The Clustering Approach To Agroenterprise Development - 2a

Part II.
The 8-Step Clustering Approach to Agroenterprise Development
Part II
The 8-Step Clustering Approach to

Agroenterprise Development
INTRODUCTION
Part II presents the eight steps in the clustering approach to

agroenterprise development that evolved in the course of the
implementation of the USDA-assisted Small Farms Marketing
Project (SFMP) that started in December 2004 and
implemented in five pilot sites in Mindanao by CRS-
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Part II. The 8-Step Clustering Approach to Agroenterprise Development
Philippines in partnership with local NGOs and Local

Government Units (NGOs).
The sharing of experiences and the refinement of the

clustering approach were facilitated by the gatherings of CRS-
Philippines with its development partners and farmer leaders
for joint learning called the Mindanao Agroenterprise Learning
Alliance (MAELA). These interactions captured the rich
experiences of CRS-Philippines in developing agroenterprises
in the light of emerging and growing markets, and the
challenge to assist small farmers to become competitive and
significant market players.
CLUSTERING FOR SMALL FARMERS
The highlight of the CRS-Philippine agroenterprise

development strategy is the innovative method of organizing
farmers into small groups called “clusters” within a defined
territory or geographical coverage. This geographical focus
facilitates the partnership building work with local
development partners, like the LGUs, for sustainability. In a
defined territory, the planning and monitoring processes for a
particular farm production system are more focused and more
efficient.
The territory of a cluster can be a sitio (sub-village) barangay

(village), group of barangays, or the whole municipality. In
due time, clusters may expand in membership or coverage, or
may form a network or federation of clusters and cover more
barangays or municipalities, and so on.
Forming clusters signifies a new development in farmer

organizing and marketing set-up. The members in a cluster
agree to develop an agroenterprise and proactively plan farm
production according to a marketing objective. As product
supply units catering to specific quality and delivery
requirements of the buyers, the clusters offer a focus to
attract buyers.
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Being small groups, clusters are better able to keep pace with
continuously changing market opportunities that require
constant innovations from them in production and postharvest
practices. Moreover, the chance for each member to actively
participate and be heard in meetings is greater than in large
groups.
The clustering method provides a concrete mechanism where

farmers can exercise ownership and control of their
agroenterprise, benefit from it, and thus facilitate the farmers’
empowerment process. The clusters provide the learning
ground for self and group management, a maturation process
that is necessary for farmers to transition successfully into
formal business entities and effectively relate with other
market players and partners.
The clustering approach for agroenterprise development is a

sequential process involving eight steps that prepares
farmers to link with the market, assist them to be effectively
organized into small groups or clusters, and guides them to
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engage the market with favorable arrangements that improve

their incomes and livelihood.
The first five steps comprise the preparatory activities. This

emphasizes the need for farmers to learn new skills, access
new information, and adopt innovative methods to be able to
identify and respond to market demands and opportunities
given their capacities. Adequate preparation during this
critical business preparation and organizing stage ensures
that a higher degree of success is attained when their actual
marketing starts to take place in Step 6 (Test Marketing).
As shown in Figure 3, the process does not end with the

development and strengthening of the cluster. The cluster
may either return to cluster plan formulation (Step 5) and
review its agroenterprise plan, or initiate the formation of new
and additional cluster (Step 4). Table 1 presents the features
and outputs of the different step.
Figure 3. An illustration of the 8-step process of the clustering

approach to agroenterprise development, CRS-Philippines
experience.
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Table 1. The steps, features, and outputs of the clustering approach

to agroenterprise development as developed by CRS-Philippines.
The
Farmers Step Dura- Activities/Tasks Outputs
“Journey” tion “The Work” “The Milestones”
Getting (1) 2 to 4 • Identify project site • Identified project site for

started weeks • Develop partnerships development support
Site with stakeholders • Established partnership
selection, (government, other with stakeholders with
partnership NGOs & development their representatives
building, organizations, local constituting a working
and business sector, group (WG)
formation farmers • WG provided with
of Working • Organize a working orientation on the
Group group (WG) development project,
(WG) • Convene orientation marketing basics,
sessions and planning participatory research
meetings • WG with a plan to
conduct research
Knowing our (2) 4 to 6 • Assist the WG to • WG/local research team

product weeks organize a local trained on PSA and the
supply Product research team use of the tools
capacity Supply • Provide training on • Research results (info
Assess- PSA on farm assets, skills,
ment • Conduct PSA products, production &
(PSA) and • Undertake a marketing conditions,
Product participatory analysis of problems, etc)
Selection research results, then • List of existing dominant
select product(s) products and farmers
producing them
• Selected products for
further research (i.e.
market chain study)
Understand- (3) 4 to 6 • Provide training to WG • WG trained on MCS and

ing our weeks on MCS the use of tools
market Market • Conduct market visits • Diagrams of market
opportunities chain study (in immediate chains for selected
(MCS) commercial areas) and products linking to
undertake MCS potential buyers with
• Undertake a costs and margins along
participatory analysis of the chain
research results and • Initial market negotiation
consolidate findings with potential buyers
into a report with • Research report
analysis of product
supply capacity
matched with market
opportunity
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Table 1 continued…
The
Deciding to (4) 2 weeks • Invite farmers growing • Report presented

work the selected products • Identified farmers
together and Cluster for orientation meeting; interested to join the
to organize formation present research report cluster
for market • Provide orientation on • Cluster formed with
competitive- marketing basics and cluster leaders
ness clustering • Basic cluster agreement
• Initiate the formation of – to pool products and
clusters, identification collectively market
of cluster leaders, • Objectives set relative to
conduct organizational agroenterprise
planning
Preparing to (5) 2 weeks • Review commitment of • Cluster planting calendar

engage the cluster members or product harvest
market Cluster (product supply, etc) calendar
Plan • Discuss in detail • Product quality
Formula- production management plan
tion programming • A cluster agroenterprise
(technologies like plan consolidating
NFTS, support market, supply,
services, infra) management and
• Facilitate an interactive financial plans
process of • An operational plan for
agroenterprise planning test marketing
with operational
planning
Taking a leap (6) 4 weeks • Undertake test • At least 4 trial product

marketing activities deliveries
Test • Call cluster meetings to • Performance report to
Marketing assess performance the clusters of every
after every product delivery relative to
delivery, implement cluster plan
adjustments in the plan • Expanded cluster
for improvements agreements, as needed
Moving (7) Continu- • Revisit cluster plan for • Regular product

forward to ing (after scaling up deliveries to buyers
build up our Scaling Up test • Establish business • Innovations (product
business market- operating systems and/or market
ing) • Implement regular development)
product deliveries to • Written business policies
the established and systems
markets; pursue new • Monthly financial and
markets operational reports in
• Call monthly cluster the cluster meetings
meetings to assess
performance
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Table 1 continued…
The
Making it (8) Continu- • Ensure that cluster • Knowledge and skills in

continue and ing (from leaders convene agroenterprise
grow. Cluster cluster regular cluster operations (in the fields
strengthen- formation meetings and of leadership and
ing to 2 undertake cluster organizational
years) assessment development, market
• Facilitate periodic strengthening, product
capability building supply and financial
support: trainings, management)
team building activities, • Clusters progressing in
cluster cross-visits, higher level of maturity
exposure trips, • Networking of clusters;
reflection sessions, etc. formalization
• Promote networking of • Networks in the business
clusters and business community
links
• Organize formal
business entity (e.g.
cooperative)
It is worth noting that the market environment of clusters is

dynamic and CRS experiences suggest that the best results
are attained when the key ideas in the approach and their
application is adjusted to the local circumstances, including
the resources of the farmers and the development service
providers.
The succeeding sections of this Guidebook describe the eight

steps in more detail.
Benefits of Clustering:
To the farmers
1. Better access to markets and better bargaining

power (as an effect of quality, volume, variety and
regularity)
2. Lower cost of doing business
3. Diversified and more predictable markets
4. Better income (as a result of higher price, reduced
losses and higher recovery, more stable markets)
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5. Better relations among growers as a result of

working together and helping one another
6. Good image in the business community
7. Organized way of relating to resource providers
(government, non- government, business groups)
To the buyers
Buyers are always particular about quantity, quality and

delivery reliability. This is where transacting with clusters
can be beneficial due to these reasons:
1. Better compliance with quality agreements

through the cluster’s Product Quality Management
Plan it has formulated and must implement
2. Traceability of both cluster and grower through
product labeling procedures
3. Easier product consolidation work
4. Immediate rewards & sanctions (discipline)
5. Flexibility to provide product preferences
6. Quick response to market feedback/complaints
7. A cluster can give in advance notice of impending
changes in shortages of product to be delivered
To the donors and implementing agencies
1. Efficient use of resources (including services)

2. Wider coverage
3. Equity of participating communities
4. Enhanced production-oriented livelihood,
agriculture and NRM projects
5. Sustainability (post-project)
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Step 1. Site Selection, Partnership Building and Working Group Formation
Site Selection, Partnership Building

and Working Group Formation
1.1 PROCESS OBJECTIVES
Through the help of the Facilitator, Step 1 aims to enable the

project to:
1. Determine the specific site for the agroenterprise;

2. Identify and engage institutional partners, such as
Local Government Units, Regional and National
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Government Agencies, Non-Government

Organizations, and Peoples Organizations;
3. Form and orient a Working Group (WG); and
4. Assist the WG in formulating a plan for community-
based research.
1.2 INTRODUCTION
Site Selection, Partnership Building and Working Group

Formation is a community process where appropriate site or
sites and partners for the agroenterprise project are identified,
and a Working Group (WG) composed of producers, local
government units (LGU), non-governmental organizations
(NGO), business sector and other relevant representation is
constituted.
This is also the phase where potential farmer leaders are

identified through rapid appraisal. These leaders are invited to
be part of the Working Group (WG) and to participate in the
upcoming initial activities.
1.3 SELECTING THE SITE
Basis for selection
In many cases, sites for the agroenterprise endeavor can be

pre-identified from among existing project areas, or on the
basis of donor preferences.
Ideally, a potential site for the agroenterprise project should

have the following facilitating or enabling factors:
1. Responsive LGU
2. Presence of good extension services
3. Willing producers
4. Surplus farm products
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5. Favorable social conditions (peace and order,

community awareness)
6. Presence of potential partners or related projects such
as agriculture, natural resource management,
landcare, or community development
The presence of more of these factors would facilitate the

development of an agroenterprise.
At the minimum, willing farmers who have products that can

be marketed can let an agroenterprise endeavor begin.
However, this will require so much facilitation for clustering,
capacity building, operationalizing and networking.
Geographical Focus
The site can be a sitio (sub-village), barangay (village),

municipality, or a group/combination of each.
In a small area, like the sitio or barangay, the focus can be on

understanding the local marketing system and identifying
problems and bottlenecks that can be addressed through
interventions in the local economy.
Rapid Area Assessment
In order to have a good grasp of the current situation of the

site, a quick survey of the resources, institutions and their
predominant business and production activities will be of help
to the Facilitator. Knowing what and who are in the community
will help him/her in carrying out the assigned tasks.
The following information can serve as a starting point for the

Facilitator in making a rapid assessment of the area prior to a
more extensive information gathering and analysis:
1. Physical resources (land and its use, water

resources, soil, climate, rainfall patterns, cropping
seasons, vegetation)
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2. Community profile (gender, age distribution, number

of farmers, other sectors, household size, social
groupings, educational level, history of collective
action)
3. Infrastructure (roads/accessibility of farm areas,
communications, electricity, water systems)
4. Business activities/services (business
establishments, markets, business service providers,
credit services both formal and informal)
5. Development assistance (NGOs, political structure,
government policies and programs for the agriculture
sector).
The above information can be generated by direct observation

or by reviewing secondary sources such as the barangay or
municipal profiles and development plans, LGU reports such
as those in the Municipal Planning & Development Office
(MPDO), the Municipal Agriculture Office (MAO), the
Municipal Economic Enterprise Development Office
(MEEDO), the Municipal Engineering Office (MEO), and other
relevant offices.
1.4 BUILDING PARTNERSHIPS
This is the continuing process of linking with and engaging

relevant institutions or organizations to support the
agroenterprise development undertakings. For example, the
Barangay Development Plan (BDPs) of Barangay Local
Government Units (BLGUs) can be the entry point for
agroenterprise projects especially when these are consistent
with, or part of the agricultural development component of the
BDP. Moreover, barangay officials, such as the Barangay
Chair and the Committee Chair on Agriculture, can provide for
the relevant local policy and program support.
At the level of the Municipal LGU, partnership can yield more

support and counterparts, such as human resources,
infrastructure, logistics (i.e., hand-held radios and
transportation services), and policies. These can be provided
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by the office of the Local Chief Executive, the MAO, the

MEEDO, the MEO, the MPDO, and the offices of relevant
Sangguniang Bayan (Municipal Council) Committees.
Links with other institutions and organizations operating in the
barangay, municipal and provincial territories (such as
producers, business sector and church) can also be
established.
The process of building partnerships can be initiated through

courtesy calls and meetings leading towards a consultation
among identified partners. The active partnership begins with
the establishment of a Working Group (WG).
1.5 FORMING A WORKING GROUP
During the community consultation, the Facilitator draws out

the current situation related to farmers’ production and
marketing, available resources, and existing programs of
NGOs and LGUs. From the discussions, he/she leads the
participants to a consensus on issues pertaining to farm
productivity and incomes.
Addressing the above issues realistically needs a multi-

pronged approach which can be led by the WG.
Role and lifespan of the WG
The WG is an adhoc body organized to provide leadership in

the gathering of information that can help in product selection
(Step 2), in conducting market chain studies (Step 3), and in
forming cluster (or clusters) of farmers for agroenterprise
development (Step 4). Immediately after cluster formation, the
WG transforms itself into a Cluster Advisory Group (CAG) that
will provide assistance in formulating and implementing an
agroenterprise plan (Steps 5-7).
Beyond the above tasks, the WG (and eventually the CAG),

can take an active role in utilizing the partnership as a
mechanism to promote and develop the sharing, coordination
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and complementation of local programs and resources

towards a common goal.
Composition of the WG
A WG may be composed of representatives from the MAO,

MEEDO, NGOs, business sectors, farmers and people’s
organization (PO). WG membership ranges from 10 to 15
individuals, at least two-thirds of which are farmers.
Members of the WG should meet at least once a month to

discuss updates and coordinate activities.
To ensure the representation of farmers in the WG, the

Facilitator must take extra effort to identify potential farmer-
leaders.
(Refer to Facilitator’s Tool Kit No. 1 for the standards used in

identifying farmer-leaders to be involved as members of the
WG.)
Identifying local leaders for the WG
The Sociogram method can be used to identify indigenous

leaders (male and female key persons and/ or opinion
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leaders) in the community who can facilitate the change

process.
(Refer to Facilitator’s Tool Kit No.1 for a guide in using the

sociogram.)
1.6 ORIENTING THE WORKING GROUP ON

MARKETING
Immediately after its formation, the WG undergoes an

orientation on the basics of marketing. This includes the
definition and importance of marketing to the farmers, the
concept of supply and demand, marketing strategies/mix (the
4 Ps), types of market, and the market chain.
(Refer to Facilitator’s Tool Kit No. 1 for the Session Guide for
the Orientation on Marketing.)
After the orientation on marketing, the WG agrees on the

schedule of the training on product supply assessment that
will be undertaken in Step 2.
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Facilitator’s Tool Kit No. 1
A. IDENTIFYING LOCAL LEADERS
Standards used in selecting farmer-leaders
Selection standard for leaders, men and women, may include,

but not limited to the following:
1. Farmer producer
2. With experience in marketing farm products
3. Respected
4. Aware and concerned about the community issues and
needs
5. Believes in the stake and power of communities
through participation
6. Good communicator: good listener, can express well
and open to ideas
Using the Sociogram Method in identifying local leaders
How to Use the Sociogram

The sociogram is especially useful in analyzing social or peer
relationships. It gives the Facilitator an idea of how a member
of a community or cluster is viewed by her/his peers in terms
of leadership, trustworthiness, approachability and in other
similar qualities.
Spot potential leaders you can invite later to join the Working
Group, following the basic steps below. You may revise these
steps depending on specific or bulk of information needed and
the number of respondents you can manage. Just make sure
you maintain gender inclusiveness.
1. Gather at least 20 respondents, 10 men and 10
women. Give each one two (2) small sheets of paper.
Make sure each has a pencil or ballpen.
2. Ask them to write their names on the topmost part of
each paper provided to them.
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3. Ask them to discreetly write on one piece of paper the

names of one (1) man and one (1) woman from the
community whom they mostly approached for advice
or opinions. Please emphasize that their choices
should come only from their community.
4. Collect the answers and proceed to the next question.
5. Ask them to discreetly write on one piece of paper the
names of two people (one man and one woman) from
their community whom they trusted most. Emphasize
that their choices should come only from their
community.
6. Collect the answers and thank the respondents for
cooperating.
7. Classify the responses corresponding each of the two
questions asked.
8. Make a sociogram of the responses to show who
among the names were frequently most approached,
or most trusted (and other qualities).
9. Make a sociogram of the results. (Refer to Figure 4 for
the example.)
10. Spot the two most approached men and women and
list down their names. Similarly, spot the two most
trusted men and women and list down their names.
This gives you eight potential leaders.
In case a person is chosen as most approached and
most trusted by a respondent, give him/her a point for
each quality.
11. Develop a tool to further assess the above potential
leaders in terms of leadership behavior (may be a
matrix of leadership qualities or standard using a 3-
or 5-point-scale from poor to excellent.
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Man Man
Mario Ramon
Woman
Woman
Bilma
Lisa Man
Armando
Man
Rolando
Woman
Woman Teresa
Mila
Man Woma
Woman
Nicasio Minerva
n
Most approached: Man – Armand; Woman – Bilma

Most trusted: Man – Ramon; Woman - Teresa
Figure 4. Example of a sociogram used to identify leaders among 10

pre-identified community members.
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B. SESSION GUIDE FOR THE ORIENTATION ON

MARKETING
Session Objectives
At the end of the session, the members of WG will be able

to:
1. Define marketing;
2. Articulate the effects of market related factors on
farmer’s profit;
3. Explain the relationships of supply and demand and
the factors affecting them;
4. Describe the market chain and the participants/actors
involved;
5. Discuss value chain and how farmers earn from value
addition through participation in the chain;
6. Articulate the 4 P’s of marketing, competition and
market positioning; and
7. Demonstrate positive attitude towards marketing
Time Duration
2.0 hours
Resources Needed
Visual aids, marking pens, newsprint/manila paper,

cartolina (for meta cards), adhesives, session and activity
guide, and energizers
Session Procedure
1. Draw out participants’ understanding of Marketing.

Open participation with this statement:
“One enjoyed a cup of brewed coffee this morning

during breakfast because marketing made it
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possible to move coffee beans from the farmers

and transform it into brewed coffee for your
consumption.”
Ask participants to individually write on the meta cards

what comes into their mind on marketing based on the
statement. Then synthesize the answers into a
definition. (It will help to arrange the meta cards with
suppliers and buyers on opposite ends, then product,
actors and activities/functions in between).
2. Present a matrix for computation where farmers can

appreciate increase in income that is substantial from
market related factors such as price increase of
product, more volume sold/reduced damage, etc.
(Refer to Table 1.) The red figures are the ones the
participants are asked to compute. Deepen
participants with discussion.
3. Give lecture and facilitate discussion on supply and

demand with the factors that affect them or are
affected by them.
4. Give lecture and facilitate discussion on Market Chain

and Value Chain. Present an example of a value
chain. (Refer to the example on page 29.) Draw out
from participants the ways in which product value
increases as it moves in the chain. Distribute meta
cards for their individual answers, and synthesize by
putting together the cards with similar ideas.
5. Give lecture and facilitate discussion on Marketing

Strategy. Draw out from participants what kinds of
questions will be helpful in strategizing using the
marketing mix of product, price, placement and
promotions. (Helpful questions as guide provided
under the topic on Marketing Strategy, pages 31-33.)
6. End the session with an input on competition and

product positioning.
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Session Content/Topics
1. What is Marketing
2. Farming Profitability by being Market Oriented
3. Supply and Demand
4. Market Chain, Value Chain, Value Addition
5. The Marketing Strategy (Target Market and the
Marketing Mix)
6. Competition and Market Positioning
Topic: WHAT IS MARKETING?
Marketing is the set of activities in moving a product from the

point of production to the point of consumption at a profit. It is
satisfying customers’ wants.
Given this definition, the work of marketing involves:
a. Understanding what the buyer wants in terms of

products and the manner of supply to them;
b. Undertaking post-harvest activities such as packaging,
transport, storage, and sale that add value to the
product as it flows from the producer to the buyer
c. Establishing a production-market linkage and
managing communications in between for market
information and feedback
Topic: FARMING PROFITABLY BY BEING MARKET-

ORIENTED
Improving production and yields has positive effect on income.

But increases in price, being able to sell the product and
reducing costs have an even higher impact to farmers’
incomes than just increasing production yield. Farmers’
concern is to earn profits from their sales to be able to cover
the farm costs and to generate earnings for the household’s
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consumption needs. To be able to do this, farmers should

have a basic understanding of the market related factors that
influence profits: price, volumes sold and costs. Table 2
shows how changes in these factors affect a farmer’s profit.
Table 2. Effect on profit of different levels of production, prices, sales

and costs. (Adapted from FAO publication, Horticultural Marketing)
Mktg
Squash Base Yield Half Price Price Cost
Case (+10%) Sold (-10%) (+10%) (-20%)
Yield (kg) 1000 1100 1000 1000 1000 1000
Quantity sold (%) 80% 80% 50% 80% 80% 80%
Quantity sold (kg) 800 880 500 800 800 800
Price per kg 5 5 5 4.50 5.50 5.00
SALES 4000 4400 2500 3600 4400 4000
Production costs 1000 1100 1000 1000 1000 1000
Marketing costs 1600 1760 1000 1600 1600 1280
Total costs 2600 2860 2000 2600 2600 2280
MARGIN 1400 1540 500 1000 1800 1720
% of base case +10% -64% -29% +29% 23%
Note: marketing cost reduction can also apply for production cost reduction.
Base case is farmer produces 1,000 kg of squash; 80% is sold, price is PhP
5/kg, production cost is estimated at PhP 1,000 and marketing cost
packaging, transport, marketing fees) estimated at PhP 1,600.
Topic: SUPPLY AND DEMAND
The quantity of produce that consumers want to purchase is

affected by these main factors: price, tastes and preferences
of the consumers, number of consumers, incomes of
consumers, prices of competing produce, range of products
available to the consumers.
The quantity of that producers supply is affected primarily by:

price of products, cost of production, technology available,
climate and post-harvest capacities.
The price of a produce is determined mainly by supply and

demand. The lower the price, the tendency is the higher will
be the demand. However, as the price goes down eventually
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less will be supplied. Conversely, the higher the price, the

higher is the supply.
1. Supply – is what producers are prepared to sell at a

certain price
2. Demand – is how much buyers are prepared to buy at

the market price
The relationship between what is demanded and what farmers

are prepared to produce leads to a balance between supply
and demand (referred to as the equilibrium). In practice, this
point is difficult to attain because the workings of the market is
very dynamic. Many factors influence supply and demand.
Example, farmer’s supply is affected by climate, seasonality,
road condition, etc. and not just the price.
However challenging is the situation of farmers, it is important

for them to understand how the market works. And their
objective should be: to be market demand oriented. This
means: producing what they can sell instead of trying to sell
what they have produced. This implies the importance of
farmers understanding demand, supply and price
movements/trends.
Topic: THE MARKET CHAIN AND VALUE CHAIN
A market chain refers to a set of linkages between actors

involved from production to the consumers. Actors are those
involved in various functions such as producing, processing,
trading or consuming a particular product, and including those
who provide various services. Figure 5 shows the functions
as the product moves in the market chains with the various
business support services.
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The Market Chain

(Adapted from CIAT ERI Guide 2) Consumption
Research
Retailing
Transportation
Trading
Government policy
& regulation
Processing
Communications
Trading Techical & business

training & assistance
Post-harvest Market information

Handling & intelligence
Production Financial services
Production input supply
Figure 5. A sample of market chain showing the different stages

and the corresponding business support services.
As the product moves from the production point to any point

along the chain towards the consumers, there is value
addition (i.e. an increase in worth). When various actors work
together for value addition, the resulting relationship among
the actors is referred to as the value chain.
Farmers as producers are part of the market chain but they

are not even aware of this crucial role they have. Helping
them to understand market chains and value chains will open
their minds that they can benefit by being active players in the
chain with other actors.
The Value Chain presents how the value of a product is

increased as it passes through different stages or links in the
chain by way of the example in Figure 6.
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28
Siay Growers’ Price Note: Trader ’s Buying Price is

Php370.00 php370 per Buriki @ 27kg content or
(23kg/crate or Php16.08/kg.) Php13.70/kg.
• Transport: Php40.00
• Misc.: Php5.00
• Mgt. Fee Php25.00
• Margin: Php60.00
Manila Wholesaler CDO Market Facilitator’s

Php500.00 Fee Php20.00/crate
•CDO Pier Loading: Php10.00

•Shipping Cost: Php50.00
•Manila Pier Unloading: Php10.00
•Trucking to Buyer: Php10.00
•Allow. for Losses: Php50.00
•Margin: Php120.00
Manila Wet Market Retailer

Php780.00
Figure 6. An example of a value chain for calamansi, Siay,

Zamboanga Sibugay.
Farmers can gain from active participation in the market chain

and in being part of a value chain in two ways.
• First, farmers can perform more value addition

functions beyond the farm such as the post-harvest
functions of drying, sorting, grading, processing,
transporting, packaging with labels. Undertaking these
activities is what is called vertical integration.
• Second, farmers can actively be involved in how

decisions are made affecting them in the exchange or
buy and sell function, such as pricing, terms of
payment, definition of quality standards, targeting of
preferred buyers and the like. In all these efforts for
value addition, farmers have to be organized to have
influence in the chain and the capacity to undertake
the activities.
29 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
The farmers may choose a long or a short chain and how far
their participation in it. It depends on the type of product, the
capacity of the farmers as well as the risks involved.
Important Market Chain Actors
1. Barangay Traders – the small traders who visit the

barangays to buy either from agents or directly from
farmers.
2. Assembly Traders – the traders who buy from the

barangay traders, agents or directly from the farmers.
They are normally operating at the rural markets or
towns.
3. Wholesalers – the traders who deal with bigger

volumes from the barangay and assembly traders.
They serve the needs of larger markets (like the
processors and institutional buyers) or other bigger
wholesalers operating in the towns or cities. They also
cater to the retailers.
4. Retailers – the ones who take care of the distribution

to the products to the consumers. Retailers can be the
sellers operating in small shops, roadside market
outlet, and the high-end supermarkets.
5. Processors – the individuals or firms who transform

products into different forms. Examples are the
processors for fruit juices or the rice millers. They can
either be small household businesses or large firms.
Topic: MARKETING STRATEGY
A Marketing Strategy has two interrelated elements: the

Target Market and the Marketing Mix. The target market is
a person, group of people or a business organization that the
seller wishes to be the buyer of the product. This enables the
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30
seller to focus on a target for both the product and the

communication work.
The marketing mix which is commonly referred to as the 4 P’s

in marketing, is a set of controllable and interrelated variables
comprised of the product, place, price and promotions that the
seller puts together to be able to satisfy the target market(s)
better than its competitors. The marketing mix is the source of
much of the content of the marketing plan.
The marketing mix variables are as follows:
1. Product – refers to the product offered for sale. The

type and characteristics of the product will depend on
what the target market wants. These questions may
help:
• Who buys the product?

• For what and how will it be used?
• What does the buyer look for in the product?
(quality, size, packaging, and other characteristics)
• What is unique about the product offered?
The following trends in consumption may serve as

additional guide in determining what products to
produce and market:
• Preference for convenience products

• Preference for natural, organically grown, healthful
and nutritious products – fruits, vegetables, low-
calorie products
• Interest in ethnic or regional products (niche /
nostalgia)
• Interest in exotic products
• Increase in meals outside of home (ready to cook
or ready to eat products)
• Concern for production conditions – social equity,
conservation, etc.
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2. Price – refers to the amount at which the product is

sold, the decision of which is influenced by what the
target market can afford and is willing to pay for the
kind of product that is being sold. Helpful questions:
• What is the price? What is the payment term and

arrangement?
• Is the price competitive?
Main considerations in determining the price offer:
• Production cost
• Marketing cost
• Other costs
• Profit margin
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32
3. Placement or distribution – refers to the channels of

distribution or the physical flow of the product from the
time it is produced until it is bought. Normal channels
include wholesalers, retailers, distributors, etc.
The choice of the channel is influenced by the buying

behaviour of the target market because the objective is
to make the product conveniently available to the
target market consistent with their purchase
preference. Helpful questions:
• Where do the buyers normally buy? Why?

• Where do the competitors sell their products?
• Who can help in the transfer in the distribution of
the product to the buyer?
Considerations in placement:
• Area covered and supplied

• Transport
• Storage (inventory)
• Channel (players involved)
4. Promotions – refers to the ways and means to build

awareness of the product and to improve the demand
of the target market. The use of promotion depends
on the target markets’ attitudes and behavior. Helpful
questions:
• What makes the customers buy the product?

• What makes the customers prefer the product to
the competitors?
Some means of promotion:
• Advertisement (informing and persuading)

• PR (good image of product/supplier)
• Sales promotion (discount or sample)
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• Direct marketing (bringing the product to the

potential buyer)
Product and Placement are considered the strategic Ps of the

marketing mix because they need long-term planning.
Promotions and price which can be changed easily are
considered the tactical Ps of the marketing mix.
Topic: COMPETITION AND MARKET POSITIONING
Competition is a “given” in marketing, especially when there

are good and big markets. It usually happens when many
suppliers with the same product have a common market.
Market positioning is making the product offer unique or

different in the mind of the target market. This is attained
through a good marketing mix, i.e. the best grouping of
marketing activities that a seller undertakes to make the
market buy the product and at a level where profit is
maximized.
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34
Step 2. Product Supply Assessment and Product Selection
Product Supply Assessment and

Product Selection
Through the help of the Facilitator, Step 2 aims to design and

implement Product Supply Assessment that will allow the
Working Group (WG) with the community to:
1. Gather information on resources, products, production

and marketing practices in the community; and
35 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
2. Identify the main products for agroenterprise

development and analyze the farmers’ capacity to
supply them for the market.
2.2 INTRODUCTION
Engaging in an agroenterprise, or any enterprise for that

matter, requires careful analysis, plan and decisions based on
realistic, timely, comprehensive and reliable information about
the producers, their supply and the market environment. This
is where research is most useful.
The research process involves several activities with the

participation of farmers and other partners. Working with the
participation of the community is critical because the aim is to
empower them with the capacity to identify their resources
and their market opportunity, and for them to have ownership
of the agroenterprise plan which is based on the research
findings.
The Facilitator acts as a catalyst, making available the

participatory tools as a means for the community’s “learning
by doing” process. He/she assists the Working Group (WG)
plan the research work which starts at the community level
and extends beyond it where marketing-related activities
continue.
This Step largely covers two activities, namely: Product

Supply Assessment (PSA) and Product Selection for
Agroenterprise Development
2.3 UNDERSTANDING PSA
PSA is a participatory study done at the barangay level on the

community’s resources, products, production and marketing
practices that have a bearing on agroenterprise planning.
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36
PSA leads to the selection of product or products for

agroenterprise development.
As mentioned in the previous step, a WG is organized to

handle the PSA. In Step 2, the WG members undergo
training on PSA which culminates with planning for its
conduct.
Key elements studied in the PSA include:
1. Farm production (farm sizes, land tenure, farm

tools/equipment, labor utilization, products, yields,
production methods, problems)
2. Marketing practices (farmers’ and buyers’ practices,
problems)
The PSA starts with the collection of relevant secondary data,

and then proceeds with primary data gathering only as a
means to fill up important data gaps.
2.4 COLLECTING PRIMARY DATA
In collecting primary data mainly on production, Focus Group

Discussion (FGD) is the method that involves the shortest
time and the least cost. (Refer to Facilitator’s Tool Kit No. 2 for
tips in conducting FGD.)
FGD is complemented by interviews using a survey

questionnaire to collect farmer- or household-specific
information. (Refer to Facilitator’s Tool Kit No.2 for a sample
of a survey questionnaire.)
Date gathered has to be summarized so they can be easily

analyzed by the WG. Collating the information on production
and marketing practices can be facilitated by using simple
tables. If resources and time allow it, the WG may seek the
assistance of a research practitioner in data handling.
37 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
FACILITATION GUIDE FOR PRIMARY DATA

GATHERING
Collecting Data on Farm Production
The main objective in the PSA is to come up with an analysis

on the farmers and their supply capacity. Therefore, it is
important to get in-depth knowledge on the farmers so that
information for agroenterprise planning will not be too general
or vague.
To gain a good understanding on the farmers’ current

production and marketing practices, including the problems or
constraints they perceive or have encountered, the WG
conducts a community consultation.
Basic Steps in Arranging and Conducting a Community

Consultation by the WG:
1. With the assistance of barangay officials and LGU staff

(e.g. the agricultural technicians assigned in the
particular barangay), arrange for a community
consultation.
2. Prior to the consultation, advise the Agricultural

Technologist of the LGU to prepare secondary
information on the main products in the barangay and
who are producing them. This will facilitate the pre-
identification of farmers who will be invited to the
consultation.
3. In the community consultation, the WG explains the

project’s objectives in terms of agroenterprise
development and the purpose of conducting the PSA.
4. Using the FGD method, the Facilitator and the other

WG members lead the participants to a discussion on
the following topics:
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38
• Farm management practices and crop/livestock

production performance
• Production costs and returns (KII with at least 5
farmers before FGD)
• Sources of information/advice related to farming and
marketing
• Sources of credit and credit arrangements
• The buyers and the marketing arrangements
• Problems in farm production and in marketing
(See Facilitator’s Tool Kit No. 2 for helpful questions during

the FGD.)
39 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
For farmer- and household- specific information, a survey is

administered among the consultation participants. This is
done by the WG or local enumerators (people to conduct the
survey) who are enlisted for assistance.
Important specific information includes the following:
• crops grown and expected harvest schedules

• areas planted or plant population
• expected yields based on past performance
• previous buyers
These above information are very useful in determining the

relevance of the crop during product selection and serve as
valuable input to the agroenterprise planning, particularly the
formulation of the product supply plan.
(Refer to Facilitator’s Tool Kit No. 2 for survey questionnaire.)
In addition, a Key Informant Interview with five (5) farmers

who are knowledgeable about the community and their
farming practices can be conducted. The data gathered will
provide a benchmark for the cost and returns with information
on break-even points (volume and price) that will guide the
farmers when they negotiate with the market for their
products. On the other hand, the data on cultural management
can help the Facilitator in identifying the good practices, gaps
and the appropriate interventions.
(Refer to Facilitator’s Tool Kit No. 2 for the sample of

questions for the KII and the table on cost & returns
summary.)
Collecting Data on Marketing Practices
During the consultations, as farmers relate about their present

buyers and marketing practices, they will be asked to draw the
market chain map showing how their products flow out from
their farms to their buyers.
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40
It is mainly a “telling a story” process with this graphic tool that

provide details of the buyers involved and their market
locations, the distances from the farms to the markets, the
packaging and transport means, the prices and the costs, and
more importantly, the major problems as they move their
products in the market chain.
In this exercise, farmers will expectedly be familiar only with a

part of the entire market chain since their products are
commonly sold locally. But this exercise is continued to fill in
the gaps in the market chain map (i.e. trace the products
beyond the community) when the WG can do the market visits
in the nearby commercial areas as will be explained in the
next step (Market Chain Study).
2.5 SELECTING THE PRODUCT FOR THE MARKET
From the products identified in the PSA through FGD and the
survey, the WG proceeds to select one to three among them
which are produced mainly for income and those that are
produced by the majority of the farmers.
Working with existing products at the start for new or

inexperienced groups offer these advantages:
1. The WG can delve on priority options in a relatively

shorter timeframe
2. Farmers are already familiar with the production

technology, thus, can focus more on marketing
aspects
When new products will be chosen, usually when they have

more capacity to venture into new enterprises, it is important
for the WG to set evaluation criteria. Important considerations
in choosing new products are as follows:
41 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
Area of Key Question

consideration
Is there a favorable market? (i.e., continuing
Market
and/or growing market demand)
Can we produce it? (i.e., agro-climatic conditions
Production
relative to the production requirements)
Do we have financial resources to produce it?
Financial
Will it be profitable relative to investment? Is the
level of risk appropriate to the farmers?
In selecting new products, it is important that the decision

making is participatory because the choice should be based
significantly on the participants’ own experiences, capacities
and risk assessment.
A tool to guide farmers to assess risk relative to their decision

on new products and markets is the Product-Market Growth
Matrix also known as the Ansoff Matrix (Figure 7).
In the Matrix, risk is shown to be lowest at Box 1 (Market

Penetration) and highest at Box 4 (Diversification). Evaluation
done above based on demand and profitability is often
associated also with high risk options. It is advisable for
farmers to start with existing products based on Market
Penetration strategies.
When they have more experiences and more resources, they

can proceed to higher risk options that bring the potentials of
higher returns.
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42
Existing
Existing New
New
products
Products products
Products
Existing
Existing 1 33
Low Risk (Product
(Product
markets
Markets LowPenetration)
(Market Risk Development)
Development)
(Market Penetration)
New
New 2 44
markets (Market
(Market High
High Risk
Risk
Markets Development)
Development) (Diversification)
(Diversification)
ANSOFF MATRIX
ANSOFF MATRIX
(Source:
(SOURCE: CIAT, 2006)
CIAT, 2006)
Figure 7. The ANSOFF Matrix used in assessing risks when

deciding for new products and markets.
43 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
INFORMATION TO BE GATHERED BY FGD
1. What are the three (3) main products in the barangay?

(Note: Ranked according to the most number of
producers)
2. Where do you avail credit and what are the
arrangements in financing?
3. Who are the main buyers of the products mentioned?
(Note: From within and outside the barangay)
4. Do you have problems with production?
5. Do you have problems with marketing?
TIPS IN CONDUCTING FGD
1. For effective handling and documentation, the number

of participants should not exceed 15, if possible.
2. Group the participants according to dominant products

in the community (i.e., the products that give the
highest economic values to the farmers). These focus
groups are referred to as the crop assemblies. The
advantage of a crop assembly is that the discussions
are more focused on a particular product and analysis
is more easily facilitated.
3. Using a prepared set of guide questions, facilitate

discussions and keenly note and record responses.
4. Synthesize the proceedings focusing on their strengths

and their constraints (weaknesses) that will need to be
addressed for effective product supply in the joint
marketing in the future.
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44
INFORMATION TO BE GATHERED BY KII WITH SELECTED

FARMERS
Name of Farmer _________________

Location _________________
Product _________________
Area _________________
Crop Period _________________
1. Crop Management
1.1. Nutrient Management

Application
Quantity Frequency Per Schedule of
Kind of Fertilizers (unit/tree) Year Application
Chemical (Inorganic)
1.
2.
Organic/Natural Method
1.
2.
1.2. Crop Protection Against Pests and Diseases

Application
Quantity Frequency/ Schedule of
Kind Used (unit/tree) Year Application
Chemical
1.
2.
Organic/Natural Method
1.
2.
1.3 Soil and Water Conservation Practices

Technology/Practice Description
1.
2.
3.
1.4 Other Farm Technologies and Practices:

Kind of Technology/Practice Description
1.
2.
3.
2. Do you have problems with your product? ____1. Yes ___2.None
45 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
3. If yes, what are your problems?_____________________________
4. Summary of Cost and Returns per crop production cycle:
Item Amount (PhP)

Labor Hired
Family
Inputs
Equipment Rental
Marketing Costs Packaging
Transport
Loan Interest
Other Expenses
TOTAL COSTS
Yield
Sales (Yield x Price)
NET INCOME (Sales – Total
Costs)
SAMPLE OF A SURVEY QUESTIONNAIRE
SURVEY AMONG COFFEE FARMERS

IMPASUGONG, BUKIDNON
1. Personal Information
1.1. Name of respondent_______________________ 1.2. Age_____

1.3. Name of spouse____________________ 1.4. Age_____
1.5. Residence (address)__________________________________
1.6. No. of years in residence: _____
1.7. Number of children______
1.8. Total number of household members (including farmer) _____
2. Information on Land, Tools and Farming
2.0 How many farmlots are you cultivating (owned, rented, leased, others)? ___ ___
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46
2.1. Information on Land

Land Status?
Dominant 1. Owned, 2. Rented (fixed
Lot Location Area (ha) Slope? payment), 3. Rented (Share
1. Flat, 2. of yield), 4. Borrowed; 5.
Gentle, 3.Steep Others (describe)
1
2
2.2. Farm Tools Owned:

Kind Quantity Kind Quantity
1. Draft Animal 6. Weeder
2. Plow 7.
3. Harrow 8.
4. Cart 9.
5. Sprayer 10.
2.3. Number of years in farming? _____ years
2.4. Crops planted? Ranking: 1. __________ 2.___________ 3.____________
3. Coffee Information
3.1. Area planted to coffee? ___________ (hectare)
3.2. Total number of coffee trees? _______________
3.2.1. Number of coffee trees bearing?____________
3.2.2. Number of non-bearing coffee trees?______________
4.1.1.1 For bearing trees, what is the average yield (kg) per tree ? ____
4.1.1.2 How many times do you harvest in one cropping season? _____
4. Marketing
4.1 Over the past 12 months, what is the quantity of coffee sold?
4.2 Quantity of Coffee Beans Sold the Past Year

Month Quantity Sold Price
(In kg)
January
February
March
April
May
June
47 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
July
August
September
October
November
December
TOTAL
4.3 Source of Capital

Purpose of Terms of
What is your capital source? How Loan? Payment?
much?
1. Own
2. Financier (name: )
3. Trader (name: )
4. Bank (name: )
5. Others (specify: )
4.4. Buyer
Who were Address? Place of Type of Reason for choosing
your buyers? delivery? buyer? the buyer? Indicate
Code*
1.
2.
* Code – reason for choosing the buyer:

1. High price 3. Usual buyer (suki) 5. Others (specify
2. No other buyer 4. Have loan with the buyer (pay to crop)
4.5. Method of Selling

4.6.1 Packaging
4.6.2. Mode of delivery (delivered or picked up)
4.6.3. If delivered, method of transportation
4.6.3.1. Point of delivery?
4.6.3.2. How much is the transport cost?
4.6.4 How much is the labor cost (loading/unloading)
4.6.5. Mode of payment (cash, installment, others)
5.0 Problems in Marketing
5.1. Do you have problems in marketing? ___ 1. Yes ____ 2. No
If yes, what are your problems? ________________________
____________________________ _____________________
Interviewer Date
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48
Step 3. Market Chain Study
Market Chain Study
Using the rapid market appraisal method, the Facilitator

together with the WG shall:
1. Conduct a market chain study for the products

selected during the PSA;
2. Identify several market chains for each product and
analyze the farmers’ position in them;
3. Select the best market chain(s) to work on and the
buyer(s) that offer the most benefits;
49 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
4. Come up with strategies to assist the farmers

participate in specific market chain(s) with the
attendant costs and margins in their participation, as
well as the development support they will need; and
5. Report the findings back to the farmers for goal
setting in agroenterprise development
3.2 INTRODUCTION
Having selected product(s) for agroenterprise development

(Step 2), the next activity is market chain analysis which is
done to get in-depth market-related information on the chosen
product(s). Some definitions will help simplify the
understanding on market chain analysis.
Market Chain
Market chain refers to a set of linkages between actors

involved from production through processing, distribution and
retailing to the consumers. Actors are those involved in
producing, processing, trading or consuming a particular
agricultural product, and including those who provide various
financial and non-financial support services such as the
truckers, suppliers (inputs, packaging materials, etc.), market
research groups, and others. See Figure 8 for an example of a
market chain.
Farmers produce and sell products but are not even aware
that in doing so they are a crucial part of the market chain.
This lack of understanding constrains them to recognize and
carry out their position in the chain (i.e., how they perform,
what their advantages and constraints are, and what their
opportunities are if they “engage” the market or work together
with other actors in the product movement).
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50
Market Chain of Green Coffee Beans
THEN NOW
FARMER FARMER
AGENT
CLUSTERS
TRADER
NESTLE TRADERS SERENITY

PHILS., INC. COFFEE CORP.
NESTLE PHILS., INC.
CONSUMERS CONSUMERS
Figure 8. Sample of a market chain for green coffee beans.
Value Chain
As a product moves from the production point to any point

along the chain towards the consumer, there is addition of
value or worth. Technically, this is known as value addition.
When the actors involved work together for value addition

(i.e., to increase efficiency and quality of product supply,
satisfy market needs, and as a result, earn more), the
resulting relationship is referred to as the value chain.
Helping farmers understand market chains will open their

minds to new knowledge that will empower them. It points at
the opportunities they can tap or constraints they can address
to strengthen their position in the market chain, and gain
stable markets and/or higher incomes.
The objective of market chain analysis is to understand the

actors, activities, costs and margins, constraints and
51 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
opportunities related to the movement of the product starting

with the farmers and ending with the buyers and/or
consumers. These information help in the identification of the
best market chain to work on, and the key buyers for the
farmers. Thus, market chain analysis is an activity for
strategic thinking in designing agroenterprises.
3.3 RAPID MARKET APPRAISAL
Rapid Market Appraisal or RMA is the most practical, popular

and preferred approach to market chain studies. Based on its
user-friendly qualities, RMA is defined as a quick, flexible and
effective market research method.
Advantages of RMA:
1. Quick (uses rapid appraisal methods: focus groups,

key informant interview, semi-structured interview)
2. Flexible (RMAs can be designed according to purpose

and resources)
3. Effective (can generate detailed understanding of

marketing systems, including constraints and
opportunities, leading to design of interventions)
Limitations of RMA:
As a quick process, the findings of RMA may apply only to its

defined purpose. Seasonality of relevant factors cannot be
captured owing to its very short time frame.
Relying on key informants, the results are largely dependent

on the openness and active participation of prospective
groups or participants. It will matter if there will be a good and
skillful facilitator and a good documenter for the activities.
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52
3.4 FACILITATION GUIDE FOR THE RAPID MARKET

APPRAISAL
Facilitate the following activities in the conduct of RMA by the

WG:
1. Design of the study

2. Implementation of the study
3. Analysis of data and information
4. Options for farmers and development support needed
5. Report writing
Activity 1. Design of RMA-Market Chain Study
In the PSA, most of the marketing-related information

gathered by the WG from the farmers are confined to the
immediate vicinity of the community. The Market Chain Study
links the market data in PSA with relevant industry and buyer
information beyond the community.
1. Create a RMA-Market Chain Study Team with

members coming from WG earlier formed in Step 1. A
good size is at least 10, two-thirds (6-7) of which are
farmers. Subdivide the Team into smaller groups of 3-
4 members each to share the market chain study
activities.
Depending on the complexity of the market chain

being studied or the extent of geographical coverage
of the study, the team may invite a marketing
practitioner who possesses the following:
• Exposure or experience in market research

• Technical knowledge (including production, post-
harvest and processing issues)
• Contacts in the trading community
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Then the RMA Team will:
2. List down possible key issues for investigation in

RMA/Market Chain, such as but not limited to:
• Product characteristics (variety, grade, moisture,

and other quality specifications)
• Demand patterns (growth and seasonality)
• Supply situation (origin, production volume,
seasonality of supply)
• Price (trends)
• Actors in the chain (market channels) and their
activities
• Marketing infrastructure (roads, market places,
facilities, communication)
3. Review available literatures or get secondary data

to clearly identify gaps that need to be filled in by
primary data.
The following are the possible sources of secondary

information for the study:
Offices Materials
• LGUs (barangay, municipal & • Newspapers
provincial) • Reports
• DA (including BAS and AMAD) • E-publications
• DTI (internet)
• NSO • Socio-economic
• NGOs profiles
• Academe & research
institutions
• Industry associations
4. Select markets and key informants
For primary data gathering, the RMA / Market Chain

Study team must start with the five most mentioned
community traders in the PSA and trace their
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54
immediate buyers to be included as informants in the

individual interviews. Because of their influence in
their marketplace, make sure to include the top five
buyers in the nearest commercial center.
Augment the activity with interviews with the various

points in the chain of the products identified in the PSA
to capture information at different points of the market
chain. Get at least two informants at each point and
cross check answers.
5. Prepare a checklist of questions or process guides
Prepare appropriate set of questions or process guides

for key informants/interviewees to elicit respective
information outlined below:
Respondents/
Informants/ Data/Information
Actors In Market Chain
• Product requirements with the quality
• Wholesalers
specifications
• Retailers
• Supply sources
• Institutional buyers
• Destination of products
(processors,
• Experiences in demand & supply
supermarkets, food
movements
service
• Prices
establishments)
• Marketing practices
• Marketing costs
• Support services
• Support infrastructures
• Openness to buy directly from farmers
The information outlined above are presented in a more

detailed interview guide.
(Refer to Facilitator’s Tool Kit No. 3 for the interview guide in

English and in Filipino.)
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Activity 2. Implement the RMA - Market Chain Study
1. Prepare for data gathering
a) The RMA Team may break up into smaller teams

of 3 members each (1 of them is a farmer) for
efficiency.
b) Assign each member a role during the interview

process (main interviewer, assistant interviewer
who makes sure that all questions are covered,
and recorder of responses)
c) Check all tools: checklists or interview/discussion

guides, pen/pencil, notebook, tape recorder,
camera, registration or attendance sheet, and other
necessities.
d) Rehearse or familiarize with the interview

questions and the manner of recording the
responses before the actual market visit and data
gathering.
2. Gather the information

a) Semi-structured interviews with key informants
(traders/ retailers/ Institutional Buyers, processors,
supermarkets, food service establishments)
b) Trace the product flow from the farmers to the

intended buyers for information needed for the
Market Chain diagram.
The RMA team will get data on costs and margins

by direct observation and informal interview of key
informants (traders and the service providers like
the transporters) during the tracking of activities as
the product moves in the market chain.
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56
In the of product flow, the RMA takes note not only

of the market chain that gives the highest returns to
the farmers but also the work that the farmers need
to undertake with the additional costs involved as
well as the risks when they decide later to take a
more active participation in the chain.
3. Cross-checking data and information
To ensure the reliability of the data that the team is

gathering, the members should ask the same set of
questions to informants within and at different stages
of the market chain then check the consistency of
answers. The RMA team can also observe the
behavior or practices (such as post harvest handling,
sorting and grading and storage technologies) and
analyze the process as the product flows to the various
actors in the chain.
Activity 3. Facilitate the analysis of RMA data and

information by the RMA Team
Tools and Methods for Analysis
1. Illustration of the Market Chain Map
This gives a picture of the elements of the market

chain, such as the producers, post-harvest handlers,
consolidators, traders, buyers, processors, retailers
and consumers. See Figures 9 and 10 for examples.
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Figure 9. Market chain map drawn from a corn market chain study
using the RMA.
Figure 10. Market chain map drawn from a vegetable market chain
study using the RMA.
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58
2. Value chain (margins along chains)
As shown in Figure 11, expenses are incurred as the

product moves from one point to another along the chain.
These have to be considered so as to be able to
determine later the possible or actual margin like the one
reflected in Figure 12.
Maragusan Price
Maragusan Price Milling Fee
Milling Fee
PP44.00/kg
44.00/kg PP2.50/kg
2.50/kg
Trucking Cost
Trucking Cost
PP1.28/kg
1.28/kg
Labor-Hauling
Labor-Hauling
PP0.06/kg
0.06/kg
Total
Total Expenses
Expenses
PP4.24/kg
4.24/kg
Labor-Drying
Labor-Drying
PP0.11/kg
0.11/kg
Honorarium ofEscort
Honorarium of Escort
PP0.13/kg
0.13/kg
Other
Other Expenses
Expenses Nestle
Nestle Buying Price
Buying Price
PP0.17/kg
0.17/kg PP62.00/kg
62.00/kg
Figure 11. Example of a value chain for dried coffee beans.
Nestle's Grade 1 Price
Other Ex penses Farmer's

Farmer’s
Margin:
Margin:
Cluster Escort Honorarium P 13.76/kg
P13.76/kg
Labor-Dry ing
Labor-Hauling
Trucking
Milling Buying
Price:
Maragusan Price P44.00/kg
- 10.00 20.00 30.00 40.00 50.00 60.00 70.00
Figure 12. Another way of presenting the margins along the chain.
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3. Buyer comparison for market opportunity

assessment
A buyer comparison table provides information about

buyers and their conditions and requirements. It gives
the grower and idea on where to sell products for
maximum profit.
Market chain study must be designed well to really

include all relevant buyer information to guide
decisions and production plan of farmers.
A buyer comparison matrix like the one shown in

Figure 13 is used to guide the WG in deciding which
buyer can offer the best value. This can still be
improved or enriched to include information such as
quality index (like moisture content), frequency,
preferences for organic or inorganic products, and
prescribed packaging.
Figure 13. Matrix for Buyer Comparison summarized by the farmers

after market survey and visits.
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60
Table 3: Sample matrix used in comparing the values offered

by buyers. (Derived from Figure 13.)
Criteria Nestle Trader 1 Trader 2

Contact information Davao City Davao City Nabunturan
Growth in demand High High High
Time of year scarce May-Oct May-Oct May-Oct
G1 P54.00
Price/kg G2 P52.50 P48.00 P44.00
G3 P50.50
Less than 12%
Triage, Less than
Quality required All in All in
12% MC, acceptable
cup taste
Delivery Needs Delivery Delivery Delivery
Volume purchased/week No limit No limit No limit
Minimum Purchase Volume 1 kg 1 kg 1 kg
Packaging Required Sacks Sacks Sacks
Largest Buyer for this
Nestle Nestle Nestle
product
Frequency of Purchase Daily Daily Daily
Terms of Payment Claim from bank Cash Cash
Interested in buying from a
Yes Yes Yes
Farmers Group?
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4. Price trends
Price trends traced from and to a particular time can

be interestingly presented using graphs. This set of
information will guide farmers in preparing their
production plans as determined by expected or
projected price, and as affected by the agro-climatic
condition at a particular time.
Figure 14 presents a price trend for coffee in a 1.5

year period.
Nestle Coffee Buying Price Jan '06-Jun '07
100.00
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
-
1/10/2006
2/10/2006
3/10/2006
4/10/2006
5/10/2006
6/10/2006
7/10/2006
8/10/2006
9/10/2006
10/10/2006
11/10/2006
12/10/2006
1/10/2007
2/10/2007
3/10/2007
4/10/2007
5/10/2007
6/10/2007
Figure 14. A graph of the Nestle Coffee Buying Price over a 1 -

year period.
5. Projections on marketing costs & returns based on

buyer comparison
Based on the PSA and the Market Chain Study

information, the farmers are guided to make financial
projections if they undertake the marketing. This will
help the farmers choose the buyers they will connect
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62
to in the marketing, and what it means in terms of price

and net incomes for them in the marketing.
Figure 15 shows the projections made by a cluster on

the marketing costs and returns for coffee with a
number of identified buyers.
Figure 15. Projected Marketing Costs & Returns from Various

Buyers in the Coffee Market Chain.
Activity 4. Options for Farmers and Development Support

Needed
To facilitate the agroenterprise planning by the clusters of

farmers (refer to Steps 4 and 5), the RMA team with the WG
shall summarize the options that farmers can undertake to
strengthen their position in the market chain and increase
incomes.
Options for farmers to increase income can come from:
• Better price with the choice of a better market in the

supply chain
• Higher price with product quality management (i.e.
sorting, good packaging that will give the buyers less
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damage and higher recovery, thus warrants their

giving a higher price, etc
• Good organization of farmers and buyer’s trust in their
delivery and quality reliability
• Good management of production related activities
such as good product quality from the field, minimal
deterioration during harvest, more efficient use of
inputs and labor, thus lowering costs, etc.
• Good management of market related activities such as
procurement and distribution of packaging of materials,
better packaging, transport, receiving and invoicing,
etc.
• Favorable program and policies (e.g. infrastructure
development support from the local government)
These will be the basis for the development interventions to

be extended to them. These interventions can include:
• Technology innovations that strengthen improve

production yields and quality, lower production costs,
provide value added opportunities and specific points
in the market chain
• Enterprise design, implementation and management
assistance
• Organizational mobilization through cluster formation
• Various areas of business support such as market
information, extension services, market linkage, etc.
Activity 5. RMA- Market Chain Study Report
A concise report on the results of the PSA and the Market

Chain Study must be prepared and presented to the farmers
as input to agroenterprise planning (Step 5). The whole write-
up should not take more than 10 pages and should revolve on
the two main analyses of market opportunity and how the
farmers will take advantage of them given their product supply
capacity, assets and constraints.
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64
The RMA team leader spearheads the report writing work,

putting clear emphasis on the following minimum parts and
topics:
I. Background
A. The farmers’ project, objectives, the site and the
development partners
B. Rationale for the PSA and Market Chain Study
II. How the Study Was Conducted

A. PSA
B. Market Chain Study
C. Methods and Tools
• Direct observation
• Semi-structured interviews
• Focus groups
• Formal questionnaires (if applicable)
III. Results
A. Product
• Product features
B. Demand analysis
• Market types/size,
• Demand conditions and prospects
• Market opportunities by market type
• Volume Trends
C. Supply analysis
• Supply sources
• Principal supply channels and constraints
• Supply Trends
• Production conditions (technology, costs, etc)
D. Prices and margins
• Price trends
• Margin analysis (gross, net and break-even)
E. Principal Market Chain and the most promising buyers
F. Strengths, weaknesses, opportunities and threats
(SWOT) related to production and marketing
(See Facilitator’s Tool Kit No. 3 for a sample of SWOT
analysis.)
IV. Strategies for the farmers

V. Conclusions
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Facilitator’s Tool Kit No.3
A. CONDUCTING A KEY INFORMANT INTERVIEW (KII)
Information to be gathered by KII:
1. Demand-Supply conditions
• Seasonality and price responses
2. General Business Information

• Type of business, kinds of activities handled
(vertical integration done?)
3. Pricing Mechanisms
• Months of lowest price and highest price over the
past 12 months
• Months of lowest demand and highest demand
over the past 12 months
• Months of lowest supply and highest supply over
the past 12 months
• Quality /Grading
• Procurement Practices (terms, frequency, source)
4. Trading Information
• Products handled
• Purchase Data over the past 12 months, (purchase
frequency, volume/purchase, month of highest
purchase, month of lowest purchase, highest
purchase price, lowest purchase price)
• Source of Products (suppliers, who is the preferred
source and why)
• Procurement Practice (method of procurement –
suppliers come or go to source, Mode of purchase
– picked up or delivered? Manner of payment –
cash or terms)
• Basis of Buying Price (prevailing, quality specs,
time and season, credit obligation from supplier)
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66
• Market Outlets (who are the outlets for his/her

traded products, type of outlet, reason for choice of
outlet, location)
• Selling Practice (price, volumes,
grading/standardization done before selling)
5. Marketing Investments (Facility/Equipment and

Capacity)
6. Market Share Protection (provides financing,

undertake own production, give price incentives,
months of lowest demand and highest demand over
the past 12 months)
7. Openness to future supply/volume in the next 12

months (what products and what estimated volume
requirements, frequency of supply)
8. Problems Perceived and/or encountered in his/her

marketing business
Tips on conducting KII:
1. Introduce yourself and your organization.

2. Be clear about the purpose and timing of the interview.
3. Stress confidentiality.
4. Be friendly and relaxed, use humor.
5. Ask simple and clear questions.
6. Follow a logical sequence.
7. Avoid leading questions.
8. Ask most sensitive questions last.
9. Be prepared to listen and learn.
10. Engage the respondent (don’t be afraid to challenge
the accuracy of the information provided, use diagrams
to assist discussions).
11. Investigate new areas of interest as they arise.
12. Avoid very lengthy interviews, follow up if necessary.
13. Use the information to improve the next interview.
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Sample of a Buyer Interview Guide
English Filipino
1. What is your name? 1. Ano ang inyong pangalan?
2. What is your complete 2. Ano ang inyong address?

address?
3. What is your cell phone and 3. Ano ang inyong cellphone at
landline number? landline number?
4. What quality do buyers look 4. Ano ang mga katangian o
for? kalidad na hinahanap ninyo sa
mga binibiling produkto?
5. How frequent do you buy? How 5. Gaano kadalas ka namimili?
much or what volume do you Gaano karami ang inyong
buy? binibili?
6. What container is appropriate? 6. Anong ang maayos na
paglagyan ng produkto?
7. How much is your buying price 7. Magkano ang bili ninyo ngayon?
at present? How much was the Magkano ang pinaka mataas na
highest and the lowest price presyo na presyo ng nakaraang
you offered or gave in the past 12 na buwan? Ano naman ang
12 months? pinaka mababa?
8. What is the payment 8. Paano ang bayaran? Cash o
arrangement, cash or terms? If terms? Kung terms, gaano
“in terms”, how long? katagal (ilang araw, linggo,
buwan)
9. Do you pick up, or is the 9. Pick-up po ba o delivery?
product delivered to you?
10. What is the minimum and 10. Gaano karami and kaya ninyong
maximum volume that you buy bilhin? Gaano kakonti naman
at a time? ang pwedeng ibenta sa inyo?
11. Where do you sell the product? 11. Saan ninyo ibinebenta and
produkto?
12. In the past 12 months, what 12. Anong buwan and pinaka
were the 3 months of highest maraming kailangan ang inyong
demand from your buyer? buyer?
13. In the past 12 months, what are 13. Anong buwan and pinaka kaunti
the 3 months of lowest demand na kailangan ang inyong buyer?
from your buyer?
14. Where do you get the products 14. Saan galing ang mga produkto
you are selling? Who is/are na ibinebenta nyo? Sino ang
your preferred suppliers and paboritong ninyong supplier?
why? Bakit?
15. Would you be interested to buy 15. Interesado ka bang bumili mula
from us? sa amin?
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68
TO THE TEAM: Through direct observation, note down the

facilities, equipment other assets used by the buyer in
marketing, as well as the marketing set up and operations,
that can be indicative of the buyer’s capacity.
B. CONDUCTING SWOT ANALYSIS
Below is a portion of a report on a SWOT Analysis conducted

for the Coffee Clusters in Maragusan, Compostela Valley. The
report shows the strengths, weaknesses, opportunities and
threats inside and outside of the enterprise. These served as
bases in determining marketing strategies and the
development interventions.
This sample report can serve as guide in conducting SWOT

Analysis
SWOT Analysis
Coffee Cluster
Maragusan, Compostela Valley
Objective: Grade 1 Green Coffee Beans sold directly to

Nestle Philippines, Inc., Davao City Buying Station
Strengths
• Maragusan used to be a major coffee-producing area

in Southern Mindanao and farmers have been
growing coffee for several decades
• Coffee trees grow well in the municipality due to its
high elevation and cool climate
• Absence of typhoon
• Farmers are predominantly self-financed, they can
decide on their product independently because they
are not tied up with the traders
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Weaknesses
• Coffee is a seasonal crop- farmers neglect their coffee

trees and tend to it only when they are about to bear
fruits
• Poor quality as farmers seldom practice selective
harvesting of berries thus producing low-quality beans
• Coffee trees are old- most of them are more than 10
years and fruiting has started to decline
• Difficulty in drying beans due to high rainfall especially
during months of coffee harvesting
• Lack of drying facilities
• Minimal agricultural extension services that can inform
the farmers on the proper management, harvesting
and processing of coffee
Opportunities
• Domestic consumption and local demand for coffee is

constantly increasing thus prompting the major instant
coffee producers to import from Vietnam & Indonesia
• There is an increasing demand for brewed coffee
which is spurred by the growing specialty coffee
shops and processors
• Farmers can be taught to harvest their berries
selectively to improve the quality of their product and
thus fetching higher prices from their buyers, and to
rejuvenate their ageing coffee trees
• Opportunity for the farmers to plant the higher value
variety of coffee (Arabica) due to its high elevation
requirement
• The biggest coffee buyer in the Philippines is
providing free training on coffee production and
processing and has a multitude of coffee buying
stations nationwide
• There is a development project (CRS- assisted in
partnership with Kasilak Development Foundation,
Inc.) that currently assists the farmers in conservation
farming by way of proper land use.
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70
Threats
• Coffee farmers have begun to convert their coffee

areas into short-term crops such as corn,
rootcrops and vegetables to finance their daily
needs
• The recent price slump (early 2000s) of the global
coffee prices has discouraged traditional coffee
farmers and forced them to look for other
profitable crops.
• Because it is the second most traded commodity
in the world, coffee prices are subject to sudden
and dramatic price fluctuations in a short period of
time
• Coffee trading in the municipality has been
handled by a handful of traders which have been
buying ‘all-in’ at one price regardless of quality
and moisture content- which de-emphasizes the
need for better quality
Marketing Strategies
1. Introduce and emphasize the need for value-adding

activities such as selective harvesting, sorting and proper
drying to the farmers
2. Sell to Nestle through its Coffee Buying Station to earn
bigger margins for the farmers.
3. Identify other buyers near the Nestle Coffee Buying
Station which can absorb the coffee beans which may be
rejected
4. Identify other higher-value markets which may be
interested in procuring good quality beans directly from
the farmers
Suggested Development Interventions
1. Introduce the clustering strategy in marketing so that the

farmers can acquire capability to meet the requirements
of the market for quality deliveries
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2. Organize farmers into clusters so that they can be

grouped effectively to consolidate product volume and to
immediately address market feedback.
3. Extend trainings and exposure related to marketing.
4. Work on the quality management program starting at the

field and up to post-harvest, with the Agri-extension
component. Avail of the free training provided by Nestle
to enhance the cultural management and post-harvest
practices of the farmers;
5. Provide assistance in market opportunity identification,

business planning and in the actual run of the first
marketing moves.
6. Install basic operating systems (i.e. recordings, financial

management, delivery monitoring, etc).
7. Provide assistance in market linkage to both the

wholesalers and the processors market.
8. Extend business coaching especially in the first marketing

activities so that critical gaps are immediately addressed
and the marketing project can take off.
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72
Step 4. Cluster Formation
Cluster Formation
Through competent facilitation, the Facilitator with the Working

Group can:
1. Present the findings of the PSA and Market Chain

Study;
2. Provide marketing basics and orientation on the
clustering method of business organizing to the
farmers;
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3. Provide farmers with informed choices by discussing

the benefits of clustering as a business group;
4. Facilitate the formation of agroenterprise clusters
and leader identification, as well as the cluster basic
agreements.
4.2 INTRODUCTION
Clustering is a general term that refers to the goal-oriented

cooperation of stakeholders in an industry. In 1999, the
government through the Department of Trade and Industry
(DTI) introduced industry clustering as a development
strategy to build industries at the sub-regional and regional
levels (e.g. food production industry in the province of
Bukidnon, fisheries and eco-tourism in the Panguil Bay area in
Region X). This strategy was conceived as a response to the
challenge of competition resulting from globalization that
allowed the open movement of products across geographical
boundaries.
Four years after, the vegetable industry association in Region

X called the Northern Mindanao Vegetable Producers
Association Inc. (NorminVeggies) adopted the clustering
strategy focusing on the cooperation among the small and
medium scale producers for a strategic move towards high
value markets like supermarkets and fastfoods. Thus,
NorminVeggies called its vegetable clusters as marketing
clusters. In this endeavor, NorminVeggies received
competence enhancing support from its partners: the DA, DTI
and the GEM-USAID.
In 2005, CRS-Philippines studied the NorminVeggies

experience on clustering. Its lessons on market and industry
moves were valuable but CRS project implementors saw the
importance to undertake the basic work first. This is the
adequate preparation of farmers so they will be ready to
engage the market in the first place. This has not been easy
given the farmers’ challenges: poor productivity, infrastructure
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74
gaps, poor logistical capabilities, a lack of understanding on

how markets work, fragmented locations and farming
activities. All these problems impede on the farmers’ ability to
effectively participate in the market and gain from the
clustering method of market organizing.
In undertaking the SFMP, CRS-Philippines tried out innovative

development interventions guided by the NorminVeggies
experience and by the informational materials drawn from the
CRS-SEAPRO and CIAT Learning Alliance. It achieved a
promising process in farmers organizing appropriate to their
circumstances for market preparedness and effective market
participation. And it called the farmer clusters formed as
agroenterprise clusters.
4.3 AGROENTERPRISE CLUSTERING
1. The Starting Point: Motivating Farmers for Collective

Action
Organizing farmers for collective marketing is a decision that

should result from a need felt by farmers to work together for a
common market. It should not be imposed on them. The
Facilitator’s task is to organize farmers into clusters and
empower them to carry out collective marketing, not to be the
one to undertake the marketing for them. The first step
towards this process is for them to understand the benefits of
working together in a joint marketing enterprise.
Participatory involvement through a consultation attended by

farmers producing the selected products is conducted. In the
consultation, the PSA and the market chain study results are
presented to them by the WG, highlighting the analysis and
options for improvements that bring income increase.
Discussion follows wherein the Facilitator points out how it is

not possible to take advantage of and benefit from the market
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opportunities if the farmers are not organized, and to explain

how the group needs to organize itself to carry out whatever
plan it will come up with.
This discussion sets the stage to introduce the approach of

organizing agroenterprise clusters that will be the vehicle of
farmers to strengthen their position in the market chain and
gainfully participate in marketing.
2. What is Clustering?
Farmers often help one another be it in farm activities like

planting and harvesting, or in the exchange of information
about how best to grow their crops and who their buyers are,
and also in social activities like the celebration of a feast day.
These are good starting points of cooperation but they need to
be carried further to bring them the advantages in the
markets.
The type of cooperation where farmers are organized into

small groups or clusters and actually consolidate their
products, coordinated with a common plan, and directed at the
agreed market(s) is what is referred to as agroenterprise
clustering.
An agroenterprise cluster is a small group of individual

farmers who, under a shared agroenterprise plan, commit to
work together for collective marketing.
This definition presupposes that the farmers in a cluster bring

not just their person into the group but also their products
because in a cluster, they are formed as a product supply unit
for an identified market(s). And they come together to
actualize their business potentials through collective action.
A cluster may come from a sitio (sub-village), barangay

(village), or municipality. At these levels, the clusters can
seek interventions in the local economy for problems and
bottlenecks in their production and marketing activities. When
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76
clusters join for linkage at the municipal or even provincial

level, they can impact not only on temporary or village based
agroenterprise related issues but also on policies and
programs that will have long term and encompassing benefits
in the environment where clusters undertake their business.
4. Types of Agroenterprise Clusters
One product cluster
As the name implies, this type of cluster commits to the

joint marketing of one product. An example is the Coffee
Cluster of Impasugong in Bukidnon.
Diversified product cluster
This type of agroenterprise cluster handles the marketing

of two or more commodities produced by the cluster
members and combined for the needs of buyers. One
good example is the Diversified Vegetable Cluster of
Maragusan, Compostela Valley that is a preferred supplier
of the assorted vegetable needs of a supermarket.
5. Cluster Size
Based on experience, successful collective marketing is

generally carried out by a cluster of five (5) to 15
members. For the collective marketing to succeed, all the
farmers should meet regularly to discuss their problems
and plan for the future. The bigger a group is in a
meeting, the more difficult it is to ensure that everyone’s
voice is heard.
The advantage of small groups is that the members can

be gathered more easily, and they can get to know the
group members well. It is recommended therefore that in
most cases, the membership of a cluster is kept at below
20.
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Farmers need to be able to talk regularly with each other

and to establish the essential trusting environment among
cluster members that have a big bearing on whether they
will also entrust their products into the joint marketing. In
the case of 30 farmers in a barangay for example who
want to form a cluster, it is recommended that the 30
farmers will be organized into two (2) clusters.
6. Features of an Agroenterprise Cluster
• A cluster can be composed of 5-15 members from the

same sitio or barangay.
• The cluster is product based and is a product supply
unit.
• A cluster is headed by a cluster leader. The cluster
can opt to choose also an assistant cluster leader, a
secretary and a treasurer.
• The cluster is guided by an agroenterprise plan with
each cluster member following common product
quality management procedures.
• The cluster adheres to the practice of market
facilitation in the marketing of the products so the
cluster members continue to own their products up to
the buyer’s end.
• There is strong emphasis for the core values of
sharing, discipline and joint responsibility to
consolidate the quality and quantity as negotiated with
the market
• A cluster may start as an informal organization and
later establish its formal structure as a business entity
such as a cooperative; or it may exist within a
cooperative or association as special structures for
product consolidation and marketing.
Figure 16 shows the basic structure of a group of clusters

operating as a small network in a barangay.
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78
Buyers
Cluster Advisory
Council of Group
Cluster Leaders (NGO/CRS/
Government)
Cluster Cluster Cluster Cluster

Leader Leader Leader Leader
Cluster Cluster Cluster Cluster

Members Members Members Members
Figure 16. Basic structure of a group of clusters.
6. Scope of Agroenterprise Cluster Agreements
On the minimum, cluster members agree to help one another

to:
1. Consolidate a particular product volume;

2. Attain agreed quality;
3. Deliver as promised or scheduled;
4. Follow the agreed product operational flow (from farm
to consolidation point and labeling for traceability of
supply source); and
5. Plan and implement group agreements such as regular
meetings, the payment of facilitation fees, particularly
management fee and marketing fee, and the
mobilization of savings
The above agreements are usually verbal when the clusters

are just new and they are still going through trial marketing
(refer to Step 6). But it is recommended that agreements be
written when the clusters undertake commercialization
operations (refer to Step 7).
79 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
7. Clustering – Not for All Farmers
The Facilitator has to be prepared that there will be

farmers who will decide not to take part at all in the
clusters for a number of reasons:
• They are satisfied with their own local markets

such as a roadside market or the barangay market
day (also called tabo) giving them satisfactory
prices; or they have good relations with a trader.
• They are not comfortable working in a group.
• They are physically isolated that makes collective
marketing activity difficult to establish.
• Their production is just for basic needs that they
may not yet have surplus for marketing and other
types of development assistance are needed.
8. The Concept of Market Facilitation by the Cluster
In marketing through the clusters, a key concept is market

facilitation. This means that the cluster only acts as the
“bridge” to connect the farmers to the market as well as to
link them to the business service providers like the
truckers, package suppliers, etc. There is no “trader”
between the farmers and the buyers to whom the
ownership of the product changes hands.
The farmers in a cluster own the product up to the buyer’s

end and so they get the price offered by the buyer. With
the ownership of the product is also the corresponding
accountability for the product in terms of quantity, quality
and delivery reliability.
The mechanism to trace product supply to a farmer, and

accordingly impose discipline in following the cluster
agreement on product quality and delivery reliability, is
product labeling by cluster and by cluster member.
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80
As product owners, the farmers in a cluster, through

representation by the cluster leaders, interact with the
buyers face-to-face. The commitment to supply therefore
is given to the buyer by the clusters themselves, not the
Facilitator. From experience, this practice has made the
clusters directly responsible for problems that they
experience, which is expected in a fluid market
environment; and not to blame the Facilitator when a
problematic situation arises.
To operate a collective marketing successfully, the cluster

needs people devoting their time and efforts in the
activities such as the cluster leaders, the product
consolidators who may be assigned, and others. Their
expenses have to be compensated, hence the farmers
while they get the buyer’s price must also shoulder the
market facilitation cost by paying service fees based on
the products that they have marketed through the cluster.
9. Cluster Leadership and Management
Successful clusters need the basic skills of group

management and decision making to make them
functional. At the minimum, the cluster must have a
common goal for collective marketing. This is the reason
why clusters are formed from farmers who are ready to
bring in their products because this is the starting point of
a goal that is simple and that can be broken down into
responsibility or accountability each one in the cluster can
take up.
The cluster must use democratic methods to make

decisions in order to give every member a feeling of full
participation and ownership in the cluster’s marketing
venture. No one should be allowed to dominate the
cluster’s decision.
The focal person in the group management is the cluster

leader. The type of leadership required in an
81 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
agroenterprise cluster needs to be elaborated. The cluster

leader need not be the biggest producer in the cluster.
What is important is he/she has the personality and the
skills to mobilize the members of the cluster. He/she is
tasked to convene and facilitate cluster meetings, and to
coordinate activities related to collective marketing.
The cluster may recognize one or more sub-leaders to

share the responsibilities. The cluster leader may take
responsibility for market related activities while a sub-
leader can handle the production related concerns. A
secretary writes down meeting proceedings and
agreements, while a treasurer ensures that a record and
report of the marketing transactions are made.
10. Communication – The Importance of Regular Cluster

Meetings
This Guidebook stresses the importance of holding regular

cluster meetings (i.e. once a week during trial marketing,
and every month subsequently). The meeting is the
venue to assess performance versus targets in the plan
made. Only by regularly reviewing activities, identifying
good practices and analyzing the bad ones can the cluster
develop the systems that work best.
With the opportunity that a meeting provides for each one

to be informed and involved, trust is built. This is of
utmost importance considering that marketing is a difficult
process, and not all transactions will turn out to be a
success. This high level of trust ensures that members
will persevere and work out the problems together.
At the start, the Facilitator convenes and facilitates the

cluster meetings until the cluster leaders are chosen and
they are phased in with guidance, and also when the
meeting schedules and basic cluster agreements are
tackled.
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82
The cluster meetings actually serve to ensure that the

development interventions are carried out in a
participatory manner; and that the farmers are not just
passive clients but are active participants of the whole
process, actually learning the business by doing it.
11. Collaboration of Clusters and Linkages
The farmers must be able to produce enough product

quantity at the right quality and time to interest the buyers
in the first place. This is the basis for the clustering
approach that brings together individual farmers to jointly
market their products.
More advantages of collective marketing are realized

when the clusters form a network among themselves and
marketing a significant quantity of products. For example,
barangay-based clusters working together as a municipal
level network can fill up a truckload of product for a bigger
market. The higher the level of networking, as in the case
of municipal level clusters working together, the more is
the bargaining influence towards higher value markets.
The cluster leaders acting together will become the prime

movers of the enterprise. Later when the clusters
transform into a formal organization like a cooperative,
representative leadership can be practiced with the cluster
leaders taking up the position of the board. Refer to Step
8 for cluster strengthening.
Clusters are more likely to succeed if they not only

cooperate among themselves but are also linked to other
organizations. These include national government
agencies, local government units, financing institutions,
transport groups, farm input suppliers, school/academe,
other farmer organizations and industry association. It
may take sometime to build these linkages but they
should be sought because the clusters will need many
kinds of support.
83 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
Serenity Coffee Corp.
Coffee Task
Force
Impasugong, Bukidnon Maragusan, Davao City

Clusters ComVal Clusters Clusters
Council of Council of Council of

Leaders Leaders Leaders
Cluster Cluster Cluster

Cluster Cluster
Leader Leader Leaders Leaders
Leader
Cluster Cluster Cluster Cluster Cluster

Members Members Members Members Members
Figure 17. Structure of Clusters covering 3 municipalities in 3

provinces collaborating to supply one market.
Which groups to connect to? The Facilitator can assist in

the linkage building process by analyzing the needs of the
cluster. The most important connections needed by the
clusters are with the business sector (i.e. other suppliers
like them who have bigger production scale and have
influence in the market, and the buyers).
12. Cluster Strengthening
It is recognized that in working with farmers, there is a

maturation period required wherein they are gradually
trained and primed for agroenterprise operations. The
role of the Facilitator is to assist this maturation process
through training, coaching, facilitation of cluster activities
and group development, leadership development,
installation of business policies and system.
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84
Cluster development takes time. It is an investment in

group learning and doing. Cluster strengthening will be
elaborated in Step 8.
4.4 FACILITATION GUIDE FOR AGROENTERPRISE

CLUSTER FORMATION
1. Conduct a consultation in the barangay, inviting the

farmers growing the products selected for
agroenterprise development. This is done right after
the PSA and the market chain study, the WG has
analyzed the results and is ready to present them to
the farmers for validation in the consultation.
Emphasize the following information during the

consultation:
• Market opportunities as revealed in the market

chain study will remain beyond the reach of
farmers if they are not organized and cannot
consolidate a significant product quantity for the
market.
• Agroenterprise clustering is the tried strategy to
transform the farmers acting independently and
with fragmented farm areas into valued suppliers
with consolidated products.
• Important information for the farmers are:
definition of a cluster, types of cluster, structure,
key features, leadership and management,
advantages in forming clusters, networking of
clusters, and cluster strengthening, benefit of
clustering.
• Membership in the cluster will require farmers to
commit a certain quantity of their products into
the cluster for collective marketing. Also, the
cluster agreements bind the farmers in a cluster.
85 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
2. At this stage, it is helpful if experiences and lessons

from organized clusters can be shared. (It is best
handled if the sharing comes directly from a local,
promising/successful agroenterprise cluster). Allow
the participants to freely interact with the resource
persons and with each other. And give time for
reflection. Then ask those who are interested in
clustering to group together.
3. Proceed to the formation of the agroenterprise

cluster/s.
• Gather expressions of interest to work together

for common marketing
• Facilitate listing of members and election of
cluster leader
• A participatory tool to facilitate cluster formation

is the cluster map that communicates the
components of the cluster (adaptation of the DTI
Industry Cluster Map). It identifies the farmers
and their planned product commitment, the
agreed markets, the supporting businesses on
which the farmers rely on, and the strategic
partnerships from the public and private sector
i.e. NGO, national government, and others.
(Refer to Facilitator’s Tool Kit No. 4 for an example of

a cluster map).
Use of meta cards or strips is recommended so that

during the process, if a farmer changes his/her mind in
joining the cluster, he/she can easily remove the card.
If a farmer wishes to add information, additional meta
cards can be pasted.
• Cluster members will then set a schedule for

enterprise planning. As an assignment, the
cluster members are ask to review their farm
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86
• activities and bring with them the information on

the quantity of the product they can commit into
the joint marketing and the schedule of delivery.
A tool to use for this information is the harvest
calendar, which the Facilitator introduces to the
newly-elected cluster leader and members. The
calendar contains an estimate of the total
production capacity of the cluster members.
(Refer to Facilitator’s Tool Kit No. 4 for an example of

a harvest and delivery calendar).
4. Before the next meeting of the newly formed clusters

for the clusters’ enterprise planning, it is recommended
that the chosen cluster leaders can be introduced to
the local officials/leaders. Each cluster leader will also
reach out to farmers who are interested but were
absent during the cluster orientation and formation.
They are advised to give time for farmers who joined
the consultation but were not immediately prepared to
join with the others and commit their products for the
joint marketing.
87 ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀ ฀
Figure 18. Cluster Map of Saranga Coffee Farmers.
Figure 19. Coffee harvest and product delivery calendar of Saranga

Cluster.
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88

The Clustering Approach To Agroenterprise Development - 2a

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Part II.

The 8-Step Clustering Approach to Agroenterprise Development

The 8-Step Clustering Approach to

Part II presents the eight steps in the clustering approach to

Philippines in partnership with local NGOs and Local

The sharing of experiences and the refinement of the

CLUSTERING FOR SMALL FARMERS

The highlight of the CRS-Philippine agroenterprise

The territory of a cluster can be a sitio (sub-village) barangay

Forming clusters signifies a new development in farmer

The clustering method provides a concrete mechanism where

The clustering approach for agroenterprise development is a

engage the market with favorable arrangements that improve

The first five steps comprise the preparatory activities. This

As shown in Figure 3, the process does not end with the

Figure 3. An illustration of the 8-step process of the clustering

Table 1. The steps, features, and outputs of the clustering approach

Getting (1) 2 to 4 • Identify project site • Identified project site for

Knowing our (2) 4 to 6 • Assist the WG to • WG/local research team

Understand- (3) 4 to 6 • Provide training to WG • WG trained on MCS and

Deciding to (4) 2 weeks • Invite farmers growing • Report presented

Preparing to (5) 2 weeks • Review commitment of • Cluster planting calendar

Taking a leap (6) 4 weeks • Undertake test • At least 4 trial product

Moving (7) Continu- • Revisit cluster plan for • Regular product

Making it (8) Continu- • Ensure that cluster • Knowledge and skills in

It is worth noting that the market environment of clusters is

The succeeding sections of this Guidebook describe the eight

1. Better access to markets and better bargaining

5. Better relations among growers as a result of

Buyers are always particular about quantity, quality and

1. Better compliance with quality agreements

To the donors and implementing agencies

1. Efficient use of resources (including services)

Site Selection, Partnership Building

1.1 PROCESS OBJECTIVES

Through the help of the Facilitator, Step 1 aims to enable the

1. Determine the specific site for the agroenterprise;

Government Agencies, Non-Government

Site Selection, Partnership Building and Working Group

This is also the phase where potential farmer leaders are

1.3 SELECTING THE SITE

Basis for selection

In many cases, sites for the agroenterprise endeavor can be

Ideally, a potential site for the agroenterprise project should

5. Favorable social conditions (peace and order,

The presence of more of these factors would facilitate the

At the minimum, willing farmers who have products that can

The site can be a sitio (sub-village), barangay (village),

In a small area, like the sitio or barangay, the focus can be on

Rapid Area Assessment

In order to have a good grasp of the current situation of the

The following information can serve as a starting point for the

1. Physical resources (land and its use, water

2. Community profile (gender, age distribution, number

The above information can be generated by direct observation

1.4 BUILDING PARTNERSHIPS

This is the continuing process of linking with and engaging

At the level of the Municipal LGU, partnership can yield more