The Nestlé Paddy Club, a contract farming arrangement between Nestlé Malaysia and the local paddy farming community in Kedah, is an example of a success story that has boosted productivity in the agricultural sector whilst concurrently increasing the welfare of B40 households. One of the key initiatives of the Nestlé Paddy Club is the transfer of technology to local farmers – this has been done through the commercialisation of the Semi Aerobic Rice Intensification (SARI) method, a means of decreasing water usage in the planting of paddy while also decreasing the methane emissions of decaying submerged organic materials.

SARI only requires that farmers release water from the paddy fields on the 50th day of each planting season, and that the soil is saturated, but not inundated with water. This has a water savings potential of up to 40% as well as reduction of methane emission by 74% from the conventional wet farming method. Despite the much reduced input of water, the output of the paddy fields running SARI achieved an average of 6.4 tonnes per hectare, higher compared to the national average of 3.7 tonnes per hectare. The SARI method pioneered by Nestlé was first introduced to 20 pioneering farms in 2010, and is now applied across more than 800 hectares of farmland in Kedah.

Nestlé started the Paddy Club in 2012 with more than 300 farmers joining the programme with the adoption of a contract-farming model that was mutually beneficial. The contract-farming model guarantees a set price for the produce of the farmers regardless of the spot price of the crop at the time of harvest, while allowing the transfer of technology and best practices from Nestlé to the smallholders that helps in increasing the paddy yield. The increased stability creates the space for smallholders to take a longer view and incentivises their compliance with Good Agricultural Practices (GAP).

This raises the quality of their crops to global standards and increases the competitiveness of smallholders in the international marketplace. As the truest affirmation of Nestlé’s philosophy of Creating Shared Value (CSV), the Paddy Club has benefited both smallholders and Nestlé alike; farmers have seen their incomes sustainably increase, while Nestlé is able to manufacture and market a globally competitive food product that satisfies the discerning yet environmentally conscious millennial consumer.

Source: Nestlé (Malaysia) Berhad.