Socially-Minded Sustainable Farming Startup, Project Alba, Takes Root in Cambodia
November 21, 2011 | Nicola Kerslake
Nearly all authorities on entrepreneurialism preach the same message on founding your first start up: keep it close to home and trade what you know. Recently, I came across two twenty-something Frenchmen who threw out this rulebook, and seem to be thriving as a consequence. When Victor Combal-Weiss and Guillaume Virag began research for a European business plan competition, their aim was to prove that, in theory, a sustainable farming business would make sense in Asia.
“We started off viewing it as an interesting intellectual exercise,” said Virag.
From this exercise emerged Project Alba, a socially-minded startup that seeks to create sustainable economic development of rural areas in Cambodia by linking the country’s farmland producers with local and international urban consumers.
In developing their business model and making the decision to focus on Cambodia, the two entrepreneurs, who trained as economists at the prestigious Paris School of Economics took a macro approach to their task. They focused on finding an “ideal environment” that met the following requirements: there had to be an economic development need, the government had to be inactive in the agriculture sector, the business environment needed to be benign and the macroeconomics of the country needed to be strong. They soon realized that Cambodia fit the bill.
With GDP per head standing at only 4% of US levels, Cambodia is one of the most impoverished countries in the world. Over half of the population works in agriculture and most farm rice at a subsistence level. Farm sizes are tiny by US standards; the average is around 1.2ha or 3acres. Farmers there have few opportunities to market their products, so there’s been little incentive to diversify crops, though some grow vegetables between the long wet and short dry seasons.
On the upside, GDP growth was 6%[i] in 2010 and tourism – one of the country’s dominant industries – is strong. Tourist arrivals were up 17% year on year in June according to official figures. The hotels catering to these tourists import 85%[ii] of their food from neighboring Vietnam and Thailand as local supplies are scarce. The imports are expensive – about the same as you’d pay for organic produce in Europe – and quality is patchy. What Combal-Weiss and Virag realized was that the 2.5mn tourists[iii] arriving in the country each year provided a decent sized initial target market, and that the 1.5mn residents of Cambodia’s capital, Phnom Penh, also wanted fresh local produce.
Project Alba’s business model is to substitute chemical-laden imported produce with organically grown local product. Cambodian farmers are paid market price for their crop, are given seeds by the company, and have no long-term commitment to participate in the program.
The company recently closed a $500,000 seed round from individual investors in Europe, Asia and the US in July, and recruited a team of 3 local technicians and a supply chain manager with emerging market experience from the World Bank and PepsiCo in Africa.
Projet Alba’s team has been through quite a learning curve since it began operations a few months ago. Some of the challenges that they faced would be familiar to any beginning farmer. For example, it transpired that Cambodian ants love lettuce seeds, so tables had to be hastily assembled to elevate seeds and seedlings out of their reach. Other barriers are specific to emerging markets; exploring the countryside is quite the adventure when even the most recent government maps omit the occasional federal highway and misplace major rivers. The two partners were also surprised to find that farmers were eager to join their program. “We’re working with 10 farmers for our pilot, but we probably had 100 who were interested,” said Combal-Weiss. The first crop of various lettuces is imminent, so testing the local market will be the next obstacle.
From there, the largest issue is logistics as the business scales. Cambodia’s food supply chain is still rudimentary. For example, there is only one cold room in the country, so ensuring swift and steady supply to customers will be a substantial challenge. Monitoring a large network of small farmers will also be tough, despite the benefits of ubiquitous cell phones.
Though some studies suggest that yields on organic crops equate to those on traditional ones, the theory has yet to be proven in Cambodia.
Project Alba has sufficient funding for the moment and believes it will hit breakeven next year, well ahead of its original schedule, in part because wholesale margins are substantially higher than in the US. They will likely seek an institutional round at some stage to fund an accelerated growth path, including expansion into the nascent export market.
In the long run, Project Alba would like to replicate its model in other emerging markets, but, for the moment at least, the young team is having a blast disproving every startup mantra in Cambodia.