This article series is sponsored by Philip Morris International.
More than 60 percent of those living in extreme poverty are smallholder farmers, according to the World Bank. In addition to providing up to 80 percent of the food supply in developing countries, these smallholders also grow crops that end up in large companies’ supply chains—meaning industry has a clear role to play in improving their quality of life.
Philip Morris International (PMI) has a stated goal for all of its tobacco supply chain farmers to achieve a living income by 2025, whether they’re contracted by the company or its suppliers. This means a farmer’s annual net income is enough to provide essentials like food, water, housing, education, healthcare, unexpected expenses and transportation for every member of his or her household.
Though tobacco is the primary source of income for most of PMI’s contracted farmers, more than 70 percent of them also grow food for their own consumption, according to the company. Launched in 2018, PMI’s crop diversification initiatives aim to give farmers the tools to grow more food crops for sale, moving them closer to a living income, said Mauro Gonzalez, director of sustainable agriculture for PMI.
“Tobacco is one source of revenue that allows farmers to achieve this living income. When there is still a gap to be addressed, we begin to introduce diversification initiatives that give farmers the opportunity to grow complementary crops to supplement what they’re earning from tobacco production,” Gonzalez told TriplePundit.
Moreover, PMI aims to phasing out conventional cigarettes as quickly as possible, including the switching of 40 million adult smokers who would otherwise continue smoking to smoke-free products by 2025. Since smoke-free products like e-cigarettes require significantly less tobacco than a conventional cigarette, the company expects its demand for tobacco to decline over the long term.
“We don't see the impact happening overnight—there’s still some way to go,” Gonzalez said. “Nevertheless, we want to be a responsible company and start to prepare the ground for when this situation is more evident. We want to build resilience in these farming communities and build expertise so they’re able to grow something else and not rely solely on tobacco for their income.”
However one might feel about its staple crop, PMI’s work in diversification offers one valid case study in what large companies can do to reduce if not eradicate poverty within their supply chains. Here we take a closer look.
Malawi is the sixth largest tobacco producer in the world and the first country where PMI tested its crop diversification programs. “Malawi was where everything started and where we began to analyze the options farmers have,” Gonzalez told us.
Although its economy has improved significantly over the past decade, this southern African nation continues to struggle with poverty. More than half of its 17.5 million residents live in poverty, according to the World Bank, and 37 percent of children under 5 are chronically under-nourished.
Considering that the vast majority of Malawi’s population earns their living from agriculture, increasing farmers’ capacity to grow a more diverse set of crops has the potential to strengthen the country’s economy while building resilience for the future.
PMI launched its diversification programs in the country in 2018 through a partnership with Palladium, a global impact firm that is implementing USAID's food security program Feed the Future in Malawi.
“Palladium was already working on crop diversification in Malawi, however they didn’t have a very extensive reach in terms of farming communities,” Gonzalez explained. “This is where we saw good synergies and started to develop a plan.”
The company worked with Palladium, other NGOs and PMI suppliers in Malawi to map local crops that could generate income for farmers. Out of this research, the partners concerted their focus on groundnuts, a family of nutrient-dense legumes that comprised Malawi’s third largest export crop in the 1970s.
Groundnut cultivation dropped significantly in Malawi as export markets collapsed in the 1980s and 1990s due to quality issues, but exporters’ appetite for groundnuts has renewed over the past decade. Returning to groundnut cultivation could help smallholder farmers increase their income, as well as provide nutritious food for their families, the partners say.
Over the course of 2018, the partners began outreach with PMI’s suppliers’ farmers and trialed different varieties and new irrigation systems. “It's not just a matter of giving out any seeds. It’s also about providing the right expertise to farmers, the right high-yielding seed, and the right crop inputs, because although they grew groundnuts in the past and some are still growing them today, the technological package for a more profitable crop today is different,” Gonzalez said.
The partners identified beekeeping as another income-generating activity with high profit potential for minimal extra effort.
PMI works with two international suppliers in Malawi that source tobacco from more than 20,000 contracted farmers. Several thousand have already started cultivating groundnuts to supplement their income, and around 500 beehives have been provided to farmers to start beekeeping, Gonzalez said.
These same suppliers will purchase groundnuts directly from the farmers and sell them into domestic and export markets, essentially “developing a new value chain,” he told us. Both suppliers have stated goals for all farmers supplying tobacco to PMI to also grow groundnuts or have another supplemental income stream by 2025, Gonzalez said.
There is no one-size-fits-all approach to crop diversification, Gonzalez told us, and PMI’s program takes a slightly different shape in every region where it’s employed.
In Mozambique, where nearly 130,000 people grow tobacco as one of their main sources of income, PMI works with the international poverty-alleviation NGO Business for Development. Since 2018, the two organizations together with Mozambique Leaf Tobacco (a supplier of tobacco from Mozambique) have worked on trialing different alternative crops such as cotton, potatoes, and flaking maize. In addition, low-cost irrigation systems for seedbeds and vegetable gardens are distributed to tobacco-farming communities.
In Pakistan, where the tobacco industry is the primary source of livelihood for 1.2 million people, the company is working with the local Hashoo Foundation to help farmers grow market mushrooms while providing support to grow corn, and other vegetables.
Since launching in 2018, the program has since expanded to supplier communities in Brazil, Colombia and the Philippines. “It’s only been two years and we’re still trialing new crops, but the main objective is to deploy this on a wider scale,” Gonzalez said. “From countries like Malawi and Mozambique, where we see that farmers are struggling, to locations where maybe farmers are better off but there is still a need to build resilience for the future. We’re starting where the needs are largest and continuing to develop.”
Image credit: Adam Cohn/Flickr