VA
Insights

There is a growing demand for organic food among health conscious consumers, as the modern techniques of developing meat and greens have raised huge safety concerns. Organic food generally refers to food that is produced using methods of organic farming – that do not involve modern synthetic inputs such as synthetic pesticides and chemical fertilizers. Our research shows that the total retail sales of organic food globally reached $80 billion in 2009. Whole Foods Market, a renowned US organic food supermarket chain, had sales revenue over $8 billion and more than 200 retail stores.

In China, the organic food market is growing at 30-50% annually. Major commercial players include Zhenggu (正谷), Helekang(和乐康), Leshimai(乐食麦), and Duoli Farm (多利农庄), etc. Most of the companies are vertically integrated, from their own production base to home delivery service either using their own logistic team or third-party companies (see the supply chain below).

Among the increasing number of players, a few social enterprises are emerging, including Fuping (富平) and Beijing Organic Farmer’s Market (北京有机农夫市集). VA wants to share a few observations on how these social businesses differentiate themselves from commercial and their innovation in operation.

Bringing More Benefit to Farmers

At the center of both SEs’ business models lies the idea of community-support agriculture (CSA), which has been very popular in North America and Europe in recent years. CSA is an alternative, locally based socio-economic model of agriculture and food distribution. The purpose is to simplify the supply chain and increase the percentage of food dollar that goes to the growers.

Besides, both SEs have genuinely provided technical and financial support to farmers. For instance, Fuping buys products from farmers at a favorable price and provides them with micro loans. Also, both SEs provide farmers with regular trainings and workshops on organic farming.

Meeting Consumers’ Needs

Due to the high cost of production, organic food sold in the supermarket is normally 2-3 times more expensive than conventional food to the least. That’s why someone on NPR made a joke that it’s not Whole Foods, it’s Whole Check. But organic products in Beijing Organic Farmer’s Market and provided by Fuping are cheaper than those in the supermarkets.

Convenience is another critical factor influencing purchasing decisions. Both SEs have taken this into consideration. Fuping takes advantage of E-commerce, which allows consumers to place orders online and enjoy home delivery. The organizers of Beijing Organic Farmer’s Market are constantly searching for free space, thus market location is not fixed week by week. But consumers can still easily track the information via Sina blog and weibo.

Trust-Based Marketing

The production and manufacturing of agro-products must meet certain standards in order to be labeled as organic food. But third-party ISO certification is quite costly. Both SEs have skipped this procedure to ease the burden on farmers, especially small- and medium-scale holders. Instead, they set up their own quality control mechanism and quality standard. Moreover, they invite consumers to participate in the supply chain themselves (see chart below). Consumers can visit the organic farms

at any time they want. In the case of Farmer’s Market, consumers can also communicate with growers directly in the market. This is the internationally recognized Participatory Guarantee System, which serves thousands of farmers and consumers around the world. This way, consumers are also more likely to stick around.