Innovative breakthrough: TAKTIK and ATN sign 5-year collaboration.

VECO Indonesia’s cinnamon farmer organisation partner in Kerinci, TAKTIK, and their long-time buyer PT Agripro Tridaya Nusantara (ATN) have recently made a major breakthrough by establishing a 5-year joint operation.

In August 2016, TAKTIK successfully gained ATN’s commitment to take their existing seller-buyer relationship to a new level and enter into a joint operation, which is a breakthrough inclusive business model allowing sharing of expertise, technology and also capital when needed, in order to improve quality, marketability and competitiveness of organic cinnamons produced by members of TAKTIK.

Since 2015, ATN had committed to not merely focus on gaining profits and was not interested in a one-off buyer-seller relationship, but had always wanted to contribute in the development of TAKTIK, which was clearly demonstrated through their willingness to sign an MoU and also by making several investments. Finally, in the first semester of 2016, an innovative cooperation model was agreed upon. It is called a “Joint Operation”. Unlike a joint venture that represents a share of net assets and equity, a joint operation represents sharing of control and arrangements of operational matters. In this case, TAKTIK and ATN each has specific roles. Members of TAKTIK—the cinnamon farmers—have responsibility to cultivate and harvest their cinnamons according to the required standards. TAKTIK as an organisation then collects the yields and conducts post-harvest processing, including sticks processing and quality control. While ATN is responsible for marketing, export handling, providing technical support and provision of capital when necessary.

The joint operation was legally formalised in Jakarta in early September in front of a licensed notary who witness the signing of the joint operation agreement detailing the rights and responsibilities of each entity for the next five years. The joint operation is expected to increase TAKTIK cinnamon’s market share nationally as well as globally.

The District of Kerinci, where TAKTIK is based, is located in the western part of Jambi Province, roughly in the heart of Sumatra Island. Covering an area of 380,850 hectares and standing 500-3,805 meters above sea level, the landscape is spectacularly adorned with soaring mountains, idyllic hills, dense rainforests including several protected national parks, and beautiful lakes. Around 54,869 hectares of the area are allocated for plantations. Cinnamon plantations cover 40,962 hectares of it, spread in several sub-districts, or approximately 75% of the area allocated for plantations.

While cinnamon rolls from Sweden and chai tea from India get their trademark flavour from cinnamons, many still do not realise that these countries probably get their supply of cinnamons from Kerinci. Many also are not aware that the quiet and picturesque district is actually the world’s biggest cinnamon supplier, providing 85% of all consumed cinnamons globally.

Cinnamon is one of the oldest spices in the world, mentioned in the Bible and was even used in ancient Egypt not only as beverage flavouring and medicine, but also as embalming agent. It was among the most sought after spices in the 16th century, triggering the West to invade and colonise many cinnamon-producing countries including Sri Lanka and Indonesia.

Cinnamon trees in Kerinci were mostly cultivated from the original buds many years ago by the ancestors of today’s farmers. Most cinnamon trees that grow in Kerinci are of the Cinnamomum burmannii species, also known as Cassiavera. This type of cinnamon is very aromatic and has a stronger, more intense flavour than the Ceylon cinnamon of Sri Lanka. It also boasts high content of essential oil, which is used in synthetic form for perfumes and fragranced soaps and detergents.

All cinnamons in the area are produced naturally without chemicals. In 2016, TAKTIK obtained an organic certification from Control Union, certifying their compliance with EU and USDA organic standards and verifying the quality of the cinnamon. This is one of the many reasons why ATN is eager to join hands with TAKTIK in a long term and more sustainable, win-win business collaboration. The innovative model secures not only sales of cinnamons but also ensures various and continuous development and improvement for TAKTIK, which in turn will allow the farmer organisation to provide better services for its growing members.

Going forward, TAKTIK also plans to transform into a cooperative, which legally offers a stronger positioning for future businesses. Together with ATN, TAKTIK projects an increased production in 2017, reaching 3,032 metric tons of organic cinnamons from 261 farmers and 3,178 metric tons of conventional cinnamons from 246 farmers. The joint operation is also targeting sales in 2017 to reach 200 metric tons for organic cinnamons and 300 metric tons for conventional cinnamons.

VECO Indonesia continues to support cinnamon farmers in Kerinci and to focus on institutional strengthening, business capacity building and development of more inclusive business cooperation in the future. VECO Indonesia is also actively involved in the Indonesian Spice Council (DRI) to foster an enabling environment and ideal condition for cinnamon trades.