Local Marketing of Organic Products in Developing Countries

Co-operation is possible in various ways:

• Collaboration between two or more stakeholders who are more or less doing similar things is called “horizon-tal cooperation”: producers collabo-rate with other producers, traders with traders, or consumers with con-sumers.

• Collaboration between two or more stakeholders who are doing different things in the “production-to-consumer chain”. For example, farmers produc-ing organic products and shops selling organic products are working together. Here, the term “vertical co-opera-tion” is used.

However, co-operation is of course also possible between producers and other stakeholders, who are not directly participating in the market chain, but who might well be important for a successful marketing initiative, like credit institutions, mass media or NGOs.

Horizontal cooperation

> Co-operation between producers

In general, the two main benefits of horizontal co-operation are the combination of different strengths two or more co-operating partners might have and the pooling of resources for tasks that can better be done in a larger framework rather than individually by each actor (e.g. transport, market fees or surveys).

The most common case of horizontal co-operation is the collaboration of producers and producer organisations. In the majority of cases an individual small producer may need partners who can help out with products when his own production becomes scarce. Starting from such a simple type of more informal co-operation, an emerging marketing initiative might have to respond to all needed requirements, such as:

• Demands of the market to be served (which products can be sold at what price)

• Quantity and quality requirements and specification of product(s) to be sold

• Information and orientation to be col-lected and used

• Logistics of warehousing and transportu Creation and distribution of promo-tion materials

• Money to cover the costs, especially in the beginning

In almost all areas mentioned above, a strong co-operation and joint organisation is helpful. Even organisations of small farmers may need to co-operate with other organisations in order to have more possibilities to act in the market.

What is essential at this stage is to find asuitable co-operation partner. Besides enhancing co-operation through additional production and bargaining power it might be important that the partners produce complementary products. However, the most important factor for a fruitful co-operation is in many cases that the partners are sharing similar interests, objectives and even values.

When it comes to the details, many points will have to be considered and answered (for details see also the checklist in the annex).

> Co-operation between consumers

In this case consumers who are interested in buying their food together in order to reduce expenses and obtain the quality of products they desire co-operate. Such food co-operatives are often found in an urban environment.

A good example can be found in Riobamba, Ecuador, where a group of low income families have been purchasing together since the year 2000. The savings are between 60 and 70 % compared with individual shopping (Canasta Comu-nitaria, Corporación Utopía Regional Chimborazo). The next step they are planning is to purchase directly from producers to further reduce expenses by avoiding the intermediaries and also to get to know where exactly their food comes from.

This leads us to a form of vertical co-operation, where consumers co-operate directly with the farmers. Among the advantages are lower prices for the consumers (because they do not have to pay the intermediary margins), a secure sales channel for the farmers, reduced marketing costs for the producers if the consumers purchase on farm and in large quantities.

A quite advanced form of farmer-consumer co-operation is described in the paragraph about the Community Supported Agriculture (CSA). Frequently those food co-operatives do not only have the common goal of reducing expenses but also to support local farmers and organic production methods.

Vertical co-operation with trade

The most common case of vertical co-operation is the collaboration between producers and distributors. Producers need the security that their product can be sold; distributors - like shop owners, supermarkets, processors - need a reliable provision of goods. Sustainable development of the market requires fair trade relations.

For vertical co-operations it is crucial that all partners have clear objectives for themselves and also for their co-operation. As a general rule for all co-operations, clear and detailed agreements help to enhance a stable relationship and to avoid tension.

Sometimes distributors (e.g. supermarkets) demand from producers that they deliver exclusively to them. Accepting such requests is quite dangerous for farmers as it makes them dependent on only one customer who might look for a different source for his products in the years to come – while the farmer has lost his other customers in the meantime. Often, in such cases, good prices and conditions are offered for the first years and are reduced for later years to a point where you no longer make enough profit.

Similar to the above, aspects of product quality, packing and availability throughout the year are as important as the price and conditions of payment.

In order to come to a lasting co-operation, producer and buyer should be fair in their conditions and transparent in their arguments. Feedback of the buyer about product quality and consumer acceptance can help to improve the products and strengthen co-operation. Planning of future sales should be done together for better fulfilment of needs and possibilities from both sides.

Integration of other stakeholders

Further development of the local market for organic products needs the co-operation of as many stakeholders as possible. Co-operation on different levels and with different points of view can help to attract attention in public and to develop new marketing ideas. In addition, it allows participants join knowledge and forces and to reduce cost. Not only producers and traders in the market or processors can be stakeholders in the local marketing process of organic products, but also others with very different functions.

Especially developmental not-for-profit NGOs play an important and often crucial role in enhancing local marketing initiatives of organic products. While in many cases they are trying to enhance food security or food sovereignty of farm families, some farmers are more innovative orproductive than others and produce surplus to such an extent that it is too much to be consumed by the farmer families alone or even to much to be marketed only to the nearby community.

The Valley Trust in South Africa is a typical example of such a NGO that has worked for many years with organic farmers in a former homeland area in Kwazulu Natal (Schrimpf, Haigh and Ngcobo 2007). Through interacting with The Valley Trust many farmers started to develop and expand their production area which led to a considerable surplus and hence marketing emerged as an issue, as opportunities to sell surplus production were sought. The issue of marketing was not initially planned for in a strategic way, but emerged as a request from farmers to the Valley Trust to assist in selling their surplus production and to facilitate their market access. For a couple of years now, The Valley Trust and the farmers have been trying to accelerate organic marketing. Recently there have been some successes but a major factor they discovered was that it is definitely more difficult to establish a marketing system for organic products that goes beyond selling in the neighbourhood, than to enhance organic production.

While The Valley Trust never tried to act as an independent marketing agent, as it felt that this was not its mandate, other development NGOs have set up a marketing unit that acts as a for-profit entity. This has been the case with an organic farmers’ association in the Caucasus which faced similar requests from their clients and started among other marketing initiatives an organic products outlet in a major city. The initial plan was that this organic products shop would generate profit and, in turn, financially support the organisation. The shop was realised, but financial surplus was never reached because the shop always ran at a loss.

The same has been reported from other development NGOs that have made similar attempts. While many factors might be responsible for these failures, there are certainly also success stories – experience shows that it is very difficult for an NGO with a not-for-profit culture to manage a for-profit business successfully, with its entirely different organisational culture.

What is behind organic agriculture?

Marketing of organic products cannot be seen as an independent activity driven merely by economic arguments. And Organic Agriculture is not confined to production alone. It rather comprises a way of living and perceives human beings and their activities as part of nature. Unfortunately many products sold as organic do not deserve the name. The fact that they have been grown without agro-chemicals and mineral fertilizers does not mean they are organic.

As a consequence, marketing activities should be embedded in the comprehensive approach of Organic Agriculture. According to the International Fede-ration of Organic Agricultural Movements (IFOAM), four main principles are to be respected:

• Health: Organic Agriculture should sus-tain and enhance the health of soil, plant, animal, human and planet as one and indivisible.

• Ecology: Organic Agriculture should be based on living ecological systems and cycles, work with them, emulate them and help sustain them.

• Fairness: Organic Agriculture should build on relationships that ensure fair-ness with regard to the common envi-ronment and life opportunities

• Care: Organic Agriculture should be managed in a precautionary and responsible manner to protect the health and well-being of current and future generations and the environ-ment.

The guiding principles of health and ecology aim to cultivate land or raise animals in harmony with nature or – expressed in modern terminology – according to the laws of ecosystems. Natural processes are enhanced; nutrient and energy flows are kept as cyclic as possible; plant and animal husbandry are closely linked. The agricultural enterprise – “the farm” – with its people, land, plants and animals is conceived as a manifold whole, as an organism.

Methods of Organic Agriculture aim to use nutrients as efficiently as possible and not only once; they are re-used as much as possible through largely closed nutrient cycles. Mineral fertilizer is not excluded but strictly limited. Fertilizers are applied primarily in order to enhance soil fertility, especially in marginal areas. In contrast, in conventional agriculture, fertilizers serve primarily to maximize yields. Optimising inputs instead of maximizing outputs is probably the most profound difference between the two types of agriculture.

This is the key issue: making optimal use of resources for production in marginal areas where resources are limited. Resource-poor people need to be empowered to make better use of a minimum of inputs – nutrients, water, and seed – to obtain at least modest yields in a sustainable way so that they can secure their subsistence and, wherever possible, sell their small surpluses.

The principles of fairness and care have a cultural, social and economic dimension. The culture has a great influence on agriculture. Ancestral wisdom and practices must be revived and included (as long as they are agro-ecologically sound – not every ancestral practice is sustainable) and the philosophy and beliefs of farmers (i.e. Cosmovision) must be considered. Hence, Organic Agriculture in South Africa will have another face than it has in Vietnam or Peru.

Socially, the farming family is central. It has strong influence on the dynamics of the system. A farm is the product of a combination of natural conditions of the site and the social, economic and cultural situation of the family. Organic Agriculture aims at equity among the different groups of human beings (gender, age, ethnic groups, class). It also looks for accordance and coordination among the different actors of the rural sector. This includes the communities, farmer organizations as well as politics.

Economically, the introduction of cash crops for an external market may be an interesting option for the farmers, but it must not jeopardize the economic survival of families. Cultivation of cash crops for export like coffee or cacao implies high initial investments and several years without any financial revenue. Prices on the world market are insecure and there is no guarantee that they will compensate for those investments and unproductive years. In the worst case farmers may lose their land if gains fail to meet expectations. The well being of all individuals involved is the primary goal – this includes farmers, their families, consumers, and the communities they are living in.

Hence, food security of the groups involved must be provided before thinking about introduction of promising export cash crops. Marketing strategies driven only by economic interests are most likely to help only a few individuals. Organic Agriculture ecology considers not only the economy of the human beings involved but also the economy of the whole system.

Food security is not only of importance for the well being of farming families, it is also a relevant issue for a country’s independence. A country, which is not able to satisfy the most basic needs of its population and depends on other countries, will have an extremely weak position in any international treaties.

Last but not least there are political aspects. Organic agriculture is an alternative proposal for national and international politics. Instead of exploitation and domination controlled by a few transnational companies, which are driven by economic interests only, organic agriculture aims at strengthening the rural sector. A political approach looking for maximum support of the organic production will have to make sure the farmers have access to land, water, seeds, information, education, technical assistance, credits and commercialization and will have to protect local and national production.