October 16, 2013

Aldaba Theater, University of the Philippines

Quezon City, Philippines

5th RIPESS International Meeting on Social Solidarity Economy University of the Philippines-College of Social Work and Community Development Manila, Philippines October 16, 2013

Growth opportunities for organic products

Domestic organic market described as a “niche” market sold mainly in specialty stores and weekend markets in Metro Manila (80% of domestic organic consumers are located).

Mainstream markets slowly absorb organic products

Total value traded P266.7M (USDA, 2000). 2007 estimate is between PhP860-PhP1.3 billion (PDAP)

Growth opportunities for organic products

Export market valued at US$18M (2006), small compared to the growing global demand for organic food and beverages estimated to have reached US$15.6B in 2009 increasing by over US$5 billion/year

Organic rice requirements for Manila is 2,480 sacks or 124 MT per month or 488 MT per year (ICCO, 2011); muscovado sugar-2,049 MT (PDAP)

Annual growth of organic consumption-20% (DA)

Growth opportunities for organic products

Of the 2,480 sacks or 124 MT per month or 488 MT per year , GlowCorp now trades 1,250 sacks of organic rice in the past months

Potential export market with actual inquiries for organic rice (Europe, Russia, US and Hong Kong); certified muscovado sugar in Taiwan, South Korea, Singapore

Growth Opportunities for Organic Products

Recognition from the Philippine Association of Supermarkets, Inc (PASI) and Hotel and Management Association of the Philippines (HMAP) of the organic products

Increasing number of farmers going into organic farming

Enactment of Organic Agriculture Law

Poverty is predominantly rural, where 70% of the poor reside in the countryside. Two-thirds of which depends on agriculture

Initiative to increase income among farmers is through sustainable agriculture and organic farming

Problem analysis

Problem Analysis

Constraints that undermine the participation of small farmers in the market:

Small-scale producers are focused on local markets (direct sells and mobile stalls)

Specialty stores for organic products are limited in scope and reach

Supermarkets favor large commercial suppliers over small farmers

Problem Analysis

Small producers are often on the disadvantage due to unfavorable trading arrangements such as pricing schemes, overdue payments by distributors, lack of logistical support Middle-men most often generate the most income than farmers

Principal Shareholders

Kappia, Abra (Muscovado)

CARRD, Manila (Muscovado, Organic Rice)

UMFI, Manila (Market Consolidator)

PDCI, Camarines Sur (Organic Rice)

AFCCUI, Antique (Muscovado)

Don Bosco, North Cotabato (Organic Rice)

Bios Dynamis, North Cotabato (Organic Rice)

SKMFMC, Sultan Kudarat (Muscovado)

KSN, South Cotabato (Organic Rice)

Our Business Model

TARGET MARKET

Quality Products Branded Quality Products

MEs

LCs

Micro Entrepreneurs

(MEs)

Local Consolidators

(LCs)

GLOW CORP

Premium Pricing Dividends

Technical Assistance

Profit

Vision

GlowCorp to be the leading market distributor of globally-competitive organic, natural and healthy agri-based commodities produced by marginalized groups and community-based enterprises that promote economic empowerment of the rural poor and improved quality of life

Mission

GlowCorp to develop new, non-traditional markets as well as increase market share of organic and natural products such as organic rice and muscovado sugar from 1% to 5%, leading to creation of more jobs and increase in income among community-based enterprises/ farmers.

Product lines

Our supply and marketing chain (rice)

Farmer

PDCI/Bios

Trading

PDCI/Bios

Processing

PDCI/Bios

Logistics

PDCI/Bios

Distribution

and

Marketing

GlowCorp

Distributors

CONSUMERS

Supermarkets

Our supply and marketing chain (muscovado)

Farmer

Processing

(SKMFM)

Trading

SKMFMC

Logistics

SKMFMC

Distribution

and

Marketing

GlowCorp

CONSUMERS

Supermarkets

Target Markets

Rice retailers and distributors

Hotels and restaurants

Supermarkets

Domestic Markets Export Markets

GLOWCORP in the [Value Chain*]

*Michael Porter

PR

OD

UC

TIO

N

1. Production inputs (seeds and fertilizers)

2. Infrastructure (farm to market roads, irrigation, equipment and post harvest facilities)

3. Production and trading capital

Challenges and issues in the Organic Value Chain

Pro

cessin

g

1. Infrastructure (rice mills, colour sorter, ware house/ packing house)

2. Packaging equipment and materials

3. Product quality

Challenges and issues in the Organic Value Chain

Lo

gistics

1. Logistics operator/ cargo forwarder

Bringing agricultural products from Mindanao is more expensive than sending these products to other countries

Challenges and issues in the Organic Value Chain

Ma

rke

ting

a

nd

Sa

les

1. Warehousing 2. Marketing and distribution

system 3. Marketing capital 4. Certification 5. Consumer awareness/education 6. Product quality 7. Supermarket fees and discounts

(listing fee, introductory discount, trade/regular discount, mailer, freight, promo fees)

8. Additional market (export)

Challenges and issues in the Organic Value Chain

Se

rvice

1. Technical support to organic farmers in ensuring product quality and organic integrity

2. Support to organic producers in the installation of ICS

3. Relationship management with buyers and consumers

Challenges and issues in the Organic Value Chain

Engaging the Market: What are the market requirements

Major factor in engaging the market Price

Product quality

Supply consistency

Engaging the Market: What are the market requirements

In engaging supermarkets, be prepared to provide: Mailer support (SM-Php250,000/SKU

annually)

Introductory discount (all retail stores-5% for new product for 6 months)

Trade discount (all retail stores-5-10% perpetual)

Value pack support (SM-Php11,000/ SKU/ store)

Anniversary support (Metro Gaisano-Php20,000-Php100,000.00)

Freight charges (SM-5% Luzon; 7% Visayas, 10% Mindanao)

GlowCorp’s experiences and challenges in organic marketing

Limited working capital for expansion

Erratic supply to sustain the growing market (especially during off-season)

Although consumption is growing, most of consumers are not yet aware of the benefits of organic products

80% of organic consumers are concentrated in Manila. There is need to focus more awareness and education campaign in the key areas of the country

GlowCorp’s experiences and challenges in organic rice marketing

Barriers of entry as new player in the organic marketing is high: institutionalization of the internal

system

introduction of new product

identification and getting new clients

working capital

cash flow management

exorbitant entry/listing fees and discounts

sustained product supply and quality

Logistics, warehousing

Product differentiation-offer something new or unique, create barriers of entry

GlowCorp recognizes its limitation in the value chain. It needs partners and other players to complete the whole chain

Making the Organic Value Chain Works

Producers, financing institutions and government are necesarry support system for capacity building, production, processing, sales and marketing

Changing the mindset of farmers to become organic producers was not done overnight. It is a continuing process.

Making the Organic Value Chain Works

Aside from the environmental implication of organic farming, economic incentive motivates farmers to sustain the organic (rice) production. Pecuaria for example provided incentive to certified farmers (up to Php20K/cropping).

GlowCorp’s expertise is in marketing. The partnership with its shareholders ensures consistent supply of organic products making it easier for GlowCorp to concentrate in marketing.

Making the Organic Value Chain Works

Reducing the number of players in the value chain becomes more profitable and sustainable for organic (rice) farmers and marketing organizations like GlowCorp

Organic production demands a paradigm shift. Aside from environmental consideration, farmers need economic motivation to ensure sustainability of organic farming

Our Learning

Every business must undergo a life cycle: from development stage to growth, maturity, and decline. The first 2 years of GlowCorp’s organic marketing is the period of introduction. Low consumer awareness and product newness resulted to low sales volume and income

Our Learning

Diversification (product, strategy, etc) is one of the key elements in sustained marketing. Overtime GlowCorp offered new products to market. In 2010, it started with rice and muscovado. Coco-sugar, coco-syrup were added later.

Our learning

Social Impact

Direct jobs created within GLOWCORP

12

Community Based Entrepreneurs (CBEs) benefited Direct Investors 4 (organic rice)

3 (muscovado) 1 (organic rice & muscovado) 17 individuals

Other CBE-producers 4 organic rice producers 2 muscovado producers 1 coco-sugar producer 1 coffee producer

Farmers reached (estimates)

1,900 farmers/millers (muscovado) 2,000 farmers (organic rice) 100 farmers (coco-sugar)

Sales Income Generated Php46.2M (2010-2013)

Close to 170 buyers/ distributors/ supermarkets as regular clients

1 exporter from Hong Kong Ongoing negotiation with exporter

for the export of organic rice flour to Europe; organic rice to Russia

What have we done

Organization 2010 2011 2012 Total Pecuaria 485,700.00 4,245,039.00 8,827,750.00 13,558,489.00 SKMFMC - 1,190,500.00 2,475,000.00 3,665,500.00 Bios Dynamis 7,873.77 1,231,327.00 55,250.00 1,294,450.77 Kappia 102,500.00 24,400.00 4,500.00 131,400.00 CARRD - 26,030.00 5,970.00 32,000.00 Kool-NE 124,700.00 264,500.00 - 389,200.00 Agtalon - 117,100.00 93,000.00 210,100.00 Linabu - 85,000.00 624,000.00 709,000.00 UMFI 47,250.00 - - 47,250.00 UPSCALE 137,500.00 - - 137,500.00 Kablon - 52,168.48 33,669.00 85,837.48

Grand Total 905,523.77 7,236,064.48 12,119,139.00 20,260,727.25

Monetary benefits provided to shareholders and other producers

Php12.058M purchases as of June for 2013

Practice of organic farming helped sustain environmental protection and preservation

Organic farming is seen as one of mitigation and adoptation measures for climate change

Environmental Impact

2013 Target

Target

Gross Sales Minimum-Php22M Maximum-Php32.3M

Sales volume Organic rice Muscovado sugar Coco-sugar

279MT 137MT 17MT

Net Income Php594,000

Number of stores/clients Existing-123 New-245 Total-368

Staff complement 5 core 1 outsourced 8 production personnel

Farmers reached 2,500

What have we done Year on Year Sales Growth

What have we done

2010 2011 2012 2013

1,385,815.00

8,254,730.00

17,116,233.79

19,875,168.99

Sales Trend

Financial performance: YoY Growth

*As of September 2013

Year-on-Year Growth Difference Percent Growth

2010 1,385,815.00 2011 8,254,730.00 6,868,915.00 496% 2012 17,116,233.79 8,861,503.79 107% 2013* 19,875,168.99 2,758,935.20 16% Total Sales 46,631,947.78

What have we done

Profitability

*As of June 2013

Sales Projection

Target 2013 2014 2015 2016 2017

Sales 32,266,000 40,332,500 50,415,625 63,019,531

78,774,414

Income 406,666 879,468 809,326 1,756,660 2,862,272

Prime Organics outlets

Coconut House Fanomart Raw Matters HDR Rollide Corp Foodah Citimart Produktong

Katutubo

Alturas Bohol Citimart Got Heart Eight Guys Choco Lover Green Bean Tardo Filipinas

Salamat!