October 16, 2013 Aldaba Theater, University of the Philippines Quezon City, Philippines
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!