Is There a Market for Organic Vegetables in Davao City, Philippines?
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1 UNIVERSITY OF THE PHILIPPINES MINDANAO SCHOOL OF MANAGEMENT Is There a Market for Organic Vegetables in Davao City, Philippines? Regional Conference on Marketing & Innovation in Organic Farming Goesan County, South Korea, October 2-3, 2015 Nikko L. Laorden*, Phoebie Charlene B. Ruyeras, Jillian April D. Alcala, Rachel C. Comidoy and Mon Alberto E. Echevarria
2 Market for Organic Products o Organic monitor estimates organic food and drink sales reached almost 63 billion US dollars in o The global organic market has increased by 170% since o Demand for organic products is mainly in North America and Europe. Production of organic products in other regions are mainly export-geared. o In 2011, the countries with the largest organic markets were the United States, Germany, and France (FiBL and IFOAM, 2013). 2
3 Asian Market for Organic Products o Demand for organic products is being fueled by the rising awareness of organic production methods (FiBL and IFOAM, 2013). o Most of the organic product sales are from affluent countries such as Japan, South Korea, Taiwan, Hongkong, and Singapore. o Asian countries mainly have export-geared organic food sectors 3
4 Demand forces driving food system transformation Global trends } Declining share of disposable income on food } Desire for variety and convenience } Concerns about healthfulness and food safety } Concerns about social impacts of food systems } Aging of the population } Ethnic groups } More travel and exposure } E-commerce } Biofuels?? Less developed } Population growth } Increasing disposable income } Urbanization } Dietary upgrading } Protein } Fruits and vegetables
5 Organic Agriculture in the Philippines o Adherence to emerging standards on vegetable production and consumption; o Executive Order no. 481, promotion and development of organic agriculture in the Philippines; o Organic Agriculture Act of 2010, an act providing for the development and promotion of organic agriculture in the Philippines; o National Organic Agriculture Program; o City ordinance in Davao promoting and supporting organic agriculture; 5
6 National Agriculture Program o Promotion and commercialization of organic farming practices; o Cultivation and adoption of production and processing methods which have already been developed, or to be developed; o Continuing research and the capacity building of farmers and; o Education of consumers 6
7 Rationale of the research o Production and sale of organic food is not evident; o Vendors of fresh fruits & veggies and food restaurants use the label organic but do not have certifications; o Consumers say they want/prefer to buy organic but... 7
8 Key Questions Do you buy Organic Vegetables? Where can you buy Organic Vegetables? How do you know if it is really organic? 8
9 The Challenge 9
10 The Challenge 10
11 Supply Chain Model 11
12 Value Chain Model 12
13 Value Chain Model 13
14 Paradigm Shift: From supply chain to value chain o A supply chain becomes a value chain when all stakeholders put exceptional effort into providing value to their customers. o Products and services become meaningful only when available and positioned from the customer s perspective. o In the end, the value delivered in a value chain is reflected in the profitability of all value chain participants. 14
15 Developing sustainable value chains... 15
16 Developing sustainable value chains... Searching Market-based Opportunities... 16
17 Understanding Consumers/Market Understanding customers needs and wants is absolutely vital for long term survival. Customer needs and wants are not always apparent! 17
18 Consumer Insight Sometimes, what people say is different from what people do. 18
19 Consumer Insight 19
20 Consumer Insight There is no way you can sell your product to everyone! 20
21 Consumer Insight 21
22 It s all about marketing... Nothing more strategic than segmentation and targeting Cannot treat the whole market as one Value proposition is different for each segment Target them differently
23 Is your segmentation valid? Not too small, Not too large Meaningful, relevant and intuitively identified by constituent variables
24 Market Research Tool/Data Analysis o Conjoint analysis a market research tool for developing effective product design. o Relative importance What product attributes are important or unimportant to the consumer? o What levels of product attributes are the most or least desirable in the consumer s mind? o Cluster analysis What specific product attributes do various consumer groups want? 24
25 For Example Assign a value between 1 and 10 to these options. 10 means most likeable and 1 means least likeable Organic Price: PhP150 Size: Small Color: Red Low Input Price: PhP50 Size: Medium Color: Orange Conventional Price: PhP25 Size: Medium Color: Red
26 Relative Importance Product Attributes Average Importance Score Method of Growing Price Size Color
27 Conjoint analysis helps identify clusters Method of growing conscious Price sensitive Size Matters Color specific
28 Data o 1,612 vegetable consumers were randomly sampled from preselected barangays in Davao City (403 for each vegetables tomato, eggplant, sweet pepper and bitter gourd) 28
29 Tomato Attributes and Corresponding Levels 29
30 Eggplant Attributes and Corresponding Levels 30
31 Sweet Pepper Attributes and Corresponding Levels 31
32 Bitter Gourd Attributes and Corresponding Levels 32
33 Relative Importance of Tomato Attributes and Corresponding Levels 33
34 Relative Importance of Eggplant Attributes and Corresponding Levels 34
35 Relative Importance of Sweet Pepper Attributes and Corresponding Levels 35
36 Relative Importance of Bitter Gourd Attributes and Corresponding Levels 36
37 Ideal Vegetable Products o Tomato Organic, Firm, Plastic Sealed, Medium Size, Orange, and PhP o Eggplant Organic, Flawless, Flabby, Medium Size, packed in plastic, and PhP o Sweet Pepper Organic, Red, packed in Plastic Container, Medium, and PhP o Bitter Gourd Organic, Medium Size, Firm, with Packaging, and PhP
38 Relevant Clusters for Tomato 92 are Method of growing conscious (30.46%) 162 are Price sensitive (53.71%) 149 are Appearance sensitive (size, color, and firmness, 78.47%)
39 Relevant Clusters for Eggplant 71 are Texture and Method of growing conscious (24.75% and 23.15%) 198 are Price and texture sensitive (36.96% and 28.11%) 134 are texture sensitive (74.74%)
40 Relevant Clusters for Sweet Pepper 69 are Price conscious (94.29%) 231 are Price and Method of growing sensitive (29.97% and 20.81%) 102 are color sensitive (50.01%)
41 No Relevant Clusters for Bitter Gourd o Less variability on the ratings given for different Bitter gourd attribute combinations; o Most consumers prefer organic bitter gourd at a reasonable price; o Why?
42 Vegetable Consumer Groups
43 Key Points o Davao City Consumers are Price and Appearance sensitive; o Organic vegetables must also be produced at a reasonable price and with good physical appearance; o There is a small market segment for Organic vegetables; o Opportunity to change consumer behavior. 43
44 Constraints to pro-poor agribusiness development in agri-food value chains o Access to capital o Land, technology, water, labour, management; o Access to information and innovations; o Poor economies of scale and competitiveness; o Vulnerable to risk and shocks; o Cultural, social and gender barriers exclude entry or influence; o Poor business enabling environment
45 Consumer Insight 45
46 46 The Paradigm Shift: Changing People s Behavior
47 47 The Paradigm Shift: Changing People s Behavior
48 The Paradigm Shift: Changing People s Behavior 48
49 References o Fearne, Andrew. (2011). Value Chain vs. Supply Chain. A lecture video illustrated with Vidoons. Kent Business School. o Ganeshan, Ram, and Terry P. Harrison,. (1995). An Introduction to Supply Chain Management. Department of Management Sciences and Information Systems, 303 Beam Business Building, Penn Stat University, University Park, PA. o Rowitz, Louie. (2009). Introduction to Systems Thinking. University of Illinois. o Speser, Phyl. (2009). Supply Chain vs. Value Chain. A lecture video for educational purposes. Foresight Science and Technology. o Srinivan, Rags. Customer Segmentation and Market Share Estimation with Conjoint Analysis. Retrieved February 2014 from IterativePath.com. 49
50 Photo references o o o o o o o 50
51 Photo references o o 51
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