restoring taro yields is being constrained by the high cost of imported lime.
Farm input supply has been identified as a major constraint to value chain development
across the board in the Pacific island region. Lime was quarried locally for the use of the
sugar industry, in the days of the Colonial Sugar Refinery (CSR). This is no longer the case –
much to the detriment of Fiji’s ailing sugar industry. Furthermore, agricultural input supply
companies have shown little interest in importing lime in bulk. TT is now in discussions with
a cement manufacturing company regarding establishing lime manufacturing operations
in Fiji. The availability of affordable lime would have major benefits for a range of Fiji
agricultural industries and, in particular sugar.
As a founder of TT notes:
Lime and calcium content of soils is a forgotten chapter in the discussion of what happens
when you promote more efficient agricultural practices to change subsistence growers
into commercial growers. We are talking about soil structure, water-holding capacity,
biological soil health etc. And it is just as important for vegetables, papaya etc as it is for
dalo and sugar. High rainfall areas are of course more under pressure than areas with
less rain. I honestly think we have a major problem which has been neglected in the last
decades. The changed approach – as in the latest ACIAR Soil Health Project involving
dalo on Taveuni – is just confirming the necessity of looking at sustainability in tropical
island agriculture from a much more comprehensive angle than the current /decade-
old NPK replacement fashion. It just doesn’t work. Lime and calcium is an integral
component of soil health (per com. Peter Kjaer May 2012).
The response to the crisis of declining soil fertility has been identified and driven by lead
farmers in the taro value chain. However, critically, this response has been supported by
technical and financial inputs from outside entities – in particular ACIAR, OMF, AusAID,
Caritas Australia, SPC and the Fiji Ministry of Agriculture.

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Environmental vulnerability - climate change and the threat of biological
disaster
The problem
Taro being exported from Taveuni is genetically identical to the Samoan variety (taro
Niue) that was decimated by TLB in 1993. This disease has not yet been detected in Fiji.
However, the incidence and susceptibility to this disease is highly correlated to increasing
minimum night time temperature (McGregor et.al. 2011). Thus the Fiji export taro industry,
based on the Tausala ni Samoa variety, is highly vulnerable to the impact of climate
change.
There was no real awareness within the Fiji taro industry and the Fiji MPI of the threat TLB
posed and the proactive remedial action that needed to be taken. The turning point
was report published in 2011 by the International Union for the Conservation of Nature
(IUCN) “Assessing the social and economic value of germplasm and crop improvement
as a climate change adaptation strategy: Samoa and Vanuatu case studies”. The IUCN
Report recommended replicating of Samoa’s successful taro breeding programme in
Fiji, where the arrival of TLB is likely to be inevitable. A breeding program to build in TLB
resistance into Fijian taro has now been initiated in collaboration with the SPC’s Centre for
Pacific Crops and Trees (CePaCT). This has commenced with taro breeding training for
Fiji Ministry of Agriculture research staff at USP Alafua in Samoa. The vulnerability of the Fiji
taro industry to disease resulting from climate change was identified from outside the taro
value chain. The response to the problem was also developed outside the value chain.
However, as the Samoan experience has shown, a high degree of farmer involvement is
necessary if the breeding program is to be successful. It is hoped that Fiji’s plant breeders
have learnt from this experience.
Market access vulnerability
The problem
The Australia Quarantine Inspection Service (AQIS) import protocol for Pacific islands
taro requires devitalisation (to prevent propagation in Australia). The physical damage
inflicted on the taro corm by the radical removal of the growing the growing points
transforms the product from a relatively non-perishable product to a perishable product.
The increase in perishability precludes sea freighting taro as a realistic marketing option.
There is also around 15% loss of product. In 2010, the AQIS devitalisation requirement
resulted in an exceptionally high rate of taro rejects.
In response to this market access crisis, a group of Fiji’s taro exporters approached the
SPC/EU Facilitating Agricultural Commodity Trade (FACT) Project for assistance. FACT
undertook a study of the taro import protocols for the four markets for Pacific taro
(United States, Japan, Australia and New Zealand). The study looked at their justification,
application and impact on taro imports and on the PIC industries.

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The specific conclusions and recommendations of the report are summarised below:
(www.spc.int/lrd/index.php?option=com_docman)
• Reform of the import protocols could more than double taro exports from the PICs,
resulting in significant benefits for large numbers of low-income rural people.
For the Australian market
• The current import protocol requiring devitalisation makes the export of fresh taro to
Australia a high risk business and has caused Fiji taro to become non-competitive,
with no prospect of market expansion.
• Devitalisation is a major underlying factor in the high incidence of corm rot
experienced with Fiji taro exported to Australia.
• There is no scientific justification for the current taro devitalisation protocol.
• The United States (including Hawaii) and Japan have significantly larger domestic
taro industries than Australia and do not require devitalisation for taro imports.
• The WTO/International Sanitary and Phytosanitary (SPS) Agreement principles of
consistency and equivalence in phytosanitary measures and their application, are
seen as relevant in this case.
• Fiji, Tonga and Vanuatu have a well-documented favourable taro disease status
with the absence of virus and fungal diseases of quarantine concern. Australia,
compared with the PICs, has a significantly less well documented disease status for
taro.
• There is a case for these three countries to be considered a pest free/low prevalence
area under International SPS standards.
• The efficacy of the current devitalisation procedures is questionable in terms of
preventing propagation and the spread of disease.
For the New Zealand market
• The high frequency of fumigation for imported taro due to the interception of
nematodes is not justified because the majority of nematodes found on Pacific
island taro pose no threat to New Zealand agriculture. The commonly intercepted
nematodes associated with Fiji taro need to be identified and, if found to be of low
or no risk, then reclassified as non-regulated pests, thereby eliminating the need for
fumigation.
• The quarantine status of PIC nematodes should return to its pre-2005 status, whereby
they were accepted as non-pathogenic/saprophytic species of no quarantine
concern and thus requiring no action.
The taro quarantine import protocol reforms recommended by the SPC/FACT study are:
• Repeal of the devitalisation protocol requirements for Pacific Island taro exports to
Australia (with the exception of those countries in which taro viruses of quarantine
concern have been recorded).
• Repeal of the ban on the importation of small corm taro from the Pacific Islands.
• Reclassification of commonly intercepted nematodes associated with Pacific Island
taro as non-regulated pests that do not require quarantine fumigation.
In 2011, Biosecurity Australia (BA) undertook a “Review of import conditions for fresh taro
corms”. The 230 page document with some 300 technical references recommended
that the existing import protocol remain essentially unchanged with devitalisation
requirements remaining in place. The BA made no reference to the SPC/FACT study and
did not address the recommendations and conclusions of the report. It would seem
that the decision for the status quo to remain was underpinned by domestic political
considerations. The SPC/FACT study notes: “Despite its small size, the Australian taro

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industry has been an active and vocal industry organization vigorously lobbying the AQIS
and local parliamentary representatives to impose tighter restrictions on taro imports”.
As noted by the SPC/FACT study, there would seem to be strong prima fascia case for
the present devitalization requirement for PIC taro exports to Australia being taken to
WTO. However, the “tyranny” of unequal size and available resources means there is little
likelihood of the Fiji taro industry mounting a successful challenge. The reform of such
trade barriers needs to be negotiated in a broader political and economic context. The
current prolonged negotiations for PACER-Plus (a free trade and investment agreement
between Australia, New Zealand and 14 Pacific Island countries) provides such an
opportunity. This would still require a substantial technical assistance input to level the
“scientific” playing field.
The problem of access for Fiji taro illustrates the difficulty faced by small island countries
in exporting to larger neighbours with similar domestic industries, regardless of how small
these industries are. Substantial and appropriate technical assistance is required to allow
for even a modest degree of parity in dealing with quarantine related market access
issues.
Industry background
Fiji has been exporting papaya for thirty years (Figure 4). The history of these exports
can be divided into two distinct eras: the government operated chemical quarantine
treatment period and industry operated non-chemical quarantine treatment period.
These are discussed briefly below.
The government operated chemical quarantine treatment era
The establishment of Fiji’s commercial papaya industry dates from the late 1970s, when
the Ministry of Agriculture imported seed from the University of Hawaii (UH) for trialling. The
first commercial planting for export began in 1984; with the Native Land Development
Corporation (NLDC) establishing a commercial, vertically integrated papaya project
adjacent to the Nadi international airport. To this day, this has been Fiji’s most ambitious
horticulture development project.
The 45 ha block allocated to papaya and mango was on land previously devoted
to sugar cane. The project incorporated aid-financed expatriate management, fruit
handling and storage infrastructure, and underground irrigation facilities. Solo seed
was sourced from the UH. The fruit was quarantine treated for export at the Ministry of
Agriculture’s ethylene dibromide (EDB) facility at Nadi airport.
The project’s feasibility study targeted annual production at 1,080 tonnes of papaya
(NLDC 1985 p, 29). The NLDC never achieved its planting target due to financial problems
unrelated to the tropical fruit venture. Nevertheless, a significant result was achieved
with 200 tonnes of export quality papaya produced in 1986-87 from 15 ha with a reported
gross value FJD340, 000. This result was achieved despite several cyclones in 1985. With
the eventual collapse of the NLDC, their Nadi estate ceased operations in early 1988.
Case Study 2: FIJI PAPAYA EXPORTS - The flagship
of the Pacific Island participation in the horticultural
export revolution

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Figure 4: Fiji papaya exports 1982-2011 (tonnes)
The NLDC experience was able to test market Fiji papaya. The major lesson on the
production side was the importance of proper site selection with respect to drainage and
the need to diversify the production base to minimize the risk from hurricanes.
In parallel to the NLDC development, a smallholder papaya sector was being initiated
under the auspicious of parastatal NMA. The government’s expectation was that the
NMA would play a “pace-setting” role for the private sector by “opening up new markets
and establishing Fiji’s reputation for quality” (NMA Strategic Plan 1985). It was on these
erroneous grounds that the NMA was given the sole licence for exports to Japan.
The NMA distributed seedlings, which were produced at the government research station,
to growers. These growers entered into an informal agreement with the NMA to sell
exportable fruit at a price of 20¢/kg on-farm. The NMA was responsible for picking and
packing. The arrangements were haphazard and inefficient and generated only limited
expansion in exports from the many thousands of seedlings distributed. The high attrition
rate can be attributed to several management factors:
• No extension support or material inputs were supplied by the NMA, while the Ministry of
Agriculture’s extension for papaya was minimal and diffused.
• The purchase “agreement” with growers was often not honoured by both parties.
• Disorganized and uncoordinated collection and shipping arrangements meant that
mature fruit was often not collected.
• Growers frequently sold their papaya to the small exporters when offered immediate
cash payment.
This overall lack of discipline has unfortunately had become endemic in Fiji’s fresh
produce marketing and remains to this day. In response to this situation, a request was
made to FAO in 1985 for technical assistance in the preparation of a nucleus smallholder
servicing project for tropical fruit. The Southern Development Company (SDC) was
identified as a suitable commercial company for this purpose. The SDC was established in
the early 1970s to organize and manage small, usually part-time farmers in the production

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of Virginia tobacco. The company provided the market, production credit, and extension
services, as well as operating a research centre. Faced with declining tobacco demand
and increased technical efficiency in curing, the SDC had considerable excess capacity
in management and support infrastructure. To ensure long-term viability, it sought to
diversify its operations into alternative crops that could use the company’s expertise and
infrastructure in the management of smallholders. The FAO feasibility study concluded
that papaya offered the best short-term alternative.
In late 1986, the NMA approached the SDC with a proposal to produce 350 tonnes of
papaya for export. The SDC was reluctant to fully commit the company to a new high-risk
commodity at a time of considerable political and economic uncertainty in Fiji . Thus, it
opted in the first instance for a “pilot scheme” in which the NMA would be responsible for
marketing. The first planting began in late 1987 with Hawaiian solo seedlings from the SDC
nursery established at a discontinued tobacco station.
The majority of the selected farmers were current or former tobacco growers. Each
grower was allocated an area between 0.20 and 0.40 ha depending on land availability
and past record as a tobacco farmer. Managerial and agronomic inputs were provided
using the same management principles as for tobacco production. By the beginning
of 1989, approximately 8 ha of viable commercial production had been established.
The Company’s exports for 1989 were almost 72 tonnes (82% of Fiji’s exports). Although
production increased and the fruit gained ready market acceptance, there was a
corporate breakdown between NMA, SDC and the market outlets in Australia. As a result,
SDC ceased its involvement in the papaya industry.
The Hawaii based East West Centers Pacific Island Development Program (PIDP)
undertook an assessment of SDC’s involvement in the development of Fiji papaya
industry. The study concluded:
These results confirm the experience of the Fiji tobacco industry that a bona-fide directed
smallholder operation provides an appropriate model for horticulture commodity
development in the Pacific islands. After gaining the farmers’ confidence, the
management company can transfer new agronomic ideas and innovation techniques
to often wary peasant farmers more rapidly than government’s agricultural services and
itinerant marketers. It is encouraging that the pilot scheme has given confidence to a
major ginger exporter, Balthans International Fiji Ltd., to enter papaya production and
marketing using contracted smallholders (McGregor 1990, p 11).
Balthan International (now Produce Specialist Ltd (PSL)) still remains Fiji largest papaya
exporter.
In this first era of the papaya industry development, the biggest value chain constraint
was the government-operated fumigation facility. In 1989, for two months at the apex
of the papaya flush, it was unserviceable while waiting for repairs by the Public Works
Department. This situation caused chaos for the papaya and other horticultural export
industries and further undermined Fiji’s reputation as a reliable supplier.
In 1990, most of Fiji’s horticultural export markets for fruit fly host products (including
papaya) were lost when EDB was banned as a quarantine treatment, on the grounds that
it was considered carcinogenic. Five years were to elapse before exports recommenced
with a non-chemical quarantine treatment.

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The non-chemical quarantine treatment era
With the loss of EDB treatment for fruit fly host products, Fiji’s fresh fruit export industries
were desperate to find a quarantine treatment that would be acceptable to Australia
and New Zealand. With assistance from the United States Agency for International
Development (USAID), Fiji embarked on an ambitious project to acquire High Temperature
Forced Air (HTFA) quarantine treatment technology. This technology had been
developed by the United States Department of Agriculture (USDA), for the treatment of
Hawaiian papaya exports to the US mainland.
USAID’s technical and financial assistance, through the Commercial Agriculture
Development (CAD) Project, was conditional on the quarantine treatment facility being
operated by the private sector (the industry). This represented a fundamental departure
from the tradition in the Pacific Islands of government-operated quarantine facilities. Fiji
MAFF had the foresight to accept the CAD Project’s conditionality. This led to the transfer
of HTFA quarantine treatment technology to Fiji and the creation of an industry business to
operate the treatment facility. Ironically, there was significant exporter opposition to an
industry operated business in favour of the continuation of government operated facility.
This surprising response can be explained by the fact that the government service was
free (albeit unreliable) and was subject to exporter manipulation of the process.
Despite this opposition, Nature’s Way Cooperative (Fiji) Ltd (NWC) was registered on
August 15th 1995, to own and operate the new quarantine treatment facility on behalf of
Fiji’s fruit growers and exporters. MAFF funded the HTFA building and provided the land at
the Nadi international airport. The NWC facility was certified for the export of papaya to
New Zealand in 1996. Unfortunately, Fiji’s proactive approach to adopting the necessary
technology to facilitate the export of fruit host products was not matched by the
regulatory authorities in Australia and the US. It took seven years for Biosecurity Australia
to approve the importation of HTFA treated papaya from Fiji. Some 15-years on, USDA
APHIS is yet to give approval for the importation of HTFA treated papaya from Fiji. Such is
the nature of the market access constraint for Pacific island horticultural exports.
Fiji papaya exports have grown steadily through from just six tonnes exported to New
Zealand in 1996 to 800 tonnes in 2011 (Figure 4). Exports have been interrupted by
natural disasters (cyclones and floods) and political disturbances (the coups of 1987 and
2000).
The current papaya value chain now consists of the following actors:
• Six seedling suppliers
• Papaya Farmers (165 registered in the Sigatoka Valley, 22 farmers along the Sigatoka
coast, 12 in the Nadi-Lautoka corridor)
• Research (MPI Research Division and the NWC Fiji Papaya Project)
• Extension (MPI Extension Division, Taiwan Technical Mission (TTM))
• Domestic Traders (road side sellers, market vendors, traders)
• Transporters and handlers (NWC staff, exporter staff, Air Terminal Services (ATS),freight
companies)
• Exporters (9 exporters – with 4 handling most of the papaya)
• Fiji Quarantine and Inspection Service (FQIS)
• NWC’s HTFA quarantine treatment facility.

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This value chain is shown schematically in Figure 5 and pictorially in Figure 6. Case study 2
presents a detailed analysis of the Fiji papaya value chain.
How the value chain was initiated, is driven and is evolving
The current development of the Fiji papaya fresh export industry is built around NWC
which was formed in 1995 to undertake mandatory non-chemical quarantine treatment
on behalf of Fiji’s fruit export industry. The Cooperative has over 140 members, made up
of growers and exporters. Around 1,300 tonnes of fruit (papaya, mango, eggplant and
breadfruit) are treated annually for export.
Fiji is currently facing an economic crisis due to the demise of its sugar industry. Papaya
provides one of the most promising diversification avenues for small farmers who have
access to suitable land in reasonable proximity to NWC. Accordingly in 2008, NWC
approached ACIAR to support an applied research project to meet the needs of this
emerging industry. In 2009, the Fiji Papaya Project (FPP) located at the NWC facility
commenced operations.
In the build up to the FPP, an extensive analysis of the Fiji papaya supply chain was
undertaken along with market surveys to NZ, Australia, USA and Japan. These surveys
identified the key inefficiencies along the value chain and the improvements that were
needed. The FPP has used the results of this value chain analysis and market research to
design the targeted research interventions. A number of on-farm and off-farm trials have
been undertaken. The data generated is now being used by the industry or in the scaling
up or replicating the trials (www.fijipapayaproject.com).
The FPP has developed a system of stakeholder collaboration and information
dissemination which has been able to bring together a fragmented industry into a more
cohesive body to respond to the needs of its members. The system is managed by a 13
member Technical Advisory Board (TAB), which meets quarterly to discuss the progress of
research activities as well as to prioritise new activities.
Major themes and key lessons from the Fiji papaya value chain
Fiji’s papaya exports have displayed considerable growth in recent years but remains
well short of realising market potential. The major themes and key lessons from the value
chain’s efforts to realise this potential are:
• The need for commercial industry-operated quarantine treatment.
• Public private partnerships (PPP) to access technology and capital.
• Responding to rising costs to maintain competitiveness.
• Ensuring high quality planting material – sustainable local seed supply.
• Dealing with extreme climatic events.
These are discussed briefly below and are dealt with in detail in Case Study 2.

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Figure 5: An outline of the Fiji papaya value chain

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Figure 6:
A pictorial
Fiji papaya value chain
The need for commercial industry-operated quarantine treatment
The problem
Most of Fiji’s horticultural export markets were lost in 1990 when the chemical EDB was
banned as a quarantine treatment. Fiji was faced with the challenge of developing a
new quarantine treatment or forfeiting the fresh produce exports of all fruit fly hosts.
In a unique partnership between industry and government, Fiji embarked on an ambitious
project to acquire HTFA quarantine treatment technology developed by the USDA.
The need for a public private partnership to access technology and capital
The problem
The worldwide experience is that successful commercial quarantine treatment facilities
must be run as a business. However, Fiji’s small exporting enterprises did not have access
to technology, land, start-up capital and regulatory services to successfully run the
business.

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It was decided, despite some initial resistance from some of the major exporters, that the
new HTFA quarantine facility would be owned and operated by the Fiji fresh produce
export industry, through the auspices of Nature’s Way Cooperative. Although run as a
private enterprise, NWC has from the outset been a PPP, with the role of the two parties
summarised as.
The public sector:
• Facilitated the initial transfer of specialised technology to the fruit and vegetable
export industry.
• Provided start-up capital (equipment, building, land and some working capital) and
contributed to expansion capital.
• Facilitated the negotiation of bilateral quarantine agreements for market access.
The private sector:
• Owns and operates the facility on behalf of the fruit and vegetable export industry.
Provides a significant contribution to start-up working capital by taking shares in the
business.
• Generated the retained earnings to maintain the business and to invest in future
expansion.
A comparison between Fiji and Tonga provides strong supporting evidence for the
appropriateness of this approach for PIC fresh produce export industries requiring
quarantine treatment. Both Fiji and Tonga obtained identical treatment facilities at the
same time and were recipients of the same technical assistance. The Fiji facility is owned
and operated by an industry owned business. The Tonga facility was operated by the
Department of Agriculture. Fiji is now exporting over 1,000 tonnes of fruit fly host products
annually and has the capacity to treat 3,000 tonnes of fruit annually. Tonga exports no
fruit fly host products, despite having highly capable market-orientated farmers.
Responding to rising costs to maintain competitiveness
The problem
The Fiji papaya industry over the last few years has faced escalating costs, which have
undermined the industry’s competiveness. Exporters have had to deal with increasing
freight, electricity, quarantine treatment, packing rates, and biosecurity charges. For
several exporters, these increases are perceived to be unworkable.
NWC through the FPP is working with exporters at the marketing end of the supply chain
to see where costs can be driven out. Areas that are being critically assessed to help
alleviate the economic pressures of rising costs include:
- Use of sea freight (reduces transportation costs by nearly 60%).
- Use of newspaper as a packing material instead of the current foam (reduces
packaging cost by up to 80%).

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Ensuring high quality planting material - sustainable local seed supply
The problem
The Fiji papaya industry was founded on the sweet red-fleshed Solo Sunrise variety and
the product is marketed as “Fiji red papaya”. Seed for this variety was supplied by the
University of Hawaii (UH) Seed Lab. This variety of papaya is gynodioceous which means
that it has perfect flowers which produce essentially inbred fruit. This means that seed
collection is a relatively simple process that involves bagging a mature flower so that it
cannot be pollinated by any other papaya varieties that may be in the area. Yet despite
this relative simplicity, the Fiji industry has continued to rely on the UH for its supply of seeds.
There are several reasons why the Fiji papaya industry needs to move away from
importation of papaya seed from the UH:
• Non Availability – The UH seed lab can no longer supply Fiji with papaya seed and this
is seriously undermining Fiji’s ability to replant after serious floods in early 2012.
• The quality of seed from Hawaii that was obtained from Hawaii is seen as inferior–
Following a survey carried out by the FPP team in Hawaii, it was confirmed that there
are a number of quality concerns: there is no bagging of flowers in the seed blocks to
prevent cross pollination, there is no monitoring and selection process for trees, there is
no commercial interest for solo sunrise in Hawaii
• Potential GMO contamination - There is a real possibility for contamination of UH seed
from GMO varieties. Fiji papaya is GMO free – which provides marketing opportunities
for certified organic papaya and access to the Japanese market. The GMO
transgenic gene is quickly spreading to many non-GMO varieties in Hawaii .
• Potential introduction of new diseases - There are several diseases of papaya that are
currently not in Fiji and are thought to be transmitted by seed .
• The industry needs to reduce costs wherever possible – The cost of importing seed
from Hawaii is high. If Fiji can produce our own quality seed these costs would be
reduced.
NWC through the FPP has been working with MPI to develop a certified seed producer
scheme. The scheme is designed to ensure a steady supply of seed by encouraging
enterprises to take up the role of seed producers. Past efforts where the public sector
has tried to produce papaya seed for the industry have not been satisfactory. A seed
producing business to deliver a high quality product is seen as the most sustainable option
for local papaya seed production. MPI’s appropriate role is in the area of certification
and training.
Dealing with extreme climatic events
The problem
In recent years, natural disasters have had a direct impact on the Fiji papaya industry
in the following ways: drought occurrences in El Niño years (causing increasing costs in
labour and overall decrease in yield and quality), destruction from floods (January 2009,
January and March 2012) and cyclones (most recently Cyclone Mick on December 2009
which destroyed approximately 80% of the papaya crop). Climate change is expected
to increase the frequency and the severity of events.

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NWC, through the FPP, has launched a number of natural disaster mitigation strategies,
including:
• Preparation of farm budgets and gross margins that factor in extreme climatic events
under a number of different simulations. This analysis provides farmers with a sound
understanding of the risks associated with natural disasters and a realistic picture of
the profitability of papaya growing.
• Design of measures to mitigate the impact of extreme climatic events such as the size,
frequency and timing of plantings as well as making farms better prepared for natural
disasters.
• Solo Sunrise varietal selection programme to include evaluation of characteristics
likely to make the selections more ‘climate tolerant’.
• Design and trialling of response measures to be implemented on farms immediately
before or after a natural disaster to minimise the losses . A natural disaster
preparedness and rehabilitation fund that utilizes retained earnings from NWC as well
as donor funds.
The Fiji breadfruit industry
Breadfruit (Artocarpus altilis), is a member of the Moraceae (fig) mulberry family. In Fiji, the
breadfruit is an indigenous crop with considerable market potential – both for fresh export
and for domestic processing. At present, breadfruit is a minor seasonal food staple, that
represents only a small fraction of the consumption of cassava and less important than
taro and sweet potato (kumala). This is in contrast to the situation in Samoa, where
breadfruit is a major food staple. The large Samoan community living in New Zealand,
Australia, and the US offer the main market for fresh breadfruit.
Breadfruit could become a major commercial industry. The fruit is nutritious and versatile
and the trees are highly productive. The fruit can be consumed fresh (baked or boiled)
or processed into high quality gluten-free flour. Breadfruit provides a medium to merge
culture and commerce. The required planting material for commercial production is
found on village land. Supplying of this material providing economic benefits to village
communities and for the industry as a whole. The opportunities are still untapped. In the
context of climate change, being able to produce substantial quantities of starch from
tree crop offers considerable food security advantages. These advantages lie with zero
tillage agro forestry, minimal chemical inputs and possible carbon credit links.
Breadfruit in Fiji is not yet grown as a crop; it is either grown “wild” in the forest, in
household compounds or around villages. Fresh breadfruit was only recently given
commercial recognition with the export of HTFA treated fruit to New Zealand. Yet fruit
for these exports is still harvested from the “wild” compromising and disrupting the supply
chain and limiting market growth.
Case Study 3: FIJI BREADFRUIT COMMERCIALIZATION
- Environmental Sustainability through the
Commercializing of a Traditional Food Crop

111
How the value chain was initiated, is driven and is now evolving
The current value chain for fresh breadfruit dates from 2000 when the NWC HTFA
quarantine facility was certified for export of breadfruit to New Zealand.
A market of 300 to 400 tonnes was identified in New Zealand, selling largely to the
Samoan community. Two of Fiji’s produce exporting companies were quick to respond
to this opportunity and began exporting in 2001, with 5 tonnes shipped. Since that time,
exports have oscillated around 10 tonnes annually. The value chain for National Exports,
the leading breadfruit exporter, is pictorially presented in Figure 7. Case study 3 analyses
the company’s value chain in detail. All the breadfruit currently exported has been “wild”
harvested from trees found in breadfruit “forests” or from trees found around villages. This
creates major production, harvesting and post-harvest handling constraints.
Figure 7: A pictorial representation of the value chain for
National Exports breadfruit exports to New ZealandNational exports supply chain
Over a decade of exports has confirmed this highly perishable fruit could be successfully
quarantine treated and air freighted to New Zealand, where premium prices are
obtained.
It t is clear that achieving anywhere near breadfruit’s market potential will require
concerted effort in two main areas:
• moving from wild harvesting of fruit to growing breadfruit as a crop; and,
• introducing appropriate quality control and post-harvest handling procedures.
To facilitate the transition from a wild harvest subsistence crop to a commercial industry
based on fresh exports and processing, NWC obtained assistance from the ACIAR
Pacific Agriculture Research Development Initiative (PARDI). The PARDI Pacific Breadfruit
Project (PBP) commenced in 2011. The PBP is assisting in bridging the gap between a
subsistence and commercial industry.
This involves applied research in three inter-related areas:
• identifying varieties that will enable year-round production and develop systems for
propagating them;
• developing best practices for the establishment and management of small scale
commercial breadfruit orchards;
• establishing harvesting and post-harvest systems to meet export market requirements.

112
A Technical Advisory Board (TAB) also operates for the PBP, which runs in parallel to the
FPP’s TAB. Both are housed at NWC.
Major themes and key lessons from the development of the Fiji breadfruit value chain
Breadfruit, of all the value chains reviewed in this report, is undergoing the most radical
transformation. The major themes and lessons learnt from this transformation are:
• The transition from wild harvest to smallholder commercial orchards
• Technology and systems to successfully export a highly perishable fresh food product.
• Ensuring year round production
• Progressing to value-added processing
These are discussed briefly below and are dealt with in detail in case study 3.
Transitioning from wild harvest to smallholder commercial orchards
The problem
The existing “wild harvest” value chain was found to be uneconomical for the following
reasons:
• Compliance with mandatory bait-spraying requirements for fruit fly control is difficult
and expensive for scattered trees.
• Harvesting from tall wild trees is difficult, dangerous, and expensive and leads to
considerable damage to delicate fruit.
• Continuity of supply is not possible with the short seasonal availability of fruit.
• There is insufficient supply to develop export and processing markets.
It was quickly discovered that the development of a commercial breadfruit industry will
depend on harvesting fruit from small orchards.
The establishment of breadfruit orchards allows for the:
• creation of a sufficient and accessible production base of required varieties through
the adoption of appropriate agronomic techniques (propagation, pruning and
fertilizing);
• efficient control of fruit flies to meet regulatory quarantine requirements (more
efficient and lower cost bait spraying);
• harvesting that is easier, less dangerous, less damaging to fruit, and provide for better
sap control; and,
• substantial reduction in post-harvest losses through improved fruit selection and better
packing.
The PBP is working with industry stakeholders to transform the breadfruit value chain from
“wild harvest” to orchard production in the following ways:
• Providing training that addresses the information gaps related to planting material,
available varieties, plant nutrition, crop cycle and production patterns. Collecting
market data related to breadfruit seasonality and pricing. Presentation of this data
would allow farmers to make more informed decisions about planning production
and the use of inputs such as protein bait.
• Establishing a network of village-based suppliers of planting material in the form of
root suckers and marcotted branches.

113
• Developing efficient ways to apply protein bait application in accordance with the
Bilateral Quarantine Agreement (BQA) breadfruit export pathway.
Technology and systems to successfully export a highly perishable food
product
The problem
Breadfruit is inedible when it is fully ripe. Once the fruit has been harvested, ripening
commences immediately. The transition from firm to soft happens quickly, with breadfruit
going soft in a matter of hours. If softening happens when breadfruit is still with the
wholesaler or retailer, claims for compensation can be expected against the exporters
and future orders may be curtailed.
The value chain’s response to the problem
Breadfruit ideally should be harvested early in the morning, or late in the afternoon, to
avoid build up of field heat. However, harvesting and treatment schedules need to be
linked with airline schedules. Also the harvesting of breadfruit from wild scattered trees
is a labour intensive activity. Thus, it is inevitable that at least some of the fruit will be
harvested during periods of full sun.
The use of plastic crates, introduced by NWC, is now a standard procedure and this
protects the fruit from bruising and skin blemishes.
It is important that as soon as the breadfruit is harvested, it be placed in the shade. This
is to avoid the heating up of the fruit and sun burn . The skin of breadfruit is extremely
sensitive and as little as 10 minutes of exposure to the sun is sufficient to cause sun burn
damage. Placing of leaves over the fruit can be a temporary protection from the sun
until the bins are placed in full shade.
Breadfruit for export is sorted and graded at the exporter’s packing shed. It is then
taken to the NWC facility for quarantine treatment and packing. Due to its perishability,
breadfruit needs to be harvested from locations that are within two hours drive of the
international airport and that preferably have good road access.
Ensuring year round production
The problem
The viability and the size of the future breadfruit industry will depend on the extent the
breadfruit season can be extended. Achieving year-round production is the “holy grail”
for the development of a commercial industry.
The MPI Research Division is currently collecting and testing varieties from throughout Fiji,
with the view of extending the seasonal availability of acceptable varieties that have
good eating and keeping qualities and tolerance to HTFA quarantine treatment. The PBP
is implementing small scale field trials to determine the diverse fruiting patterns of the two
main commercial varieties. Over time, new varieties from the entire Pacific island region
will come on stream for testing for SPC/CePaCT tissue culture collection.

114
The transition to processing
The problem
The greatest market potential for breadfruit lies in processing and, in particular, in the
production of high quality gluten free flour. However, processing of any scale is unlikely
to occur until substantial quantities of raw material are available at competitive prices. It
would be uneconomical to go into the business of value adding unless you have a strong
production base, which will be the basis of a steady supply chain.
The value chain’s response to the problem
NWC’s PBP is focusing on the development of small commercial breadfruit orchards and
on extending the breadfruit fruiting season. It is envisaged that a significant volume of
export reject fruit that would then be available at a low price, and would provide the
basis for establishing a processing industry. It will take time for the results of this research to
be commercially applied materialise. In the meantime, the PBP is promoting home and
cottage industry processing of breadfruit and in particular, the manufacture of breadfruit
chips and frozen products.
The Vanuatu spice industry
Spices are a minor industry in Vanuatu – but
important for isolated area. Around 300
households now supply Venui Vanilla (VV),
the only commercial processor and exporter.
These village based farmers are mainly in
remote locations such as Big Bay, North and
North East Ambae, North and North West
Malekula, Malo, Aneityum and Tanna. All
of these spices are organically produced.
However, only a third is certified organic in
because of the high logistical costs involved.
The farmers who miss out on the price
premiums on offer are most deserving and
often produce the best quality vanilla. This
“tyranny of isolation” is a common problem
for value chain development in the Pacific
islands.
Vanilla is not a difficult crop – it is different
from other cash crops (copra and cocoa)
with which Melanesian farmers are familiar.
Only farmers willing to understand these
differences will become successful vanilla
farmers. The transition requires considerable
training and extension support which would
Case Study 4: VANUATU SPICES
- Reconciling Traditional Production and the Tyranny of
Isolation with the Quality Demands of International Markets

115
normally not be available to village farmers, particularly those living in remote locations.
Vanuatu’s premium-quality cured vanilla beans, vanilla extract and vanilla paste are
exported to markets in Australia, New Zealand, New Caledonia and Japan. Peppercorn
is also exported to New Caledonia (Table 5). The total FOB value of these exports is
around 9.5 million VT. Vanuatu spices are not competitive in the larger markets of Europe
and North America because of exceptionally high transportation costs. The same will be
true for other PICs.
The Vanuatu spices export value chain began in 1987 with the establishment of Venui
Vanilla at South Santo. It soon became evident that the South Santo location was not
climatically well suited to vanilla production, with a low rate of flowering experienced.
Thus the company decided to expand the production to outgrowers in more suitable
areas. To facilitate the outgrower programme, a long-lasting partnership was established
with an NGO, the Farm Support Association (FSA) and its Spices Network. VV and the
FSA jointly provided training and curing equipment and slowly the production started to
increase. Meanwhile, VV fine-tuned a processing method that was able to supply high-
quality vanilla from isolated locations using basic low cost equipment.
Vanilla was first marketed locally. An encouraging market response prompted VV to add
other spices – peppercorn (green and black), ginger, turmeric and chilli. Volumes were
small but the quality was exceptionally high. Importantly, further value adding of vanilla
beans (vanilla essence and vanilla paste) was introduced to the product line.
By the mid-1990s, production exceeded the local demand, and a search for an
appropriate overseas buyer was initiated. The turning point for export marketing came
in 1997, when VV was invited by the South Pacific Trade Commission to participate in the
Melbourne and Sydney Fine Food Fairs. Three consecutive years of participation were an
irreplaceable opportunity to study packaging, labels, prices and market requirements. A
contract with one buyer/distributor for the Melbourne area was initiated in 1997 and it is
still continues today, 15 years later.
Viable export marketing required a greater volume than was being supplied at the time.
Accordingly, suitable outgrowers were identified, Ambae and Malekula, to whom training
and extension services were provided through FSA and the Spices Network.
Table 5: Vanuatu spice exports 2011*
Source: McGregor and Bianchessi 2012

116
Figure 8: A schematic map of the Vanuatu spices value chain
Today, VV exports vanilla extract (conventional) to three ice cream companies in New
Zealand, vanilla extract, paste and beans (organic) to Australia, vanilla and peppercorn
(conventional) to New Caledonia and occasionally vanilla and peppercorn to Japan.
The volume and value of VV’s sales in 2011 is presented in Table 5. A very promising
niche/gourmet market for organic vanilla and peppercorn in France is under discussion
but exceptionally high freight costs may jeopardise the deal.
The Vanuatu spices chain is shown schematically in Figure 8 and pictorially in Figure 9.

117

Major themes and key lessons learnt from the Vanuatu spices value chain
The major themes and key lessons to emerge from the 25 years of experience from the
Vanuatu spices value chain are:
• Premium quality products are imperative for commercial viability for producers from
remote locations. There is no place for bulk or second grade products.
• Farmers in remote locations can produce high quality spices provided they receive
appropriate support and have confidence in the buyers.
• There is a need for agribusiness to “pull” products through the value chain.
• Strategic partnerships are important.
• The important role of organic certification in accessing markets.
• Over 95% of the market for organic products is in Europe and North America –
however, Vanuatu is excluded from these markets because of high transportation
costs.
• The role of certification is changing
These are discussed briefly below and presented in detail in the Vanuatu spices value
chain case study, case study 4.
Figure 9: Vanuatu Spices Value Chain Map

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High quality value added products, an imperative for commercial viability
The case study shows that value added products are a must for Vanuatu to compete in
the highly competitive international vanilla market. It is unlikely that a Pacific island vanilla
business could be viable in the long term, based solely on the export of premium quality
beans. Less than 50% of the vanilla produced can be sold as premium beans in the retail
market. The remaining beans (short, oversplit, blemished) are still top-quality beans (in
terms of their vanillin content ) but need to be processed to access the market. VV has
specialised in the manufacture of high-quality vanilla extract and vanilla paste, which
have become the mainstay for the export business.
“Pulling” products through the value chain
The experience of the Vanuatu spices value chain has shown that Pacific island
smallholders, with the right organisation and support, can successfully produce export
quality product. However, success requires the involvement of companies such as
VV who are willing to be proactively involved in the development of these industries,
including making significant long term investment. These are the enterprises that “pull”
products through the value chain, in contrast to “pushing” products through the chain
by suppliers from isolated rural areas. Unfortunately, donors tend to be biased toward
supporting the bottom end of the value chain by funding community/village based
projects that aim at “pushing” products to market. This is reflected in the current vogue of
“Fair Trade” certification which tends to bypass existing agribusinesses, to the detriment of
village-based smallholders.
Farmers in remote locations can produce high quality spices provided they
receive appropriate support and have confidence in the buyer
The worldwide experience has been that vanilla farming has been successful in areas
where no other opportunities were available due to difficult market access. Vanuatu is
no exception. Most farmers choosing vanilla or pepper are located in isolated areas,
on islands with poor transportation links and communications. Some of VV’s best vanilla
is sourced from such locations. A typical farm plot averages 100 to 200 vanilla and/
or peppercorn plants (approximately ¼ of a Ha). The relatively small income earned
is essential for these isolated rural communities. With 300 to 400 spice farmers, the
production will never reach the volume necessary to enter the bulk world spice market.
These isolated growers need to have the confidence of an assured market and
appropriate information on the required market requirements. VV has been able to
provide this through a partnership with the FSA and the Spices Network.
Vanilla demonstrates the benefits to farmers that can be achieved by improved
sustainable production practices. The Spices Network has provided the internal control
system (ICS) required for organic certification. However, beside the ICS, the network
supplies its members with up-to-date technical information and training material, and
provides field coaching, plus practical training through the use of pilot plots and the
active participation of selected lead farmers.
Farmers looking to participate in the Spices Network must adhere to production and
quality standards that are significantly higher than those required by the organic
certifying agency. An important secondary benefit of FSA’s field involvement for organic
certification has been the improvement in vanilla productivity and quality. As a result,
participating village smallholders have been able to produce world-class quality vanilla

119
beans. This in the longer term has, perhaps, been more important than the organic
certification itself.
The importance of strategic partnerships
Without the strategic relationship between VV and FSA, the Vanuatu spices value chain
would have certainly withered on the vine. In the Pacific islands context, it is not realistic
to expect the limited government extension service to perform this role. The Vanuatu
Department of Agriculture has been supportive of these arrangements, which has been
important for their long standing success.
The role of certified organics in accessing markets
For VV, with such a limited supply of spices the only available marketing option was to sell
to demanding niche markets. Certified organics was a part of VV’s marketing strategy to
access these niche markets. The specifics of the marketing strategy are:
• Premium quality requirements– there is no market for second grade as there is for bulk
commodities such as copra and cocoa
• Higher prices for farmers to ensure quality products are delivered
• Attractive packaging and labels that feature the exotic origin and beauty of Vanuatu
• Organic certification as a marketing bonus that has provided recognition, facilitating
entry into these demanding markets.
The experience of the Vanuatu spices value chain is that organic certification has not
resulted in any direct price premiums. However, organic certification has proven critical
in securing market access. Certification proved to be an important tool in providing
credibility to a company marketing vanilla from a remote Pacific island location. A new
buyer in Australia and New Zealand tends to have more trust in a company with an
international certification, even if they are not particularly interested in organic products.
To obtain certification, a company must demonstrate traceability of all purchased
products, cleanness of transportation and storage, and true labelling. Together with a well
maintained webpage, the certification is a good marketing tool, even if only 30% of VV’s
suppliers are certified.
For the Vanuatu spices value chain, after 15 years of experience, the following
conclusions can be reached regarding organic certification:
• The organic certification has proven to be a marketing tool rather than a means of
providing access to organic markets.
• There is no extra premium for organic spices – at least in regional markets.
• The only price premium is for consistent high quality.
• The high-cost and complicated requirements of existing certification systems mean
that there are questionable net benefits accruing along the spices value chain.
The changing role of certification
Organic certification has been used as a form of quality assurance. Other forms
of certification, such as Hazard Analysis Critical Control Point (HACCP) food safety
certification, would achieve the same result and provide wider acceptability.
Over the last few years, HACCP certification has become increasingly important for
companies exporting processed products for human consumption. For VV food safety

120
certification has become a tempting alternative to organic certification. Given high costs
involved, a small Pacific island agro processing business cannot afford the proliferation of
certifications being sought by the market. While the organic certification is more sought-
after by the retail-packaged market, the HACCP certification is a better guarantee for
importing companies purchasing bulk vanilla beans, extract or paste for manufacturing
purposes (ice cream, chocolate, yoghurt and other products).
HACCP may become obligatory in the near future for enterprises exporting processed
products for human consumption. It is likely that VV will have to substitute HACCP
certification for organic certification unless the cost and the administrative burden of the
latter can be substantially reduced. Considering the limited production, to have more
than one certification will be uneconomical until the off-shore certification agencies
move to ‘one-step certification’ where Organic, Fairtrade and Food Safety Guarantees
are inspected and certified in one session.
The Samoan lime export industry
Samoa has some 17,000 farming families operating small holdings on a largely semi-
commercial/ semi-subsistence basis. A feature of the Group 2 PICs (the middle sized
countries of Polynesia have more modest land resources) is the low level of export
earnings. In 1993, Samoa’s taro exports accounted for over 95% of all export earnings.
Thus, with the demise of the industry with taro leaf blight, Samoa’s total exports collapsed.
For a while, fresh tuna was able to fill some of the vacuum left by taro (Figure 9). However,
no agricultural product has come close to replacing taro. It was in this economic
environment that Samoa was looking for alternative export earners.
Case Study 5: SAMOAN FRESH LIME EXPORTS
- An Emerging Value Chain Exploiting
Seasonality and Favourable Quarantine Status.
Figure 10: Samoa’s main export earners (‘000 tala)
*Source: Central Bank of Samoa Statistics
40, 000
taro
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
coconut oil
coconut cream
fish
35, 000
30, 000
25, 000
20, 000
15, 000
10, 000
5, 000
0

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Tahitian limes emerged as a prospect in late 2009, when approval was received to
export limes to New Zealand. Around 200 tonnes of limes are imported annually by New
Zealand, with average total annual cif value of NZD 1 million (Table 6). Imports from
Samoa represent less than 2% of this total. The United States is by far the largest supplier,
followed by Australia, New Caledonia and Vanuatu. Samoan limes have been able to
command a significant price premium.
This market opportunity for Samoa is based on a seasonal niche (September through
February) based on the non-availability of local production during the winter months.
While, currently, lime exports are very small, expanding these 5 to 10 tonnes per month
is seen as readily achievable and would result in a worthwhile export industry. Annual
exports of around 50 tonnes would present a market share for Samoa of around 25%.
How the value chain was initiated, is driven and is evolving
Tahitian lime was introduced to Samoan smallholders by the UNDP/Ministry of Agriculture
Fruit Tree Development Project in the late 1990s. The basis of identifying fresh lime (West
Indian and Tahitian) as a good export opportunity was the expectation that New
Zealand would accept limes from Samoa as a non-host. Also Samoa was known to
be free of the bacterial disease citrus canker (Xanthomona saxonopodis) - a disease
of major quarantine concern to New Zealand. In 1999 and 2000, non-host testing was
conducted against Samoa’s two fruit flies regarded as a quarantine pest by New Zealand
(Bactrocera kirki and B. xanthodes). Limes were shown to be a non-host to these pests in
accordance with test guidelines outlined by New Zealand MAF.
A non-host protocol (NHP) is the preferred mechanism for exporting fresh fruit. It avoids
the high cost and management problems associated with quarantine treatment
and other pest control measures (bait spraying). A NHP also means small shipments
are feasible and these can grow in line with market development and an increasing
production base.
Tahitian limes were identified to have the following positive market indicators with respect
to the New Zealand market:
• accepted as non-fruit fly host for the New Zealand market;
• perform well under Samoan conditions – good yields and year-round production;
• reasonable production base already in place;
• production could be increased through pruning and improved management of
existing trees;
Aug Sept Oct Nov Dec
Imports
from
Samoa
(kgs) 344 0 449 778 418
Total
imports
(kgs) 5,812

17,744

20,387

44,436

33,941

Samoan
imports
as
a
%
of
total 6% 0% 2% 2% 1%
Cif
value
Samoan
(NZD) 4,361 0 5,263 9,117 4,690
NZD
Samoan
imports
(NZD/kg) 12.68 11.72 11.72 11.22
Average
value
of
import
(NZD/kg) 9.97 7.40 7.56 7.30 8.12
Table 6: Samoa’s lime exports to New Zealand, 2010
*Data provided by Pacific Islands Trade and Investment Commission from
Statistics New Zealand

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• has a six to eight week shelf-life thus there is an opportunity to use sea freight;
• can be shipped at the same temperature as taro, thus an opportunity to “piggy
back” relatively small consignments with taro exports;
• Tahitian lime has minimal pests and diseases ;
• not greatly affected by fruit piercing moth;
• New Caledonia and Vanuatu are the only Pacific island competitors;
• Australia excluded on quarantine grounds.
• New Zealand-grown Tahitian limes are only available between April and August; and
• Small but growing market for Tahitian lime amongst the general New Zealand
population (including “gin and tonic” market in the hotel sector).
The Samoa non-host data for Tahitian limes was submitted to NZ MAF in 2001 as part of a
market access request. Approval was given eight years later, which is symptomatic of the
long delays in achieving market access even when there is no political element involve.
There no immediate interest by private sector exporters in taking advantage of this
new opportunity. Major New Zealand produce importers, Turners and Growers (NZ) Ltd,
approached the Samoan Farmers Association (SFA) in 2009 seeking supplies of Tahitian
limes during the New Zealand winter.
The SFA is a farmer organisation with around 300 members, comprising individual farming
families and village groups. There are also a small but growing number of agribusiness
members. In early 2010, the SFA agreed to take on the task of initiating the development
of this new export industry. This has involved direct participation along the entire value
chain. This included:
• harvesting the fruit from the farmers’ trees;
• cleaning the fruit to meet the requirements of the bilateral quarantine agreement;
• grading the fruit to ensure that it meets market and NZ quarantine requirements; and,
• transporting packed fruit to the airport and arranging the documentation for the
shipment.
Exports began in August 2010 (Table 6). The limes are supplied by 20 farmers who are
scattered around the island of Upolu – with one grower supplying 50% of the quantity
exported. The value chain is shown pictorially in Figure 10.
The SFA involvement in the lime value chain is highly labour intensive and demanding on
the Association’s scarce resources. On its present scale, this is not seen as a commercially
viable activity for SFA. However, the Association deems this involvement as necessary to
develop a new export market on behalf of its members. The SFA plans to phase out this
direct marketing activity as soon as satisfactory private sector marketing arrangements
can be put into place – thereby releasing the Association’s resources to facilitate the
development of other market opportunities. It remains to be seen if this occurs.

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Figure 11: A pictorial
Samoan lime export
value chain
Major themes and key lessons from the
emerging Samoan lime value chain
The major themes and key lessons seen from this still emerging value chain are:
• Taking advantage of seasonality and favourable quarantine status.
• The role of a farmer organization in the developing of a value chain.
• The challenge of making new value chain sustainable.
Taking advantage of seasonality and favourable quarantine status
The Pacific islands face major constraints in the export of high value horticultural
products – these relate particularly to diseconomies of scale, isolation and associated
transportation difficulties and market access issues. These disadvantages can in some
instances be offset by advantages in the form of seasonal niches and favourable
quarantine status.
The best known examples of exploiting seasonal niche markets are Fiji’s fresh ginger
exports to the United States and Tongan squash exports to Japan. For more than a
decade, Fiji’s ginger industry (southern hemisphere) and Hawaii’s ginger industry (northern
hemisphere) combined to supply US west coast markets with fresh ginger throughout
the year (McGregor 1988). At that time there were no other competitive southern
hemisphere producers and Fijian ginger faced no quarantine barriers in the United States.
This has now changed with the entry into the market of low cost producers from China
and Thailand.

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Japan consumes over 200,000 tonnes of butternut squash (cucurbita maxima) annually.
For a short period between November and the end of January, squash in Japan is in
short supply. During this window domestic squash season has ended, the California
and Mexico season is winding down and production in New Zealand has not yet
started. In 1987, Tongan and New Zealand entrepreneurs determined that the peak
production season for squash grown on Tongatapu coincided with peak demand for
imports in Japan. Further, Tonga’s fruit fly status would allow export to Japan without
quarantine treatment (Sefanaia 1989). Squash exports to Japan rapidly became Tonga’s
major industry, which prompted some commentators to refer to the Tongan model of
agricultural led growth (Sturton 1992). However, overtime in the face of production and
environmental problems, the Tongan squash industry has declined to a shadow of its
former self.
The fledgling Samoan lime exports to New Zealand are based on a similar combination of
seasonality and quarantine status. This value chain is unlikely to reach the level of exports
achieved by Fijian ginger or Tongan squash. However, the prospects for sustainability are
probably better. Small orchards of lime trees do not face the same land degradation
problems as those experienced by ginger and squash. Further, this small market niche is
likely to be far more robust in face of competition from other supply sources.
The role of a farmer organization in developing a value chain
The structure of Pacific islands agriculture is such that the development of horticultural
export industries is best served by small farmers under the direction of commercial
exporters and processors. However, for a variety of reasons there has often been
reluctance on the part of the private sector to develop new export industries. This has
sometime promoted the involvement of parastatal agencies in the development of these
industries (McGregor, Halapua and Sturton 1992). This government involvement has often
been under the guise that “they would develop the market and then pass it on to the
private sector”. The reality is that government agencies in the Pacific islands have proven
particularly inept in the development of horticultural exports with little inclination to pass
on markets to the private sector.
In the case of the Samoan lime exports, it is a farmer organisation, which has stepped
in to initiate the development of a new market. This is seen as a “second best” option
to agribusiness exporting from the outset. The SFA Strategic Plan (2012-16) has as an
objective “the transfer of Tahitian limes exporting to a suitable private sector entity by the
end of 2013”. After withdrawing from the direct marketing of lime, it is still SFA’s intention
to continue to be involved in industry development. In so doing, it would be performing a
similar function as the Vanuatu FSA and the Spices Network.
Requirement to make the value chain sustainable
Samoan fresh lime export value chain as it stands is probably not sustainable – the scale is
too small, transportation costs are too high and the services provided by the SFA are too
labour intensive. Under the auspices of SFA, a program is underway to achieve long term
sustainability of the value chain, involving:
• The identification of lead farmers and the supply of quality grafted planting material
and provision of technical advice in pruning and post-harvest handling.
• The transfer of quality control and grading requirement to lead farmers.
• The transition from air freight to sea freight to take advantage of desirable shelf-life
and quarantine properties of Tahitian lime.

125
Case Study 6: SOLOMON ISLANDS FLORICULTURE -
Exploiting Post Conflict Opportunities
The Solomon Islands floriculture industry
The floricultural industry in the Solomon Islands is a recent development. Keys to the
growth of the industry have been its small scale nature; flowers can be grown on small
parcels of land, and the value chain is very short. The small-scale nature of production
and the low capital requirement are also incentives for smallholders to become florists.
The industry is unusual in that it has grown to its current size without any input from
government although there has been donor involvement.
The Solomon Islands floricultural supply chains are generally very short (Figure 11). At the
growing level, around 500 households, in and around the capital of Honiara, are involved
with the regular production of flowers for income generation. The next level of supply
consists of florists.
Florists are important drivers in the floricultural value chain. The demand for cut flowers
this stage comes primarily from weddings and funerals. At present, floral arrangements
are the most high value and tradable products in the Solomon Islands floriculture chain
which explains the increase in florists. Florists in the context of Solomon Islands are those
who have the skills to add value to cut flowers through flower arrangement. The flower
growers are selling products, while the florists are selling services. There is no “flower
shop” in Honiara. Florists, operating from their own homes, using cut flowers that come
Figure 12: A pictorial representation of the
Solomon Islands floriculture value chain

126
from several sources - their own backyard, backyard growers belonging to their personal
network and Honiara Central Market on Saturdays. According to a Vinning and Maedia
2009 report entitled “Solomon Islands Blooming Flower Industry”, the major sources of
demand are businesses, churches, government departments and the general public
for special occasions. The report also states that the prices of flowers are generally high
compared with those of Fiji.
Growing flowers for sale began in Honiara around 15 years ago. At the end of 1998,
ethnic tensions on the main island of Guadalcanal rapidly escalated. There was
resentment at influence of settlers from other islands and their occupation of land in and
around Honiara. The settlers, mostly from nearby Malaita, were drawn to Honiara and its
environs by comparatively greater economic opportunities. Violent clashes involving rival
militant groups erupted. In July 2003, in response to the unrest, the Regional Assistance
Mission to Solomon Islands (RAMSI) sent more than 2,200 armed services personnel, police
and public servants into Solomon Islands. By December 2003, more than half of the troops
had been withdrawn, and more of them departed in early 2004. Today, the RAMSI force
in the Solomon Islands consists of more than 400 people from 15 different countries, with
the majority coming from Australia and New Zealand.
The RAMSI presence stimulated economic activity in Honiara, including the purchase
of flowers primarily by the wives of expatriate personnel. The floriculture value chain
responded to this demand. Once established the chain is now sustained by the local
Solomon island population and is becoming less dependent on expatriate buyers. It
provides a good example of supply of products such as flowers generating its own
demand.
Major themes and lessons for the Solomon Islands floriculture value chain
A “demand pull” value chain with local florists as the main drivers
The problem
With the sudden arrival of a large number of expatriates in Honiara, there emerged a
significant demand for floriculture products. This demand was further enhanced by
church groups, business houses and a growing local ‘flower culture’. The virtually non-
existent floriculture industry was in no position to meet this jump in demand.
Seeing the demand, more and more villagers began to bring small numbers of flowers to
the Honiara Central Market along with their other produce. Entrepreneurial individuals
with an interest in flowers began making flower arrangements and promoting them to
potential clients. In mid- 2006, the Honiara City Council allocated space at the Honiara
Central Market to flowers. Business started very slowly with just the four producers.
The situation was enhanced in mid-2008 when the Market Manager fenced off the
flower area, thereby improving security and enhancing the notion of a clearly defined
dedicated space. There now exist around 40 flower growers, who regularly use Honiara
Central Market as their main outlet. Florists are key drivers in the floricultural supply chains
in Solomon Islands. Flowers once arranged become tradable products to meet a need
rather than a want. Florists in the context of Solomon Islands are those who have the skills
to add value to cut flowers through flower arrangement.

127
A lot of people making a little bit of money, a basis for sustainability.
The problem
Although the market for cut flowers in and around Honiara has increased from nothing to
what it is today, it still remains very small in economic terms. On this basis, there has been
no major investment in commercial flower production.
There has been a significant increase in the number of smallholder producers of growing
flowers and decorative foliage around their homes or food gardens. None of these
producers earn a living solely from floriculture. They continue to produce flowers even
when there are lulls in the market. The varieties of flowers grown and the small scale
nature of production means that becoming a new grower or expanding production
requires little or no capital investment. Similarly, the informal florist/flower arranging
business has very few overheads, with people working on a part-time basis out of their
own homes. This has allowed farmers or working people to take on flower arranging as a
small business.
Accessing appropriate technical assistance and support – linking with Pacific island
enterprises
The problem
As the floriculture industry began to develop, a need was identified for technical
assistance and support. However, this support had to match the small scale of production
and level of business experience of the stakeholders.
The early flower enthusiasts and aspiring entrepreneurs began to lobby anyone who
would listen to get some support for floriculture. The first technical inputs came in the
early 1990s when the International Labour Organisation (ILO)/USP provided the service
of Jimmy Montu from Fiji. Jimmy for more than a decade provided training in floral art
through the region. Being one of the founders of Fiji’s floriculture industry, as a florist and
grower, Jimmy Montu knew what it meant to start small and how to connect with his
Pacific counterparts. This low key low budget program has a major impact on floriculture
development in the Solomon Islands and other small PICs.
More recently, AusAID gave direct support to developing value chains in the Solomon
Islands through the Value Chain Enhancement through Enterprise Development (VCEED)
Project. The focus of this initiative was to provide technical assistance and training to
emerging Solomon Island value chains using successful enterprises from other Pacific
islands as service providers and mentors. The program involved Vanuatu’s Venui Vanilla
(vanilla) and Tanna Coffee (coffee). For the floriculture value chain this assistance was
provided by Fiji’s South Sea Orchids (SSO) and Tadra Flowers (TF). SSO has operated a
floriculture out grower program and wholesale market for more than two decades. TF is
Fiji’s leading florist.
The approach of using Pacific island value chain enterprises for assistance and mentoring
was a major departure from the norm of training and technical inputs coming from

128
outside the region. This approach proved successful because those providing the advice
could identify the context within which they were operating. This Pacific enterprise to
Pacific enterprise approach warrants replication in the development of value chains
throughout the region. Unfortunately, AusAID prematurely ended VCEED in favour of a
far less focused and development theory “making markets work for poor” approach.
Scaling up – determining the most appropriate model for the Solomon Islands
The problem
The Solomon Island floriculture industry still remains very small. The challenge is to scale
the industry up to a level that makes a significant contribution to the economy and to
livelihoods.
The appropriate model for industry growth still remains unclear. Vinning and Maedia
(2009) identified three potential growth paths for the Solomon Islands floricultural industry:
• The Kenya and Ecuador route by concentrating on developing the export industry
• The Hawaii route by concentrating on developing the tourism sector
• The Fiji route by concentrating on developing the domestic industry.
Vinning and Maedia concluded for Solomon Islands concentrate in short to medium term
that the “Fiji route” was the most appropriate, using the SSO out grower approach as the
appropriate model.
Despite this recommendation, there are ongoing donor driven efforts to develop the
floriculture sector which have focused on exports. This included a recent study visit of
florists and growers to markets in Brisbane, Australia. A small industry exporting to Australia
will face large, and probably, insurmountable quarantine market access constraints.

129
Agricultural value chain - A way of describing the different ‘links’ along a chain required to
take a product from the farm to the end consumer.
Cash flow – The difference between the flow of money over time from selling the product or
the service and the flow of money spent on producing the product or service.
Competitive advantage of a particular value chain compared with other value chain
producing the same product - Being able to offer consumers a differentiated/better product;
and being able to offer consumers a lower price because of a relative lower-cost advantage.
Cost benefit analysis (CBA) – A process for calculating and comparing benefits and costs
over time that are expected to arise from the proposed investment in the value chain.
Demand – How much consumers are willing to pay for the product at the market price.
Exporter marketing margin - The difference between the fob price (the price loaded on the
aircraft or vessel) and the price paid to farmers (or trader) for the equivalent quantity of raw
material that went into the product.
Exporter “profit” for the product - The exporting marketing margin less the cost of getting
the product from the farmer onto the aircraft or vessel.
Farm gate price – The price farmers receive for their product if they sold it at their farm rather
than further along the value chain.
Fixed costs – Those costs that are the same regardless of how much is produced. For
example land rent or the cost of a building.
Gross margin for a farm enterprise - gross income (i.e. value of production) expressed in
monetary terms minus the variable cost of that production.
Market – The consumers who purchase the product.
Marketing - The process of getting the product from the farm to the consumers.
Market research - The process of investigating a market in order to find out the sales
prospects for a product and how to achieve success with it.
Niche markets - A niche market is small part of the overall market on which a specific product
is focusing. For example the market for organically certified cocoa is a small part of the
overall market for cocoa.
Opportunity cost – The money that could be earned from the resources used to produce the
product or service if they were used to produce something else. For example the opportunity
cost of a farmer’s labour used in growing a particular crop is what he or she could earn using
this labour to grow a different crop or the wages that could be earned working off the farm.
Annex 2:
Key terms and definitions

130
Price taker value chain - A value chain that has no influence on the final market price of
the product. For example a Pacific Island exporter selling cocoa to the world market has no
influence on the price.
Retailers marketing margin for the product - The difference between the retail price and the
price paid to the wholesaler/importer.
Retailers “profit” for the product - The retailer marketing margin less the cost of getting the
products from the wholesaler into the hands of the final consumer.
Risk – What could go wrong. For example your crop being destroyed by a natural disaster.
Technology – Using knowledge of tools, machines, techniques to solve a problem or improve
a pre-existing solution to a problem. For example, the use of plastic crates are a technology to
overcome the problem of product bruising.
Value chain actors - The people at each link along the chain required to move a product from
the farm to the consumer.
Main actors - those who buy and sell the product as it moves along the chain. For example a
farmer is a main actor.
Supporting actors - those who provide services to facilitate the movement of the product along
the chain. For example a transport company is a supporting actor.
Value chain analysis – A way of looking at every step and actor along the value chain to
identify both weaknesses to be resolved and opportunities for increasing profits for all involved in
the chain.
Value chain map – A value chain map is a way of taking what is seen regarding the value chain
and put it into a pictorial form that is more easily understood.
Variable costs - Those costs that vary according to how much is produced. For example the
cost of labour is a variable cost.
Wholesaler/importer marketing margin for the product - The difference between the price
the product is sold to the retailer (the wholesale price) and the fob price for the product.
Wholesaler/importer “profit” for the product - The wholesaler/importer marketing margin less
the cost of getting the product from the exporting port (airport) to the retailer.
Key terms and definitions

131
Annex 3:
A selection of other value chain
guides/resources
Methodological guideline Lead authors Sponsoring organization
Participatory market chain
approach
(CIP 2006)
Thomas Bernet, Graham Thiele,
Thomas Zschocke
International Potato Center (CIP)
Guidelines for rapid appraisals
of agrifood chain performance in
developing countries (FAO 2007)
Carlos A. da Silva, Hildo M. de
Souza Filho
Food and Agriculture Organization
of the United Nations (FAO)
Participatory market chain
analysis for smallholder producers
(CIAT 2007)
Mark Lundy, Veronica Gottret,
Carlos Ostertag, Rupert Best,
Shaun Ferris
International Center for Tropical
Agriculture (CIAT)
The operational guide for the
making markets work for the poor
(M4P) approach (DFID 2008)
Springfield Centre (specific
authors are not specified)
Department for International
Development (DFID), Swiss
Agency for Development and
Cooperation (SDC)
Chain-wide learning for inclusive
agrifood market development (IIED
2008)
Sonja Vermeulen, Jim Woodhill,
Felicity Proctor, Rik Delnoye
International Institute for
Environment and Development
(IIED)
Making VC work better for the
poor: A toolbook for practitioners
of value chain analysis (M4P 2008)
Tim Purcell, Stephen Gniel, Rudy
van Gent
Making Markets Work Better
for the Poor (M4P) Project, UK
Department for International
Development (DFID)
ValueLinks manual
(GTZ 2008)
Andreas Springer-Heinze German Agency for Technical
Cooperation (GTZ), now German
Agency for International
Cooperation (GIZ)
VC development for decent work
(ILO 2009)
Matthias L. Herr, Tapera J. Muzira International Labour Organization
(ILO)
Building competitiveness in
Africa’s agriculture: A guide
to value chain concepts and
applications (World Bank 2010)
Martin Webber, Patrick Labaste World Bank
Pro-poor VC development: 25
guiding questions for designing
and implementing agroindustry
projects (UNIDO 2011)
Lone Riisgaard, Stefano Ponte UN Industrial Development
Organization (UNIDO),
International Fund for Agricultural
Development (IFAD), Danish
Institute for International Studies
(DIIS)
Value chain development wiki
(USAID no date)
Not specified United States Agency for
International Development (USAID)
1
CIAT’s guide for value chain development was first published in Spanish in 2003. A revised version was published in
2007 in English and Spanish. The revised English version was assessed for this review.
2
The guide reviewed here, UNIDO (2011), is part of a toolkit of value chain development for understanding and
diagnosing value chains. See http://www.unido.org/fileadmin/user_media/MDGs/IVC_Diagnostic_Tool.pdf.

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