Business

Last updated: 11 august, 2009 - 10:53 GMT

Global Branding

About this programme by Peter Day

All farmers are vulnerable - and to many things.

The weather during the growing season can play havoc on crops. Diseases and plagues are a constant threat to be guarded against.

And just as vicious are the vagaries of the commodity cycles that are reflected in the global prices for the food they grow.

The Fair Trade movement tries to avoid the worst effects of a sudden plunge in prices - triggered, for example, by good harvests - by promising to pay a premium to the growers and give them more certainty about their income.

But exposure to the ups and downs of the commodity cycle is not a nice thing.

The main trouble with commodities is that they are just that : commodities. Provided wheat or coffee beans or tea meet a certain minimum standard, they can be traded round the world without anyone caring much where they were grown or how they got into the trading system.

The experts say the way out of this is to imitate the big international companies and build a brand - that is, to spend money on advertising or marketing so that consumers are prepared to pay more for a sign or a symbol or a name on a packet of tea or coffee or rice. The commodity is turned into a premium product.

That is not possible for most farmers - though some co-operatives of farmers, banded together, can make links with Fair Trade organisations in consuming countries and get their story told.

In the shops

This edition of Global Business hears from a man who was hired to set up a cotton supply chain for an Indian company's cotton mills in Nigeria, after a currency crisis meant it was impossible to important raw cotton from abroad to feed the mills.

Sunny George Verghese, who is Indian by origin, had a background in business and agriculture. After getting the cotton supply moving, he turned his attention to other Nigerian agricultural produce.

The business he has built up in 20 years from that Nigerian base, Olam International, now supplies one quarter of all the world's cashew nuts.

But only other businesses know the Olam name, not the ordinary retail customer in the shops.

Olam has built its business on being a brand for other brand owners to reply on. They buy their nuts from Olam, and put their own brand on the nuts they sell to the shops.

Sunny Verghese tells me step by step how he learnt this business on the ground, overcoming obstacles, learning from mistakes. Olam now sells 14 different agricultural products to 56 countries.

But the cashew nut experience illustrates the things that he had to learn - and that other producers will have to learn if they want to add the power and value of the brand to their wholesale or retail products.

Much of the nut, when picked off the trees, is shell, so it is best to process the nuts near the farms. But the expertise in shelling and processing nuts was in India, so Mr Verghese had to bring that skill to Africa to create a better business there.

Bags of products

He also had to tackle the plausibility of Africa as a business address. When he started the company, Western customers were doubtful about the reliability of suppliers in African countries.

That made it difficult to agree long-term contracts with customers, forcing processors and the farmers whose crop they bought to trade in the spot market for immediate delivery - exposing them again to the uncertainties off the world commodity markets.

Olam had to flee Nigeria to gain plausibility, relocating first to London and then to Singapore. In doing so, it was building reliability into its wholesale brand.

The Olam story also illustrates the power of information in another way. Commodities are just bags of products that look and smell OK. Olam has added information to the nuts: where they came from, and what is happening to them during processing and shipping.

You cannot hope to rid farmers of exposure to the ups and downs of the raw material price cycle altogether. But every product tells a story - and that is what branding is all about.

Previous updates - August

  • Peter Day finds out how to make money out of commodities in the developing world.

July

June

  • Peter Day finds out how to innovate your way out of an economic downturn.

  • A sense of time and place is changing Internet businesses everywhere.

  • Social entrepreneurs from Lebanon, Palestine and Egypt who are all innovating and confronting poverty in new ways.

  • A look at a hugely successful childrens TV series and it's boss Magnus Scheving.

  • No business school has a more daunting image than Harvard, 100 years old last year.

May

  • Intel is going to appeal against both the judgement that it broke European Union monopoly rules and an eye-watering fine.

  • Men got us into this current economic mess, maybe women can get us out of it.

  • An entrepreneur's thoughts on a way of weaning motorists off their reliance on oil.

  • The industry that changed the world – the US automobile business – is in deep trouble. Peter Day finds out why.

April

  • A look at the edges of Europe and asking whether joining the EU, or in the case of Iceland wanting to, was worth it?

  • A look at the edges of Europe and asking whether joining the EU, or in the case of Iceland wanting to, was worth it?

  • A look at the edges of Europe and asking whether joining the EU, or in the case of Iceland wanting to, was worth it?

March

  • Sydney Finkelstein, co-author of Think Again - Why Good Leaders Make Bad Decisions and How to Keep It From Happening to You.

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