MAY

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Flower Power Project Summary

Objectives

Develop the oil roses cluster in Afghanistan to produce rose essence for the fragrance industry worldwide 240 ha. of cultivation Excellent conditions for organic cultivation of Damascena rose

Production

Value adding processing and distillation done locally Oil roses yield US$ 3,000 per ha. (US$ 1,650 farm-gate price), a good economic alternative to poppy 500 to 1,000 farmers involved

Local Development /

Harvest: temporary employment for 3,000/5,000 workers including many women 10 to 30 local processing units will employ 50 to 150 workers opportunity for women entrepreneurship 25 qualified workers in the central distillation unit

Beneficiaries

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Approach & Methodology Work plan

Market research
Phase 1

Identification of opportunities for Flavor and Fragrance crops in Afghanistan Field feasibility study

Phase 2

Selection of crops Technical scheme for project implementation

Phase 3

Implementation and Business plans

Phase 4

Sourcing of stakeholders

IMPLEMENTATION

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Approach & Methodology People interviewed

Key industry leaders across all levels have been consulted through one to one interviews.
PARIS
GIVAUDAN Natalie Garcia-Cetto, Perfumer fine Fragrance Anna Estevane, European Marketing Director FIRMENICH Odile Pelissier, Account Manager TAKASAGO Jean Gatignol, Senior Vice President DUCROS Alain Carronnier LOREAL Mathias Houpillart, Naturals RM buyer Marie Claude Fonade, Perfumer
-

GENEVA
GIVAUDAN Rmi Pulvrail, International Buyers Naturals Francis Chabagno, New molecules development Director
-

FIRMENICH Jean-Pierre Rozat, Director Global Purchasing Perfumery Natural Raw Material Gordon Sanders, Buyer Perfumery Natural Raw Material

GRASSE
ROBERTET Jean Daniel Dor, Development Director Robert Sinigaglia, Production Director Anne Sophie Boulet, Account Manager IFF Bernard Toulemonde, General Manager Laboratoire Monique Rmy

KABUL / JALALABAD
MADERA Alain de Bures, Founder Anne Lancelot, Country Director GERMAN AGRO ACTION Dr. Julius Obermaier, Expert in rose cultivation Alexandra Rueth, Field Manager URD Francois Grunewald, Founder OTHER Zalmai Chawali, Teacher and Farmer

OTHER
MT ROMANCE / AUSTRALIAN SANDAL WOOD Co. Stephane Picquart DESMARET SA M. Desmaret, General Manager BIOLANDES SA Dominique Roques, General Manager

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The Flavor & Fragrance Market Market Mapping

1
The Flavor and Fragrance Market is a growing market estimated at 18.4 billion US $
Market Size, in Bn US $, estimates
20

Fragrances account for 40% of the market

Flavor/Fragrance Split 2002

100%

CAGR* = 10.1%
15

40%

Fragrance

47.4 MM
50%

10

13.8
5

16.6

18.4

60%

Flavors
2000 2002 2003 (est.)

0%

Natural Raw Materials (RM) represent 13% of the total RM used

The market size for Natural Raw Material for the Flavor and Fragrance Market is 900 M $

13%
Synthetic Raw Material
- Non speculative - Affordable - Allergy free

Natural Raw Material

- Uniqueness - Bio / Well being - High Quality

2002 16.6 Bn $ 6.3 Bn $ 0.9 Bn $ Market Size

Flavor and Fragrance Market Size Of which we consider only the RM Of which we consider only the Natural RM

87%

Note: *Figures come from the aggregated revenues from the companies dealing in the market. Actual growth should be lower according to our estimates Source: Freedonia Inc; Givaudan; Firmenich; Robertet; Altai Consulting analysis
5 COPYRIGHT 2004 - ALTAI CONSULTING, KABUL - AFGHANISTAN

Pre-selection Criteria for F&F crops in Afghanistan

A Size and growth of the market B Differentiators in the market: Is it a value (quality) or volume (low cost) driven market?

C Structure of the market: presence of oligopolies, speculation?

D Non-sustainability of the current supply chain: non-socially responsible suppliers, cartels,

E Willingness of the buyers to find new variants

F Attractiveness of Afghanistan in this market: primary suitability (climate, soil)

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Pre-selection Fragrance Crops

Fragrance Crops (Market Size in M $; Essence Price per kg), 2002, est. High
Sandal (15-21 M $; 500-700 $/kg)

Rose (18 M $(*); 4,400 $/kg)

Patchouli (25 M $; 25 $/kg) Jasmine (5.5 M $; 550 $/kg)

Geranium (9-12 M $; 45-60 $/kg)

Business Attractiveness

Sage (7.5 M $; 25 $/kg)

Lavendin (12-13 M $; 12-13 $/kg)

Vetiver (6-14 M $; 50-120 $/kg)

Clove (4.5 M $; 3 $/kg)

Citronella (3-6 M $; 3-6 $/kg)

Low Low Suitability to Afghanistan High

(*) including rose essence and concrete

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Focus on the Damascena rose

The Damascena Rose is recognized as the best oil rose Market price for rose essence, has been US$ 4,000 to 5,000 per Kg It takes 3,500 Kg of rose flowers to make one Kg of essence Rose concrete is sold for US$ 700 to 800 per Kg It takes 450 Kg of rose flowers to extract one Kg of concrete Value Chain:
5000 4000 3000 2000 1000 1,400 0 Raw Material Producer Margin Processing Costs Processing Margin Intermediate Margin Wholesaler Margin Final Price Wholesale

Value Chain of 1 kg of Rose Essence (~1.3 hectare), est., in US $ Production + Processing: 3,200 $
400

Production: 2,100 $
700 400 700

800 4,400

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Damascena Rose: Market Research and Feasibility Study

Market Research Main findings

Feasibility Study Main findings

Market size: the rose extract for fragrance market segment represents US$ 18 million (*) yearly worldwide (10,000 tons of flowers) Main producers are Bulgaria and Turkey (~90% of the market), others include Morocco, Lebanon, Iran Market Opportunities: buyers want to change suppliers production costs in Bulgaria likely to increase with entry in EU Afghan Rose quality and concept

Oil roses will grow well above 1,000 meters elevation in the central and eastern regions: water quality is good salt content is low Other fragrance crops can be cultivated there: geranium under 1,000 meters lavender at all altitudes other local specialties to be explored Farmers can intercrop with vegetables and clover for additional revenue

(*) including essential oil and concrete

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Approach & Methodology Work plan

Phase 1

Market research

Phase 2

Field feasibility study

Phase 3

Implementation and Business plans Financial scheme for project implementation

Phase 4

Sourcing of stakeholders

IMPLEMENTATION

10

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Production Plan

Farmers Rose Flowers

Rose Flowers Processing Unit

Farmers Rose Flowers Rose Flowers Processing Unit

Rose Water

Distillation / Extraction Unit

Rose Essence / Concrete

Distillation / Extraction Rose Flowers Unit

Farmers

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Suitable Areas for Rose damascena Cultivation in Eastern Afghanista

Andarab Hisa-I-Awali Panjsher

Site selection
Spring frost free areas south of the Hindu Kush 1,000 meters elevation Irrigation water security Low salt content

Khinjan

Panjsher Salang Hisa-I-Duwum Panjsher Shinwari Jabalussaraj Chaharikar #

#

Mandol Wama Waygal

Koh Band Nijrab Mahmud Raqi Dawlat Shah Alasay Nuristan Chapa Dara Pech
#

Asadabad

Bagram Istalif Kalakan Mir Bacha Kot Shakar Dara Dih Sabz Guldara

Marawara Alishing Kohi Safi Tagab

#

Legend

Alingar Dara-I-Nur Mihtarlam Nurgal

Narang Chawkay

Sirkanay

Provinces Adm initrativ e D

Districts Adm inistra tive D i National landcove r

Paghman

%
Surobi Kabul Bagrami Qarghayi
#

Khas Kunar Kuz Kunar Jalalabad Surkh Rod Khaki Jabbar Hisarak Chaparhar Sherzad Rodat Khogyani Azra Dih Bala Pachir Wa Agam Achin Shinwar Muhmand Dara Nazyan Dur Baba Bati Kot Lal Pur Kama Goshta

Fr uit Trees /Vine yard and G

Irrigate d: Intensively C ulti (1 Crop/Ye ar)

Maydan Shahr Chahar Asyab Musayi

Irrigate d: Intensively C ulti (2 Crops/year) Rivers

The Central region (around Kabul) and Eastern regions (around Jalalabad) have been identified as suitable See details on map Central region:

Elevation below 1000 m ete Not suitable for Rose Cult

Muhammad Agha

Khushi

Jaji
N

Baraki Barak Puli Alam

Sayid Karam Charkh

Lija Mangal Chamkani Dand Wa Patan 0 Jani Khel Jaji Maydan

W S

50 Miles

Eastern region: Smaller landholdings Remote locations Natural flower garden

Easier logistics, less transportation costs and time Rehabilitation (Chamali plain) Bigger landholdings potential for more efficiency and quality
12

Alternative livelihood for farmers

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Khinjan

Site Selection: Suitable areas for Rose Damascena Mandol Panjsher cultivation in Eastern Afghanistan Salang
Hisa-I-Duwum Panjsher Shinwari Jabalussaraj Chaharikar #
#

Wama

Waygal

Suitable Areas for Rose damascena Cultivation in Eastern Afghanistan

Andarab Koh Band
Nijrab Mahmud Raqi Bagram Istalif Alasay Dawlat Shah

Hisa-I-Awali Panjsher
Nuristan Chapa Dara Pech
#

Asadabad

Khinjan

Salang Kalakan Mir Bacha Kot Shakar Dara Shinwari

Paghman Dih Sabz Jabalussaraj

Guldara

Panjsher
Kohi Safi Tagab

Mandol Alishing
Alingar

Marawara

Legend

Wama
Dara-I-Nur Nurgal

Narang Waygal Chawkay

Sirkanay

Provinces Adm initrativ e D

Hisa-I-Duwum Panjsher
Mihtarlam
#

Districts Administra tive D National landcover

Koh Band Nijrab Surobi Alasay

Surkh Rod Khaki Jabbar Hisarak Kuz Kunar Qarghayi Dawlat Shah

Khas Kunar

Fruit Trees /Vine yard and

Chaharikar # # Kabul Mahmud Raqi Bagrami

Nuristan
Jalalabad Kama # Chapa Dara Goshta

Asadabad Pech
#

Irrigated: Intensively Cult (1 Crop/Ye ar)

hr

Irrigated: Intensively Cult (2 Crops/year) Rivers

Bagram Chahar Asyab Musayi Istalif Kalakan Mir Bacha Kot Shakar Dara Muhammad Agha Dih Sabz Guldara

Lal Pur Marawara

Alishing
Sherzad

Kohi Safi

Tagab
Khogyani Mihtarlam #

Chaparhar Alingar

Legend below 1000 me Elevation

Districts Administrative Divisions

Bati Kot Rodat Dara-I-Nur

Narang

Sirkanay

Not suitable for Rose Cul Provinces Adminitrative Division

Nurgal

Chawkay Shinwar Muhmand Dara Khas Dur NazyanKunar Baba

Azra

National landcover Fruit Trees/Vineyard and Gardens Irrigated: Intensively Cultivated (1 Crop/Year)

Paghman
#

%
Kabul
Khushi Bagrami

Surobi Jaji

Dih Bala Kuz Kunar Pachir Wa Agam Qarghayi

Achin

Shahr ki Barak Puli Alam Chahar Asyab Musayi Khaki Jabbar Lija Mangal Hisarak Chamkani Dand Wa Patan Sayid Karam Sherzad Muhammad Agha

Jalalabad
#

Kama
N

Goshta

Irrigated: Intensively Cultivated (2 Crops/year) Rivers

Surkh Rod
W

Lal Pur Chaparhar

0

Bati Kot
S

Elevation below 1000 meters Not suitable for Rose Cultivation

harkh

Rodat
13

Khogyani

50 Miles Shinwar Muhmand Dara2004 - ALTAI COPYRIGHT

CONSULTING, KABUL - AFGHANISTAN

Flower Power Presentation of Actors and Roles

PROJECT MANAGEMENT Research Steering Coordination Marketing NGOs Training Production Control FARMERS Cultivation Harvest PRIVATE BUSINESSES - Local Processing Units (10 to 30) Post-Harvest Processing Rose Water Distilling - Afghan Rose Co. Production Distribution Logistics Marketing

DONORS
Funding

14

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Actors and Roles

Infrastructure
Donors Funds NGOs Training Production Control

Cultivation

Farmers Rose Flowers

Processing
Rose Water Production Units

Rose Water

Afghan Rose Co. Transformation and Sales Rose Essence International Market

Sales

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Action Plan
Project Management Marketing Coordination Producti Post on Harvest Training Distillati Monitori Processi on ng ng
Train the trainers Practical training for farmers Demonstration plots Capacity building Develop Quality Control procedures 10 to 30 decentralized post-harvest processing units Potential for women entrepreneurship programs Main distillation units Distillation Techniques R&D

Market Investment Researc h

Market Research Feasibility Study Business plans and partner recruitment

Sales and Promotio n

Develop relationship with international buyers Certification of the production process

FUNDING
DONORS (Grants for R&D and Infrastructure)

DONORS

PRIVATE INVESTORS

IMPLEMENTATION
PROJECT MANAGEMENT TEAM

NGOs

PRIVATE INVESTORS
PROJECT MANAGEMENT TEAM
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PRIVATE INVESTOR AFGHAN ROSE CO

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Focus on Farmers
Advantages for farmers: income security, training, access to international markets

Expected average landholding: 2 jeribs (0.4 hectare) Investment is US$ 1,050 per hectare Revenue of rose flowers is US$ 1,650 per hectare after year 3, and reaches over US$ 2,000 per hectare including intercrops Profit is around US$ 400 per year after year 5 The return rate for this investment is 17% a year on 10 years cash flow

17

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Focus on Farmers Financing Scheme

Early farmers (50 of them) will need to import cuttings for an expensive US$ 1 a piece. They will nevertheless make more profit from selling many cuttings for reproduction. These early farmers will produce cuttings and sell them to new farmers for US$ 0.35 All farmers will need a credit scheme in order to make up for the investment and lack of production in year 1 These figures do not include any grants from donors. Interest free credit schemes or grants could be built in to help farmers invest in cuttings

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Value to farmers and their communities

Very high labor costs (harvest) are detrimental to the farmers bottom line, but they are a plus for the extended family / community:

NPV(*) of 10-year cash flow

US$ 5,200

Value to the community

US$ 1,500

Value to the extended family

Value to the farmer

US$ 280

(*) NPV= net present value of projected cash flow

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Business Plan Local Processing Unit

Advantages for entrepreneurs: proven technology, natural investment for the surrounding community Investment is $4,000 Good return on investment US$ 500 profit per year With donor grants of $3,000 per unit, each unit can bring a 35% return on a 10-year period

20

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Business Plan Afghan Rose Co.

Advantages for private investors: market segment where Afghanistan can be very successful (and become a brand)

Investment is US$ 400,000 The company shows 19% Internal Return Rate on a 10-year period, when taking into account: US$ 150,000 grants to purchase equipment Donors participation in R&D, Marketing Other flowers, roots and herbs can be distilled for the fragrance industry, adding to the profitability of the distillation and marketing company

21

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Donors Involvement
Funding for agricultural infrastructure
Project Management

Import and reproduction of roses

Selection and contracting of farmers Grants and credit scheme for farmers Training of extension agents and farmers

Extension / field work

Funding for distillation infrastructure

Research and Development, Marketing, Project Management Grants for test distillation units Training of distillation staff Early test of roses for distillation Sourcing or cultivation of test crops for distillation

22

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How to get started

Phase 1 Pilot farm and distillation unit

Phase 2 Development

Cultivation of potential crops (flowers and herbs) Training of personnel Distillation tests/ Research and Development Market research, involvement of key stakeholders in the market Support of other Essential Oil projects (local roses, other flowers, dried spices and wild herbs)

Production and marketing of successful Phase 1 Essential Oils Expansion of pilot farm by private investors Final selection of crops for Afghanistan Extension projects in several regions

23

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Pilot Farm - Objectives

Market research and selection of crops, sourcing of cuttings and seeds (potential crops are geranium,
lavender, iris, sage, mint, basil, citronella)

Hiring and Training of personnel (management, horticulture, distillation) Cultivation and harvest

Phase 1

Sourcing of additional distillation raw material

(such as orange blossoms, vetiver, cardamom, aniseed, cumin, saffron)

Distillation

Test of distillation material

Promotion of results

24

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Pilot farm - Details

25 to 40 hectares Cultivation
7 to 10 hectares imported Damascena roses Remaining lands and intercrops: local roses, other flowers and herbs

Phase 1

Employment: 20 to 30 employees

Potential to populate 20 hectares every year with local cuttings of Damascena roses

25

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Milestones and Timeline

Jun 04 Oct 04 Plant Order cuttings cuttings 2004 2005

2006

Apr 07 First Large Scale Rose Flowers Harvest 2007

2008

2009

2010

Phase 1 Pilot Farm

Import and cultivation of roses and other crops Training of personnel Test distillation

Extension
Contracting and training of farmers Production and Quality control

Processing and Distillation

Build more capacity Production of essential oils

Sales and Promotion

26

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Afghan Roses Executive Summary

Position Afghanistan on a promising market segment: flowers for the fragrance industry worldwide Provide access to international markets for 500 to 1,000 farmers in mountainous remote areas Create 100+ jobs and 3,000 to 5,000 temporary jobs Help private companies invest in processing and distillation capacity in order to add value locally Create a sizeable revenue stream for the country

27

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