UMFI Experience - Linking Community-Based Enterprises with the Mainstream Markets

“Making markets work for small farmers: Understanding Marketing and

Market Intermediation”

First Regional Forum cum Training WorkshopLinking Small Farmers to Markets

June 7-11, 2008Hanoi, Vietnam

UMFI Background and Context Marketing Program that started in 1989 as a

program component on Upland Development for Tribal-Upland Communities

Project Objective was to address “Marketing” concerns of Upland Communities

Current Mandate is to provide market access to Community Based Enterprises (CBEs) with support services on access to Technology and Finance

Bridging the Big

MARKET

Divide

UMFI’s Core BusinessCBEs Supermarkets

Primary Clients:Community Based

Enterprises (CBEs) inSustainable Development

Sustainable Forest/Resource Mgt

-Non Timber Forest Products

Sustainable Agriculture

- Use of appropriate Farming Technology

- Organic Farming

- Non Destructive/ Environment Friendly

Sectors in Partnership

- Indigenous Communities

- Agrarian Reform Communities

- Coastal Communities

- Micro-Small Enterprises

Primary MarketsConsumer Market

- Supermarkets (230)

- Groceries/ Convenience Stores (100)

Current Operations

Distribute 8 CBE products

- Organic Rice, Muscovado Sugar, Jams-Jellies,

- Bottled Sardines, Honey, Juices, Vinegar, VCO

0

5

10

15

20

25

30

35

40

2001 2002 2003 2004 2005 2006 2007

Sales Performance 7 year period

So we have accessed the Mainstream

Market! Success???

Problem Solved?

OR

Just the beginning of an endless state of Solving Problems

UMFI’s core learningThe easiest thing to do in Market

Intermediation is getting there – accessing the market.

What happens next is the real challengeHow do you survive or maintain the

market?How do you grow in the market?How do you protect your share of the

market?

Getting ThereHiring of Personnel – Professionals from

within the IndustryWith Expertise (knows the systems, policies)With Experience (knows how to manage

dynamics)With Contacts (knows the people inside)With Right Attitude and Orientation

Know the Market – In order to have the right product to sell

Market Opportunities and Realities Market Trends: Increasing Demand for the following:

“Healthy” Food products, All natural product, No Chemicals, Preservatives, Organic

Consumer Survey (200 respondents) Results:50% willing to pay premium price for healthy productsPremium Price is 35% higher than commercial priceHealthy Products defined as Fresh (fruits and

vegetables) No Preservatives, No Chemicals, No Additives

2% willing to pay premium prices for Environment Friendly Products

1 % willing to pay premium prices for Fairly Traded Products

Strategic Positioning Community-Based Products as “HEALTHY

PRODUCTS” Healthy for the Consumers No Chemicals, No

Preservatives, All natural Ingredients, Organic Healthy for the Environment Use of

Appropriate Technology, Supports Sustainable Forest Use

Healthy for the Community Fair Trade Practices

How Do We Recover our Marketing and Distribution Costs?

CBEs Upland

UMFI

Supermarkets,Groceries,Retail Shops

END CONSUMERS

Book Orders

Distribute

Collect

Merchandise

Maintain

Promote/Adv

CBEs LowlandCBEs Coastal

SMEs

Consolidation = Scale to cover costsAny volume but must be constant

Champion Products – Large VolumeRider Products – Small Volume

Consolidating for SustainabilityLimited Volume/

Limited Products To sell

STILL not Enough Products/ Volume

To sell

70%< 1%

Surviving/ Maintaining the Market

How Do We Grow the Markets given the limited capacities of CBEs?

CBEs

UMFIChampion Products

Supermarkets,Groceries,Retail Shops

END CONSUMERS

CBEsCBEs

Common Brand = Shared Quality Standards, Shared Costs-MANY

Organic Rice = 1 10 CBEsMuscovado Sugar = 1 5 CBEsHoney = 1 6 CBEs

Allows CBEs to collectivelySupply the market and to recoverFrom impact of natural disasters/

Internal problems

Common Brand for Sustainability

How do we Protect our share of the Market – Erecting Barriers

Making it harder for new entrants to come inBuild a Strong Brand, Saturate the marketProduct Standards on an Industry LevelCertification

Making it harder for new entrants to copyProduct Development – Higher Value products – going

beyond access to markets and better packaging

Current Level of Operations89% increase in Farmers gross incomeRecognized in the supermarkets as the

distributor of organic productsRecognized as the No. 1 Brand for organic rice

in 2007 consumer survey, Estimate share 40% (25% Main Brand, 15% Smkt Brands)Brand recall of 24% unaided (highest) 43%

(aided), Product usage: Trial: 31%, Used most often: 24%, Brand used in the past 12 months 26% Brand used last: 23%, Brand will use next: 25%

Overall Survival Strategy If you can, know everything but do NOT do

everything. Address the bottlenecks Establish partnerships – Trust and TransparencyOutsource services outside your core businessWork with past/existing/relevant initiatives

(organized communities, standards, policy)Focus on core business

Research, StudiesAssessments,

Analysis

Input Sourcing

Production Distribution Sales and

Marketing

Customer Service /

Market Feedback

Thank You