Organic Rice MarketingOrganic Rice Marketing Concepts and Issues Concepts and Issues

Nerlie M. ManaliliAsiaDHRRA –LSFM Project Advisory Committee Member

Presentation OutlinePresentation Outline

•Objectives

•Overview of Regions Organic Industry

• Marketing Opportunities of & Challenges Confronting the organic sector

•Some regional insights

Objectives

•Gain enhanced understanding and appreciation of Marketing Organic Rice (concepts and issues) within context of sustainable agricultural chains•Find association between concepts learned/ issues

revisited & current challenges in organic marketing

•Be able to Identify entry points for applying newly enhanced knowledge on tasks on hand & their anticipated outcomes

Southeast Southeast AsiaAsia Economic DevelopmentEconomic Development

Home to tiger economies (Malaysia, Thailand) Home to tiger economies (Malaysia, Thailand) and emerging economy (Vietnam) and yet and emerging economy (Vietnam) and yet home to least developed economies (Laos, home to least developed economies (Laos, Myanmar)Myanmar)A region A region

Of contrastOf contrast

Home to the world’s two largest rice exporters, Thailand & Vietnam as well the biggest importer, the Philippines

Though having the biggest rice producing areas, organic area only about 1% of total production area

Food Production & AvailabilityAccounts for 45% of the World’s Agricultural production and 30% of agricultural inputs and yet home to most food insecure (1$ a day households)

Organic Industry SituationerOrganic Industry Situationer• The organic market though still limited is increasing

• Organic & natural products’ global sale =US$B 100 (2008)

• Growth in organic product demand and supply is due to:o increasing food safety awarenessodesire to lower input costsodecrease reliance on nonrenewable resourcesoparticipate in high value markets & obtain premium pricesoadvocacy to promote healthy lifestyle

• With the limited players in organic farming, supply will not meet the demand

• Organic farming endorsed mostly by NGOs worldwide

Organic Product DefinedOrganic Product Defined

Those grown without the use of

chemical fertilizers/pesticides and with the use of organic fertilizers and

botanical sprays extracted from plants

Adopted from Pequaria,Phils

Types of organic Types of organic producersproducers Certified organic Certified organic

farms producing for farms producing for a premium price a premium price marketmarket Recognizes both Recognizes both

ecological & ecological & economic benefitseconomic benefits

Primarily sales Primarily sales oriented (export)oriented (export)

Non certified organic Non certified organic farms producing for farms producing for their own households their own households and/or local marketsand/or local markets Basic reason for Basic reason for

going organic is going organic is intrinsic local benefits intrinsic local benefits ( improved soil, less ( improved soil, less external input, nature external input, nature friendly)friendly)

ChallengesChallenges

Sustainable marketing of organic products

(Social vs economic)

promoting healthy and environmentally lifestyle through organic may be the aim but you cannot do it sustainably without gains or profit

Thus the need to better Thus the need to better understand your marketunderstand your market

The need to know more The need to know more about marketing and about marketing and marketing plansmarketing plans

While marketing plan While marketing plan alone is no guarantee for alone is no guarantee for success, at least you success, at least you have considered all have considered all factors affecting factors affecting profitabilityprofitability

Importance of Importance of Marketing to Marketing to

Enterprise VenturesEnterprise Ventures• Relates the enterprise to outside world

•Sells and delivers products /

services to customers

•Brings investment back to

the enterprise

Some ConcernsSome Concerns• Marketing ones product is the hardest part of being a farmer

•Most farmers:

* lack the skills and are not familiar with marketing if they need technical assistance in production which they have been doing all their productive lives, then more so in marketing which is new to them

* not use to dealing with market participants

* neither know how to identify who will buy their product nor

determine where to sell their products with profits

The usual questions when trying to market produce

Lots of people Buying vegetables in the market near me

I am producingvegetables

No assurance of ready Markets

Why despite increasing Why despite increasing demand for organic demand for organic products most cannot products most cannot find a market for their find a market for their organic produceorganic produceSurely I

have a ready market

Most of the time find themselves takingthe same price as those of non organic produce

Common Questions on Common Questions on Marketing Organic Products Marketing Organic Products

Producers: Why can’t Producers: Why can’t we easily market?we easily market? Consumers: Why I Consumers: Why I

should pay more?should pay more?

Market not yet that developed

Consumers unable to differentiate organic from non organic

Target market may be erroneously identified

Low supply, high demandYield may be low: losses diseases, pest, wider plant spacing

More organic inputs

Labor intensive

Produce first Then sell Know market

Then Produce to

Specifications

Requires farmers’ awareness of

• who their end consumers are• in what agricultural chain they are in

Shifting trendShifting trend Whether existing Whether existing

market or market still market or market still to be developedto be developed

(as in the case of (as in the case of organic products)organic products)

You have to know your market !

Industry(sellers)

Market (Buyers)

Goods / services

money

Information/ communication

Action / decision

A Simple Marketing System

Producers(sellers)

Market (Buyers)

Goods / services

Payments/revenues

Information/ communication

Action/ decision

Value creation (cost)

Value Creation

•Core competencies•Resources• partners/networks

•End consumers preferences satisfaction levels• consumer relations

These leads to dynamic marketsSmallholder producers are

ill equipped to compete in these ever increasing dynamic markets (excluded)need to be brokered in to be able to cope/be integrated in dynamic markets (included)

Market AnalysisMarket AnalysisDescribes current market who the buyers are in terms of:

• Market size (volume &value of products)

• Buying motives & behavior

• Current marketing strategies of key players

•Past /current supply & demand as well as Projected demand

• Market shares - key players

Cambodia Philippines Indonesia

Area (ha) .2%(5,000) 1%(4,000) 9%(40,000)

value Targeting export market

250M pesos40% domestic60% imports

Targeting export market

Expansion 10% 10-20% 10%

Level infancy Infancy Developing

Market Health conscious

Health conscious & environment advocates

Health conscious

Distribution SupermarketsOther buyers (Institutional

SupermarketsOther buyers (Institutional )

Specialty stores

Demand increasing as well as supply

Demand will outpace production

Demand increasing as well as supply

Primary producers

Farmer groups, NGO assisted

Cooperatives, farmer groups

Big agribusiness producers

MarketingMarketing

Core Concepts

• Segmentation

• Target market

• Positioning

Market SegmentationMarket Segmentation

Process

subdividing a big heterogeneous market into more homogeneous groupings

Considerations

Market size, accessibility, measurability

Product Map

Helps determine:

Business boundaries

Who are your competitors?

Which are your products’ substitutes?

Rice Consumers Non Rice Consumers

Consumption pattern

rice as staple Occasional consumers

lifestyle Health conscious Non health conscious

Income purchasing power

High Middle Low

Who makes decision

Adult decision Kids decision

Buying where Specialty shops, supermarkets

Wet market

Sample Organic Rice market MapSample Organic Rice market Map

Target MarketTarget Market

Set of clients which an organization would like to serve or is currently serving

identified from different market segments

• Creation of an image on the clients’ mind

Primary MarketPrimary Market

Secondary Secondary MarketMarket

Tertiary MarketTertiary Market

Product PositioningProduct Positioning

Positioning

Creation of an image

on the clients’ mind

For Organic ProductsFor Organic Products

(current positioning)(current positioning)

High Quality High High Quality High PricePrice

High quality medium High quality medium

priceprice

Marketing Strategies

Broad approaches implemented to meet marketing objectives

• Product strategies Branding - giving a product a namePackaging - total presentation of the productLabeling - providing information about the

product• Price strategies - primarily communicate value of the product

in monetary terms• Place strategies - making the right product available at the right place & at the right time thru distribution channels

• Promotion Strategies- communicating the strategies (promo mix) sales, advertizing,publicity, personal selling

Components:

Product StrategiesProduct Strategies

Entails decision :

Product line – related products as to function, client needs being satisfied, marketing and marketing channels

width - number of products in the line (short or long)

strategy - to extend product position downward, upward or both

•

•

Pricing StrategiesPricing Strategies

PRICE value of products expressed in monetary terms

Steps in Pricing

1. Set pricing objectives

2. Determine demand3. Determine costs4. Determine

competitors’ prices and pricing strategies

5. Evaluate different pricing methods

6. Set the price

Cost + % Margin Full cost + Fixed cost +

On going Market Price

Competitive Pricing

Pricing Pricing MethodsMethods

Distribution StrategiesDistribution Strategies

• Making the right products available at the right place and at the right time; done through distribution channels

• Choice of channels dependent on:

a. Nature of product

b. Capability of the producers to produce

c. Willingness of the middlemen to carry organizations products

Promotion StrategiesPromotion Strategies

• Done to communicate part of the marketing strategies

• The promotion mix includes:

a. Sales promotion

b. Advertising

c. Publicity

d. Personal selling

Marketing Mix Marketing Mix by Sample Strategiesby Sample StrategiesMarketing Mix Marketing Mix by Sample Strategiesby Sample Strategies

Product

Price

Place

Promo

PlacePrice

Promo

Product

Product Strategy Price Strategy

Market Study PreparationMarket Study Preparation

1. Define the market objectives

2. Analyze the market for the products

3. Conduct further market research

Target study population and sample

Data gathering methods

Instruments to be used

Market researches and time of actual conduct of interviews

Data analysis and report writing

4. Describe the target market Market groupings Market size Market location Estimated market

share5. Forecast demand and

sales Survey of buyers’

intentions Sales force composite Experts’ opinions Quantitative methods

6. Formulate Marketing Strategies

Rapid Market AppraisalRapid Market Appraisal TipsTipsAsk key market players perceived constraints

market behaviortrends (quality and

prices)

shipping lines, airlines have

data on goods transported

and transport prices as well

Review Secondary Information import statisticsprices and originsgaps & opportunities

know taxes and fees to payregulations to follow

Producers(sellers)

Market (Buyers)

Information/ communication

Value creation (cost)

Usual Challenges within organic rice Value Chain

•Core competencies•Resources• partners/networks

•End consumers preferences satisfaction levels• consumer relations

•Seeds (source/price)•Lacking in technological knowhow•High certification cost/Competition with non certified•No Premium price •Needs to be brokered in , cannot do it alone initially

•Consumers still unable to differentiate (O & NO)

•If able not willing to pay the price differential

•Lacking in environmental consciousness

Limited volume, non sustained trading (high transaction cost - of assembly)

Same milling facilities (O & NO)Volume not big enough to warrant separate milling

Side by side display of O & NO rice easily creates confusion (NO taken as O)

Some manipulate prices (increasing prices of NO to O )

Point of rice quality reduction (mixed with NO rice)

Pass on the cost to suppliers (shelf maintenance, promo)

• Know your chain, who the participants & end consumers are• enhance coordination (act as one, no longer competitors)• strengthen chain position, participate in decision process• Key is becoming better producers /value adders/ effective marketers

Thank You !