June 2016
Purdue Improved Crop Storage (PICS) Bag Commercialization Overview
J. Lowenberg-DeBoer, Professor of International Entrepreneurship, Purdue University
Summary - The Purdue Improved Crop Storage (PICS) technology is a simple, low-cost (about US$2-$3) triple-layer plastic bag that allows small-scale African farmers to protect their harvested grain from insect damage without insecticides. The PICS bag consists of an outer layer of ordinary woven polypropylene and two inner liners of high density polyethylene (HDPE) 80 microns thick. Better storage improves household food security and it gives farmers more flexibility in marketing leading to higher incomes. PICS commercialization was launched with funding from the Bill & Melinda Gates Foundation (BMGF) from 2007-2013. During this period the technology was been disseminated to millions of cowpea farmers in 10 countries in West and Central Africa including Ghana, Nigeria, Burkina Faso, Niger, Senegal, Mali, Benin, Togo, Cameroon and Tchad. Subsequently, the PICS2 project showed that the technology could be used to storage any dry grain and PICS3 (https://www.picsnetwork.org/) is extending use of hermetic storage in maize growing areas of Nigeria, Burkina Faso, and Ghana, and into East Africa. To achieve scale up PICS bag adoption, Purdue University worked with many partners, including local and international non-governmental organizations (NGOs), national agricultural research systems (NARS), national extension organizations, farmer-based organizations, women’s groups and for-profit businesses (i.e., manufacturers, distributors and ag input retailers). The extension effort involved direct contact with millions of farmers in almost 45,000 villages. African and Asian plastic manufacturers and local entrepreneurs produced and sold almost five million triple-layer bags from 2007- 2015.
The origin of the technology is in the USAID-supported Bean/Cowpea Collaborative Research Support Program (CRSP) which identified cowpea storage as the key constraint to greater productivity in the 1980s. In village meetings farmers had indicated that they could produce more cowpea, but did not because harvest time prices were too low and storage losses were too high. Starting in 1987, Purdue Entomology Professor Larry Murdock and colleagues developed a portfolio of non-chemical storage technologies. Adoption surveys showed that the most widely accepted improved storage technology was the triple layer storage bag. Grain coming from the field is commonly infested by low numbers of pest insects whose numbers increase exponentially during postharvest storage. When such grain is sealed in an airtight container, the insects quickly consume the oxygen in the bag, cease feeding and reproducing, become inactive and may die of desiccation. Subsequent research has shown that PICS bags can be used effectively to store any dry grain.
The PICS regional adoption studies in 2010 and 2012 showed that about 46% of respondents used some type of hermetic storage and about 44% of the quantity of cowpea stored on farms was in hermetic containers. This is substantially more than the 30% of cowpea grain in hermetic storage reported in 2003-2004 survey. Given the continued growth in PICS bag sales, the persistent use of metal drums in some areas and the increased use of plastic jugs, it is likely that cowpea grain stored on farms in the region exceeded the 50% hermetic benchmark in 2013.
Regionally PICS bags are used by more respondents and for a higher percentage of cowpea than any other hermetic container. Alternative hermetic containers include metal drums, plastic jugs and “double bags” (i.e., two layer bags, with a single liner of low density polyethylene). PICS adoption surveys show that PICS bags are used by 18% of farmers in the region and for about 20% of cowpea quantity. Some insecticide use still occurs with hermetic containers of all kinds – as a sort of insurance – but insecticide use is down since 2003-2004.
When PICS bags are available they are used by women as well as by men. A survey of adult women in randomly selected villages in Burkina Faso, Niger, and Nigeria, has shown that over half of the women use hermetic techniques for their cowpea. In surveys about 28% of rural women in these three countries use PICS bags.
The PICS experience shows the importance of supply chain development. Knowledge of how to use new technology is of little use to farmers if they cannot obtain the inputs required. Developing distribution systems depends on a competitive profit at each link in the supply chain. Insights from the PICS supply chain study (http://purl.umn.edu/138675) are already being applied by Purdue and other organizations to PICS bags system in other parts of the world and to other agricultural inputs.
PICS has resulted in greater cash income for farmers, new businesses, new jobs, less insecticide exposure, and increased cowpea availability for families, schools and orphanages. Hermetically stored cowpea commands a 10% to 15% premium price in some markets because consumers know it contains no insecticides. Surveys indicate that most PICS bags are used at least three years. The survey respondents who store in PICS bags gain on average $26.58/bag at sale Given the sales of 1,277,470 PICS bags in the 2010-2012 period, a conservative estimate of the extra cashflow for African farmers and households attributable to PICS is $33,955,153 for the 2012-13 storage year.
Sustainability - From the beginning of the PICS project in 2007 Purdue and its partners focused on making PICS bags a profitable product at all links in the supply chain. PICS moved from a product ordered by the project and sold by consignment in 2007, to helping distributors order bags in 2008 and 2009, to a completely private activity by 2010. The sustainability of PICS technology and business model is best seen in the continuing growth in bag sales in in the face of diminishing grant funding in West and Central Africa. For example, over 1 million bags were manufactured and sold privately in Nigeria by PICS licensee Lela Agro for the 2015 harvest season in spite of Boko Haram disruptions and the economic recession. The most durable impact of the PICS initiative is probably that at least eight for-profit companies are investing in research and development with the goal of creating better grain storage bags for African farmers.
PICS bags were never patented, but at the instigation of African business partners Purdue registered the PICS trademark. Purdue licenses the manufacturing of triple layer storage bags with the PICS trademark in 15 countries and the sale in an additional five countries. The licensees benefit from PICS brand loyalty, and perhaps more importantly from Purdue technical and management support in the event of problems. The university has looked into spinning off either a for-profit or not-for-profit company to manage PICS bag licensing as grant funds are phased out, but decided that license revenue is not enough support a U.S. based organization. Consequently, the university decided to manage licensing in house for the time being partially supported by internal resources. The hypothesis from the venture capital world is that in the long run as grant funds for hermetic storage dry up the university will probably phase out of PICS licensing and that the hermetic storage bag market will be dominated by generic manufacturers.
Challenges – During the PICS projects the key challenge for Purdue and its partners was the development of the PICS bag distribution system. Adoption surveys indicated that if farmers had to travel more than 7 km to buy PICS bags, use of the technology declined sharply, but in many countries in West and Central Africa, the agricultural input supply retail distribution system is rudimentary. Even where donors had funded agro-dealer networks (e.g., Ghana, Nigeria), the resulting system was often more focused on dealer rent seeking, than on service to the customer. The BMGF encouraged Purdue and its partners to hire business consultants in each country and to experiment with various commercial partners (e.g., farmer based organizations, cooperatives, non-ag retailers, agro-dealer networks). The flexibility the Foundation allowed Purdue to work with a range of commercial partners was essential in responding to this challenge.
In the longer run quality control will be a key challenge. Price competition is intense in African and Asian markets. The easiest way to cut the cost of triple layer storage bags is to reduce the thickness of the liners and use more low density polyethylene (LDPE) instead of high density polyethylene. Or more radically to eliminate one of the liners. Those cost cutting measures also increase the probability that insects will pierce the liners, the bags will no longer be air tight and storage damage will occur. Purdue licensing of the PICS trademark requires maintaining the PICS specifications and includes quality spot checks. If Purdue phases out of the licensing, there are concerns that price pressure will drive manufacturers to the lowest common denominator and only low quality bags will be marketed. An alternative perspective is that the market will determine how much risk of storage damage African and Asian farmers and grain traders are willing to support.