The cooperative and the company: A game changer for smallholders
Toan Thang Agricultural Service Cooperative (TTAC) was founded in 1960 and is located in Hai Toan village, Hai Hau district, Nam Dinh province of Vietnam. Since 2016 they have transformed to a new cooperative model. Currently it has 456 rice grower members. Their main services to members are input supply of fertiliser, pesticides and seedling, land preparation and other output services such as collecting, processing of rice and medicinal plants. After a scoping for potential, TTAC has been Agriterra’ s client since September 2017.
Similar to most cooperatives in Vietnam, Toan Thang Cooperative is facing big challenges from the ever-emerging highly competitive market. Despite being at a strategic location in the land of aromatic specialty rice, TTAC lacks capacity in business management, it has limitations in human resource management, lacks capital for investment and for specialty marketing skills. In 2017 the cooperative had 144 ha of farming land contracted with only 3 clients, which generated a low income. Being very passive in doing business, TTAC mostly waited for its buyers to approach them rather than actively seeking out buyers, thus the cooperative was highly dependent on the demand of its clients. Additionally, their product was not branded under Toan Thang. Smallholder farmers and the cooperative received only a small amount of money, as most of the profit went to the middlemen and distributors.
Market research was conducted by Agriterra national business advisors, local consultants and the cooperative mapping out potential buyers and strategic partners for Toan Thang. A SWOT analysis was made showing great opportunities for TTAC to start a joint business venture with partners who could compensate for what TTAC is missing. A series of meetings and matching events with development partners in the private sector and government agencies were hosted by Agriterra. Early 2018 seven strategic partners were identified with strong a commitment to support Toan Thang and to start a company under the Cooperative. These include Hai Hau District People Committee, the Agriculture departments of Nam Dinh Provincial and Hai Hau District, the Ministry of Agriculture and Rural Development, Vietnam Cooperative Alliance and the Center of Technology Transfers and Agricultural Extensions (CETDAE).
In June 2018, Hai Hau Organica JSC was founded by Toan Thang Cooperative in partnership with Sunshine Holding with a charter capital of VND 500 mil (20,000 EUR) of which 60% is mobilised from its farmer members. Seeing great potential in the organic specialty rice market, the company business plan was presented and it attracted an investment of VND 200 mil (8000 EUR) immediately, given as a grant by the Vietnam Cooperative Alliance. This has allowed the company to pilot its first organic crop of Tam Xoan and Nep Bac specialty rice successfully. In the last quarter of 2018 the total production was 127.4 ton of organic specialty rice which generated a revenue of 334,435,000 VND (13,000 Euro). The sale price of organic rice has increased by 40% in comparison to 2017.
Mr Ha Minh Duc, Director/Chairman of Toan Thang Cooperative, is very optimistic and says; “In the first quarter of 2019 the cooperative will expand its organic production area triple-fold”. This joint venture is allowing the cooperative to attract external resources, not only in terms of money and funding, but in expertise such as marketing and knowledge of the value chain. Duc stated that “Toan Thang has land and skillful farmers in production and natural conditions, but Sunshine has distribution channels, processing techniques and external relationships. This is the fundament of Hai Hau Organica. We believe in organic sustainable production, an equal share of profits and maximising farmers value.”
Farmers of Toan Thang Cooperative are benefiting financially by having a better marketing service. They can participate in a profitable organic rice business and sustainable farming techniques of organic rice production. One of the 39 new members who joined the cooperative recently said; “We are happy with the prospect of a good future for this organic rice business and we are committed to invest money and use the services of the cooperative”.
Nguyen Thu Trang, business advisor, Agriterra Vietnam