Local Marketing of Organic Products in Developing Countries

Where will you sell your products and how will they get there? A product can be sold either directly or indirectly. Directly means the producer himself sells the product to the customer. Indirect sales involve one or more intermediaries. Indirect channels of distribution are intermediaries, agents, wholesalers or retailers. When the product passes down the chain to the next intermediary, value may be added by processing and elaborating: for example deep frozen potato fries or orange juice.

Each of these channels has its own requirements which must be taken into account regarding quality, quantity, price, packaging etc.

The producer should try to determine how his products are sold, thus avoiding a one-sided dependency on a single buyer and retaining an influence over pricing.

If you are a good salesperson, you may enjoy personal contact with customers and wish to sell to the end consumer.

Otherwise, you may prefer to concentrate on production.

Important options for local marketing of organic products:

• Farmers’ markets

• Farm shops

• Restaurants and hotels

• Schools, hospitals

• Local processing industry

• Food stores

• Supermarkets

• Box scheme

• Subscription farming

• Community Supported Agriculture

Experience from local marketing initiatives often show a development from direct to indirect sales when amounts of products and numbers of persons in-volved increase.

The activities of Eco-Logica a producer’s association in Peru began in 1998 with a basket home-delivery service, sold in the districts with the highest purchasing power in Lima. Given the high distribution costs, the delivery service was ended after a year. The home-delivery service was replaced by a weekly street market that attracted an ever-increasing number of consumers, sales and products. Thanks to this successful initiative, Eco-Logica Peru started another weekly street market in another place in 2005. With increasing demand, it became obvious that a weekly market would not solve the marketing problems of organic producers. Efforts would have to be focused on mass sales. At the time, the discussions were centred on whether it was advisable to sell the products in supermarkets or to have an own grocery store.

The advantage of having an own grocery store was that an environment could be created adapted to the needs and expectations of consumers. Besides, some producers who had already supplied supermarkets individually did not recommend it, as they had experienced long waits for paymentand problems with the return of damaged products.

The advantages of selling in supermarkets were that fixed costs were lower and consumers would find a complete range of goods (part of them organic products). Finally a decision was taken in favour of the supermarkets.

(Schreiber et al 2007).

Farmers’ Markets

Farmers’ markets are the easiest way to do local marketing as they do not require extensive physical equipment and coordination efforts are small. At farmers’ markets producers sell directly to the final customer. Well organized farmers’ markets are very attractive to consumers and give a good opportunity for direct contact with the customer.

A group of producers who want to organize an organic farmers’ market should meet the following conditions:

• A good variety of products

• Good quality of products

• A good assortment throughout the whole year

• Farmers committed to assume their duties

• Certificate or another guarantee for the organic nature of the products

• Transport from the farms to the mar-ket must be organized and ensured

The location of the market should be in a public place with easy access for everyone. It should be accessible by public transport and for cars and offer parking opportunities. A good location is a place where many people pass by and see the market. It should be free of contamination and garbage and not close to sources of contamination, bad smells or excessive noise. The neighbourhood should not be too expensive or too poor; it should be acceptable for people of different social rank.

At an organic market farmers offer special, high quality products. This special quality should be represented by the appearance of the whole market. People should appreciate attractively-arranged products on clean tables, carefully packed vegetables, cleanly dressed sellers.

Prices should be clearly displayed on a visible list. Avoid bartering; the purpose of an organic farmers’ market is not competition among the farmers. The prices should be fair for both sides — farmers and customers, so bartering should not be necessary. After some time, customers understand that they should accept the fixed prices — although whether this is feasible or not clearly depends on the traditions in your culture.

An even easier and less costly way of direct marketing is the booth at the road side, which is usually set up on a temporary basis to sell seasonal products such as fruits.

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Farm shops

A more intensive way of direct marketing is to open up a shop on the farm — a sound practise in places where many potential customers are passing by anyhow. The shop is normally built in an extra room on the farm, if possible with a room for storage attached and a possibility to keep products cool. The room must be clean and friendly, the products arranged nicely, all wilted pieces sorted out.

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Such a shop has several advantages:

• Direct contact with the consumers creates an atmosphere of trust and understanding. The advantages of the products and the characteristics of organic agriculture can be explained; a bond will be created between con-sumers and producers

• Customers like to shop here because of the personal atmosphere and because they experience the farm, they have an “adventure” while shopping

• As there are no wholesalers or retail-ers involved the farmer can keep the full retail price. Many customers will accept a higher price because they know who they support and what qual-ity they get

• Some kinds of products do not have to be packaged

• Transport is a less important issue

There are disadvantages, too:

• The shop keeping has to be regarded as an extra and time consuming job. It takes time to always have fresh prod-ucts in the shop, to weigh and package small quantities, to chat with cus-tomers. This time is not available for other farm work. Possibly an extra person has to be employed.

• The assortment of goods has to be attractive enough for people to come regularly. That means either the farm has a highly diverse production or additional products have to be bought from outside.

• The person working in the shop must be well informed and friendly; the farm should look attractive.

Farm shops usually need the above mentioned “good” location and easy accessibility — but advertisement is also needed to make it known. You should also decide if it is more feasible to serve customers whenever they come or to stick to fixed opening hours and make these opening hours known to your customers.

Local Processing Industry

Food processing companies need high quality input for their products. Especially companies which produce breakfast cereals, corn bars or baby food are very interested in non-contaminated, organic ingredients.

Another option can be the processing of products by your group, e.g. dried mangos, marmalades, tomato-sauce, or chutneys. This adds value to your products and is also useful for conservation of products at times when fresh produce are in oversupply. But be careful to meet the sanitary requirements ofpublic health authorities for processed food stuff.

These processed goods can be sold on a farmers’ market or via small retailers in local food stores. They will probably not meet the quality and quantity demands of bigger supermarkets.

Food Stores

Local retailers might be interested in extending their assortment with organic products. Explain the difference between your products and conventional ones. Maybe you can give them a leaflet with the main arguments and characteristics of organic products and organic farming. Try to get a special place for your products, an own shelf or table, where the products are displayed together with information about them. At the beginning, while your products are being introduced, you might want to be present to talk to the customers and offer them samples to taste.

In big cities, mainly in Asia, there are also organic food stores. They are mostly well stocked with non-perishable food items (grains, pulses, oil) but lack vegetables, dairy products and meat which makes a good opportunity for farmers to come in with their products.

Another possibility is that producer groups manage their own local food store. This way of marketing is often encouraged by NGOs that support organic agriculture producer groups as for instance Navdanya in India or Naykrishi in Bangladesh.

Supermarkets

Over the past few years, supermarkets have become increasingly important in the food supply of the population. At the beginning, supermarkets could only be found in urban centres. Now, even in smaller villages, branches are being built. They compete with the traditional wholesalers’ markets and with small food retailers. Their high sales volumes increase their bargaining power and streamlined logistics allow them to cut costs and offer the products at prices that may be even lower than those at traditional markets. Customers are attracted to the supermarkets for different reasons: the broad assortment offers everything they need for the family shopping basket; they do not have to go to different places to satisfy their needs; and they can save time doing the whole shopping at one place. Also products are usually of high quality as supermarkets have very strict conditions and permanent quality control.

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These facts present opportunities as well as threats for the producers. For farmers who are able to meet the stringent conditions of the supermarket, this may represent an opportunity to enter a new market. On the other hand prices are low and mostly not negotiable. In addition, a common practice in supermarkets is delayed payment for products (up to several months after they receive the goods). Sometimes the risk of not selling everything is shifted from the supermarket to the farmer when the supermarket insists on paying only for those products which could be sold. Given the perishable nature of these products ,this can result in big losses for the farmers. Given these disadvantages and risks, it is not advisable to rely on a supermarket as sole partner.

Selling to a supermarket can nonetheless be a very interesting option especially for organic producers. It might give them the opportunity to reach new customers, e.g. people who would not purchase their food at traditional markets. To meet the demands of the supermarket, farmers might have to organize themselves in larger operational and organizational units like co-operatives or associations in order to be able to guarantee quality and quantity of their products and exact timing of supplies.

In the supermarket it is even more important than in other shops that the organic products can be distinguished easily from conventional goods. A special marketing strategy should be developed with the participation of the supermarket management. Optimal would be an “organic corner” or shelf where only organic products are displayed. Marketing initiatives such as the development of handouts or posters to be displayed together with the products should be discussed with the management as well. A good reason for a supermarket to add organic products to the assortment is the possibility of attracting new customers and of gaining an advantage over competing supermarkets.

In co-operation with a supermarket, many aspects have to be considered. The producer association Grupo Eco-Logica Peru has collected valuable experience on this (Schreiber et al. 2007). www.ideas.org.pe/ecoperu

The Box Scheme

Home delivery services of organic food on a subscription basis are known as ‘Box Schemes’. The concept was first developed in the U.K. in the 1980s. A Box Scheme is a simple direct or indirect delivery of farm produce to consumers. A box may contain different kind of vegetables and fruits. Consumers pay a fixed amount per box which may be offered in different sizes and content

A box-scheme can be managed by one producer or by a group of producers. Participating farmers will deliver their produce at a location, produce will be cleaned, packed into boxes and loaded to a truck which will take the boxes to the customers. Customers must be interested in regular delivery, accept an assortment composed by the producer(s) and willing to pay a little extra for this service. Box schemes have become very popular worldwide for the marketing of Organic Food.

The system can be a good option for a farmers’ group and even generate additional employment for cleaning and packaging. It is a simple and flexible marketing concept and can be done with a minimum of packaging. It can be started with just a few products and gradually become diversified according to the capacity of the producer(s). However, it requires a lot of organizational and logistic effort.

Example: Northwood Farm, Devon, United Kingdom

Tim Deane has been operating a Box Scheme over the past 10 years on his 30-acre farm. The box scheme supplies 60 crops and 150 varieties annually to its 150 customers. Each box contains 7 to 16 crops. Teamed up with another farmer, Martyn Bragg, together they sell products worth about _35,000. They are successfully selling to their neighbors, who also have their own farms and enjoy rural life. Some 40 to 50 customers (20%) are from the same village, the rest lives in the local area.

The Operation:Boxes are delivered to each individual household every week. Products are sold in plastic boxes, three of which consumers have to buy at the beginning. Unlike larger scale box schemes, Tim and his partner do not buy from outside to keep the number of items stable. When setting prices, market prices are taken into consideration, but they are fixed all year around. Communication with consumers is guaranteed by issuing monthly newsletters, setting up open days on farms in summer and providing the possibility for customers to pick up their boxes directly from the ‘pack-house’. Customers can pass requests on to the producers by putting notes on the returning boxes.

The advantage: According to Tim, they can earn more money out of their organic farm than they used to when selling to conventional markets. The prices are better, income is generated weekly and there is less risk because of fixed prices, which all enable them to make their living out of his small organic farm. Besides, they have to spend less effort to comply with standards on shape and size of produce. Also, by producing a wide variety of produce organically, the farm’s economy is more stable. Furthermore, Tim simply feels that it is more ‘interesting” for him to work on his farm and to operate his box scheme.

The challenges:Nowadays, they face more competition because several people have started box schemes in the same area. However, only few consumers have left his box scheme, which he thinks is because he has continuously made efforts to supply good products. Source: Taniguchi (2003)

Community Supported Agriculture (CSA)

Community Supported Agriculture (CSA) is a model of close linkage between a farmer and the customers. It is quite common in the USA and Japan (Teikei) and might be an interesting option for producers and producer groups in developing countries.

The CSA-model is simple: the farmer sets a price for a share of the year's produce from his/her farm, then recruits a group of participants who purchase a membership in the farm and receive a weekly supply of freshly-picked produce. CSA members have the satisfaction of knowing where their food comes from and the farmer who grows it. The farmer has a guaranteed market in place — often before the growing season begins — coupled with up-front cash from member payments that can eliminate the need to borrow start-up capital. Farmers also benefit by developing a long-term community interest in the viability of their farm. Reconnecting people with the land and the farmers that support them is an important part of CSA.

The CSA model has unlimited potential for connecting consumers directly to the source of their food, and for giving small-scale farmers and market gardeners a viable alternative to other marketing efforts. In the USA, CSA projects first started on the east coast in the mid-1980s. The idea has spread quickly to the west coast, and today there are about 1700 CSA-farms with some 340.000 consumers throughout the country who rely on CSA arrangements for the majority of their produce.

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The Ten Principles of Teikei

1. To build a friendly and creative relationship not as mere trading partners

2. To produce according to pre-arranged plans on an agreement between the producer(s) and the consumer(s)

3. To accept all the produce delivered from the producer(s)

4. To set prices in the spirit of mutual benefits

5. To deepen the mutual communication for mutual respect and trust

6. To manage self-distribution, either by the producer(s) or by the consumer(s)

7. To be democratic in group activities

8. To take much interest in studying issues related to Organic Agriculture

9. To keep members of each group in an appropriate number

10. To go on making a steady progress even if slow toward the final goal of the convinced management of Organic Agriculture and ecologically sound life.

Japan Organic Agriculture Association (Taniguchi 2003)

For more information, see for example http://www.joaa.net/English/teikei.htm

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Restaurants, hospitals, schools

Restaurants, hotels, hospitals, schools are also potential customers. They all need fresh provisions for their kitchens. There are usually two main challenges with these customers: logistics and price. They often buy only from one source which supplies everything they need in an efficient way for a cheap price. Price calculations are usually very narrow; they are often not willing to buy organic products for a substantially higher price. In order to make it attractive for them to buy your premium products at a higher price you should figure out how you can make logistics easy for them: regular offers, easy ordering, reliable delivery, perhaps some pre-processing (cleaning, cutting, etc) and flexibility on your side could make buying from you attractive for them.

In addition, for higher standard restaurants and hotels, top quality products and freshness is a high value and you can deliver them more easily than large wholesalers can.

For public school lunch programs, Japanese researcher have identified six steps to the successful marketing of local produce to such programs:

• Estimate the rate at which local pro-duce is currently being used in the local school meals

• Conduct research on how many par-ents of the school children want local, organic produce to be used in school meals

• Investigate the current situation of quantity, prices, and seasons of the produce currently used in school meals.

• Organize a producers association and examine feasibility

• Study how local schools procure meals.

• Make good presentation on the find-ings and show your ability to fulfil your proposal

One of the big obstacles to selling to public institutions is bureaucracy. One strategy to win a school meal tender is to allow contracts to be broken into small plots, stipulating specific product and service criteria, such as freshness, conformation criteria, delivery times, seasonal menus or local specific products. Another way to avoid the red tape of public procurement laws is to set up a private organization that runs school canteens, such as parent committees in Italy. Yet another way is to operate a local food outlet where school caterers purchase produce on the ‘spot’ rather than procuring through contracts

(Taniguchi 2003).