The Business Case for Sustainable Agriculture in Asia

Start Date: 
Jan 15, 2014
End Date: 
Apr 15, 2015
Summary: 

Kellogg Company sources agricultural commodities from around the world to manufacture its products; the company is committed to enhancing the natural resources and livelihoods of the areas and people from whom it sources its ingredients. As part of its Project K Initiative, Kellogg is working to build the global supply chain of the future by making investments in emerging markets. Kellogg seeks to understand how its current work in Thailand and India (with rice and corn, respectively) impacts the triple bottom line. Specifically, this research evaluates impacts on the environment, farmer livelihoods, and with regards to improving Kellogg’s top/bottom lines and security of supply.

Rice represents a particular sourcing priority for the Asia Pacific and Africa region because it is needed by every plant in the region and is central for the production of two of Kellogg’s most celebrated brands: Rice Krispies and Special K. The company uses a specific variety - medium grain rice - for the production of its cereal. Historically, medium grain rice has grown only in certain temperate regions; however, increasing climatic stress in these areas and the need for a reliable medium grain rice supply to meet the needs of the growing Asia Pacific region led Kellogg to develop its own variety of seed able to grow in tropical climates. In 2014, Kellogg implemented a medium grain rice pilot program in Thailand.

This project uses farmer and expert survey results and desktop research to determine if Kellogg’s initiative can provide a viable source of medium grain rice to support the manufacturing of Kellogg products in Asia Pacific while improving farmer livelihoods through improved agronomic practices and income security and reducing negative impacts on the environment. The primary objective of the survey and subsequent analysis was to determine the necessary elements to create a secure and sustainable supply chain for medium grain rice production in Thailand, and to present interventions Kellogg Company can implement to improve production.

Corn is the main ingredient incorporated into a number of products including the iconic Corn Flakes cereal brand. In India, low cost corn, grown with non-GMO seeds, represent characteristics that are paramount for continued use in Kellogg products. Currently, corn
accounts for 9% of total cereal production in India with numbers doubling in the past decade and expected to increase. Nonetheless, yields are about half of the global average with climactic conditions and limited technical resources contributing to lack of capacity to increase quality and quantity of yields.

Through interactions with farmers and millers, complexities within the corn supply chain have been better understood. Survey results gleaned from farmer interviews reveal that a combination of pre-harvest and post-harvest practices contributes to the lessened quality and quantity of corn. Additionally, senior-level management identified their concerns and willingness to support proposed strategy interventions based on responses from farmers. Overall, considering farmer and miller perspectives along with senior-level management provides the opportunity to identify the most viable intervention strategies that are low cost and will have a net benefit for key stakeholders.

Sponsor: 
TRG-Franklin Associates
Keyword: 
Supply chain
Cost-benefit analysis
Kellogg