Tuesday, July 12, 2016

Ahuana Jam Factory: A “Sticky” Situation

Blog 3: Ahuana Jam Factory: A “Sticky” Situation
June 14th, 2016

There is a phrase in Hindi that roughly translates to “gold is found in dirt.” Mitti me sona haiis the most concise way that I can describe the Quilla Pacari Ahuana Jam Factory. In the small town of Santa Fe, forty-five minutes from Pulingui on a stretch of treacherously uneven road, a bright yellow building with adorable white window panes and a large, iron-wrought gate stands in contrast against the cement houses in the community.

The women of the jam factory, we were told, sought our advice as to how to best expand their product to larger cities and markets around the country. I was joined by five others: Daniel, our SEC Regional Coordinator for Northern Ecuador; Tosi, a volleyball player from UConn who had a keen eye for fashion and visual appeal; Bobo, a Romanian student with extensive travel experience; Serena, an avid reader from Florida; Carly, an incredibly fast hiker from Long Island who enjoys taking pictures of laughing sheep (seriously, it was a little weird); and Daniel “Vivas,” a fluent Spanish speaker from Costa Rica.

At first glance, the six of us were simply at a large house. But inside the tall, iron-wrought gates and through the large metal door, a large, cold factory stood still.

The factory was operated by five women, ranging from the age of fifteen to fifty. Though all of them were indigenous, only two wore the traditional “Chimborazo hat” and colorful throw. The other women wore jeans, hoodies, and tennis shoes. Our work began with the women explaining their organization: their jam (actually marmalade, but they called it jam) is carrot-based and they have three flavors, maracuya, guayaba, and mora. They have been in business for about two decades and currently sell their jam exclusively in Santa Fe; in order to sell in markets beyond their own community, they require a minimum of three licenses (one for each product). The jam factory shares the building with bed-and-breakfast style accommodations and French tourists are common because the jam factory has a relationship with a French company (but the women did not know anything about this relationship). They hope to become an internationally renowned jam factory, with sales in the U.S. and England. In the next year, they told us, they would like to expand their operations into milk, cheese, and yogurt production.
The jam is sold in 250 mL jars and 500 mL jars, priced at $1.50 and $2.50 respectively. When asked, the women estimated a profit of $0.50 for each jar sold, regardless of size.  They are prohibited from selling in super markets or tiendas because they lack a sanitation license. Nine years ago, Ahuana had a sanitation license, but sales in the single tienda were not successful and they did not expand beyond. Now, the jams are refined and the women believe they will fare well in the market place but they still must purchase the license. The license costs $1000 for each product for ten years. The factory, and the women, have been operationally inactive for the last six months because of a surplus and lack of demand. In regards to inventory, they had “thirty small jars.”

Immediately, we realized that Ahuana did not in fact understand their business model; on several occasions, they gave different answers for the same question. On the shelves, there were more than 150 small jars and nearly forty large jars. The group did not know their input costs (the small jars were either twenty, forty, or sixty-five cents), how much they had in stock, or targeted locations and markets. There was no work schedule or weekly production goals; the women worked whenever they pleased.

The first goal: expectations management. Before they can expand to dairy, Ahuana had to focus on improving their business practices.

Our recommendations stood on three legs: better accounting practices, ideas for short-term fundraising, and publicity or marketing opportunities.

To lower costs, Ahuana needed to first understand what their production and operation costs were. The cost for producing their jams, we were told, was $1.00 for the small jams and $2.00 for the larger jams. After some discussion, the women confessed that they actually did not their costs. Immediately, we recommended that they sit down and jot down each of the costs of producing jam. When we compared products of comparable quality, we found that Ahuana could increase the cost of their jam. Rather than selling their 250 mL jar for $1.50, they could safely raise the price to $3.00 and probably even more. Majority of the visitors to Santa Fe are French tourists and comparable products in France sell for $4.25 to $7.00. However, comparable products in Ecuador are priced at around $3.20 - $3.80. We figured that $3.00 would be very feasible for French tourists, but also for locals; we did not want to prevent locals from participating as Ahuana customers.

Fundraising is difficult for Ahuana because they do not have the capacity to ship their products yet. All of our fundraising efforts were then centered around raising funds through the tourism center in Santa Fe. We explained the importance of having a story for their products and how tourists buy products for their story. We then created a “donation letter,” explaining the story behind the women of Quilla Pacari and the town of Santa Fe. Additionally, we recommended that Ahuana partner with the tourism center (where Quilla Pacari already works) and offer tours of the jam factory, to further the relationship and story of the artisans.
In regards to marketing, publicity beyond the community would not be feasible because Ahuana did not have a license to actually sell their jam in supermarkets. Additionally, the jam was not popular among locals. However, Pulingui and nearby pueblos were hotspots for tourists, many of whom would be interested in jam tours and artisanal jam. As a small, up-and-coming company, Ahuana needs to leverage the relationships of nearby communities. Furthermore, the Ecuadorian government has recently invested in many national campaigns to explain the significance of buying domestically. Campaigns such as “Primero Ecuador” encourage Ecuadorians and tourists to purchase products that are made by indigenous women, artisans, and Ecuadorians. To qualify for such certifications, Ahuana first had to purchase the sanitation and sales licenses, so certifications would be long term focuses.

We presented our findings to the “Board of Directors” for the community. Some were receptive but some were not. Most notably, two of the older women nodded off in the first thirty seconds of the presentation. On the other hand, we knew for sure that the infant was awake the whole time, as his shrieks could be heard through the factory. At the end of the day, we were consulting for Ahuana. The women were not obligated to follow our advice. But, we were glad to hear that they increased their prices right before we came by to purchase the incredible jams. Maybe we should have bought the jam before the presentation? 

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