Is There a Market for Organic Vegetables in Davao City, Philippines?

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
Market for Organic Products
o  Organic
monitor estimates organic food and drink
sales reached almost 63 billion US dollars in 2011.
o  The global organic market has increased by 170%
since 2002.
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
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
Demand forces driving food system transformation
Global trends
Less developed
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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??
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Population growth
Increasing disposable income
Urbanization
Dietary upgrading
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Protein
Fruits and vegetables
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;
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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
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
Key Questions
Do you buy Organic
Vegetables?
Where can you buy Organic
Vegetables?
How do you know if it is
really organic?
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The Challenge
9
The Challenge
10
Supply Chain Model
11
Value Chain Model
12
Value Chain Model
13
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.
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Developing sustainable value chains. . .
15
Developing sustainable value chains. . .
Searching Market-based
Opportunities. . .
16
Understanding Consumers/Market
Understanding customers’ needs
and wants is absolutely vital for long
term survival.
Customer needs and wants are
not always apparent!
17
Consumer Insight
Sometimes, what people say
is different from what
people do.
18
Consumer Insight
19
Consumer Insight
There is no way you can sell
your product to everyone!
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Consumer Insight
21
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
Is your segmentation valid?
Not too small, Not too
large
Meaningful, relevant and
intuitively identified by
constituent variables
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?
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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
Conventional
Price: PhP50
Size: Medium
Color: Orange
Price: PhP25
Size: Medium
Color: Red
Relative Importance
Product Attributes
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Average Importance Score
Method of Growing
12.86
Price
38.32
Size
28.37
Color
20.45
Conjoint analysis helps identify clusters
Method of growing
conscious
Price sensitive
Size Matters
Color specific
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)
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Tomato Attributes and Corresponding Levels
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Eggplant Attributes and Corresponding Levels
30
Sweet Pepper Attributes and Corresponding Levels
31
Bitter Gourd Attributes and Corresponding Levels
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Relative Importance of Tomato Attributes and
Corresponding Levels
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Relative Importance of Eggplant Attributes and
Corresponding Levels
34
Relative Importance of Sweet Pepper Attributes
and Corresponding Levels
35
Relative Importance of Bitter Gourd Attributes
and Corresponding Levels
36
Ideal Vegetable Products
o  Tomato
– Organic, Firm, Plastic Sealed, Medium Size,
Orange, and PhP15.00-30.00
o  Eggplant
– Organic, Flawless, Flabby, Medium Size,
packed in plastic, and PhP 5.00-25.00
o  Sweet
Pepper – Organic, Red, packed in Plastic
Container, Medium, and PhP 80.00-100.00
o  Bitter
Gourd – Organic, Medium Size, Firm, with
Packaging, and PhP 30.00-45.00
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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%)
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%)
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%)
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?
Vegetable Consumer Groups
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
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
Consumer Insight
45
The Paradigm Shift:
Changing People’s Behavior
46
The Paradigm Shift:
Changing People’s Behavior
47
The Paradigm Shift:
Changing People’s Behavior
48
References
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Fearne, Andrew. (2011). Value Chain vs. Supply Chain. A lecture
video illustrated with Vidoons. Kent Business School.
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.
Rowitz, Louie. (2009). Introduction to Systems Thinking.
University of Illinois.
Speser, Phyl. (2009). Supply Chain vs.Value Chain. A lecture video for
educational purposes. Foresight Science and Technology.
Srinivan, Rags. Customer Segmentation and Market Share Estimation
with Conjoint Analysis. Retrieved February 2014 from
IterativePath.com.
Photo references
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http://northwindcoop.org/
http://www.fsm-blogs.com/vans-gluten-free-snacks/
http://foodworldobserver.com/are-natural-food-labels-aremisleading/
http://www.crazyfooddude.com/2013/08/review-turkey-hill-allnatural.html
http:/freedesignfile.com/83659-natural-food-label-design-vector-04/
http://littlegreencloth.com/ins-and-outs-of-organic-and-natural-food/
http://pickyeaterblog.com/demystifying-health-food-labels-what-dothey-all-mean/
Photo references
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http://pickyeaterblog.com/demystifying-health-food-labels-what-dothey-all-mean/
http://www.personal.psu.edu/afr3/blogs/siowfa12/2012/09/the-nextbig-moneymaking-scheme-organic-food.html