María Concepción Rosales Guzmán collects corn husks in Mexico’s Jalisco mountain range.
SAN GABRIEL, Mexico — In the past, farmers would make the dangerous trek north from this tiny town hidden in the rugged folds of the Jalisco mountain range to the United States, hoping to earn enough money doing odd jobs to cover debts incurred while cultivating the small plots of land that have been in their families for generations.
But more recently, many have managed to avoid the trips, staying home as the result of a new venture with PepsiCo, which buys their crops.
“Some of us used to go north to work to make money to pay off debts, but no longer,” said Martín Ramos Torres, a farmer, adding that at least two members of the cooperative he leads had been caught by United States border patrol agents and deported. “In just three years, everything has changed.”
Mr. Ramos and some 300 small farmers here no longer sell their corn to middlemen but directly to PepsiCo, which guarantees the price it will pay for their crops upfront. The deal enables the small farmers to secure credit to buy seeds and fertilizers, crop insurance and equipment.
“Before, I had to sell my cow to buy what I needed,” said José Guzmán Santana, another farmer selling to Pepsi. “Now I keep the cow and my family has milk while I grow my crop.”
PepsiCo’s work with the corn farmers reflects a relatively new approach by corporations trying to maintain a business edge while helping out small communities and farmers. Begun as a pilot project by the foundation affiliated with the company’s Sabritas snack foods division, it is expanding to about 850 farmers to develop a local source of sunflower oil, which the company needs to improve the nutritional quality of its products.
corn project saved PepsiCo transportation costs because the farms were close to
two of its factories, and the use of local farms assured it access to types of
corn best suited to its products and processes. “That gives us great leverage
because corn prices don’t fluctuate so much, but transportation costs do,” said
Pedro Padierna, president of PepsiCo’s operations in
The social benefits of the corn program are obvious in higher incomes that have improved nutritional and educational standards among the participating farmers, not to mention its impact on illegal immigration and possibly even the reduction of marijuana production.
The sunflower farmers are expected to see similar benefits — but PepsiCo insists those benefits are ancillary to the business rationale for the program.
growing number of major companies have adopted similar business tacks aimed at
profitability that also prove to be economically and socially beneficial for
needy people. One of the earliest examples was Danone’s development of a
vitamin-enhanced yogurt product that sells for 11 cents in
“These are markets,” Harry Verhaar, head of strategic sustainability initiatives at Philips Electronics, said of countries with sizable populations of impoverished consumers.
Philips has begun selling low-cost,
solar-powered lighting products in
The products reduce the use of kerosene, the fuel of choice among the world’s poorest consumers. Because they light homes that previously went dark at sundown, they may enable a child to study longer or a community to enjoy an evening soccer game.
And they have spawned business. “A guy will set up a small shop with a large solar panel on the roof or behind and charge a small fee for recharging the solar light,” Mr. Verhaar said.
are seeing an increased focus by companies looking to see how they can use their
core capabilities for public good rather than simply writing a big check,” said
Gaurav Gupta, regional director for
Mr. Gupta stressed that what was emerging was not “corporate social responsibility,” a loosely defined concept typically driven by corporate marketing departments, which he said was “largely nonsense.”
“This is about a company’s core activity, which is something it is constantly thinking about and working to improve,” he said. “Its impact on business can be defined and measured.”
Derek Yach, the former
World Health Organization official who
is now PepsiCo’s senior vice president for global health and agriculture policy,
said firmly: “This is a business. All the good things we want to do have to be
financed out of the profits of the company, so why not do them while we are
doing our business?” Mr. Padierna described the program in the state of Jalisco
as Act II of a three-act play, which started when the company needed a way to
mitigate its impact on the potato market. Through a guaranteed purchase system
similar to the one it uses with the small farmers, PepsiCo enticed big
agribusinesses to invest in the development of potato varieties better suited to
Today, the company is the largest buyer of potatoes produced in
Working with small farmers was a bigger challenge. Mr. Guzmán and Mr. Ramos, for instance, had little experience with pesticides, having previously relied on the local priest to bless away worms.
Nor did they maintain bank accounts, a hurdle to payment by wire transfer. “We didn’t have money to put in the bank,” said Bonifacio Villalvazo, who together with Mr. Guzmán and Mr. Ramos is a member of one of the cooperatives created by the program.
company teamed up with a Mexican nonprofit group,
Fundación Sembrando Trabajo, which
extended to farmers in Jalisco a program it had begun in
A team of engineers from the nonprofit did soil and other tests to determine what seeds and fertilizers would work best. The engineers live nearby and so are frequently on hand to offer farmers advice and services, like delivering the seeds, instructing farmers on how to plant them and counseling on the safe disposal of pesticide containers, which in the past had been re-used to store water and other things.
“They taught us to first triple-wash them and then to poke holes in the bottom so they can’t be reused,” Mr. Guzmán said. “Now we use them to make fences” — which in turn reduces the need to cut down trees, thereby reducing soil erosion.
Other members of the group repeatedly stressed how helpful it was to know they would receive their seeds and supplies on time. In the past, they worked through intermediaries who would sell them what they needed to plant their crops, financing some or all of their purchases.
The intermediaries decided when to deliver seeds and fertilizer and when the farmers would harvest. And almost invariably, the price an intermediary would pay for that crop was less than the amount a farmer owed him — assuming he even agreed to take the crop. “I planted a lot less because I didn’t know if I could sell it and I didn’t want to end up with a big debt,” said Germán Rodríguez Estrada, the youngest member of the cooperative. “Now that I have a secure buyer, I plant twice as much.”
Indeed, the farmers said Pepsi’s purchase guarantee was the most valuable aspect of the program, benefiting even farmers who did not participate. “My neighbors come to me and ask what Sabritas is going to pay me for my crop,” Mr. Ramos said. “Now everyone is getting that price.”
The farmers said the price was higher than they ever got from any intermediary, which means they end up with money in the bank after a crop is harvested. Sembrando Trabajo estimates that while their output has increased by about 160 percent, their incomes have tripled over the three years the program has been in place.
“Well, it depends on the year and the crop, but, yes, we all have higher incomes in general,” said Matías Estrada Figueroa, the treasurer of the cooperative.
now maintain bank accounts, which Ellis J. Juan, representative of the
Inter-American Development Bank in
Other broad benefits Mr. Juan cited were the program’s potential to reduce
illegal immigration to the
The bank has struck an agreement with PepsiCo to provide up to $5 million in credit guarantees to support a program similar to the corn project. The new project has enlisted farmers in the states of Jalisco and Durango grow sunflowers, the first time since 1970s that the crop has been grown for anything other than floral arrangements and bird seed, according to PepsiCo.
company will spend roughly $52 million over the next seven years to buy crops
that may eventually produce 40,000 tons of sunflower oil. That oil will begin
replacing the 80,000 tons of palm oil it needs each year for products made in