Innovative Practice Philippines: Keys to Inclusion of Small-Scale Organic Rice Producers in Supermarkets

Innovative Practice Philippines: Keys to Inclusion of Small-Scale Organic Rice Producers in Supermarkets - The Case of Upland Marketing Foundation Inc.

by Sylvia Concepción, Larry Digal, René Guarin, Luis Hualda

This study examines a case of successful linkage of small organic rice farmers to supermarkets. These small-scale farmers have tapped opportunities brought about by the changing markets in the Philippines where supermarkets continue to improve patronage from consumers who demand convenience as incomes improve and lifestyles change.  This was possible through the innovations and strategies made by Upland Marketing Foundation, Incorporated (UMFI) who acts as marketing consolidator for supermarkets buying from organized groups of organic rice farmers such as the Pecuaria Development Cooperative, Incorporated (PDCI).  A distinct innovation is that a development or non-profit institution (UMFI) acts as a marketing arm to enhance access of small-scale producers to mainstream supermarkets.  This was made possible by doing their marketing role as effectively as possible, at least at par with private marketing corporations.  The main difference is that the mission of this organization is to promote development particularly for small-scale producers and enterprises. In addition, being a development entity, trust with small-scale producers is in place enhancing supply chain collaboration. Funds from development agencies help cover the high costs of dealing with small-scale producers particularly in linking them to high value markets. Key strategies that worked include establishing a house brand to allow as many suppliers as possible to supply the product if the market picks up. They also adopted a niche consolidator strategy which combines champion and rider products. They achieve economies of scale for champion products and provide opportunities for rider products to pick up and at the same time meeting requirements of supermarkets for variety. They continue to strategically position their product by assessing trends in the markets and deciding which product features to highlight.  These strategies are augmented by providing market requirement information to producers, who in turn deliver commodities that meet market demands. By providing opportunities to small-scale producers to access supermarkets, farmers have improved their income. A survey of 18 farmers showed that while yield declined under organic rice farming compared to the conventional/inorganic farming and production costs has not changed significantly, net income of farmers increased by 119%. This is mainly due to better prices with a difference of 46%. The price premium can be attributed both to the quality attributes of the brand and the product as well as to the type of market outlet.  Supermarkets generally provide higher prices compared to traditional markets due to convenience provided to consumers.  Moreover, based on sales records of 36 farmers before (2000) and after (2006) products were sold to supermarkets, volume sold per farmer and price paid per kilo of rice increased by 64% and 16% respectively.  These translate to an 89% increase on the average gross sale from PHP 27,069.75 or USD 563.95 to PHP 51,202.85 or USD 1066.72.