Written by ACDI/VOCA Transforming Market Systems Activity in Honduras
The blog focuses on some of the more near-term adaptations that firms have done/are doing to better weather the challenges resulting from covid-19. Certainly, shifting to known channels that are still operational, including on-line channels, is important, but from a systemic resilience perspective it only scratches the surface of what will be important to learn. It will be interesting to hear what TMS learns about connectivity, power and diversity and how these factors affect firm/industry resilience. For example, what supporting services are central to being able to adapt, especially to channels that were previously unknow to the firm. An additional important question for TMS would be, how does a shock also presents an opportunity for systemic change. For example, it could be assumed that connected and powerful firms will weather this shock better, which is likely to result in those firms coming out of covid-19 in a substantially improved competitive position. If this is a real possibility, should projects think more systemically about which firms should get assistance, focusing more on firms that could/would catalyze substantial shifts in the competitive landscape coming out the shock? TMS is at the forefront of thinking systemically and it exciting what they will learn as their research continues.
With the ongoing COVID-19 crisis, people and businesses around the world are facing unprecedented challenges. This is particularly evident in countries like Honduras that have fewer resources to cope with and adapt to the shock. For many businesses, social distancing measures mean lost revenues and forced decisions about how and whether to continue operations and retain employees.
In Honduras, compelling data gathered by the USAID/Honduras Transforming Market Systems (TMS) Activity shows how well businesses are adapting to these challenges. The data was gathered through a survey of 1,178 enterprises from 16 out of the 18 departments in Honduras and across 17 economic activities. The survey demonstrated that the resilience of a business was closely aligned with their willingness to adapt their business model. This has widespread implications for the evidence-based decisions that public organizations, entrepreneurs, and the government will need to take to mitigate losses and support recovery.
Coping With Distribution Chain Disruptions
The TMS Activity is working closely with Honduran businesses, their chambers of commerce, and the government to identify solutions to the unique problems stemming from the COVID-19 crisis. Our approach involves looking at the entire value chain to determine what changes, improvements, and relationships can be initiated that will affect not only the large distributors in Honduras but also the small farmers at the beginning of the chain. This means acting and adapting quickly to develop interventions that will help businesses be more efficient and well-positioned to expand by connecting distribution channels and offering relevant and timely technical training.
Earlier this year, with support from the TMS Activity, JJ-Agro inaugurated the first hydroponic strawberry production unit in Honduras through a $200,000 investment in greenhouses. JJ-Agro is a major supplier of potato, cabbage, broccoli, and cauliflower for Walmart and several Honduran supermarkets. The planting of 54,000 strawberry mother plants offered export potential and the opportunity to diversify revenue streams. However, shortly after the first strawberry harvest, the COVID-19 crisis struck, and export channels were blocked.
KEY TAKEAWAY 1: Manufacturers in Honduras are more likely to be affected and less able to cope with the impacts of COVID-19.
To quickly adapt to the crisis, the TMS Activity helped JJ-Agro rapidly diversify its distribution channels. We linked JJ Agro with a Tegucigalpa-based produce delivery service, Pyflor, and a San Pedro Sula-based produce delivery service, Yojoa Trading Company, to sell their first harvest of strawberries. Over the last two weeks, JJ-Agro was able to sell 3,000 pounds of strawberries through these services, avoiding product and job losses and opening relationships and growth pathways.
“Our clients are extremely satisfied with our product and we are now sold out of our first batch of strawberries. We are launching our first marketing campaign this week, and everything is thanks to the work and support of [the TMS Activity].” — a JJ-AGRO manager
KEY TAKEAWAY 2: Transformative resilience capacities, such as the capacity to find new buyers, are linked to the level of confidence a Honduran business has to recover from COVID-19.
Overcoming Disruptions Via E-Commerce
Yojoa Trading Company, one of the services that offered a lifeline to JJ-Agro, also received support from the TMS Activity when they launched their online sales platform a month ago. The company began using the electronic payment platform of another TMS Activity partner, Sube Latinoamérica. Sube Latinoamérica provides an integrated e-commerce solution for small- and medium-sized businesses. To help businesses learn how to transact online, Sube Latinoamérica provides webinars, workshops, access to logistics carriers nationwide, and ongoing consultation services as part of its service offer.
KEY TAKEAWAY 3: Honduran businesses selling online cope better with the COVID-19 crisis. An estimated 19.5 percent of businesses surveyed are changing their business models to sell products and services online.
Thanks to online sales and new home delivery services, Yojoa Trading Company experienced rapid growth in just 10 days. The company can now sell and deliver fresh produce directly to consumers, bypassing intermediaries, such as grocery stores, while still offering fair prices and reducing food insecurity in the two largest Honduran cities. Given the observed success of these new and improved distribution models, other businesses, such as Pyflor, are also considering expansion into new e-commerce channels through Sube Latinoamérica.
KEY TAKEAWAY 4: Commerce enterprises in Honduras, especially those using online selling platforms, are more resilient to the COVID-19 crisis.
Transforming Business Models
This story is more than anecdotal; it represents the type and profile of businesses that are statistically coping better with the negative impacts of COVID-19. More than half of the businesses surveyed are proactively changing to their business models to adapt to the COVID-19 situation. They are building their resilience capacities by taking sales online, diversifying their products and services, and implementing strategies to operate in a post-COVID19 reality. As a result, these enterprises are losing fewer sales and laying off fewer staff.
The TMS Activity is paving the way for these businesses by applying our systemic, market-based approaches to reduce the barriers they face in adopting e-commerce solutions. We are facilitating new patterns of supply chain distribution and supporting businesses as they test and validate new products, services, and business models so that these outliers may become the new norm.
Honduras, like most countries, will face uncertainty and difficulty in the months and years ahead. But, with support from the TMS Activity and its market systems approach to building business resiliency, many Honduran enterprises will weather the storm and be prepared to hit the ground running when the clouds roll away.
Access the USAID/Honduras TMS Activity's COVID-19 Business Resilience Analysis via the link below.
The MSDHub Blog Series is authored by respected implementers and donors of market systems projects globally.