Developing Marketing Strategies for Organic Products Employed by Small and Medium Retailers in...

Developing Marketing Strategies For Organic Products Employed by

Small and Medium Retailers in Bangkok

Master Thesis

Submitted at

Hochschule für Technik und Wirtschaft Berlin

Master‘s Program Master of Business Administration & Engineering

By Chusin Mateechaipong Student Number: 537469

Supervisors First Supervisor: Prof.Dr. Sven Prüser

Second Supervisor: Mr. Chusak Suvimolstien

Submitted on September 18th, 2011

Declaration

I hereby declare that I wrote this Master’s Thesis by myself. All references used in this work are properly quoted.

Berlin, September 18th 2013 Signature

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Acknowledgement

This master thesis would not have been accomplished without help and support from many people. I would like to express my deepest gratitude to the following:

• My first supervisor, Prof. Dr. Sven Prüser, who had helped me from the scratch, for his meaningful advice and feedback that helped me to complete this master thesis.

• My second supervisor, Mr. Chusak Suvimolstien, who had helped me with his support and guidance during the research period in Thailand. His assistance was crucial for my survey and interview fieldwork in Bangkok.

• Organic Key Actors and CEOs from Green Net, Thai Organic, Aden, Rangsit Farm, Lemon Farm and Thailand Ministry of Commerce, for the support, invaluable input to this master thesis, the productive discussions, and for the access to relevant information and documentation.

• All my friends and family members, who supported me during the research period in Thailand and during writing the master thesis in Germany, for their friendly, priceless advises and feedback. Chusin Mateechaipong Berlin, September 18th 2013

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Abstract Although Thailand’s organic sector is small, it has grown rapidly during the last decade. Concerned about their health, targeted consumers tend to choose organic products instead of conventional ones.

This master thesis aims to find the outstanding characteristics and reactions in marketing mix of organic consumers in Bangkok, Thailand and develop the marketing mix strategies for organic products employed by Small and Medium Retailers in Bangkok. This thesis also purposes to identify strengths, weaknesses, opportunities, and threats of the organic agriculture business in Thailand.

The research methods are composed of quantitative method that is the assessment of organic product consumers’ characteristics and response towards marketing mix with a standardized survey of 438 respondents, and qualitative method that is semi-structured interview with five organic product retailer’s owners and one from Thailand Ministry of Commerce.

The results show that most organic consumers have age over 40 years old and have a bachelor degree or higher; also most of them are women. They usually have children in the household and have a monthly income of over €250. Health and contamination in food are the major concerned points for the consumers to purchase the organic products.

The advantage of the organic retailers over the large department stores is that they can interact directly with the consumers therefore they should take advantage of this benefit and take actions accordingly. The organic retailers are encouraged to do cross promoting between the products, communicate clearly to consumers why the prices of the organic products are high and locate the shops in strategic locations. Meanwhile, marketing communications of the organic products could be done differently based on the characteristics of the retailers and consumers.

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Table of Contents 1. INTRODUCTION ......................................................................................................................... 1 1.1 BACKGROUND AND PROBLEM DISCUSSIONS ........................................................................................ 1 1.1.1 Organic Agriculture in Thailand ............................................................................................... 1 1.1.2 Problem Discussions ....................................................................................................................... 3

1.2 RESEARCH QUESTIONS, OBJECTIVES AND FRAMEWORK ................................................................... 4 1.3 STRUCTURE OF THE THESIS .................................................................................................................... 6

2. LITERATURE REVIEW .............................................................................................................. 7 2.1 FACTORS INFLUENCING PURCHASE OF ORGANIC PRODUCTS ........................................................... 7 2.2 CHARACTERISTICS OF “ORGANIC” CONSUMERS .................................................................................. 8 2.3 CHARACTERISTICS OF ORGANIC RETAILERS AND ORGANIZATION .................................................. 9 2.4 MARKETING MIX .................................................................................................................................... 12 2.4.1 Organic Product ............................................................................................................................. 13 2.4.2 Price of Organic Product ............................................................................................................ 14 2.4.3 Distribution Channels of Organic Product ......................................................................... 16 2.4.4 Promotion of Organic Product ................................................................................................. 18

3. RESEARCH METHODOLOGY ................................................................................................ 21 3.1 RESEARCH OVERVIEW .......................................................................................................................... 21 3.2 RESEARCH APPROACH .......................................................................................................................... 21 3.3 RESEARCH STRATEGY ........................................................................................................................... 22 3.4 TIME HORIZON ....................................................................................................................................... 22 3.5 LOCATION ................................................................................................................................................ 22 3.6 DATA COLLECTION METHODS ............................................................................................................ 22 3.6.1 Survey Questionnaire ................................................................................................................... 23 3.6.2 Interviews with Key Actors ........................................................................................................ 24

3.7 LIMITATIONS .......................................................................................................................................... 25

4. RESULTS .................................................................................................................................... 26 4.1 DEMOGRAPHIC CHARACTERISTICS OF RESPONDENTS .................................................................... 26 4.2 PURCHASE AND CONSUMPTION OF ORGANIC PRODUCTS .............................................................. 29 4.3 CONSUMER’S SATISFACTION AND DECISION IN CHOOSING MARKETING MIX (4PS) OF ORGANIC PRODUCTS .................................................................................................................................... 36 4.3.1 Product ............................................................................................................................................... 36 4.3.2 Price ..................................................................................................................................................... 38 4.3.3 Place .................................................................................................................................................... 40 4.3.4 Promotion ......................................................................................................................................... 43

4.4 ORGANIC SMALL AND MEDIUM RETAILERS (SMRS) IN BANGKOK, THAILAND ........................ 45 4.4.1 Leading Companies and Organizations in Thailand ...................................................... 45 4.4.2 Five Forces Analysis ...................................................................................................................... 51

4.5 SWOT ANALYSIS OF ORGANIC AGRICULTURE BUSINESS IN THAILAND ..................................... 52

5. DISCUSSION .............................................................................................................................. 58 5.1 SUMMARY OF RESEARCH RESULTS ..................................................................................................... 58 5.2 ORGANIC CONSUMER SEGMENTATION .............................................................................................. 58 5.2.1 Demographic Segmentation ..................................................................................................... 59 5.2.2 Consumption Readiness Segmentation ................................................................................ 60 5.2.3 Organic product buying motive Segmentation ................................................................ 61

5.3 MARKETING MIX STRATEGY ................................................................................................................ 62 5.3.1 Organic Product Strategy .......................................................................................................... 62 5.3.2 Price Strategy .................................................................................................................................. 66 5.3.3 Place Strategy ................................................................................................................................. 68 5.3.4 Promotion Strategy ...................................................................................................................... 74

5.4 BLUE OCEAN STRATEGY ....................................................................................................................... 81 5.5 GREEN NET CASE STUDY ..................................................................................................................... 82

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6. CONCLUSION, OUTLOOK, AND FUTURE WORKS .......................................................... 91 6.1 CONCLUSION AND OUTLOOK ................................................................................................................ 91 6.2 FUTURE WORKS ..................................................................................................................................... 92

7. REFERENCE ............................................................................................................................... 93

8. APPENDICES ............................................................................................................................. 99 8.1 LIST OF EXPERT INTERVIEW ............................................................................................................... 99 8.2 QUESTIONNAIRE ................................................................................................................................. 100 8.3 CONSULTATION HOUR ........................................................................................................................ 104

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Illustration Index

Figure 1: Thai Organic Product Value ......................................................................... 2 Figure 2: Thai Organic Production Quantity ................................................................ 2 Figure 3: Thai Organic Product Life Cycle .................................................................. 2 Figure 4: Research Framework .................................................................................... 5 Figure 5: Framework of factors that affect purchase decision of consumers of organic

food products, taken from [23] ............................................................................. 8 Figure 6: Interactions between traditional and organized chains in modernizing food

systems, taken from [44] .................................................................................... 11 Figure 7: The Four P Components of the Marketing Mix, taken from [62] ............... 13 Figure 8: Organic agriculture growth in Thailand 1998-2011, taken from [2] .......... 13 Figure 9: A basic flowchart for retailers who are in wholesale, retail or operating

home delivery systems. ...................................................................................... 17 Figure 10: 34 marketing tactics for Natural and Organic Products, taken from [72] . 19 Figure 11: The marketing budgets in small, medium and large companies, taken from

[72] ..................................................................................................................... 20 Figure 12: Research Onion, taken from [76] .............................................................. 21 Figure 13: Age of the respondents ............................................................................. 27 Figure 14: Gender of the respondents ........................................................................ 27 Figure 15: Respondents have/have not children in the household ............................. 28 Figure 16: Monthly family income of the respondents .............................................. 28 Figure 17: Education level of the respondents ........................................................... 29 Figure 18: Structure of questionnaire and resulting groups of interviewees .............. 29 Figure 19: Respondents buy organic products ........................................................... 30 Figure 20: How long do the respondents buy organic products ................................. 31 Figure 21: How often the respondents buy organic products ..................................... 31 Figure 22: Reason to buy organic products ................................................................ 32 Figure 23: The respondents concerned about GMO in food products ....................... 33 Figure 24: The respondents concerned about pesticide residues on vegetables and

fruits ................................................................................................................... 34 Figure 25: The respondents’ knowledge about organic products ............................... 35 Figure 26: When the respondents are sick, do they think about organic products? ... 35 Figure 27: The respondents’ satisfaction with the range of organic products in

supermarkets ....................................................................................................... 36 Figure 28: Which organic products the respondents buy the most? ........................... 37 Figure 29: Are brands and labels influence the respondents to buy organic products?

............................................................................................................................ 38 Figure 30: Is the price of organic products a problem for the respondents? .............. 38 Figure 31: How many more percent are the respondents willing to pay for organic

products? ............................................................................................................ 39 Figure 32: Where do the respondents buy organic products? .................................... 40 Figure 33: Why do the respondents buy organic products at the above places? ........ 41 Figure 34: Do the respondents refer organic retailers to department store? .............. 42 Figure 35: Why do the respondents prefer organic retailers to department store ...... 43 Figure 36: Channels that the respondents know about organic products ................... 44 Figure 37: Service that the respondents like .............................................................. 45 Figure 38: Five forces of Thai Organic Product Industry, taken from [91] ............... 51 Figure 39: SWOT Analysis of organic business in Thailand ..................................... 53 Figure 40: Organic Consumer Segments in Thailand ................................................ 59 Figure 41: Organic Consumer Group and Approach ................................................. 60

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Figure 42: Product Strategy proposed by Igor Ansoff ............................................... 65 Figure 43: Pricing Strategy ........................................................................................ 68 Figure 44: Organic Consumer Hybrid Marketing Channel ........................................ 72 Figure 45: Facebook Campaign of Thai Organic Co.,Ltd ......................................... 73 Figure 46: Tops supermarket online shopping option ................................................ 74 Figure 47: Advantages and Disadvantages of 9 modes of Integrated Marketing

Communications ................................................................................................ 77 Figure 48: Integrated Marketing Communications and Product Life Cycle .............. 77 Figure 49: Cost-Effective of Three Different Communication Tools at Different

Buyer-Readiness Stages ..................................................................................... 80 Figure 50: Relative Spending on Promotion Tools in Consumer versus Business

Markets ............................................................................................................... 81 Figure 51: Green Net Organization Chart .................................................................. 83 Figure 52: Organic Agriculture Network ................................................................... 83 Figure 53: Green Net’s Market Position .................................................................... 86 Figure 54: Green Net’ s Marketing Process ............................................................... 88

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Index of Table

Table 1: Trends in the organization of food systems from farm to plate, taken from [44] ..................................................................................................................... 10

Table 2: Price comparison of fresh vegetables in Bangkok supermarket (baht/kg), taken from [94] ................................................................................................... 15

Table 3: Demographic characteristics of respondents ................................................ 26 Table 4: How long have you buy organic products? .................................................. 30 Table 5: How often have you and/or your family buy organic products? .................. 31 Table 6: Reason to buy organic products ................................................................... 32 Table 7: Concerned about the use of GMO in food products versus Organic buyers

and non-buyers ................................................................................................... 33 Table 8: Concerned about pesticide residues on vegetables and fruit Versus Organic

buyers and non-buyers ........................................................................................ 34 Table 9: Do you think that organic and pesticides-free products are the same? ........ 34 Table 10: When you are sick, do you think about organic products? ........................ 35 Table 11: Are you satisfied with the range of organic products offered in the

supermarkets? ..................................................................................................... 36 Table 12: Which organic products do you buy the most? .......................................... 36 Table 13: Are brands and labels important for you in buying organic products? ...... 37 Table 14: Is the price of organic products a problem for you? .................................. 38 Table 15: How many more percent are you willing to pay for organic products

compared to normal products? ........................................................................... 39 Table 16: Where do you buy organic products? ......................................................... 40 Table 17: Why do you choose to buy organic products at the above places? ............ 41 Table 18: Do you prefer organic retailers to department store? ................................. 42 Table 19: Why do you think organic retailers are better compared to department

store? .................................................................................................................. 42 Table 20: Which channels are the most effective for you in knowing about organic

products? ............................................................................................................ 43 Table 21: Which service do you like the most? ......................................................... 44 Table 22: Initial and current perceptions on consumers of Thai Organic Food, taken

from [51] ............................................................................................................ 49 Table 23: Green Net Competitive Differentiation ...................................................... 63 Table 24: Green Net’s Product Attributes .................................................................. 63 Table 25: Green Net’s packaging methods ................................................................ 64 Table 26: Comparison of direct marketing and indirect marketing ........................... 69 Table 27: Pull and Push Strategy of Organic Organizations ...................................... 78 Table 28: Green Net’s objectives about Consumer-readiness Stage .......................... 80 Table 29: Green Net position and responsibility ........................................................ 84 Table 30: SWOT Analysis of Green Net’s Marketing ............................................... 85 Table 31: Green Net’s target group ............................................................................ 86 Table 32: Green Net’ Promotion Activities 1995-1998 ............................................. 90

1. Introduction

1.1 Background and Problem Discussions

1.1.1 Organic Agriculture in Thailand There is an emerging consumption awareness and trend concerning organic products in developed countries such as European countries, USA and Japan. Due to the latest IFOAM (International Federation of Organic Agriculture Movements) survey, there are 162 countries with certified organic agriculture and 37.2 million hectares of organic agricultural land (including in-conversion areas) and the global market reaches €47.44 billion [1]. IFOAM has defined organic agriculture as a production system that sustains the health of soils, ecosystems, and people. Organic agriculture combines tradition, innovation, and science to benefit the shared environment by promoting fair relationships that provide improved quality of life for all involved.

Thailand is called “Kitchen of the World”, implying that Thailand is an agricultural world leader. Thailand’s organic sector is small but has grown rapidly over the past ten years in line with global trends; the organic product value has increased by five times between 2001 and 2011, from €9.38 million to €44.98 million as shown in Figure 1. This growth is attributed mainly to growing consumer consciousness, declining incomes from conventional farming, and environmental concerns [2]. In 2007 the total volume of organic products in Thailand delivered to market was estimated at 33,678 tons, a substantial increase from 9,756 tons in 2003 as indicated in Figure 2 [2]. Right now, according to Thai Organic Trade Association, there are 7,499 organic farms, 432 processed and fresh organic products, which count as €4.5 billion in Thailand [2]. There are 21,768 hectares which count as 0.21% of the whole agriculture area in Thailand; 43% is rice, 21% is tea, 11% is coffee and 9% is fruits and vegetables [3, 4]. Based on the life cycle analysis illustrated in Figure 3, the organic market in Thailand is somewhere between introduction and growth phase especially in Bangkok. A maturing market for organic produce is increasingly expanding to ‘conventional’ consumers rather than only ‘core idealistic organic’ consumers. However, most consumers in Thailand lack of organic knowledge in general, regarding organic production methods and its differentiation from other labeled products [5]. According to Agriculture Ministry of Thailand, Thailand agriculture undergoes the difficulties concerning the high external input system. Most conventional producers use chemical pesticides and fertilizers, which are imported at a very high price. As a result, there are 400,000 people/year suffering from immediate agricultural chemical toxicity [6]. From the survey of Asian Institute of Technology studying organic distribution channels in Bangkok and its adjacent area in 2004 [5], there are 242 places, where the organic products can be sold. Furthermore, 29 places more from the author’s online and fieldwork research in Bangkok till June 30th, 2013. The organic market in Thailand is expected to significantly expand in order to serve customers’ needs especially in the big cities.

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Figure 1: Thai Organic Product Value

Figure 2: Thai Organic Production Quantity

Figure 3: Thai Organic Product Life Cycle

9.38 15.22

23.01 23.70 24.42

20.15

33.86

44.98

0.00

10.00

20.00

30.00

40.00

50.00

2003 2004 2005 2006 2007 2008 2009 2011 Organic Value (€mil)

Year

Thai Organic Product Value

Value (€mil)

9,756.05 15,966.08

29,415.10 30,374.84

33,677.48

26,564.74

44,688.49

0.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

2003 2004 2005 2006 2007 2008 2009

Organic Production Quantity

(tons)

Year

Thai Organic Production Quantity

Production quantity (tons)

Product(Life(Cycle(

SALES(

TIME(

Intro7(duc8on(

Growth( Maturity( Decline(

Organic(Products(in(Thailand(

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1.1.2 Problem Discussions Organic retailers have encountered a rough competition from large supermarkets. According to Kasterine, Ellis and Panyakul’s study [7], supermarket has replaced organic retailers’ store recently. To compete with their competitors, organic retailers have to develop their marketing mix (4Ps) strategy. Before that, the problems of the marketing mix (4Ps) in organic products are identified as follows.

The problems regarding the organic products are that organic produces are not consistent and meet consumer demand especially fresh fruits and vegetables. Moreover, certifying and quality control issues need to be improved. The organic produces are often far from the distribution channels. Hence they need to be managed in terms of collecting, transporting, which result in higher prices. Those problems remain unsolved and do not have enough attention due to unorganized planning between producers and marketers. Furthermore, discount stores do not concern about the organic products since they are not mainstream products and lack of uniqueness.

The problems regarding prices are that there are no research study and analysis about the cost of organic production. The organic producers and retailers appear to use “feeling” instead of “fact” in setting the prices. In some cases, there are some attempts in assigning the prices based on production cost analysis yet they are not stable and not efficient enough. The prices of the same product could go a lot higher or sometimes lower than the other competitors’ in the market. Generally, the prices of the organic products are higher than conventional products and the consumers do not have knowledge for the reason of higher prices, so they are unwilling to pay.

The problems about the distribution channels are that there is a trend of supermarket/modern trade superseding organic retailers/specialized stores. However, most environmentalists believed that modern trade and supermarket could destroy the relationship between producers and consumers as well as they could possibly take advantage of the customer. In addition, there are a limited number of distribution channels for organic products.

The problems concerning promotion are that there are a limited number of public relations. Most promotions are cost-free and aim for healthy, pesticide-free and good quality products, which sometimes lack of standard certifications.

Consequently, the thesis aims to help retailers by developing marketing mix (4Ps) strategy for organic retailers and to find the solution to the problems of 4Ps that mentioned previously. The organic consumers’ characteristics, motivations, perceptions and attitudes as well as their satisfaction and decision in selecting organic 4Ps will be studied. The qualitative and quantitative methods will be used in order to target the right organic consumers and develop marketing mix strategy. Furthermore, there is limited and scattered body of knowledge in organic product business in Thailand and some problems of organic producers, which have to be taken into consideration. There is a limited number of organic producers in Thailand since most farmers and producers practice conventional farming and the organic producers lack of confidence in changing to organic agriculture. The producers do not have knowledge about organic production and certification. With a limited number of organic raw materials and misuse of technology to good soil, the produced organic products are not the high quality ones [89]. Moreover, there is very limited number of organic agriculture network. Therefore this project directs to organize the

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marketing mix strategy and conduct SWOT analysis, that help broaden organic retailers’ organic business knowledge as well as contribute the best practices and strategies in organic business in Thailand for private organizations, marketing research and governmental sector.

1.2 Research Questions, Objectives and Framework Research Questions

1. What are the characteristic, motivations, perceptions and attitudes of organic consumers in Bangkok, Thailand?

2. What is the organic consumer’s satisfaction and decision in choosing marketing mix (4Ps) of organic products?

3. What are strength, weakness, opportunity and threat of organic agriculture business in Thailand?

4. How can organic small and medium organization/retailer use Marketing Mix (4Ps) and Marketing Mix Strategies to attain its objectives by marketing organic products to a certain customer group?

Objectives

1. To find outstanding characteristics and reactions in the marketing mix (4Ps) of organic consumers in Bangkok, Thailand

2. To develop the marketing strategies and marketing practices based on the marketing mix and consumer survey and organic key actor interview for organic small and medium organizations/retailers in Bangkok, Thailand

3. To identify strength, weakness, opportunity and threat of organic agriculture business in Thailand.

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Research Framework

Figure 4: Research Framework

Figure 4 shows the research framework of this thesis. The framework aims to study the connection between the characteristics of organic consumers and retailers, which are used to develop marketing mix strategies and contribute to the sustainability benefits in various aspects as follows.

1. Economics (cost) -‐ Retailers and consumers have food security. -‐ Retailers understand the characteristics, motivations, attitudes and

perception of organic consumers as well as their reactions towards 4Ps so they can set up their marketing mix strategy according the consumers’ needs.

-‐ Retailers know how to survive among the highly competitive environment with large discount stores and gain advantage among others

-‐ Help Retailers and Thai farmers to have a steady income and clear debt 2. Social and Culture (value)

-‐ Fair Trade Movement between retailers and consumers -‐ Retailers and consumers learn more about the concept of organic and

sustainable agriculture -‐ Learning between retailers and consumers

3. Environment (cost and value) -‐ Retailers and consumers help in conserving the resources and

environment -‐ Retailers and consumers help increase biodiversity

4. Health (cost and value)

-‐ Producers and consumers have good health and good mood

Marke&ng)Strategies)Marke&ng)Mix)

)))))))))))))))4Ps)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))4Cs)1.  Product))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))1.)Customer)solu&on)2.  Price)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))2.)Cost)to)customer)3.  Place)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))3.)Convenience)4.  Promo&on)))))))))))))))))))))))))))))))))))))))))))))))))))))))))4.)Communica&on))

Characteris&cs)of)Organic)Consumers)

Organic)Consumers)

Organic)Retailers)

Characteris&cs)of)Organic)Retailers)

1.  Economics)(cost))2.  Social)and)Culture)(value))3.  Environment)(cost)and)value))4.  Health)(cost)and)value))

Rela&onship)

Sustainability) Fair)Trade)Movement)

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1.3 Structure of the Thesis The master thesis is organized into five following chapters

Chapter 1 Introduction: This chapter explains the background of the thesis presenting the holistic view of organic agriculture business in Thailand and identifies problems occurred on the topic, refines research questions, objectives, research framework, and eventually describes the organization of the thesis.

Chapter 2 Literature Review: A theoretical section is presented to serve literature review of organic consumers including factors influencing the purchase of organic products, and their characteristics, organic retailers’ characteristics and marketing mix of the organic products.

Chapter 3 Research Methodology: This chapter elucidates the methods utilized in the thesis. The topics consist of research review, research approach, research strategy, time horizon, location, data collection methods, which are consisted of survey questionnaires and key actor interview and finally the limitations of the research.

Chapter 4 Results: This chapter presents the results of the survey questionnaire and interview of key actors. The author categorizes the results into three main topics mainly about 1) organic consumers, which includes the respondents’ demographic characteristics, purchase and consumption of the organic products and the consumers’ satisfaction and decision in selecting marketing mix of the organic products 2) organic small and medium retailers in Thailand, which consists of leading organic retailers and organizations and Five Forces Analysis of the industry 3) organic agriculture business in Thailand, which composes of SWOT analysis of the subject in details.

Chapter 5 Discussion: This chapter organizes to present the applications of the results, which can be applied to the organic consumer segments, the marketing mix strategy, and blue ocean strategy. The chapter also includes the case studies of the successful organic retailers and organizations to be used as the best practices and strategies for the organic retailers and organizations.

Chapter 6 Conclusion and Recommendations: The last chapter reveals the main thoughts and ideas of the findings and sets the areas for future research. The topics consist of summary of results, recommendations and outlook.

Chapter 7 References: The author uses Vancouver Style for reference format.

Chapter 8 Appendices: This chapter composed of list of expert interview, survey questionnaires and consultation hour with Prof. Dr. Sven Prüser and Mr. Chusak Suvimolstien.

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2. Literature Review

2.1 Factors Influencing Purchase of Organic Products A survey by Birgit Roitner-Schobesberger [8] conducted on 848 consumer interviews with a standardized questionnaire in seven different supermarkets in Bangkok. The respondents were divided into three groups: 40% have purchased organic products; 26.9% have heard of it but don't buy and 33% of respondents have never heard of organic farming. The survey showed that the main motives for purchasing organic products were expected positive effects on health and the lack of pesticides. Some consumers buy them because they have uniqueness, better quality and safety attributes compared the conventional ones [9]. Consumers, for this reason did not purchase organic products due to lack of knowledge; also they confused organic products with ‘pesticide-free’ products and found difficulties in finding organic products. However, there were several other reasons working together, for example, supporting organic farming or protecting the environment [10]. After health issues, environment issues were another main reason that people buying organic products. This confirmed by many studies in many countries [11, 12].

Whereas, the main reasons that prevented consumers from buying organic food were expensiveness, limited availability, unsatisfactory quality, lack of trust, lack of perceived value and misunderstanding of organic food production processes [13, 14, 15, 16].

Consumers with high income tended to have a broad range of motives for buying organic food. “Hedonist and Altruistic” were one of the main reasons. Medium and low-income consumers focused more on animal welfare and health. Furthermore, households with children worried more about environment and animal welfare [17].

Consumers in the US paid more attention on health and nutrition before taste and the environment as reasons why they purchased organic food [19]. Interestingly, the consumers in Germany, production without chemicals and additives, a taste, which reminds of former times, preventing illnesses and a better taste were their main reasons for purchasing organic food [20]. In Italy, consumers valued organic food as more tasty and nutritious than conventional ones [21].

Nevertheless, the organic product’s information was asymmetric, as a consumer might not detect the presence or absence of organic characteristics even after purchase and consume. Consumers might only know that the product was organic when they were informed [22]. As a result, organic labels had to come into place to enable consumers to be more aware and easily access product quality [23]. A number of studies have found a positive relationship between consumer purchase decision and organic product labeling [24, 25, 26, 27]. There were many factors that influence the decision of organic consumers shown in Figure 5.

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Figure 5: Framework of factors that affect purchase decision of consumers of

organic food products, taken from [23]

Some consumers bought organic products based on the trust of the organic retailer shop, the sales person’s advices, where the product came from and some recognized organic logos and labels. Some purchased organic products directly from the organic farm where they could surely trust where the product were traced from. Moreover, direct contact with organic farmers helped maintaining and increasing trust as well as providing feedback on product taste and quality [28].

There were some doubts about organic products were really healthier and whether they were strictly controlled [20]. Moreover, the costs and availability of organic products were constraints [29].

2.2 Characteristics of “Organic” Consumers The linkage between gender and environmental acts were found by several studies. Baneerjee and McKeage [90] found that women tended to be more environmentally conscious than their male counterparts. Some western studies found that women were more likely to buy organic food [20, 29] and men tended to be less interested in food in general [20] especially men between 40-60 years old [30]. The maturity of the market was one of a factor, which influenced the demographic composition of organic consumers. If the organic market was less developed, women and higher incomes tended to be overrepresented. In mature markets, the socio- demographic features of organic consumers were more diversified [31].

A study of Lockie et al. [29] showed that income had an effect on the consumption of organic products. The reason of the general assumption was that the majority of organic products were more expensive than conventional ones. Hence, such products were determined by people with higher income. However, the income did not necessarily have an impact on the interest in organic products. Several studies stated that income did not have an impact on green purchasing [32, 33, 34, 35]. The level of

Looking east, looking west 119

Factors in!uencing purchasing decisions

Krystallis, 2002; Hay, 1989; Huang, 1996; Yiridoe et al., 2005). Due to this rather complex situation, a conceptual framework adapted from Yiridoe et al. (2005: 196) was used. As shown in Figure 2 three factors are distinguished: product related factors, consumer related factors and exogenous factors.

Product related factors are di!erentiated into product characteristics and the perceived attributes of the consumer. Product characteristics can be noticed and experienced by the consumer and are for instance quality signals (taste) or communication tools (labels, certi"cation). Perceived attributes otherwise cannot be detected by the consumer and therefore rely on information. #e perceived product attributes are in$uenced by product characteristics as well as the knowledge and the awareness of the consumer regarding organic products and its values and attitudes, as the arrows in the "gure show.

Consumer related factors imply social and demographic variables on the one hand and values & attitudes of the customer and their knowledge and awareness on the other hand, which are in$uencing each other.

Exogenous factors, such as the market environment, legal standards, or food quality and safety standards in$uence the purchase decision as well. Organic products are purchased because of their uniqueness compared to conventional food from a customer point of view. #e market of conventional food therefore is of high importance for the organic sector as well. A widely accepted argument is that food scandals in the conventional sector favor the purchase decision for

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Figure 2. Framework of factors that a!ect purchase decision of consumers of organic food products (Yiridoe et al., 2005: 196).

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education also influenced the buying of organic foods [29, 36] and there were a trend indicates that bigger households were likely to buy organic products [17].

On the other hand, a number of researches argued that there were no relations between socio-demographic characteristics (age, gender, income) and environmental consciousness [18, 34, 37]. A study by Shamdasani et al. [38] indicated that Singaporean consumer’s green buying decisions were influenced by personal factors rather than environmental awareness. Many researchers suggested that personality and attitude were considered to be better predictors than socio-demographics. Moreover, Tutunjian [39] found that organic food consumers shared attitudes and values rather than demographics. Overall, redefining organic food consumer profile helped to better address the specific values underlying their food consumption. However, there was still no finite conclusion to what extent socio-demographic characteristics play a role in differentiating organic consumer from non-organic consumer.

Most of the research about characteristics of organic consumers was conducted in different countries, usually in the west. Hence, there are cultural differences that need to be taken into consideration. Furthermore, people from different countries shared different attitudes and values, which affected their buying decisions [40]. As in Thailand, many studies found that Thai organic consumers shared both the similarities and dissimilarities when compared to Western organic consumers. Both Thai and Western consumers were younger, had access to higher education and were in higher social status [41, 42, 43]. However, western consumers thought that they could help preserve the environment by buying green products whereas Thai consumers did not think the same [40]. This might be because of the lack of environmental awareness as well as organic products were not widely and readily available to Thai society.

A study of Hamzaoui and Zahaf [28] categorized two sets of organic consumers: hardcore and regular organic food consumers. The hardcore consumer was committed to the environment whereas the regular consumer was committed to personal health. The hardcore consumers were looking for “fair trade organic foods”, while regular consumers looked for “regular or local organic foods”. Organic food consumers could be also classified as “classic” or “emergent” consumers. The former was highly educated, a professional or white-collar worker. They are willing to pay a premium for organics and to search out sources of organic food products (e.g. producer or farm markets). The latter was also highly educated, a professional, and committed to personal health. They prefer shopping in supermarkets since convenience was an important factor in his/her purchasing decision [28].

2.3 Characteristics of Organic Retailers and Organization The most trusted channel of distribution across all organic food consumers was the organic food store, then health food stores, and producer-to-consumer channel. Suppliers clearly stated that an important attribute for an increasing number of organic food consumers was the local origin of the organic product [28].

A various literature described the reorganization that has taken place in food chains, with implications for chain participants and for the broader economy shown in Table 1.

10

Table 1: Trends in the organization of food systems from farm to plate, taken from [44]

It was usual in Thailand where supermarket penetration was quite low. Farmers selling fresh fruits and vegetables directly to retailers and supermarkets tended to obtain agricultural products directly from farmers or farmer groups [68]. The advantage of wholesalers was that they could be better positioned to meet retailers’ and processors’ requirement than particular farmers or small holders since wholesalers could assemble a big volume of produce from market shed. Still traditional chains were practiced widespread in agriculture-based economies, farmers and traders supplied traditional wholesalers, who sold to small processors and retailers. On the contrary, modern chains were practiced by farmers and traders supply specialized wholesalers or distribution centers, who then sold to organized retailers and processors. Both chains might exist from side to side in countries with modernizing food systems, with some exchange between them as conditions allow, as illustrated in Figure 6.

Specialized wholesalers have captured important market segments in developing countries [45, 46] because they could better keep good quality and information, and response demand from retailers and wholesalers promptly [47, 48]. For organized retailers, bypassing traditional wholesalers gave better quality control and could lower costs if savings from reduced spoilage offset the costs of managing the distribution facility. In developing country, high spoilage rates in traditional wholesale markets presented retailers strong motivations to bypass traditional wholesalers.


Small farms and the transformation of food systems: an overview

2.3 Organizational trends along the value chain

Acting at once and o!en reinforcing each other, driving forces have exacted and continue to exact major changes on food distribution systems. A wide body of literature, particularly from the last decade, describes the reorganization that has taken place in food chains, with implications for chain participants and for the broader economy (Table 2). Much of the evidence available is focused on retail, particularly supermarkets. Many of the procurement and marketing studies focus on fresh fruits and vegetables grown for export to consumers in developed countries. "e dairy subsector has also garnered a fair amount of attention. While not all locations, crops or stages in the supply chain have received interest proportional to their importance for rural poverty, there nevertheless exists a robust set of documented studies from which to draw conclusions about the implications of the reorganization of supply chains and resulting transformation of food systems for food security, and in particular, rural poverty.

Retail consolidation trends

"e proliferation of supermarkets in developing countries is one of the most widely cited elements of food system transformation. Trends in consumption pave the way for consolidation in the retail sector, which then reinforces dietary changes. Demand for safe food and for processed food

Table 2. Trends in the organization of food systems from farm to plate.

Traditional Structured Industrialized

Consumption Rising caloric intake, diversi!cation of diets

Diet diversi!cation, shift to processed foods

Higher value, processed foods

Retail Small scale, wet markets Spread of supermarkets, less penetration of FFV1

Widespread supermarkets

Processing Limited processing sector Processing o"ers employment and value addition opportunities

Large processing sector for domestic and export markets

Wholesale Traditional wholesalers, with retailer bypassing for exports

Traditional and specialized wholesalers, some retailer bypassing

Specialized wholesalers and retailer bypassing through distribution centres

Procurement Via traditional markets Via structured (regulated) markets

Via managed chains, advance arrangements

Production systems Diversi!ed, low input systems

Intensive input use, specialization of cropping systems

More focus on conservation

Safety in food system No traceability Traceability in some chains with private standards

HACCP2 system, private safety standards and public accountability (liability)

Vertical coordination Relationships Relationships/rules Binding agreements, ICT3 systems for e#cient consumer response

1 FFV = fresh fruit and vegetable.2 HACCP = hazard analysis and critical control point.3 ICT = information and communications technology.

11

Figure 6: Interactions between traditional and organized chains in modernizing food systems, taken from [44]

In Southeast Asia, specialized wholesalers had a small market share but play a vital part in quality segmentation [49]. Retailer store prefers working through wholesalers because the demand for organic products was high and wholesalers can provide large quantities at regular delivery times. Some farmers and producers thought that they could increase the amount of supply, but it turned out that this brought down the product quality resulting in poor supply trust and poor availability at the demand level.

For organic suppliers, the most reasonable access to consumers in many countries was through the conventional retailers [50]. Hence it was necessary for them to establish a closer collaboration between the supply chain actors.

From the organic specialized stores’ point of view (e.g. independent stores and chain stores), supermarkets and specialized stores were different in terms of variety, price and quality. Supermarkets’ strengths were that they were easily accessible, have a variety of products with cheaper prices while specialized stores’ strengths were that they had better quality and originality of the products. From a producers’ perspective, the main difference between suppliers was established in terms of short-direct / long channel of distribution, with producers providing quality and traceability.

Most companies involved in marketing and trading of organic products in Asia were very new, usually less than five years old. Price competition and logistic arrangements were the main problems in the organic market. In Thailand, Vietnam and Singapore, organic products, especially vegetables, had to compete with products grown with a limited use of chemical fertilizers and pesticides, such as IPM (Integrated Pest Management) vegetables or “safe” and “hygienic” vegetables. Consumers usually confused about the differences between organic products and those low-chemical products. Moreover, the latter one always promoted as being organic. Therefore, certified organic products had to compete with self-claim and hygienic/safe products on price, product varieties and regularities. Some retailer store


Small farms and the transformation of food systems: an overview

green bean processing chain has sustained smallholder participation much better than the fresh green bean chain has (Narrod et al., 2008).

With the transformation of food systems there has been a trend of upgrading and consolidation in agri-processing !rms in developing countries. A shake-out of domestic processing !rms has been observed with the entry of foreign !rms, facilitated by the liberalization of FDI and trade (Chen and Stamoulis, 2008; Wilkinson, 2008). Competition to meet cost-e"ectively retailers’ standards has led to consolidation amongst the remaining domestic processing !rms in developing countries. Consolidation of retail in developing countries has been most pronounced in sub-sectors whose processors are smaller, more independent and less advanced technologically (Chen, 2004). Small processors in developing countries reported di#culties selling to supermarkets because the retailers applied large stocking fees (Chen and Stamoulis, 2008). For example, in southeast Asia, supermarkets have catalysed major changes in the fresh fruit and vegetable packing industry but not on chicken packers, who had already adopted internationally-accepted standards by the time domestic supermarkets became important buyers.

Bypassing of traditional wholesalers

By assembling large volumes of produce from a ‘marketshed’, wholesalers are better positioned to meet retailers’ and processors’ requirements than are individual farmers, particularly smallholders. In traditional chains, which are still widely prevalent in agriculture-based economies, farmers and traders supply traditional wholesalers, who then sell to individual retailers and processors, many of whom are small in scale. In modern chains, farmers and traders supply specialized wholesalers or distribution centres, who then sell to organized retailers and processors. In countries with modernizing food systems, both chains may exist side to side, with some exchange between them as conditions allow (Figure 5).

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Figure 5. Interactions between traditional and organized chains in modernizing food systems.

12

started with direct marketing, for example home delivery, mobile markets or organic bazaars, which would not require much equipment, staff and overhead costs. In terms of promotion, direct promotion (e.g. word of mouth, targeting specific events) was often used.

Most of the retailers tried to cut off some intermediary links and lower the cost of organic food in order to attract consumers who interested in cheap organic products. NGO could be a great support for organic retailers since financial constraints were one of the obstacles that retailers have at the beginning. They sometime operated from the farm or home or "sit in" with another organization, such as an NGO due to insufficient budget for office rental. There might be some drawbacks if the retailers operated from home or farm since the impression about the professionalism of the organization were sometimes not good.

Some believed that having as many products as possible might attract consumers. However, some thought that having reliable, high-quality products were more than enough to attract loyal consumers. Some retailers adapted the market bit by bit by starting with fresh produce, such as vegetables and fruits then adding another item later on since they believed that the success of one product could lead to other initiative developing another products.

Some store decided to sell low-pesticide products, which were not organic. Nevertheless, this had the disadvantage that consumers were often confused about the differences between organic and low-pesticide products. Other retailers even planted their own products in their own farm instead of buying from contracted producers. This would give them more control over production issues, such as quality, quantity and variety.

Some NGOs have made several attempts to go into business themselves, but eventually they all encountered conflicts between their commercial and their social and development operations. It seemed that those two could not go together since they required very different working attitudes and organizational cultures. It was recommended that setting up a separate business unit of the NGO was a better option [51].

2.4 Marketing Mix Marketing Mix is defined as the set of marketing tools the firm uses to pursue its marketing objectives by marketing its products in an effective manner to the certain customer group. McCarthy classified these tools into four broad groups called the 4Ps: Product, Price, Promotion and Place. Figure 7 explains the Four P Components of the Marketing Mix.

13

Figure 7: The Four P Components of the Marketing Mix, taken from [62]

2.4.1 Organic Product According to Figure 8, in the last 11 years, the total land under organic farming in Thailand was 20 times increased from 1,052 to 21,939 hectares. Unfortunately, Thailand’s certified organic area is one of the lowest in the world, at below 1% of total agricultural land, and remains insufficient to meet the demands for export and within the country [52].

Figure 8: Organic agriculture growth in Thailand 1998-2011, taken from [2]

The number-one sale product is organic rice, primarily Hom-mali jasmine rice from the northeast region, followed by fresh vegetables and herbs. Organic vegetables consist of leafy vegetables, especially the salad type and Chinese vegetables, produced mainly in central Thailand and in Chiang Mai province. Organic orchards

Target market

PlaceChannelsCoverageAssortmentsLocationsInventoryTransport

PromotionSales promotionAdvertisingSales forcePublic relationsDirect marketing

PriceList priceDiscountsAllowancesPayment period Credit terms

ProductProduct varietyQualityDesignFeaturesBrand namePackagingSizesServicesWarrantiesReturns

Marketing Mix

10 CHAPTER 1 MARKETING IN THE TWENTY-FIRST CENTURY

period-to-period marketing-mix changes in the short run than the number of market-ing-mix decision variables might suggest.

Robert Lauterborn suggested that the sellers’ four Ps correspond to the cus-tomers’ four Cs.14

Four Ps Four CsProduct Customer solutionPrice Customer costPlace ConveniencePromotion Communication

Winning companies are those that meet customer needs economically and conve-niently and with effective communication.

COMPANY ORIENTATIONS TOWARD THE MARKETPLACEMarketing management is the conscious effort to achieve desired exchange outcomeswith target markets. But what philosophy should guide a company’s marketing efforts?What relative weights should be given to the often conflicting interests of the organi-zation, customers, and society?

For example, one of Dexter Corporation’s most popular products was a prof-itable grade of paper used in tea bags. Unfortunately, the materials in this paperaccounted for 98 percent of Dexter’s hazardous wastes. So while Dexter’s product waspopular with customers, it was also detrimental to the environment. Dexter assignedan employee task force to tackle this problem. The task force succeeded, and the com-pany increased its market share while virtually eliminating hazardous waste.15

Figure 1-3 The Four P Components of the Marketing Mix

6,281.41

5,510.13 10,524.01

13,419.25 55,992.32

69,748.72 86,871.89

135,634.33 140,939.98

119,722.81 105,967.10

192,220.03

219,390.66

0.00 50,000.00 100,000.00 150,000.00 200,000.00 250,000.00

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011

Land under organic farm

ing in Thailand

(1/10 hatares)

Year

Land under Organic Farming in Thailand

Land under organic farming in Thailand

14

are also becoming more popular. Many organic vegetable farms also produce organic fruits. Mango, papaya, and longan are the major fruits.

A study of Thode-Jacobsen [53] stated that Thailand is a country that has a potential to produce and export organic products (both basic and processed) to EU member countries. The study found that dried fruits, canned fruits and canned vegetables, fruit juices and vegetable juices, and processed cereal foods have greatest market potential in this respect. Non-food organic products too (e.g. clothing, toiletries, decorative and spa products) are of considerable interest as well.

The basic problems for agricultural products are different from other kind of products [5] in that they are perishable. In addition, usually the production takes place in small-scale, scattered, and rural area whereas the main consumer market is in the big city. Therefore, effective transport has to be provided in order that the products can reach to the consumers as soon as possible before they are perished. As a result, the products require higher cost, for example packaging cost. Packaging should be durable and attractive to the customers, yet should not be too expensive. Their bulkiness is also one of the reasons that may increase the cost of transportation, packaging and maintenance of products. Furthermore, some farmers are lack of knowledge in selecting seeds, organic fertilizers and pesticide so that diseases and insects destroy the products during harvesting. High cost of production can occur if the farmers are lack of farm organization and irrigating management.

Some agricultural products can be collected in different seasons. Thus the type of products and their quality can be varied according to the season during the year. Furthermore, the consumers’ demands are not related to picking-up season. Therefore, the complication of standard grading can occur as their quality varies differently from year to year and season to season.

Credibility is one major factor for consumers to buy organic food. Hence a transparent and recognized certification system is of paramount importance [54]. Certification and labeling systems are able to enhance distribution and market development, create trust, and foster confidence [28].

2.4.2 Price of Organic Product The prices of organic products varied depending on the country and on the product (on average more than 30%). The reasons behind the premium price were because of higher input costs, lower yields on the farm level, and higher quality due to higher environmental friendliness of the production. From Table 2, the price of organic produces was highly variable compared to conventional vegetables. Whilst the organic products were popular in the market, the premium price levels were awaited to reduce [54].

A study conducted by Gil et al. [55] stated that current and potential organic consumers were willing to pay a higher price on fresh organic meat, fruits, and vegetables than conventional ones. Furthermore, there were studies in organic consumer’s willingness to pay premium prices for organic products [55, 56] and even more influential for people who were at health risks [55].

15

Table 2: Price comparison of fresh vegetables in Bangkok supermarket (baht/kg), taken from [94]

A survey of Italian consumers [56] found that they often concerned about the pesticides-contaminated products and were willing to pay higher prices for pesticide-free produces. Around 70% of the consumers agreed to pay 10% higher compared to the regular price. Another survey from Boccaletti and Nardella [56] indicated that consumers, who had trust in organic retailers, were willing to pay 20% higher than conventional prices. Yiridoe et al. [23] found that the acceptable level of a premium price for organic was between 10-20%.

Green Net found that consumers could accept up to 10 - 15% price differentiation. In more mature organic markets like in some European countries, where surveys indicated consumers could accept around 20 - 30% higher price for organic products [61]. The price of an organic product was important for sale and critical if the marketing organization intended to expand the market to other consumer groups. However, organic products were purchased mostly by (upper) middle-class consumers, whose decision to buy, was not so much influenced by price.

A study of Zhou Zejiang, (OFDC, China) [51] conducted a survey on consumer income and the price of organic vegetables at Nanjing Planck. It indicated that 40% of the respondents whose income was over $400 per month said that the shop offered a reasonable price for its organic vegetables. Sixty percent of consumers, whose income below $400, believed that the price was too high or a bit too high. The survey reported that 80% of the consumers could accept a price premium of 10 – 30% while the rest admitted a price premium of 40 – 90%. In rare cases, a price premium of 100% could be admitted under conditions of organic product undersupply.

Due to recession in Asia in the last few years, the need to review the price of organic food was necessary. The quicker the organizations could adapt to organic product prices, the higher their chances to gain advantage in the organic market. Some organization took advantage in economy of scale by increasing volumes to reduce the costs on a per kilo basis in transportation service.

There was an important term called Willingness-To-Pay (WTP) for environmentally friendly products, which were widely discussed in a great amount of research [57, 58, 59]. This WTP was a general tendency, and despite the increasing availability of

108 Looking east, looking west

A. Kasterine, W.W. Ellis and V. Panyakul

Surveys indicate that consumers are ready to pay a maximum premium of 10-15% for organic produce. As shown in Table 2, organic produce attracts a signi!cant but highly variable retail premium over conventionally produced vegetables. However, as more organic agricultural produce is launched in the market, premium levels are expected to decline and may even disappear.

Despite declining farm-gate premiums, and the increasingly weak position of smallholders to negotiate fair prices for produce with large supermarket chains, still there remains su"cient price di#erential for growers as an incentive for conversion. $e price di#erential at farm level is clearly demonstrated in the case of organic asparagus. Growers obtain an average price of 32 baht/kg (euros 0.64/kg) for organic asparagus in comparison to 22-25 baht/kg (euros 0.44-0.50/kg) for conventional asparagus (Boonyanopakun, 2007: personal communication). A member of the Srakaew contract farming arrangement with two rai (0.32 ha) of farm land is able to generate an average income of 132,130 baht (euros 2,643) per year from organic asparagus (Uathavikul, 2004) in comparison to an average income of 115,000 baht (euros 2,300) per year obtained from conventional asparagus (Department of Agriculture, 2007). $e di#erences are summarised in Table 3.

In 2003, members of a Srakaew organic asparagus contract farming operation were able to generate an average annual income of 132,130 baht (euro 2,643) from two rai of farm land (equivalent to euros 8,258/ha/yr) (Uathavikul, 2004). A survey at the same site also showed that the cost of farm management using organic methods was 40-59% lower than the cost of conventional methods. A steady stream of income, combined with lower variable production costs, can make organic farming an attractive choice for growers.

Table 2. Price comparison of fresh vegetables in Bangkok supermarket (baht/kg) (Earth Net Foundation/Green Net, 2008).

Conventional vegetables

‘Hygienic vegetables’1

Organic vegetables

Organic premium (compared with ‘hygienic vegetables’)1

Organic premium (compared with conventional vegetables)

Dec 01 40.18 54.79 88.375 61% 120%Jul 02 41.28 60.28 66.99 11% 62%Mar 03 38.98 35.29 65.94 87% 69%Dec 03 57.49 56.75 64.28 13% 12%Mar 04 29.45 46.29 76.77 66% 161%Aug 04 34.85 83.3 135.29 62% 288%Feb 05 29.85 48.24 52.37 9% 75%Aug 05 49.29 64.22 45.84 -29% -7%Apr 06 46.03 75.38 108.03 43% 135%Jul 07 43.88 103.06 134.17 30% 206%Dec 07 42.13 105.26 122.80 17% 191%

1 Hygienic vegetables are produced using good agricultural practice.

16

organic food products, there were few studies that examined the variability of WTP for organic products in terms of product categories and organic consumer segments.

Generally, one reason why consumers were willing to pay a premium was to ensure product quality [60]. However, some consumers were willing to select higher-priced products themselves [58]. The research studied two groups of consumers, which were regular and hardcore consumers. The result showed that each group had different willingness to pay due to their respective motivations. Health is the main motivation for regular consumers while hard-core consumers tended to support the environment, local community, and health.

Organic retailers placed their pricing based on initial point from farmers and added their margin. The margins could be ranged depend on different consumers, for example, the margin was high for home delivery and low for schools. The premium cost of an organic meal compared to a conventional one corresponds to +32.5% for catering societies and +20.8% for restaurants [54]. Fair trade could be applied by pricing the products transparently with a clear margin. It is noted that organic organization could use their margins for their operational expenses e.g. store running cost, wages for their employees, market expansion, and some emergency cases.

Some organic organizations supported farmers to convert to organic agriculture by applying various premium prices for organic and in-conversion products. For example, in Hanoi organic, the prices of organic products were 10-15% higher than that of the in-conversion products and much higher than the conventional prices. Some strategy was to apply a lower margin (in percentage) on the low-value products compared to the more high-value ones. A number of organic marketing organizations initiated fair trade principles in their price setting policies stating that the price that the producers sold their products should at least cover their cost of production [51].

2.4.3 Distribution Channels of Organic Product Distribution Channel means a channel structure consists of organizations that transport products and service to a target market. Organizations that bring products to the target market are called marketing organizations. Generally, distribution activities include transportation, warehousing, storage management and inventory management. Meanwhile, distribution channel is the route of products, which includes direct channel from producer to consumer or to industrial user [62]. The distribution impacts the environment in two ways. Firstly, long distance transportation can lead to problems of destroying the produces. Secondly, transportation usually consumes fuel and energy and lead to air pollution. Therefore, marketers should consider these impacts before planning distribution strategies. Figure 9 shows a basic flowchart of product distribution for retailers, who are in wholesale, retail or operating home delivery systems.

In a last decade, retailer’s stores counted as 95% of the organic market share and 5% were supermarkets. Currently, the trend is the opposite [63] since the organic product industry is heading from niche markets to mainstream market [64, 65].

17

Figure 9: A basic flowchart for retailers who are in wholesale, retail or operating home delivery systems.

Alternative distribution channels are classified by a link between the producer and the consumer [66]. There are two main types of consumption; regular consumers using standard distribution channels for example supermarkets and hardcore consumers utilizing alternative channels for example box delivery, farmers’ market, specialized and grocery stores [28].

Supermarkets are the main organic product distribution channels, which are above 50%, in 27 European countries (incl. Switzerland, Croatia and Norway; excl. the Baltic states). The highest market share was in Northern Europe country e.g. Norway, Finland, Denmark and Sweden [67]. Interestingly, in Germany and the Netherlands, specialized stores are the main channels for organic products [30]. However, German conventional supermarkets have entered the market and gained a market share of 49%. In Poland, Spain, Italy, Greece or Portugal, specialized organic shops were still the dominant channels covering at least 50% of all organic sales [67].

In Lebanon, recommendations from shop owners or sales representatives in the specialized store were the main motives for consumers to buy organic products. Moreover, the consumers believed the organic products were more trustworthy in the specialized store than in the supermarket since some consumers cannot differentiate the organic labels [73]. Direct channels such as the farmer’s market, was aimed toward consumers that looked to interact directly and socially with the producers, to find out about product’s production methods, originality, variety, and cooking tips [66].

Community Support Agriculture (CSA) or Teikei systems and the supermarket had equally market channels for organic food in Japan [30]. In the USA, the organic market was widely ranged from supermarkets, CSA or farm-gate sales, and natural food stores. In 2009, supermarket and natural food stores were almost the same share counting 49% and 48% respectively. The rest of 3% was in direct sales [69].

Some research examined some out-of-home channels that distributed organic food such as food service channels and organic canteens in school and hospitals, which would be an increasing trend [54].

In Thailand, the most popular organic channel in Thailand was supermarket, which has replaced health shops recently [7]. However, the other distribution channels were the member system (weekly deliveries to subscribed customers within the

Local Marketing of Organic Products - A Guide for SMEs

- 18 -

Production

Distribution to retailers,Home delivery,

Direct Sales

Compile demand quantityand inform farmers,

producers accordingly

Packaging and StoringCollection and Transportation

5. ORGANISING THE SUPPLY CHAINThis chapter describes the current supply chain management systems of the different initiatives, includinggeneral product process flowcharts. Key contract provisions are highlighted. The section concludes with somelessons learned and ideas of the different initiatives on future improvements of their organisation as well aswhat would have been done (similarly or differently) if they were starting up today.

SUPPLY CHAIN SYSTEMSSupply chain management is one of the key issues to the success of developing a local organic market.Efficiency and quality management are determining factors and need particular attention. Key issue in qualitydevelopment is the establishment of a quality assurance system throughout the supply chain. This involvesquality of raw materials, procurement control system, processing quality, packaging, and stock management.Both the marketing organisations and the producers need to apply a Total Quality Management (TQM) fortheir operation so that product quality is continuously maintained.

Based on their set up and product lines, different marketing organisations manage their supply chain indifferent ways. For the organic bazaars supply chain management is accomplished in association with localcommittees and linked to extension programmes. Farmers intending to supply a forthcoming organic bazaarsubmit an application to their local Community Learning Centre. After receiving the applications from thefarmers, volunteers of IIRD visit the farms and assess the quantity and quality of the products to be sold andto verify whether the crop has been produced organically. Selection is then based on an analysis of supplyand demand. Detailed descriptions of the procedure for supplying to bazaars are provided to the farmers inthe organic production manual supplied to the farmers who are registered with IIRD. These include:� Agreement with farmers.� Calendar of training for the farmers.� Organic bazaar manual.� Farmer- consumer workshops.

Selected farmers are then required to sign an agreement with IIRD containing a declaration of organicintegrity. Channelling supplies for organic bazaars is a complex process involving multiple stakeholders.Organic market schedules are announced for a period of three months, giving the IIRD volunteers adequatetime for facilitating supplies. IIRD sends out detailed circulars inviting organic farmers to sell at the organicbazaar.

For organisations involved in wholesale, retail or operating home delivery systems, a basic flowchart is asfollows:

Although not in all organisations with the same thoroughness, all organisations apply quality control measuresat the different levels of the supply chain. In addition, most organisations have a recording system to monitor

18

community), weekly markets, retail health shops, health supermarkets, and organic restaurants. The location was one of the most important for organic retailers to sell organic products. It was recommended that the stores should locate in the vicinity of residential areas with a relatively higher-level education of consumers and high rate of consumption. The ideal location to open organic stores should be accessible by private, commercial and public transportation and parking should be available. Moreover, they should be visible by pedestrians and available all year round.

2.4.4 Promotion of Organic Product Organic retailers and organizations use different tools for promotion considering which is the most suitable for their customers and marketing objectives.

A survey conducted by AWeber communications [72], among the 34 marketing tactics for Natural and Organic Products shown in Figure 10, the most effective ten marketing tactics are: 1) Live Demos 2) Television Advertising 3) Websites 4) Facebook 5) Coupons 6) Email Newsletters 7) Print Advertising 8) Event Marketing 9) Buzz Marketing 10) Search Engine Optimization. Email marketing and social media are among the most effective methods right now in terms of cost and result tracking. Since email marketing is widely used by natural product marketers, and social media such as Facebook are very effective to target online consumers and used not only to interact with customers, but also as a popular market research tool.

The statistical data from Natural Products Marketing Benchmark Report 2011, from a 44-question survey of 411 natural products companies in Figure 11, [72] reported that most natural product businesses spent less than $100,000 on consumer marketing. The amount they spent was directly proportional to the size of the company. The majority of small companies (revenues less than $1,000,000) spent less than $10,000. Medium companies (revenues of $1,000,000 to $15,000,000) spent between $10,000 and $250,000. Large companies (revenues over $15,000,000) spent between $500,000 and $10,000,000. In summary, organic and natural food organizations spent the average of 3.26% of their revenue on marketing, which was considered low compared to other industries.

In Europe, a study [54] indicated that the market was very heterogeneous and there were no dominant global/international organic brands owned by the food industry. Most brands are small and local. Hence communication activities were mainly low budget for example creating events, fairs, and promotions or direct marketing from farmers associations or NGOs and activities are carried under governmental institutions or NGO’s.

Word-of-mouth and mass media were important primary sources for consumer to know more about organic products [71, 70]. From a study of German organic consumers [70], it showed that television and lifestyle magazines were the first source of information, followed by word-of-mouth communication, and the third was TV cooking shows, then women magazines and magazines with independent product tests respectively.

19

Figure 10: 34 marketing tactics for Natural and Organic Products, taken from [72]

It found that regular organic consumers obtained different sources of information from hardcore organic consumers. Regular consumers got information about organic agriculture and healthy nutrition from the media press as the most important trigger for consumption of organic food whereas hardcore consumers indicated word-of-mouth communication from friends or relatives are the main consumption reason [71]. A reason behind this could be that the hardcore consumers are more similar with organic products since they have tried a wide range of organic products and more active information search behavior thus leading to a stronger word-of-mouth stance [54].

While larger companies spend larger dollar amounts on marketing, smaller companies actually invest a larger portion of their overall revenue in marketing than bigger brands. This could be because larger companies enjoy the negotiating power that comes from already being established and experienced in their field.

Small companies still need to build up their customer base, while larger companies can benefit from returning customers and word-of-mouth referrals.

Marketing Tactics

As the natural products industry has evolved from its 1970s roots in print, radio and television to online marketing channels, today’s marketers face different challenges.

Budgets can go farther online, and results can be measured more directly than, say, tv ads. But competition for search rankings is fierce, and creating content for email newsletters and social media page updates is more time-consuming than one-time ads or direct mailers.

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Figure 11: The marketing budgets in small, medium and large companies, taken from [72]

The best ways to market the organic products, during a time of financial crisis and to consumers who have very little awareness about organic farming, were direct communication. There were advantages of direct communication, which include getting immediate feedback from consumers. However, the sales representatives had to have good knowledge about organic issues so that they could clarify the issues promptly and clearly. The direct communications could be in the stores or one could conduct the lunchtime talk, cooking demonstration and at the same time to promote the awareness of organic products. It was very essential to create the bridge to the mass media and journalists, who were willing to publish about organic agriculture because it helped to create a trend of health and sustainable environment. A good article by a journalist could contribute more than a paid advertisement and came at no cost. To create a successful marketing campaign, marketers should consider both culture and characteristics of consumers, so the marketers could predict which were the most suitable channels for the consumers. There were many marketing initiative methods. For example, IIRD, an organic organization in India, set up consumers’ meetings in association with women's groups and social clubs e.g. the Lions, the Rotarians, etc. to discuss the importance of organic agriculture, food security and health as well as promoted their upcoming organic bazaars in the same time [51].

Marketing Budgets

Let’s take a look at that greatest internal challenge: limited budgets.

Not surprisingly, in 2011, most natural product businesses spent less than $100,000 on consumer marketing. The amount they spent was directly proportional to the size of the company.

In general, the majority of small companies (revenues less than $1,000,000) spend less than $10,000. Medium companies (revenues of $1,000,000 to $15,000,000) spend between $10,000 and $250,000.

Large companies (revenues over $15,000,000), spend between $500,000 and $10,000,000. In terms of gaining awareness among consumers, the extra dollars put larger companies at a definite advantage.

On average, natural product companies spend 3.26% of their revenue on marketing. Compared to budgets for industries across the board, this is fairly low.

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21

3. Research Methodology

Research methods used in the research are reviewed in this chapter. Topics in the chapter consist of research overview, research approach, research strategy, time horizon, location, data collection methods and the limitations of the research.

3.1 Research Overview Planning both appropriate and effective research strategies is an important part of conducting research in order that the researchers can establish the frameworks and confirm that the collected data is compatible with theories and explanations that are given [74]. Saunder et al. [75] mentioned that “The research strategy will be a general plan of how you will go about answering the research question you have set”.

Saunders et al. [76] had developed the figure, ‘Research Onion’ which is shown in Figure 12. The diagram is targeted to assist researchers design research and help them make sense of the choices of research approaches as the diagram shows specific and clear overviews. Through the diagram, researchers can consequently proceed on to discussing and providing any justifications for their choice of research design. The layers of the onion, in the diagram, show stages in increments. Stages are in the following order of research philosophy, approach and strategies.

Figure 12: Research Onion, taken from [76]

3.2 Research Approach This research aims to answer research questions using both deductive and inductive approaches. Quantitative data are the first key to the study while some qualitative data are also required. Both types of data are analyzed deductively in order to describe the characteristics, motivations, perceptions and attitudes of organic consumers and retailers in Bangkok and later use the analyzed data to develop marketing strategies and guidelines for Organic Small and Medium Retailers. However, previous literature may not be sufficient for the whole subject, satisfactory

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Figure 3 – Research Onion

(Source: Saunders et al., Research Methods in Business, 2006)

3.2) RESEARCH PHILOSOPHY

Another aspect of research that all researchers have to pay attention to is the research

philosophy. Saunder et al. (2003, p.84) describes it as “The research philosophy depends on

the way you think about the development of knowledge”.

There are three types of research philosophies which are positivism, realism and

interpretivism (Saunders et al, 1997). Regarding the three types of research philosophies

outlined previously, positivism has been found to be appropriate for this dissertation due to

its statistical significance and its generalisable results (McDaniel and Gates, 1998).

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answers from both processes are needed to collect data inductively to be studied and implemented in the conceptual framework. In the nutshell, both deductive and inductive methods are used in this thesis since it is the most suitable method to answer the thesis’s objectives and research questions [77].

3.3 Research Strategy The reason of quantitative approach is used in this study is due to its quantifications of the processes of data collections and data analyses [77, 78]. Bryman and Bell [78] mentioned that the quantitative method is easy to be distributed on a larger scale and able to reach large numbers of participants in a short duration hence the author decides to use the quantitative method as it is the most effective for the first part of the research.

The author chooses ‘a mixed method approach’ since this method illustrates both qualitative and quantitative data collection and analysis procedures where the quantitative aspects are first highlighted, and later the qualitative aspects. There are controversies among researchers regarding a mixed method approach that it does not exist by itself in isolation yet such approach allow researchers to gain better opportunities in studying subjects, rather than focusing on any one method [78, 79].

Qualitative approach depicts philosophical assumptions of relevant qualitative inquiries in order to obtain knowledge of complex phenomena. The semi-structured interview of six organic key actors about their views for the organic business in Thailand and their marketing strategies displayed their multiple ‘realities’ as experienced by any individuals looked into.

Qualitative methods in this specific research are as important as the quantitative approaches due to the research's emphasis on both insight of opinions and empirical data. Mere numbers do not allow the researcher to focus deeper into the research and it allows the author to gain new ideas and thoughts beyond what has already been displayed by the surveys and discover other insight subject that are beyond any existing research. There is some drawback with qualitative approach due to its small sample size, which gives less credibility than the larger sample size [80].

3.4 Time Horizon The time horizon applies in this research will be the cross-sectional horizon, mainly because of the restricted time limit of one month from the 15th of April to the 15th May 2013. This research cannot employ a longitudinal approach, which is a diary perspective that observes people over time. Consequently, this research is a cross-sectional study where data collected at a particular point of time [76].

3.5 Location Because of the time constrictions and author’s own constraints, the questionnaires were given out both online and on the street to the populations in Bangkok, Thailand. The data were collected from the 15th of April to the 15th May 2013. Later on, the gathered data would be interpreted, analyzed and presented in the following chapters.

3.6 Data Collection Methods The most proper methods of data collection are selected after implementing the mixed-method approach. The most appropriate methods would be ones that can systematically answer all research questions [79].

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3.6.1 Survey Questionnaire

3.6.1.1 Development of the Questionnaire and Sample Size First, the questionnaire was drafted in both English and Thai. The questions and issues raised were based on the results from the literature research, the expert interviews and recommendation from Prof. Dr. Sven Prueser on the fifth consultation hour on March 20th 2013; please refer to Appendices 8.3 for further details.

The first draft of the survey questionnaire was discussed with a second supervisor, Mr. Chusak Suvimonstiean on the second consultation hour on March 25th 2013; please refer to Appendices 8.3 for further details. In this first evaluation step the focus was to see whether the topics covered were relevant for the Thai situation regarding characteristics, satisfactions and decisions of organic product consumers concerning 4Ps and 4Cs. Another aspect was to find out which issues should be added, edited or addressed more in detail.

The final draft of the questionnaire was analyzed and corrected by the second supervisor, Mr. Chusak Suvimonstiean on the third consultation hour on April 1st 2013 (please refer to Appendices 8.3) to ensure that the questionnaire was convenient, make sense an appropriate for surveying Thai organic products consumers in both Thai and English.

The English and Thai versions of the questionnaire were tested with the interviewers. A pilot test has been conducted by collecting data of 30 questionnaires and data collected is analyzed using SPSS (Statistical Package for Social Sciences). Lastly, a reliability coefficient (alpha) is calculated and is equal to 0.75 that is considered acceptable reliability [81]. The population that was considered in collecting data through a quantitative survey was both male and female, Bangkok residents who age between 16 – 65 because they are the ones who make their own purchasing decisions. According to Department of Provincial Administration, Ministry of Interior, the number of registered Bangkok residents between the ages of 18 and 60 was more than 3.6 million in December 2011. Therefore, the author determined the sample size based on Taro Yamane's (1967) Formula for determining sample with confidence level of 95% and error of. 5%.

n = ! !!!(!)!

Where; n = sample size

N = population size

e = sampling error (e = 0.05)

Therefore, n = !,!"#,!"# ! !!,!"#,!"# (!.!")!

When the formula was applied to the above, the author chose 400 people to be the sample and added 38 people which were around 10% error in case that some information was missing on some questionnaires.

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3.6.1.2 Content of the Questionnaire The questionnaire is divided into 3 sections as follows:

A) Demographic information

In this section, gender, age, children in the household, monthly family income, and level of education were asked to see if the difference of consumer’s characteristic will strongly affect on their purchasing behavior and on 4Ps

B) Purchase and consumption of organic products

Questions about the purchase and consumption of organic products and looks for the reasons why people buy or do not buy organic products.

C) Consumer’s satisfaction and decision on choosing 4Ps of organic products

The satisfaction and decision with the current product selection available and what are the consumers’ opinions about products, price, place and promotion (4Ps) of organic products

3.6.1.3 Data Analysis The collected data were entered into a Microsoft Excel. Once the data were successfully in place, the author checked them again and tried to eliminate errors caused by data entry and to ensure complete data sets. The data were analyzed with SPSS 11.0 for Windows, the methods applied were descriptive analysis, cross tables and the Chi-square test that was carried out at a significance level of 5 percent. Several books, online SPSS tutorial and SPSS experts are consulted to confirm a correct statistical data analysis.

3.6.2 Interviews with Key Actors An exploratory research in the form of qualitative interviews with six organic experts and key actors in Thailand are conducted. According to Gilbert and Churchill [82], an exploratory study makes the analyst more familiar with the obstacles and provides information on the practical possibilities of the research.

Key actors from different organizations and companies dealing with and involved in organic farming were interviewed. The interviewees are 5 dynamic CEOs of different organic product retailers and one from Thailand Ministry of Commerce; please refer to Appendices 8.1 for further details.

A semi-structured guide is conducted, which covers the following topics:

• How and why are you/is your organization involved in organic farming?

• What are the visions and policies of your organization?

• What are your marketing strategies (in 4Ps and 4Cs) in your organization?

• What are your target groups?

• What are your main products?

• Which organic product groups are available & bought?

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• What are the reasons for consumers to purchase organic products?

• Influence of health and safe foods on the market for organic?

• What are the SWOTs of the organic business in Thailand?

• What are the future and obstacles of doing the organic business in Thailand?

The interview questions asked depend on the interviewee and his/her background. The results of these interviews are used to evaluate and revise the questionnaire. There are four important organic events where the author participated in qualitative interviews. The author attended

1) The 3rd Organic Symposium 2013, where Thailand Organic Key Actors come to give a seminar talk to audiences from May 10th -11st, 2013 in Bangkok Thailand.

2) The author also participated Organic and Natural Expo 2013, from May 9th-12nd, 2013 at Queen Sirikrit Convention Center Bangkok Thailand, where over 200 organic SME and SML organic companies exhibit their booth as they promote their organic products and services. This event is the biggest event for organic exhibition in Thailand.

3) Furthermore, the author also appeared at the Organic Pavillion at Thaifex- World of Food Asia, from May 25th- 29th, 2013 at Impact Arena, Muang Thong Thanni Thailand, where SME and SML organic businesses all around the world showcase their organic products and services.

4) The author also took part in the Thai Traditional Health Exhibition at Wat Po, Bangkok, from April 24th-28th, 2013 where organic and healthy food organizations exhibit their organic and healthy food and services.

The interview of Organic Key actors and management of organic organization is conducted at the above-mentioned four events, and by telephone if more information is required.

3.7 Limitations There are some obstacles, which could affect the results and research process that have to be taken into consideration.

Most respondents misunderstood organic products that it was the same as pesticide-free or hygienic products since the word “hygienic or pesticide-free” were translated in Thai literally. However “organic” are translated in such a way that people may misunderstand to something else if they never heard or be educated about it before. In fact, organic products mean that the products contain no chemicals used in the process of growing and no methods that could destroy the environment. Yet pesticide-free or hygienic products are the products containing the chemicals that are safe to consume. Moreover, they are produced in such a way that they do not concern about the biodiversity.

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4. Results

4.1 Demographic Characteristics of Respondents

Table 3: Demographic characteristics of respondents

Variable 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓

𝑟𝑒𝑠𝑝𝑜𝑛𝑑𝑒𝑛𝑡𝑠

!

Organic non-

buyers

Organic buyers

Significance of difference between

the groups

!

Age (in years)

ns

<20 years 18 22.2% 77.8% 20-30 years 249 17.3% 82.7% 31-40 years 85 11.8% 88.2% >40 years 85 10.6% 89.4% Gender ns Male 179 47.00% 39.60%

Female 259 53.00% 60.40% Children in

the household

ns

Yes 118 11% 89% No 319 16.4% 83.6%

Education level

*

Secondary School

12 9.1% 90.0%

High school 46 17.4% 82.6% BSc 238 17.2% 82.8%

MSc or more 142 11.3% 88.7% 𝐹𝑎𝑚𝑖𝑙𝑦 𝐼𝑛𝑐𝑜𝑚𝑒 𝑝𝑒𝑟 𝑚𝑜𝑛𝑡ℎ

!

*

<10,000 baht 9 22.2% 77.8% 10,000-

20,000 baht 86 11.8% 88.2%

200,001-30,000 baht

65 13.8% 86.2%

>30,000 baht 277 15.9% 84.1% 1: Some information was missing on some questionnaires so not all categories add up to 438 2: Significance: * = Pearson Correlation Sig. (2 -tailed) ≼ 0.05; not significant: ns 3: The National Office for Statistics in Thailand reports that the average monthly family income in Bangkok in 2011 was approx. 23,236 baht (100baht = 2.4euro)

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Figure 13: Age of the respondents

As seen in Figure 13, the main age group of organic buyers in Bangkok is 31-40 years old and 40 years old (88.20% and 89.40% of these groups buy organic products respectively). Whereas, people age below 20 years old tend to buy less (77.80% of this group buy organic products).

Figure 14: Gender of the respondents

Figure 14 displays gender of organic buyers. Organic buyers tend to be women, which is 86.50%, compared to 82.60% of men.

22.20% 17.30% 11.80% 10.60%

77.80% 82.70% 88.20% 89.40%

<20 years 20-‐30 years 31-‐40 years >40 years

Age Organic non-‐buyers Organic Buyers

17.40%

82.60%

13.50%

86.50%

Organic non-‐buyers Organic Buyers

Sex Male Female

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Figure 15: Respondents have/have not children in the household

From Figure 15, 89% of organic buyers have children in the household, compared to 83.60% of organic buyers do not have children in the household. Noted that the age of the youngest child living in the household is 1 year old and the oldest is 40 years old. The mean age is 9.15 years old and the standard deviation is 8.04 years old. Also, the women are slightly more likely to have a child living in their household (59.3% of women, compared to 40.7% of interviewed men).

Figure 16: Monthly family income of the respondents

Figure 16 indicates that people who have monthly family income more than 10,000 baht are more likely to buy organic products. As seen that only 77.80% of people who have family income less than 10,000 baht have bought organic products, which is around 10% less than the other three groups. While there is not much difference in those three groups, that is, around 85% of the respondents have bought organic products.

11%

89%

16.40%

83.60%

Organic non-‐buyers Organic Buyers

Children in the household Yes No

22.20% 11.80% 13.80% 15.90%

77.80% 88.20% 86.20% 84.10%

<10,000 baht 10,000-‐20,000 baht 20,001-‐30,000 baht >30,000 baht

Monthly family income Organic non-‐buyers Organic buyers

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Figure 17: Education level of the respondents

Figure 17 shows that consumers with a lower level of education are likely to buy organic products. However, the number of secondary school respondents are 12 people (3% of the respondents), which is unlikely to represent the whole group as 7 out of 12 people are aged above 40 years old, hence the author decides to neglect this secondary school group. Most of the respondents are mainly BSc and MSc or more, which accounted for 87% of the respondents. Therefore the author concludes that those who hold a higher academic degree are more likely to have bought organic products.

4.2 Purchase and Consumption of Organic Products

Figure 18: Structure of questionnaire and resulting groups of interviewees

9.10% 17.40% 17.20%

11.30%

90.00% 82.60% 82.80%

88.70%

Secondary School High school BSc MSc or more

Education level Organic non-‐buyers Organic Buyers

Have you ever buy organic products? (n=438)

Yes (371) No answer (1) No(66)

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Figure 19: Respondents buy organic products

As shown in Figure 18, there are 438 respondents in the survey. The figure shows that 371 people have bought organic products, 66 people have never bought organic products and 1 person has no answer. Translating this into a percentage, Figure 19 displays that 85% of respondents have bought organic products and 15% of the respondents have not bought organic products.

Table 4: How long have you buy organic products?

Years Frequency Percent <1 156 35.6 2-5 165 37.7 5-10 32 7.3 >10 18 4.1

Non-buyers and no answer

67 15.3

Total 438 100

85%

15%

0%

Did you buy organic products?

Yes

No

No answer

<1 year 36%

2 to 5 years 38%

5 to 10 years 7%

>10 years 4%

Non-‐buyers and no answer

15%

How long have you buy organic products?

31

Figure 20: How long do the respondents buy organic products

Table 4 and Figure 20 show that 36% of the respondents have bought organic products for less than one year. 38% of them have bought the organic products for 2-5 years. Only 7% and 4% of them have bought the organic products for 5-10 years and more than 10 years respectively.

Table 5: How often have you and/or your family buy organic products?

Frequency Percent Every week

70 16

Once a month

149

34

Once every few months

143

32.6

Never and no answer

76 17.4

Total 438 100

Figure 21: How often the respondents buy organic products

Table 5 and Figure 21 indicate that 34%, 33% and 16% of the respondents have bought organic products once a month, once every few months and every week respectively.

Every week 16%

Once a month 34% Once every few

months 33%

Never and no answer 17%

How often have you and/or your family buy organic products?

32

Table 6: Reason to buy organic products

Frequency Percent better taste

Yes 129 29 No 309 71

fresher than the other products

Yes 209 48 No 228 52

good for my health

Yes 339 78 No 99 23

good for my children

Yes 194 45 No 240 55

not contain pesticides / have lower residues

Yes 316 73 No 118 27

want to try something new

Yes 214 49 No 221 51

good for the environment

Yes 58 13 No 375 87

trendy/fashionable to buy organic products

Yes 55 13 No 380 87

I have a record disease Yes 43 44 No 380 56

*Some information was missing on some questionnaires so not all categories add up to 438

Figure 22: Reason to buy organic products

129

209

339

194

316

58

214

55

43

309

228

99

240

118

375

221

380

380

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

better taste


good for my health



want to try somethcing new



I have a record disease

Reason to buy organic products

Yes

No

33

Table 6 and Figure 22 show the reasons why the consumers buy the organic products. Health (78%) is the major concern for the organic consumers. Followed by organic products do not contain pesticides and has lower residues (73%), the consumers want to try something new (49%), fresher than other products (48%), good for their children (45%), the consumers have a record disease (44%), better taste (29%), good for the environment (13%), and fashionable to buy (13%).

Table 7: Concerned about the use of GMO in food products versus Organic buyers and non-buyers

Are you concerned

about the use of GMO in food

products?

Organic Buyers

Organic non-

buyers

Significance of difference between

the groups

!

Very much 8.90% 12.30% ns Often 13.50% 7.70%

Sometimes 62.80% 53.80% Not at all 14.80% 26.20%

Total 100% 100% 1: Significance: * = Pearson Correlation Sig. (2 -tailed) ≼ 0.05; not significant: ns

Figure 23: The respondents concerned about GMO in food products

Table 7 reports that 8.9% of organic buyers are ‘very much’ concerned about GMO in food products whereas 14.8% of them are ‘not at all’ concerned about it. Figure 23 illustrates that 10%, 13%, 61% and 16% of the respondents are ‘very much, often, sometimes and not at all’ concerned about the use of GMO in food process respectively.

Very much 10%

Often 13%

Sometimes 61%

Not at all 16%

Are you concerned about the use of GMO in food products?

34

Table 8: Concerned about pesticide residues on vegetables and fruit Versus Organic buyers and non-buyers

Are you concerned about pesticide

residues in vegetables and

fruits?

Organic Buyers Organic non-buyers

Significance of

difference between the groups

!

Very much 40.60% 33.30% * Often 29.60% 19.70%

Sometimes 27.80% 37.90% Not at all 2.00% 9.10%

Total 100% 100% 1: Significance: * = Pearson Correlation Sig. (2 -tailed) ≼ 0.05; not significant: ns

Figure 24: The respondents concerned about pesticide residues on vegetables

and fruits Asked about their concerns regarding pesticide residues on vegetables and fruits, Table 8 presents that 40.6% of organic buyers are ‘very much concerned’ about it whereas 33.3% of organic non-buyers are ‘very much concerned’ about it. The 2% of organic buyers are ‘not at all concerned’ about it while 9.1% of organic non-buyers are ‘not at all concerned’ about it. Figure 24 states that 40% of the respondents are ‘very much’ concerned about the pesticide residues. The rest 3% of the respondents is ‘not at all’ worried about pesticide residues in food products. Of the respondents, 28% and 29% are ‘often and sometimes’ concerned about it respectively.

Table 9: Do you think that organic and pesticides-free products are the same?

Frequency Percent Yes 304 69.4 No 134 30.6

Total 438 100

Very much 40%

Often 28%

Sometimes 29%

Not at all 3%

Are you concerned about pesticide residues on vegetables

and fruit?

35

Figure 25: The respondents’ knowledge about organic products

Table 9 and Figure 25 describe that most respondents (69%) misunderstood that organic and pesticides-free products are the same.

Table 10: When you are sick, do you think about organic products?


Total 438 100

Figure 26: When the respondents are sick, do they think about organic

products? Table 10 and Figure 26 state that 63% of the respondents think about organic products when they are sick.

Yes 69%

No 31%

Do you think that organic and pesticides-‐free products are the

same?

Yes 63%

No 37%

When you are sick, do you think about organic products?

36

4.3 Consumer’s Satisfaction and Decision in Choosing Marketing Mix (4Ps) of Organic Products

4.3.1 Product

Table 11: Are you satisfied with the range of organic products offered in the supermarkets?


Never buy and no answer 45 10.3 Total 438 100

Figure 27: The respondents’ satisfaction with the range of organic products in

supermarkets Table 11 and Figure 27 report that 46% of the respondents satisfy with the range of organic products offered in the supermarkets.

Table 12: Which organic products do you buy the most?

Frequency Percent Fruits&Vegetable 322 73.5

Eggs 21 4.8 Rice&Cereal 21 4.8

Dairy Products 8 1.8 Bread&Pasta 5 1.1

Meat 4 0.9 Juice 7 1.6

Canned food 0 0 Never buy and no answer 50 11.5

Total 438 100

Yes 46%

No 44%

Never buy and no answer 10%

Are you satisaied with the range of organic products offered in the

supermarkets?

37

Figure 28: Which organic products the respondents buy the most?

Table 12 and Figure 28 depict that fruits and vegetables are the most popular organic products that consumers buy, which count as 73%. Followed by eggs, rice & cereal each for 5%, milk for 2%, bread & pasta and meat each for 1% respectively. Table 13: Are brands and labels important for you in buying organic products?


Never buy and never buy 35 8.0 Total 438 100

Fruits&Vegetable 73%

Eggs 5%

Rice&Cereal 5%

Milk 2%

Bread&Pasta 1%

Meat 1%

Juice 2%

Never buy 11%

Which organic products do you buy the most?

38

Figure 29: Are brands and labels influence the respondents to buy organic

products? Table 13 and Figure 29 point that 82% of the respondents agree that brands and labels is vital for them in choosing organic products.

4.3.2 Price

Table 14: Is the price of organic products a problem for you?


Never buy and no answer 47 10.7 Total 438 100

Figure 30: Is the price of organic products a problem for the respondents?

Owning to Table 14 and Figure 30, 44% of the respondents say that the price of organic products is a problem for them whereas 45% mentioned an opposite.

Yes 82%

No 10%

Never buy and never buy

8%

Are brands and labels important for you in choosing organic

products?

Yes 44%

No 45%

Never buy and no answer 11%

Is the price of organic products a problem for you?

39

Table 15: How many more percent are you willing to pay for organic products compared to normal products?

Frequency Percent 1-3% 113 25.8 5% 113 25.8 10% 103 23.5 20% 51 11.6 30% 8 1.8 40% 6 1.4

No answer 44 10.2 Total 438 100

Figure 31: How many more percent are the respondents willing to pay for

organic products?

In accordance with Table 15 and Figure 31, 52% of the respondents are willing to pay 1-5% more for organic products than conventional ones. Of the respondents, 23% and 12% are willing to pay 10% and 20% premium price respectively. While 1% and 2% of them are obliged to pay 30% and 40% price premium respectively.

1-‐3% 26%

5% 26%

10% 23%

20% 12%

30% 2%

40% 1%

No answer 10%

How many more percent are you willing to pay for organic products compared to normal products?

40

4.3.3 Place

Table 16: Where do you buy organic products?

Frequency Percent Carrefour 117 26.7

Villa 86 19.6 Tops 65 14.8

Lemon Farm 57 13.0 Au Tor Kor Market 67 15.3 Bonmache Market 25 5.7

Royal Project 6 1.4 Food Land 4 0.9

Gourmet Market 1 0.2 Green market 0 0

Hospital Market 1 0.2 Organic Exhibition 1 0.2

Organic Farm 0 0 Organic Retailer 2 0.5

Never Buy 6 1.4 Total 438 100

Figure 32: Where do the respondents buy organic products?

Carrefour 27%

Villa 20%

Tops 15%

Lemon Farm 13%

Au Tor Kor Market 15%

Bonmache Market 6%

Royal Project 1%

Food Land 1%

Organic Retailer 1% Never Buy and no

answer 1%

Where do you buy organic products?

41

Due to Table 16 and Figure 32, more than half of the respondents tend to shop the organic products more in department store than in specialized stores or in the wet market. The main department stores, where the respondents buy the organic products in Bangkok is Carrefour (27%), Villa (20%), TOPS (15%), Foodland (1%). The main specialized stores, where people purchase the organic products in Bangkok are Lemon Farm (13%), Royal Project store (1%) and other retailers (1%). The major wet organic markets in Bangkok are Au Tor Kor market (15%) and Bon Mache Market Park (6%).

Table 17: Why do you choose to buy organic products at the above places?

Frequency Percent Close to home 119 27.2

Reliable 80 18.3 Variety of products 28 6.4

Fair price 25 5.7 Good service 11 2.5

Fresh products 78 17.8 Certified products 49 11.2


Figure 33: Why do the respondents buy organic products at the above places?

Close to home 27%

Reliable 18%

Variety of products 6%

Fair price 6%

Good service 4%

Fresh products 18%

Certinied products 11%

No answer 11%

Why do you choose to buy organic products at the above places?

42

The main reason for the respondents to purchase the organic products at the preferred location, illustrating in Table 17 and Figure 33, is comfortable for organic consumers in terms of distance from home (27%). The following second reason is reliable and fresh products (18%). The remaining reasons of buying organic products at the favorable location are the products are certified (11%), a variety of products (6%), fair price (4%), and good service (4%).

Table 18: Do you prefer organic retailers to department store?



Figure 34: Do the respondents refer organic retailers to department store?

Table 19: Why do you think organic retailers are better compared to

department store?

Frequency Percent Better quality 170 38.8 More variety 87 19.9

Have specialist 39 8.9 No answer 42 32.4

Total 438 100

Yes 62%

No 25%

No answer 13%

Do you prefer organic retailers to department store?

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Figure 35: Why do the respondents prefer organic retailers to department store Table 18, Table 19, Figure 34 and Figure 35 report that 63% of the respondents prefer to purchase organic products at specialized and retailer’s stores more than in department store due to the fact that the consumers believe in specialized stores that they will provide better quality (39%), more variety (20%) and they have specialist in the shop (9%).

4.3.4 Promotion Table 20: Which channels are the most effective for you in knowing about

organic products?

Frequency Percent TV 212 48.4

Radio 5 1.1 Books and Magazines 39 8.9

Social Media 47 10.7 SMS 6 1.4

Organic Exhibition 34 7.8 Internet 24 5.5

Ads Board 10 2.3 Asking specialist in the

shop 16 3.7

Shop Booth 37 8.4 No answer 8 1.8

Total 438 100

Better quality 39%

More variety 20%

Have specialist 9%

No answer 32%

Why do you think organic retailers are better compared to

department store?

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Figure 36: Channels that the respondents know about organic products

Table 20 and Figure 36 depict that the respondents use TV (48%) as the most effective channels in knowing about organic products whereas Radio and SMS are the less effective ones (each 1%). Followed by social media (11%), books and magazines (9%), organic exhibition and shop booth (each 8%), Internet (6%) and asking specialist in the shop (4%).

Table 21: Which service do you like the most?

Frequency Percent Home Delivery 128 29.2

Giving Information about organic

99 22.6

Specialist in the shop 47 10.7 Product replacement 23 5.3

Discount 91 20.8

Suggestion box 5 1.1 No answer 45 10.3

Total 438 100

TV 48%

Radio 1%

Books and Magazines

9%

Social Media 11%

SMS 1%

Organic Exhibition

8%

Internet 6%

Ads Board 2%

Asking specialist in the shop

4% Shop Booth 8%

No answer 2%

Which channels are the most effective for you in knowing about organic

products?

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Figure 37: Service that the respondents like

Talking about which service people like the most, owning to Table 21 and Figure 37, the respondents refer home delivery as the most likable service in the organic shop (29%) while suggesting box is the least likable one (1%). There are many services that organic buyers mention as follows: giving information about organic (23%), discount (21%), specialists in the shop (11%) and product replacement (5%).

4.4 Organic Small and Medium Retailers (SMRs) in Bangkok, Thailand

4.4.1 Leading Companies and Organizations in Thailand There are three different categories of organic organizations: 1) Direct Sales/Farmers Markets, for example the organic bazaars 2) Retail 3) Wholesale/Retail/Export. Most of organic organizations presented in this chapter are in the third category.

• Green Net (Thailand) The summary of Interview and presentation [2] in Organic Symposium 2013 with Mr. Vitoon R. Panyakul, the Thai Organic Trader Association (TOTA) Chairperson, on May 10th - 11st, 2013 at Meeting room 1-2 of Queen Sirikrit Conventional Centre, Bangkok. The author also consulted with articles, journals and books in a Green Net library.

About

Green Net, a co-operative of organic farmers, was formed in 1993. It wholesales organic products made by Thai farmers to retailers, as well as exports. About 80 percent of its products are exported, mainly to Europe. Its product range comprises

Home Delivery 29%

Giving Information about organic

23% Specialist in the shop 11%

Product replacement

5%

Discount 21%

Suggestion box 1% No answer

10%

Which service do you like the most?

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of organic rice, fruit, vegetables, herbs & spices, shrimps, and herbal tea. At present, it sells through four channels; 1) shop in Bangkok, 2) wholesale to Green Health shops in Bangkok and other provinces in Thailand, sell organic products to convenience shops, 3) export of rice to European fair-trade groups, and 4) direct sale. Green Net has initiated an information database on its producer groups to support Green Net's publicity activities. Green Net Marketing policies are as follows:

1) Fair Trade for Thai Farmers 2) Organization centralized, expand distribution channels as well as retailers’

shop, wholesale and retail chain stores, expand the production source 3) Promote the expansion of production lines, product development and product

processing. 4) Promote an alternative health and environment-friendly food for Thai organic

consumers 5) Create campaign to boost consumers’ organic agriculture knowledge. Enable

them to realize the drawbacks of food chemicals and understand the organic food consumption concept, which relates to farmers’ benefits. Reduction of chemical export and pesticide sickness. Improvement of economic, and environment. Farmers can sell their products in fair trade and consumers adapt to food consumption according to season and environment.

More analysis and Case study of Green Net Marketing Strategies and Plans will be discussed more in Section 5.5. Please refer to Section 5.5 for further details. • Aden The summary of Interview with an Aden CEO, Mr. Kitipong Pataraturanan in May 23rd 2013 (14.20 p.m.-15.20 p.m.)

About:

Aden was established 15 years ago. Aden focuses on 2 main businesses 1) Organic Aden Super Store 2) Aden International. The Organic Aden Super Stores, which are in charge of domestic products, have 10 branches located in the main city in Thailand e.g. Bangkok, Cheng Mia, Lam Pang, Kon Kaen and Ubon Ratchathanni. Whilst Aden International is responsible only for the export market, its market focus has changed from 80% export/20% domestic to 90% export/10% domestic. Its shops change from 10 stores to 6 stores. Aden provides around 2,000 organic items. The main export products are all kinds of organic rice as the first place followed second by processed organic food.

Vision:

Promoting sustainable environment and improving human health by avoiding chemical and pesticide polluted products. Mr. Kitipong mentioned that nowadays people in Thailand suffered from diseases such as cancer. One of the reasons of people having cancer is that they eat polluted food. He said it is a shame that right now hospital business is so booming because Thai people tend to get sick.

Highlighted Marketing Strategies:

- Membership systems: in each store around 10,000 members, 3% discount (for customers who do not bring their own shopping bag), 5% discount (for customers

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who bring their own shopping bag)

- Promote environment awareness: reduce using plastic bags

- Monthly newsletter about organic farming, organic products, health and promote environmental awareness

- Contract Farming: promote farmers to convert to organic farming and send products to the stores once or a few times per week. The advantages are that Aden can have more variety of fresh fruits and vegetables all year round.

- Certification: Organic Thailand Certification is enough to export within Thailand and Asia. Other certification is necessary depending on target countries.

- E-Commerce: consumers buy products online and home delivery becoming a trend. Mr. Kitipong believed that there is no need for consumers to come to the shop anymore since most of the transaction should be done via online in the future.

Mr. Kitipong told that Aden and other organic organization in Thailand do not need to fully focus on the marketing budget since the organic supply is not that sufficient to the demand. He recommended that the new organic retailers should start slowly and firmly in this organic agriculture business. He saw many organic organizations failed because they cannot provide ample products to the market due to various reasons, for example, adverse weather condition (e.g. extremely hot weather in Thailand) and insufficient products to the market. Hence organic food process and organic produce’s species are recommended to be developed in order to stand for such extreme weather condition in Thailand.

Target Group:

Focus on 35 year-old women who have children in the household, Distance of 1-kilometer proximity from each store. 80% of consumers are 35 year-old women who have children in the household. 15% of consumers are elders and patients. Mr. Kitipong mentioned that the people, who have children in the household, tend to buy healthy food. They also concerned about their health and other family members.

Organic Business in Thailand:

- In Thailand, organic business is growing and it is time for promoting and giving knowledge to Thai people about organic products. Mr. Kitipong mentioned that there is a 300% increase in health awareness of Thai people who concern about organic especially people with high level of education. However, the organic sales are not that much increase (only 15% increase from last year) due to the high cost of living in the big city and the effects of the economic crisis in Thailand. He told that Thai people have the same income but things are getting more expensive. Therefore, they spend most income for rent and transportation.

- In terms of competitors, Mr. Kitipong said that there is no competition in this organic market because the business is quite new and growing. The more competitors are actually good for overall Thailand’s organic market since they will drive Thailand’s organic market from niche market to the mainstream market and get Thai consumers know more about organic food.

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• Thai Organic Co.,Ltd 25.05.2013

The summary of Interview of Mr. Karn Reitkajorn, the general manager of Thai Organic Co.,Ltd on May, 25th 2013 at Organic Pavillion, Thaifex- World of Food Asia, Thailand

About:

Thai Organic Farm located in Ratchaburi province and its area is 6 hectares. It has opened for 13 years. The most popular product is seasoning sauce, organic vinegar. Fresh fruits and vegetables have a steady sale since they have loyal customers for 13 years. It has got 2 contract farmers producing organic vegetables, herbs, and rice. Most of these products are sold locally in Thailand. It received certification in 2001, from ACT Thailand and it also is a member of IFOAM. Thai Organic Co.,Ltd distributes products to various stores in Thailand e.g. TOPS, MaxValue, Lemon Farm, Agency in each province (one shop each province).


- Organic Farm One-Day Tour: Thai Organic Co.,Ltd lets customers go to its organic farm in Ratchaburi province and it arranges organic farming activities such as organic vegetable planting and picking, organic lunch and drinks. As a result, the customers know more about organic food

- Facebook (Like and Share to expand the base of online consumers): this is the most popular fan page for organic product in Thailand

- Event within Thailand and in Biofach Germany - Customer recommended each other

Now they are shifting focus to Processed food such as an organic seasoning sauce, organic vinegar export to UK, Switzerland, Austria, and France. However, organic market in Germany is very hard to entry even though they have been to BioFach in Germany for nine times.

Target Group: Women of 35 years old with children in the household. Besides, there is a shift of consumers’ perception. Table 22 represents the initial and current perceptions on consumers of Thai Organic Food.

Organic in Thailand: Mr. Karn said the organic market in Thailand is growing rapidly and the price will become cheaper since most of organic organizations would like to bring products into the mass market. He mentioned that some of his product such as organic vinegar is even cheaper than one in the supermarket.

Obstacles doing organic business:

Mr. Karn mentioned “As SME business, we have limited technology, and limited fund for research development. Some SME business finds the solution by loaning from the bank but we don’t do that. This is why we are not that fast in terms of expanding our exported market compared to other SMEs. However, we have sufficient products available and ready to rock the market as our price is quite cheap compared to our competitors. We also would like to expand our market abroad”

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Table 22: Initial and current perceptions on consumers of Thai Organic Food, taken from [51]

*IPM: Integrated Pest Management or ‘Safe’ or ‘Hygienic’

• Rangsit Farm The summary of interview and presentation [95] of Mr. Parinya Pornsirichaiwattana, the Rangsit Farm CEO on May, 10th 2013 at Meeting room 1 of Queen Sirikrit Conventional Centre, Bangkok.

About:

Rangsit Farm is the leading supplier of organic fruit & vegetables in Thailand. Formed in the mid 1990s, the company grows organic fresh produce, wholesales to retailers and other channels. It mainly deals with organic leafy vegetables like lettuce, spinach and cabbage. Other organic products include fruits like bananas, jackfruit, and papayas; vegetables like cucumber, tomatoes, beans; herbs & spices like lemongrass and chilies. Marketed under the Organic Siam brand, its products are mainly found in supermarkets. It also supplies health food shops, hotels, cafés, as well as direct to consumers. It uses integrated crop production on its farm and promotes the relationship between producers and consumers.

Vision:

“Doing Organic Agriculture uses art and science. We are passionate and have a good attitude about organic agriculture. The organic agriculture promotes our health and environment, economic and social to be better and sustainable”


Rangsit Farm does not export since its focus is in domestic. Its main strategies are to drive local consumptions and to drive country image e.g. promotion through a luxury hotel like Grand Hyaat Thailand, and promotion through popular chef. Rangsit Farm wants to make organic products to the mainstream products in the future so that Thailand can minimize organic products import, as it is a high potential organic producer in Thailand.

Local Marketing of Organic Products - A Guide for SMEs

- 8 -

Changes in knowledge about the consumers and changes in the market are illustrated in the Table 2.

Table 2: Initial and current perceptions on consumers and completion (Thai Organic Food).

Initial Perception: Current Perception:� Target market: domestic upper class people � Target market: domestic educated people and upper class

people� Concern: target market’s growing demand of food safe � Target market’s misperception of the concept of food

safety� Target market perceives safe food = IPM.

And IPM = no dirt, no soil� Consumers' lack of information about organic products. � Target market is very difficult to educate� Consumers' perception: Organic = IPM � Target market perception: Organic � IPM� Educating target market would result in: Organic > IPM� To be organic is to be prevalent � To be hydroponics is to be prevalent� After being educated: Best Organic Standard =

International standard� Competition: increasing number of direct competition

(IFOAM certified organic vegetable producers)� At present, indirect competition is more serious than direct

competition� Direct competition is becoming more serious because of

the growing of 'Organic Thailand' (Thai Organic Standard)� Thai culture: Government certification = Best

50

• Health Society Co.,Ltd (Lemon Farm) The summary of interview of Ms. Suwanna Langnamsung, the Health Society Co.,Ltd CEO on May, 15th 2013

About: Over the past 12 years, Lemon Farm operates organic food stores, which are located in the middle of the metropolis, utilizing organic market to link between urban consumers to rural producers. The ninth branch of Lemon Farm has just opened in the large shopping center with a macrobiotic restaurant in the midst of many consumers interested in organic food and products. Vision: To find, develop and manage high quality organic products and food in sufficient quantity to meet the consumer’s needs. At the same time, she mentioned “We also support producers, that is rural farmers doing good work and growing organic produces ” Ms. Langnamsung said that “We are not born to use our lives in any which way, but we were born to consider with this life that we were given what can we do and what are we ready to do while we live” Marketing Strategies: Ms. Suwanna mentioned “We work with over 200 rural small-scale farmers, invite and support them to make a transition to organic farming. We work as the farmers’ friends and fellow invested partner, through tough times and good times, solving problems together. We plan our production and marketing together in a new way, upholding and in balance with nature, the seasons and the life of the producer. Moreover, we would like to gain the trust of consumers and spread the organic knowledge, be honest, connect producers and consumers as equals.” Difficulties in doing organic business: Ms. Langnamsung mentioned that “After we invite conventional farming producers to convert to organic farming, we aim that we will need to take care them and take responsibility together because organic agriculture is hard work starting from the producer level onwards. The producers need to give their heart to it. If they are not really convinced, they may give up easily since the produce yields may drop 30-50%. Hence, they have to be confident that there is a market that sees the value of this work” • Thailand Ministry of Commerce The summary of interview and presentation [3] of Mr Sithiporn Bangkaew, Thailand Ministry of Commerce in Surin Province, on May, 10th 2013 at Meeting room 2 of Queen Sirikrit Conventional Centre, Bangkok.

Mr. Bangkaew told that Thailand Ministry of Commerce sets up four major marketing strategies to support all the organic organizations in Thai organic market and to satisfy the growing number of organic consumers in Thailand. Organic Product Promotion Strategies from Ministry of Commerce are as follows.

1. Capacity Building - Educate producers, contributors, processors and exporters about organic business and organic product marketing - Coordinate and help fund the organic organization - Build an organic network

2. Market Expansion

- Marketing outside Thailand e.g. Biofach 2013 in Germany and Organic Pavillion at Thaifex- World of Food Asia in Bangkok

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- Marketing inside Thailand e.g. Organic and Natural Expo, Organic Symposium, Organic Business Community (Permanent and Temporary)

3. Value Creation - Development of R&D - Promotion of Organic Branding, Product and Packaging Development - Educate organic organization about the certification issue

4. Trade Facilitation - Promote various kinds of distribution channels - Educate related parties in terms of logistics, supply chain to reduce the cost and preserve product’s quality

4.4.2 Five Forces Analysis Porter’s five industrial forces framework (1985) is an important tool to analyze the main forces acting on an industry and whether the industry presents high barriers or tough competition. Companies should always use the framework to develop an edge over rival firms and use this model to better understand the industry context in which the firm operates, determine the profitability of a new market they are planning to enter and develop their strategy. Some markets and industries exhibit extreme competition with high entry barriers whereas some others are still maturing in order to be fit for new entrants. In this part of the analysis, retailers such as supermarkets will be taken as industry players and consumers will be stated as buyers. Porter divides the forces acting on an industry into five parts: Buyer power, supplier power, degree of rivalry, threat of new entrants, and threat of substitutes. The acting powers on Thai Organic Product Industry are illustrated in Figure 38.

Figure 38: Five forces of Thai Organic Product Industry, taken from [91]

1. Buyer Power: The vast volume of potential customers of the food retail industry diminishes the power of individual consumers. The revenue generated by any particular consumer is virtually insignificant for the retailer. However, collectively, consumers have the power, as buyers and their interest will decide the future of the industry. Therefore, retailers cannot afford to disregard consumer trends and

Organic Foods in The Norwegian Market: Are Organic Food Products Bound to be a Niche?

Oktay Inceefe

Companies should always use the framework to determine the profitability of a new market

they are planning to enter. Some markets and industries exhibit extreme competition with

high entry barriers where some others are still maturing hence provides more suitable

environment for new entrants. In this part of the analyses, retailers such as supermarkets and

hypermarkets will be taken as industry players and consumers will be stated as buyers. Porter

divides forces acting on an industry on five parts: Buyer power, supplier power, degree of

rivalry, threat of new entrants, and threat of substitutes. Figure 4 presents the acting powers

on Norwegian food retailing industry.

Figure 4: Five Forces of Norwegian food retailing industry (Source: DataMonitor, 2010)

1. Buyer Power: The vast volume of potential customers of the food retail industry

diminishes the power of individual consumers. The revenue generated by any

particular consumer is virtually insignificant for the retailer. However, collectively,

consumers have power as buyers and their interest will decide the future of the

industry. Therefore, retailers cannot afford to disregard consumer trends and demands.

Due to this bi-polarity, the buyer power in the food retail industry is considered to be

moderate.

2. Supplier Power: Suppliers of the food retail industry are food manufacturer, farmers

and agricultural co-operatives. Large retail chains often maintain tight relationships

with a large variety of suppliers in order to establish stability in food supply and price

stability. Therefore, suppliers have a power over the retail chains as they control the

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demands. Due to this bi-polarity, the buyer power in the food retail industry is considered to be moderate.

2. Supplier Power: Suppliers of the organic retailers are food manufacturer, farmers and agricultural co-operatives, club and network. Large retail chains such as Green Net often maintains strong relationships with a number of suppliers in order to establish stability in terms of food supply and price. Therefore, suppliers have a power over the retailers as they control the input to their businesses. However, the huge size of the retail chains often diminishes such bargaining power since losing a single customer can mean losing half of suppliers business. Therefore, the bargaining power of suppliers is considered moderate.

3. Degree of Rivalry: The degree of competition in the food retail industry is often one of the fiercest ones among all industries. There are a substantial number of new organic retailers enter into an organic market compared to the past few years as organic business is growing. The lack of substantial switching costs for the consumers places a huge pressure on retailers to secure their loyalty. Such pressure often exhibits itself in price wars enhanced furthermore, by the limited availability of differentiation in the product range. Therefore, the degree of rivalry in the industry is considered high.

4. Threat of New Entrants: Large scale, established retailers e.g. Maxvalue supermarket who is recently opened many of its branches around the populated community selling both conventional and organic products, hold an uphold advantage in operating their businesses in ways that benefits significantly from established connections, economies of scale and by being able to employ aggressive pricing schemes that cannot possibly be matched by small players in the long term. However, even the large retailers are not invulnerable to the threat of new entrants due to the exit and entry costs’ been relatively low in the industry. Therefore, although a possible fact that may bother industry players from time to time, the threat of new entrants is considered to be moderate.

5. Threat of Substitutes: The only possible substitutes for the food retailing industry are food service such as organic restaurant and fast food chains and subsistence agriculture where individuals grow their own food such as city farm project in Bangkok, where organic organizations promote Bangkok people to grow their own organic produces in their backyard and at the roof deck. On the other hand, restaurants, fast food and subsistence agriculture alternative in Thailand is in small scale, thus they are not able to hold a reasonable position as a substitute. Furthermore, individual farming practices are usually unrealistic in a big city like Bangkok where the majority of the population resides in urban areas. Therefore, the threat of substitutes in the industry is considered to be low.

4.5 SWOT Analysis of Organic Agriculture Business in Thailand To understand how Thai organic product sales have grown to more than €5 million a year for a last few years [Figure 1] and what actions will be executed to continue this trend, the six key actors of organic business in Thailand were interviewed. The author incorporated SWOT analysis, the overall evaluation of Thai organic business’s strengths, weaknesses, opportunities and threats. Essentially, strengths and weaknesses are considered from an internal environment, whereas opportunities and threats explain external factors. SWOT findings can be very useful to lead the organic retailers and community to meet their marketing objectives.

53

In order to facilitate the readers to gain full understanding about Thai organic business, the author consolidated a cross-reference at the bottom of each section that connects possible strengths and weaknesses to coordinating threats and opportunities and vice versa. Figure 39 describes SWOT analysis of organic business in Thailand.

Figure 39: SWOT Analysis of organic business in Thailand

STRENGTHS The key actor interviewees were asked what were the biggest strengths of the organic business in Thailand, several advantages are displayed including consumer demand, audition and certifications, supporting organizations, organic legislation, and Thailand as an agricultural country. A number of research also show the benefit of organic versus conventional products.

Consumer demand According to the author’s survey, 85% of consumers have bought the organic products meaning that Thai consumers strongly support organic products. There are growing numbers of organic consumers in Bangkok. The distribution channels are also expanding to the city hospital, city school, city department store, and several green markets. These groups of consumers influence producers and farmers to turn into organic farming.

Threats: Information and choice overload, Demand over supply, Global trade barriers Opportunities: Rising domestic market, Mounting export market, Consumer education

Audition and certification bodies There is an organization and management bodies in Thailand, who are responsible for organic audition and certification from production, and process. They try to make their certification be accepted by other countries. Moreover, the organic distributors are willing to pay for audition and certification expenses. There are also internal audits among a group of farmers, which can save a lot of money.

Weaknesses: Consumer confusion Threats: Information and choice overload, Opportunity: Consumer education

SWOT%Analysis%of%Organic%Business%in%Thailand%STRENGTHS%%

Consumer0demand:%growing%consumers%%

Audi5on0and0cer5fica5on0bodies:0suppor;ve%

Strong0green0network0and0export0organiza5on%

Organic0legisla5on:0Act%number%11%

Thailand0as0an0agricultural0country:0kitchen%of%the%world%

WEAKNESSES%%

Consumer0confusion:%pes;cide%free%vs%organic%%

Producer0Mo5va5on:%transi;on%from%conven;onal%%to%organic%farming%

Price0barrier:0expensiveness%%

Insufficient0agriculture0research0

OPPORTUNITIES%%

Rising0domes5c0market:0government%support%%

Moun5ng0export0market:0EU,%USA,%Japan,%Asian%countries%%

Environmental0leadership:0sustainability%movement%and%green%role%model%%%

Consumer0educa5on:0online%marke;ng%%

THREATS%%Informa5on0and0choice0overload:0brands,%labels,%

cer;fica;ons%%

Demand0over0supply:0demand%more%than%supply%%

Global0trade0barriers:0complica;on%of%audi;ons%and%cer;fica;ons%0%

Conflic5ng0voices:0misinforma;on%in%the%media%

54

Strong green network and export organization There are mainstays in each community who are successful in commercial organic farming. Some are even able to educate other farmers and people, and hold seminar in doing organic farming. A group of producers is able to create a green network among their community in order to attract consumers to purchase the organic products. The green network is in the main city, for example, Bangkok, Chieng Mai, Surin, Mayasarakam, and Songkra. Export organization in Thailand has good management and organization experiences in exporting the organic products. Therefore fresh products are kept in good condition for a longer period of time. For example, export organization uses outstanding packaging to promote the product images and prolong the product’s age.

Weaknesses: Producer motivation, Threats: Global trade barriers Opportunities: Rising domestic market, Mounting export market

Organic legislation The act regarding agricultural products, from 20th February 2012 onwards, scripted that agricultural producers must control the standard in using chemicals and be responsible for consumer loss due to polluted produces. This encourages producers to grow organic products.

Weaknesses: Consumer confusion Threats: Conflicting voices, Opportunities: Consumer education

Thailand as an agriculture country Thailand is always known as “Kitchen of the World” which refers to its importance as a producer and exporter of food commodities. Thailand has sufficient resources, suitable climate for organic products all year round. An agriculture area in Thailand varies in different height ranging from 50 meters to 500 meters. Especially in upland areas, where use of pesticide is minimal, may be ideal for establishing certified organic production zones without the need to pass through a long transition period before certification is granted. Moreover, producers can produce all kinds of high quality vegetables including organic, local, and winter vegetables. For example, Organic Thai Hom Mali Rice is the original, genetically unmodified species of Thai rice, which is globally renowned for its excellent taste. Efforts have been made by several countries to grow it, but none has managed to outperform the Thai quality so far.

Weaknesses: Producer motivation, Price barrier, Insufficient agriculture research Opportunities: Rising domestic market, Mounting export market Threats: Global trade barriers

WEAKNESS As organic market in Thailand is young, there are many issues to be improved. According to the key actor interviewees, they pointed out many problems comprising of consumer confusion, producer motivation, price barrier, and insufficient agriculture data.

Consumer confusion The author survey indicates that 69% of respondents confused between organic and pesticide-free products. Furthermore, the study of Birgit Roitner-Schobesberger pinpointed that organic consumers in Bangkok cannot differentiate the label’s meaning. Mr. Karn from Thai Organic Co.,Ltd also confirmed that most consumers confused about the use of technical language to define organic. He mentioned that

55

most consumers do not easily understand terms such as ‘organic’ in Thai and often fail to connect with a term on an emotional level.

Threats: Information and choice overload, Conflicting Voices Opportunities: Consumer education

Producer Motivation Ms. Suwanna from Lemon Farm mentioned that farmers are skeptical to change from conventional to organic farming due to no financial support for the organic start-up farmers. So, they may be in the loss in the short period when they first begin their organic farming. In addition, types of vegetables, which are produced by SME organic organizations, are mainly consumed within Asian countries but not the main products in USA, Europe and Japan. The main products of USA, Europe and Japan are bamboo shoot and baby corn. She explained that organic producers in each province are not able to network firmly. Hence, they cannot plan in advance to grow a variety of produce as well as unstable quantity. Small-scale production is done because large-scale production needs lots of financial and labors. Meanwhile, farmers do not have knowledge about documentation, internal audition, quality control and standard procedure. They are lack of equipment and facilities, for example, cool room facility, and cooling systems for organic produces to be transported to distant areas.

Strengths: Consumer demand, Thailand as an agricultural country, Threats: Conflicting voices Opportunities: Rising domestic market, Mounting export market

Price barrier According to the result, 44% of consumers think that the organic products are costly. Mr. Kittipong from Aden told that the price of the organic products in Thailand is relatively high compared to the other countries in Southeast Asia. He commented that the demanding tasks are to educate consumers about the true costs and values associated with the organic products.

Strengths: Consumer Demand, Threats: Demand over supply, global Trade Barriers Opportunities: Consumer Education

Insufficient agriculture research There are a small number of research institutes, information source regarding organic production, marketing, and R&D. Moreover, there are no links between organic organizations and governmental organizations.

Strengths: Strong green network and export organizations

OPPORTUNITIES The key actor interviewees were requested to give their opinions about the biggest opportunities for organic business in Thailand. Responses included rising domestic market, mounting export market, environmental leadership, and consumer education.

Rising domestic market Mr. Sithiporn from Thailand Ministry of Commerce responded that organic market is growing in Thailand as he saw there were twice of organic retailers in Organic Natural Expo this year compared to last year event. There are plenty of annual organic events, where producers are able to promote and negotiate with the traders e.g. Thaifex event, Thailand Health & Beauty event, Made in Thailand event, and OTOP city event. There are many organic business associations establish to promote

56

and give knowledge to consumers about organic agriculture through mass media and other sources. As he mentioned that the government supports and promotes producers to use organic fertilizers instead of chemicals so that the farmers are interested in doing organic farming. In addition, there are several new marketing channels, for example, chef from famous restaurant, hospitals, and spa center, where active organic buyers are willing to purchase the organic products from them.

Weaknesses: Consumer confusion, Producer motivation, Price Barrier, Insufficient agricultural research, Threats: Demand over supply

Mounting export market Mr. Karn from Thai Organic Co.,Ltd told that European countries, USA, and Japan are current market for Thai organic products. Meanwhile, Asian countries are new market. Therefore, an organic organization is able to negotiate the price with the current market and expand the products in the new market. Besides, there is a clean and healthy food consumption trend. The market is wide open for the new kinds of organic food. Furthermore, there are a lot of potential organic distributors in foreign market and many channels to export fresh and processed organic food.

Weaknesses: Consumer confusion, Price Barrier, Insufficient agricultural research Threats: Demand over supply

Environmental leadership There is a big trend in conserving environment and organic agriculture is a pioneer of sustainability movement. Nevertheless, from the author’s result, environmental concern is among the lowest reason to purchase the organic products for the consumers. Mr. Karn from Thai Organic Co.,Ltd said that “When we host one of our organic one day tour, the consumers are very curious to learn about how we can grow the produces organically and interested in knowing about how organic will help our environment”.

Weakness: Consumer Confusion, Threats: Information and choice overload

Consumer education There are mounting opportunities to communicate, correct the misunderstanding and educate consumers about organic. The organic retailers and organizations should be proactive in their messaging strategies. Online marketing are the most effective tools to stimulate and engage online conversation about organic agriculture and products. Thus, the organic retailers have the opportunity to elevate the emotional attractiveness of organic agriculture and products.

Threats: Conflicting voices

THREATS Threats are described as external conditions that could damage performance or growth. While these things may be out of the organic business’s control, it is worthwhile to be aware of these threats and take actions to minimize any plausible negative effects. The key actor interviewees specified the threats, which include information and choice overload, demand over supply, global trade barriers, and conflicting voices.

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Information and choice overload Consumers are confused since there are too many organic brands, labels, and certifications. Thus, the organic retailers and organizations need to put an effort to both educate consumers about the unique benefits of organic products.

Strengths: OrganiclLegislation, Weaknesses: Consumer confusion Opportunities: Consumer education

Demand over supply Mr. Kittipong referred that Aden had some problems that the demand of the organic products are more than the supply. Therefore, Aden needs to expand its contract farming agreement with more farmers. While importing products maybe a solution, some organizations are skeptical to do so because they believe that it may hinder the expansion of organic domestic market. In addition, some consumers hesitate to purchase import product due to food safety.

Strengths: Consumer Demand, Strong green network and export organizations Weaknesses: Insufficient Agricultural research Opportunities: Rising domestic market, Mounting export market

Global trade barriers Mr. Sithiporn from Thailand Ministry of Commerce mentioned that European countries, USA and Japanese’s market has their own certifications. Therefore, a complication of auditions and certifications may occur because they do not support different organic certifications. Furthermore, Thailand is not in the list of “Article II List Countries” of the European Union. Therefore, there is more cost regarding documentations and exporting issues if it would like to export its organic products to Europe. Besides, some values, for example, Food Miles* are the main obstacles for Thai organic organizations to export to another country.

Strengths: Strong green network and export organizations *Food Miles is a term, which relates to the distance food is transported from the time of its production until it reaches the consumer.

Conflicting voices The organic business in Thailand is at risk due to the many conflicting voices that create an intensive discussion in the media. Thus, it distributes consumer confusion on issues, for example, organic regulation and agreement.

Weaknesses: Consumer confusion, Opportunities: Consumer education

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5. Discussion

5.1 Summary of Research Results The author’s survey confirms the assumption that women are mentioned as being more interested in purchasing organic products [20, 29]. Men tend to be overrepresented in the group of organic non-buyers and underrepresented in the group of organic buyers. The majority of age is above 40 years old for the organic consumers. The relationship between education and the group of organic buyers and non-buyers are also significant, which agree with the results from Torjusen et al. [56] and Wier and Andersen [54]. Furthermore, the author’s result is in accordance with the study of Lockie et al. [29], indicating that income had an effect on the consumption of the organic products.

From the author’s survey, it shows that 77% and 73% of the respondents buy organic products due to it is good for health and it contains no pesticides respectively. One of them is a CONDOR research project. CONDOR research project [83] conducted a survey of 8400 consumers in eight countries in Europe, which includes Denmark, Finland, Germany, Greece, Italy, Spain, Sweden and the UK. It found that health motivation was the strongest influence on purchase.

According to the author’s result, only 29% of the respondents stated that organic food does not have better taste comparing to conventional ones. This result is affirmed by Harriet Vogt’s study [84] that organic enthusiasts do not necessarily pick the organic or even distinguish it from its non-organic counterpart. Qualitative research indicated that sometimes consumers describe positive taste attributes to organic foods where no appreciable difference necessarily occurs. Some suggest that it associated with “feel-good factor”, which can be translated into a genuine sense of enjoyment.

Due to the author’s survey, 45% of the respondents say that organic food is good for their children. It was affirmed by the study indicating that the birth of a child was the trigger for buying organic food for the first time. In UK, organic baby food accounted for 43% of the total baby food market. Furthermore, the demand is so high that Sainsbury’s has discounted its own-label non-organic baby food range [85]. There is a significant relationship between the group who concern about pesticide residues in food products and those who buy organic products, which is confirmed by the research of Birgit Roitner-Schobesberger [8]. According to the survey, 69% of the respondents confuse about organic products VS low-pesticide products therefore the organic retailers should provide them with a constant knowledge about the organic product differentiation.

5.2 Organic Consumer Segmentation Organic Consumer Segments are an initial step for product positioning. The name given to segments or how a market is divided into segments can vary greatly depending on the countries. Each country can be divided into different consumer segments allowing marketers and producers to easier target their organic consumers. In this thesis, the author explains different segmentations illustrating consumers in terms of their demographics, consumption readiness and organic product buying motives. Furthermore, Green Net’s case study focusing on its targeted market is also presented.

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5.2.1 Demographic Segmentation A study from National Research Council of Thailand [5] confirmed the author’s result that organic buyers usually have children or elders in the household and prefer to buy organic products in specialized organic retail store due to its better quality and variety of products. In addition, their buying decisions are usually influenced by the mass media, friends, sales representatives in the store and labels. The study [5] categorizes Thai organic food consumers into 3 groups as follows:

1) Middle class: People who live in the city, have 1-2 children, have €750-€1,500 as average monthly salary

2) Healthy women: Working women or housewife who has health awareness

3) Healthy people: People who can access to useful information about health including organic food sources, healthy food and products

A 2011 report from Thai Organic Trader Association segments organic consumers into 5 categories as shown in Figure 40. The report confirms the direction of the author’s survey regarding children in the household, sickness and health issues.

1) Healthy family with children (30%) 2) Healthy people (20%) 3) Patient’s family members (21%) 4) Elders’ family members (12%) 5) Foreigners (16%)

Figure 40: Organic Consumer Segments in Thailand

Healthy family with children 31%

Healthy people 20%

Patient’s family

members 21%

Elders’ family members 12%

Foreigners 16%

Organic Consumer Segments in Thailand (Thai Organic Trader Association: TOTA)

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5.2.2 Consumption Readiness Segmentation From the study of National Research Council of Thailand [5], there are 5 organic consumer groups based on consumption readiness. According to the author’s survey, loyal customers are the groups that have bought organic products every week for more than 10 years. On the contrary, the suspect consumers are the groups that have never bought the organic products. Please refer to Figure 20 and Figure 21 for further details. To make organic products successful, different approaches are applied to each group as shown in Figure 41.

Figure 41: Organic Consumer Group and Approach

1. Suspect consumer approach: From the author’s survey, the respondents who have never bought the organic products are in this group. This group needs to be educated to become loyal organic consumers. Therefore, mass media is the most effective channel to educate them about organic products.

2. Prospect consumer approach: According to the author’s result, this group of consumers can be the people who have bought the organic products once every few months for less than one year. This group knows about organic products but do not realize how important they are regarding an effect of pesticide food, destroying environment and society. Health and environment campaign could be a way to provide relevant information to this group.

3. Consumer approach: As shown in the author’s survey, this consumer groups have purchased the organic products once or once every few months for 2-5 years. This group can quickly develop to advocate and loyal consumer if they have better financial status. As a result, the development of household economic becomes an important factor to increase the household income. Meanwhile, the production and logistics system of organic products has to be developed in order to reduce the costs. These allow consumers to access the products easier.

4. Advocate consumer approach: This group often buys organic products however 4.

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4. Advocate consumer approach: From the author’s result, this group has bought the organic products every week for 5-10 years. This group often buys organic products however they may wonder and would like to ensure on the quality of the products. Hence a clear and recognized labeling, logos and certification are very important in building trust to this consumer group. Moreover, establishing consumer-producer/retailer network is the way to build more trust.

5. Loyal consumer approach: From the author’s survey, this consumer group has bought the organic products daily or once a week for more than 10 years. This group strongly believes in organic products. They realize not only their health, but also sustainability and environment. This group should be knowledge-based society where they can share the organic knowledge to other group

5.2.3 Organic product buying motive Segmentation The British Market Research Bureau originally develops the segmentation used for the UK Government’s Department of the Environment and Rural Affairs (DEFRA) bureau. By using DEFRA standards, the organic consumers in Thailand market can also be divided into following seven distinct segments based on buying motive.

1. Positive greens: their buying behaviors are driven by the sustainability issues. They are mostly well educated and believe that are critical in today’s society and humans are largely responsible for current environmental problems. This group tends to buy organic not only because it is healthier but also it is more environmental friendly on the production stage.

2. Waste watchers: they are concern about the environment and sustainability issues. However, their actions are mainly driven by a need to avoid waste rather than minimize the environmental impact. They lack awareness of other issues and are skeptical about the scale and urgency of environmental problems. Therefore, their organic consumption is limited by personal interest in taste or health.

3. Concerned consumers: they are motivated by environmental and social concerns but their consumption choices are egotistical and focused to make them feel less guilty about environmental damage. They are also concerned to be perceived as an environmental- friendly person by the social. This group has the potential to buy organic as they feel the need to be perceived as ‘green’ with their shopping behaviors.

4. Sideline supporters: they are generally consumers who have an environmentalist worldview but are not convinced about the urgency of the problem just yet. Therefore, they lack of actions, as they believe that governments are the one who responsible, not themselves. This group will buy organic if they have personal preference such as taste and health.

5. Cautious participants: they are consumers who have an average environmental worldview. They are likely to accept that there is an upcoming crisis or problems, but they are, at the same time, pessimistic about their ability to tackle the problem individually. Therefore, this group is not bothered about the environmental benefits of organic farming too much.

6. Stalled starters: this group composes of consumers whose environmental views are quite confused. They have the lowest level of knowledge about environmental issues and are generally disinterested about the topic. Therefore, the group will only

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buy organic if they like the taste better or cheaper than the conventional food.

7. Honestly disengaged: they have a total disregard on ecological worldview. They refuse responsibility for environmental damage and are skeptical about the scale of the threat. They believe that such problems, if exist; can be solved without any change in lifestyles.

Eighty seven percent of the respondents, from the author’s survey, do not aware that the organic products are good for the environment. Besides, health is the major buying motive for the surveyed respondents. Therefore, the author concludes that Thai consumers are in the group of “Sideline supporters”

5.3 Marketing Mix Strategy

5.3.1 Organic Product Strategy

5.3.1.1 Summary of Best Practices and Case Studies Organic Product Strategy can be divided into 3 aspects:

1. Product Characteristics and Service

A study from the Soil Association Research [86] found that 55% of organic consumers tried fruits and vegetables before other categories, followed by eggs and dairy products. The study can be compared with the author’s survey, where fruits and vegetables are the most popular (73%) organic products followed by organic eggs (5%), rice and cereals (5%), milk (2%), juice (2%), and meat (1%). Organic buyers can be persuaded to drive this cycle by cross-promoting some categories to the buyers of others. For example, Go Organic promoted its pasta sauces through miniature recipe leaflets attached to organic egg boxes. Tesco markets its organic grocery lines using leaflets in the packaging of fruits and vegetables. Some market-leading organic businesses and retailers (e.g. Aden Organic Super Store in Thailand) initiate the “reduce, reuse, recycle” campaign in the way that their products are packaged and promote their customers to reuse the shopping bags.

According to IFOAM’s proceedings [51], there is no different in marketing organic and conventional fresh produce since both of them have to meet consumers’ demands in terms of quality, consistency and variety. However, organic produce aims for the higher standard (e.g. taste and appearance) than conventional ones in order to make a significant market impact.

For some organizations that like to expand their market in organic products, high amount of long term investment (processing technology, recipes and equipment) and external collaboration have to be taken into consideration. In most cases, the marketing organization buys directly from the producers, often based on long-term contracts. Keystone (India) has a specific policy to buy through intermediaries if their credentials can be verified. This has allowed the procurement to expand into new areas where people acknowledge about the organization and its basic principles and philosophy. Some organizations set up more than one producer group within one category of products, for example tea or vegetables, so that there is more reliable availability as well as a bit of competition among the groups to increase in product quality and to reduce the risk in terms of natural disasters, pest/disease outbreaks and other calamities. Nevertheless, this strategy is not that effective in creating "friendly" competition among producer groups so that they will "naturally" improve their

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quality.

Organic retailers shop should be staffed with managers and salespersons that have knowledge about organic farming and organic food and can explain to curious customers. Lemon Farm and Aden Organic Superstore have a formal system to document customer feedback through the availability of a suggestion box and immediately replace any product with a defect or complaint.

Green Net (Thailand) differentiates their products by creating wide range, high quality products with certified organic bodies. Regarding to their service, they are not only sale the products but also present how and where the products are produced and processed. Environment and fair trade is also a unique image, which differentiates Green Net from other competitors. Table 23 and Table 24 display Green Net competitive differentiation and its product attributes respectively.

Table 23: Green Net Competitive Differentiation

Product Differentiation High quality, wide variety and standard organic certification

Service Differentiation Information and data about products and services dissemination

Personal Differentiation Information about the background and sources of production

Image Differentiation Focus on environment and fair trade

Table 24: Green Net’s Product Attributes

Core Product Organic food and green product Tangible Product Good quality, fresh, hygienic and high

nutrition Expected Product Free from pesticide Augmented Product Protect environment Potential Product Help local farmer and community

development

2. Controlling production standard

Fruit and vegetable production nowadays are lack of product diversity and sometimes fail to deliver on a regular basis. This is because of limited technical skills, unpredictable weather and natural calamities, unavailability of good organic seed, and lack of soil improvement techniques. Therefore, it is quite impossible to expand the market for organic produces, which are available for a few months since there is a limited range and unstable production of organic fruits and vegetables. High investment cost have to be invested (e.g. cool storage or cool truck) in order to maintain the good quality of the products during transport since the produces can be destroyed during the transportation especially when the volume builds up. Realizing these problems, some retailers such as Rangsit Farm and Green Net decide to start with a subscription or box scheme, in which the subscribers within the near community have little choice in what they receive in their weekly or biweekly bag or box. Another option would be to target for example schools, who only need a few kinds of vegetables per week that are in the season. On the other hand, while these

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problems still remain, it is impossible to expand and to reach out more customers, such as supermarkets, restaurants and hotels.

From the author's view, there are 3 ways to control and certify organic products:

1) Corporate with local and private organization such as northern of Thailand organic certification, for example, Healthy Organic Vegetable Network in Supanburi Province and Organic Agriculture Community Network in Chieng Mai Province.

2) Corporate with organic agriculture organization, for example, IFOAM (International Federation of Organic Agriculture Movement) and Organic Agriculture Certification Thailand

3) Self-controlling, for example, Green Net (Thailand) and Hanoi Organics (Vietnam) decided to organize their own extension network or to employ their own extension staff to responsible for other non-perishable products, which are often harvested once a year. So, producers are able to plan their production (i.e. to align with consumer’s demand) to reduce the problem of over-supply and unnecessary competition among organic producers. Nevertheless, high investment cost has to be funded in order to set up such systems and strategies have to be well planned to start with a quantity that the farmers can grow according to their resources. Then more produces could be added as their organic farming experience, technique and knowledge increase; off-season planting could be initiated accordingly. As a result, consumers are able to continually access the products as needed.

3. Packaging and Logo

The organization’s packaging and logo are the important means of communication. A good logo should be attractive, easy to recognize and confirming the organic identity of both company and products. From the author’s survey in Figure 29, 82% of organic consumers in Bangkok believed that organic brands and labels influence their buying decision. Moreover, certification is also a vital factor to build consumer trust though it is an expensive mean. From the author’s interview, Green Net categorizes its packaging methods into three parts, which show in Table 25.

Table 25: Green Net’s packaging methods

Packaging Methods Product Type Remarks

Pack from producer Organic shampoo, conditioner, lotion and liquid soap

The products were packed from producer in the factory.

Self-pack Organic rice, sugar, snack, fresh fruits and vegetables

Simple package, less vivid color, area minimized to reduce waste and save cost, use only environment-friendly package (foam container is prohibited)

Self-pack with specific Organic tea, coffee and herb as powder and leaf

Green Net designs in small package for those

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packages forms products in order to maintain their quality and the package should be marked by produced and expiry date, production source, quantity, and consume method etc.

5.3.1.2 Theory meets Practical

A number of organic retailers and organizations utilize Igor Ansoff’s product strategy [87], which shows in Figure 42.

Figure 42: Product Strategy proposed by Igor Ansoff

1) Market Penetration Strategy

This strategy aims to penetrate the market by increasing sales in the current product and current market. The activities include expanding the place of distribution (e.g. opening more branches), promotion (e.g. discounts, free trail, free items, ads campaign, event marketing), buying competitors’ business. According to the author’s interview, Green Net, Lemon Farm, Aden and Rangsit Farm apply this strategy to their organization.

2) Market Development Strategy

This strategy targets to develop the market by rising sales in the current product in the new market. The actions include expanding the new target group, for example, changing from B2C (Business to Customer) to B2B (Business to Business) or to B2G (Business to Government) as well as exporting companies’ products abroad or different locations. According to the author’s interview, Green Net and most of small

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organic retailers utilize part of this strategy expanding the market to government places in the main city. Rangsit Farm sells its organic products within its own shops and to other organic retailers e.g. Lemon Farm and Tops Supermarket.

3) Product Development Strategy

This strategy is utilized to increase sales by introducing new products in the current market, for example, product replacement, new packaging, adjusting size, changing of brand identity. Many organic organizations adapt this strategy developing their products and packages to satisfy consumers’ needs, for example, Rangsit Farm and Aden change their organic salad package into the salad box with various dressings and a fork inside. Their salad boxes come out in many styles such as Thai spicy style and Japanese sesame, teriyaki and salmon style.

4) Diversification Strategy

This strategy points out to immerse into entirely different market to lower the risk in doing only one business. There are 2 approaches 1) Concentric Diversification approach e.g. Green Net, who distributes fresh fruits in the local market, wants to expand the export market into dried fruits and organic rice. 2) Conglomerate Diversification approach e.g. Food company want to expand their business to telecommunications.

5.3.2 Price Strategy

5.3.2.1 Overview of Best Practices Of the four marketing mix, price is the only element that produces revenue; the others produce costs. Price, as always discussed in market research, is one of a critical factor determining whether people buy organic products. According the author’s result, 52% of organic buyers accept to pay 1-5% premium price and 23% of them has no problem paying 10% premium price. As Yiridoe et al. [23] and Green Net’s survey [61] estimated, consumers were willing to pay a premium 10-20% and 20-30% respectively for organic products. Nonetheless, the price comparison in Table 2 showed that in 2007, the premium price of the organic products in Thailand is 191% more expensive than the conventional ones, which is way expensive than the acceptable price.

Padel and Foster [92] mentioned that price is a major cause for the consumers not buying the organic products. One interviewed organic key actor also commented that the price of the organic products would confine their purchase for the lower level of income group. From the author’s survey, 45% of consumers said that the price of organic products are worth paying while 44% of consumers mentioned that the high price of the organic products are one of the factor they do not buy the products [Figure 30]. In addition, 21% of consumers agreed that they like to see special low-price offers on organic products [Figure 37].

There are two major reasons for the high prices of the organic products: 1) high cost of production and 2) Fair trade. At the initial level, preparing the farm for organic produce to be planted increases the cost. Although producers do not need to use pesticide and chemical, which make the cost lowered, they have to spend more time and labor to look after the organic produces such as pest control. In fact, organic products not only fulfill the needs of customers in consuming healthy food but, ultimately, also serve the society through Fair trade. However an ordinary customer

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may not know their significance. Organic retailers therefore need to communicate with the consumers by all means, preferably through mass media, to ensure consumers are clarified the reason of higher prices. If the environmental and social costs were added in the actual cost of conventional products, they would not remain cheap. Use of pesticides at the farm level and addition of chemicals at processing of conventional products, have disastrous effects on the whole ecosystem. The chemicals use in conventional agriculture products, settle down deep into the soil and pollute the underground water resources. Some of the chemicals may be carcinogenic. The worker in the farm is also exposed to these poisonous chemicals, which may have disastrous effects on their health. Many cases of abnormal and premature birth have been reported when women were exposed to these conditions [6]. If organic retailers provide this information to consumers, this can give a clear picture of the high prices of organic products. Hence, the consumer would be satisfied and understand why they need to pay higher.

In setting pricing policy, organic retailers should follow a six-step procedure [62]. 1) They select their pricing objective and 2) they estimate the demand curve. 3) The suitable quantities they will sell at each possible price are identified. 4) They evaluate how their cost change at different levels of output, at levels of accumulated production experience and for differentiated marketing offers. Then, 5) they investigate a pricing method and 6) finally pick the final price. However, the organic retailers do not often set a single price, but rather a pricing structure that shows variation in geographical demand and cost, market-segment requirements, purchasing time, order levels and other factors. Many pricing adaption strategies are available including 1) geographical pricing 2) price discounts and allowances 3) promotional pricing and 4) discriminatory pricing

5.3.2.2 Summary of Theory Pricing strategy is important for the organic retailers who would like to discover the price point where they can maximize sales and profits. The organic retailers may utilize a variety of pricing strategies, depending on their own unique marketing goals and objectives. Owning to Figure 43, the author summarizes the pricing strategies as follows: 1) Skimming Pricing Strategy

By setting the price higher than the price in the market, this strategy is suitable for products that need to build the brand and for the high-income person e.g. Gucci bag, Porsche car. This strategy is not suitable for organic products since the price of organic products are already high compared to the conventional products. Besides, Thai consumers might not prefer high prices of the organic products, according to the survey.

2) Penetration Pricing Strategy

By setting the price lower than the price in the market, this strategy aims to penetrate competitor in the market and reach the target group quickly e.g. Tesco and Carrefour department store. This strategy can be applied when organic organizations start their business and would like to get customers to know their products first.

3) Competitive Pricing Strategy

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By setting the price same as the price in the market, this strategy is used when the organic retailers compete with their competitors. This strategy applies to most of organic retailers, for example, Green Net sets and compares its prices with other organic retailers in the market.

4) Dynamic Pricing Strategy

This strategy set the price according to the season, cost and needs of customer e.g. organic vegetables and fruits, meat, oil, gold, fuel. Most organic retailers such as Lemon Farm utilizes this strategy set the price of seasonal organic products to be cheaper than a conventional one as well as provide discount in monthly basis for a monthly organic fruits and vegetables for the members.

Figure 43: Pricing Strategy

5.3.3 Place Strategy

5.3.3.1 Overview of Best Practices Marketing Channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption. Due to the survey, 62% of organic consumers prefer organic retailers to the department store. The reasons are the retailers provide a specialized and good quality product assortment focusing on the preferences of their loyal regular customers. In addition, there are skilled staffs who offer advices and stimulate the interest of customers on ethical and environment-related topics. Moreover, some products are regional and offer at lower prices because of direct purchases from producers. Higher prices are applied for national or international products due to lower economies of scale and higher administrative costs. Some organic retailers even offer an additional service to customers e.g. warm meals for lunch.

Still, most organic consumers choose to shop in the large department store such as Carrefour, Villa and Tops. This is because it is more convenience in terms of transportation and distance from home. In addition, most department stores are often accessible by car and local transportation, and there is a variety of activities that

Pricing'Strategy'

• By'se0ng'the'price'higher'than'the'price'in'the'market,'this'strategy'is'suitable'for'products'that'need'to'build'the'brand'and'for'the'high'income'person'e.g.'Gucci'bag,'Porsche'car'

Skimming'Pricing'Strategy'

Penetra>on'Pricing'Strategy'

• By'se0ng'the'price'lower'than'the'price'in'the'market,'this'strategy'aims'to'penetrate'compe>tor'in'the'market'and'reach'the'target'group'quickly'e.g.'Tesco'lotus,'Carrefour'super'store'

Compe>>ve'Pricing'Strategy'

• This'strategy'set'the'price'according'to'the'season,'cost'and'needs'of'customers'e.g.'vegetables,'fruits,'meat,'oil,'gold,'fuel'

Dynamic'Pricing'Strategy'

•  By'se0ng'the'price'same'as'the'price'in'the'market,'this'strategy'targets'to'compete'with'their'compe>tors'e.g'Coke'and'Pepsi'

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consumers can do e.g. buying other products, having food in the restaurant, and watching movies. Besides, they allow the consumers to buy organic and conventional products at a single point of sale. The organic products in supermarket are also reliable, fresh, offered at lower prices (but high quality and easier to compare with conventional food) and with certification. Therefore, the organic retailers should find a strategic location, where the consumers can access the products conveniently in order to compete with the large department stores.

In general, there are different types of marketing distribution system. Consumers are able to buy the products from different market place. All these distribution strategies consist of producer, wholesaler, retailer, and consumer. There are mainly four types of marketing distribution channel:

Table 26: Comparison of direct marketing and indirect marketing

Direct Marketing Indirect Marketing Membership Personal

Selling Organic Retailer Store

Organic Corner in department store

Supermarket

Advantages Direct interaction with consumers

✓ ✓ ✓

Consumers are accessible

✓ ✓

Variety of products

✓ ✓ ✓

High sale volume

✓ ✓ ✓

Regular sale ✓ ✓ Cash payment

✓ ✓ ✓

Disadvantages Low sale volume

✓

Highly competitive

✓ ✓

Focus only a few products

✓

Credit payment at least 1 month

✓ ✓ ✓

Complicate accounting issues

✓ ✓ ✓

Need good management skills

✓ ✓

Time-consuming

✓ ✓ ✓

Conventional Marketing channel: consists of an independent producer, wholesalers and retailers. Each is a separate business seeking to maximize its own profits. No one has complete control over the others. For example, Xongdur Organic Food (producer) produces organic cereals and distributes to wholesalers and retailers such

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as Lemon Farm and consumers collect the product from the retailers respectively. Once producers collect the organic products, they have to find distribution channels through direct or indirect marketing. Table 26 compares the pros and cons of direct and indirect marketing. Conventional marketing channels along with e- marketing channels can be exploited to advertise organic products. The organizations, which are actively involved in buying and selling organic products, can offer these products through e-commerce. With online shopping, organic consumers save their time and energy going back and forth.

Vertical Marketing channel: comprises of the producer, wholesalers and retailers acting as a unified system. One channel member, the channel leader, owns the others or franchises them or they all cooperate. The channel leader can be the producer, the wholesaler or the retailer. For example, Aden and Lemon Farm have contract farmers and the contract farmers have to sent organic produces once or few times per week to the store.

Horizontal Marketing channel: two or more unrelated organizations chain together resources or programs to exploit an emerging marketing opportunity. The companies might work with each other on temporary or permanent basis or create a joint venture company. For example, organic supermarkets have arrangements with local banks to offer in-store banking. In Thailand, Lemon Farm has arrangements with Bang Jak Gas Station to open organic store in the gas station around Bangkok.

Hybrid Marketing channel: occurs when a single firm uses two or more marketing channels to reach one or more customer segments. Nowadays most companies adopt Hybrid Marketing channels. As seen in Figure 44, the producer can be divided into two types in Thailand. The first type is self- production without certification and the second type is with certification. The former one, the organic produces are consumed within the household. When the produces are excess, they bring the produces for sale without certification. The consumers have to rely on the producers themselves. The latter one, the producer grows the organic products and request for recognized certification from certified organization in Thailand or abroad. The consumers have more choices in choosing the produces via various certifications. Generally,the producer can be one of the following lists:

- Processor e.g. Doikham Food Product Co.,Ltd. (Green Net Cooperative Thailand hires Doikham Product Co.,Ltd. to process its vegetable), Kaokho Talay Pu Co.,Ltd. (rice, vegetable, dried herbs packaging), Natural Food Thailand Co.,Ltd (dry and freeze all Thai herbs, vegetable and fruits)

- Producer and Processor e.g. Harmony Life International Thailand Co.,Ltd. (Salad and vegetable packaging)

- Collector and Processor e.g. Supanburi Organic Club (collect and process fruits and vegetables)

- Processor and Distributor e.g. Tippawan Best Food (2527) Co.,Ltd.(process and distribute fruits and vegetables)

- Processor and Exporter e.g. Green Net Cooperative Thailand (process and export rice, fruits and vegetables)

- Full equipped Operator (produce, process, distribute and export) e.g. Thai Organic

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Food Co.,Ltd, River Kwai International Food Industry Co.,Ltd., Rangsit Farm, Song Serm Kaset Innsri Co.,Ltd.

According to Figure 44, after the producer, distributor is one of the crucial players in the supply chain. The distributor connects between the production and consumption and gives right information to consumers. The distribution channels of organic products are as follows.

- Membership Market: Market, which consumers and producers are in direct contact by making an agreement to sell and buy products according to the season. Consumers pay the money in advance. The products will be delivered to consumers directly when they are ready according to the season. The products are usually rice, fruits, vegetables and eggs. The producers can get guarantee that the products will be bought before planting. There are membership markets in other countries as well e.g. Community Support Agriculture or CSA (US), Box Scheme (Europe), Teikei (Japan). In Thailand, there are some club and farm do this, for example, Supanburi Organic Club, Daung Tawan Farm.

- Green Market/Community Market: Market often takes place in the populated community or area. The advantage of Green Market is that the consumer are directly interact with the producers. The market is opened once or twice per week on a period of time. For example, Green Market at Regent House in Ratchadamri Rd., Bangkok, opens every Thursday from 10.30 a.m.-16.00 p.m.

- Wholesale/Retail Market: The producers use intermediaries to distribute the products using indirect channel. The wholesale/retail markets are as follows:

1. Specialized retailers with branch (chain store) e.g. Lemon Farm (healthy organic and macrobiotic supermarket where has 9 branches in Bangkok), Aden (organic and green store who has branches in Thailand)

2. Specialized retailers without branch e.g. Urban Tree Organics, in Bangkok, Website: http://urbantreeorganics.blogspot.de/

3. Department Store: This channel of distribution is growing since the consumers can easily access to modern trend and variety of products. Usually, they have special section for healthy and organic products e.g. Tops supermarket, Foodland, Carrefour, Gourmet Market, Tesco, Villa Market etc.

4. Hotel : Rangsit Farm distributes its organic product to Hyatt Hotel in Bangkok. The hotel then uses the organic products to serve their guest.

5. Restaurant: Thai Organic Co.,Ltd distributes their organic vegetables to a number of restaurants in Bangkok.

6. Hospital: Rangsit Farm distributes its organic products to hospitals in Bangkok. The hospitals then use the organic products to serve patients.

7. School: The organic products can be delivered directly to schools. The products are consumed by the students, teachers and school members.

8. Airlines: The number of products can be delivered to the Airlines’ kitchen and are used for meals in the plane and at the airport canteen.

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Figure 44: Organic Consumer Hybrid Marketing Channel

5.3.3.2 Summary of Theory The author categorizes Place Strategy for Organic Retailers and Organizations as follows:

1) Traditional Trade Channel Strategy: this strategy uses traditional channel like wholesalers and retailers, which distribute products for all consumers in the country. This strategy is appropriate for specialized store such as Lemon Farm, Royal Project and Green Net, where they utilize this strategy to sell their organic products in organic market in the big cities.

2) Modern Trade Channel Strategy: this strategy aims for modern channels through convenience stores (such as 7-11), supermarkets, department stores, discount stores specialty stores and category killers. The channels cover around the country but have high cost through modern trade. Organic Thailand Co.,Ltd and Rangsit Farm use this strategy to sell their organic products to modern trade in large discount store such as Carrefour, TOPS, Villa Market etc. This strategy is good for medium to large-scale producers, who like to distribute their organic products through modern trade. It seems, in this strategy, producers can gain the most profit since products in modern trade is always sold in large scale. Moreover, from the author’s survey, more than half of consumers bought the products in department store rather than in organic retail store because all supermarkets are easily reachable and the products are reliable and fresh.

3) Stand Alone Strategy: in this strategy, the company utilizes their own channels and expands their branch among diverse areas. This strategy has some risks from the store’s profit that cannot cover the store’s expenses. This strategy is suitable for stand-alone specialized stores or retailers, who are located at a wet organic market or other location such as Au Tor Kor market and Bon Mache Market Park. Retailers have to continuously develop product’s quality and store location to be accessible like large discount stores. According to the author’s survey, 63%

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of consumers prefer to buy organic products at specialized store mainly because of the product’s quality.

4) Franchise Strategy: building Franchise systems for interested businessperson to participate e.g. 7-11 Convenience Store. This strategy helps expand the stores very quickly and at low risks.

5) E-commerce Channel Strategy: using Internet and Online channels to attract new generation consumer since they often buy products online. It is easy, accessible anywhere anytime and uses low cost to operate. As indicated in Figure 45, Thai Organic Co.,Ltd uses Facebook to promote their organic products. Consumers can choose the products and pay by transfer the money to a certain bank account. Then the products will be delivered directly to consumers’ door if the consumers buy more than €12. Tops supermarket also provides online shopping option for consumers as shown in Figure 46.

Figure 45: Facebook Campaign of Thai Organic Co.,Ltd

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Figure 46: Tops supermarket online shopping option

6) MLM (Multi-Level Marketing) Strategy: this strategy targets through network marketing channels using membership systems. Community Supported Agriculture (CSA) is one of good membership example to develop a high level of interaction and build trust between consumers and producers. The consumers are directly involved in production matters, making payment before receiving products, as well as price setting.

7) Direct Selling Strategy: this strategy directs to consumers person to person e.g. telemarketing, catalogues, newsletters, cable TV, local radio, magazines and newspapers etc. Carrefour and Tops supermarket utilize this strategy as they market organic products through direct marketing at the point of purchase to arouse consumers to buy the products.

5.3.4 Promotion Strategy

5.3.4.1 Overview of Best Practices Promotion means a communication with the customers or consumers. It includes all the ways available to make a product and/or service known to and purchased by customers and clients [62]. According to the survey [Figure 22], 78% of Thai organic consumers believe that health is the main reason to purchase organic products. Therefore, in order to market organic products, health messages, good quality and tasty products are the best way to get new customers on board. However, mass education about several benefits is needed to unite consumer commitment and increase spending. An example of a very successful specialized store is Lemon Farm (Thailand), offering the convenience of supermarket shopping. It opens from 8 a.m. to 8 p.m. daily, providing foods under one roof, bulk-buy savings and special discounts for members. They also offers an outstanding ethical issue on fair-trade foods, no air freighted products, friendly service, organic restaurant and café and free tastings.

Marketing communications are the methods that organizations use to inform, persuade, and remind consumers, directly and indirectly, about their products and brands. Though marketing promotion is often a crucial element of a marketing

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communications program, it is usually not the only one, or even the most vital one, in terms of building brand equity [62]. The marketing promotion mix in organic business consists of nine major modes of communication. The advantages and disadvantages of them are also presented in Figure 47.

• Advertisements: Most organic retailers advertise in local newspapers distributed around the shop’s area. Placing banners and ads board in strategic locations within the city or near the shop are also recommended. According to the survey, TV (48%) is the most usable tool that people get information about the organic products. Even if broadcasting via local TV network is an expensive strategy and may not always bring the effective outcome since organic business is still a niche market. Green Net (Thailand), for example, initiates a policy of no- advertisement as it sees that it is not worthwhile enough to cover such expenses.

• Online: From the survey, social media (11%) is the second most practicable mean for consumer to be informed about organic. Walters and Lancaster [88] studied how Internet helps to interlink different players, spanning the distance between the customers, suppliers and distributors from around the world, to carry out business transactions, and processes, and exchange information with remarkable convenience and ease. By dominating the e-channels, it enables companies to bypass the others in value chain and helps to approach the target consumers effectively. It also helps to produce and introduce new products and services for existing customers as well as new customers. Particularly in case of organic foods, the first aim of the organization is to educate the consumer about distinguishing the unique features of the products. Then the second objective comes, which is to sell the products. Internet and information technologies are the most effective and affordable platform to communicate to all consumers. Through online platform, the organic organizations and retailers not only promote their products effectively with all promotional activities and special discounts available but also enhance the trust of consumers on organic products, by providing all the details regarding certificates and organic information to their websites. Internet is changing the way people buy and sell products and services. Organic consumers now use the Internet to search and purchase products/services online. Hence, organic organizations unavoidably need online strategies and presenting the marketing mix online to attract and retain customers. For example, Thai Organic Co.,Ltd has their own Facebook to promote their products and upcoming events, Farm to Table’s organic ice-cream promote their organic ice-cream shop through Facebook and YouTube.

• Mass media: Due to the survey, books & magazine (9%) is the third most workable way for the organic products’ promotion. Articles are published in the printed media such as newspapers and magazines. There are many organic organizations, which maintain relationships with journalists who are interested in the organic agriculture issues and support the organic movement. Press conferences are sometimes held and press releases are another way to further the local organic movement.

• Direct marketing and Point of Purchase (P.O.P): The bazaar, wet market or specialized shop is a platform for person-to-person marketing of organic products. This platform provides consumers to interact and know more about organic products from the producers or specialized staffs. Some supermarket e.g. Carrefour sets up the booth of organic products and creates an event to promote

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particular products via free trail in order to arouse the consumers to buy. Green Net promotion strategy is to encourage "product trial" so that the consumers are introduced to organic product and can try some. Direct marketing can also be conducted through door-to-door campaigns or over the phone. However, the latter methods are labor and time consuming.

• Brochures: Promotional materials are distributed to the target consumers and registered members, providing information about the organization, discounted products, events, and members’ benefits. They are printed in mass quantities and have a few pages format.

• Word of mouth: Many organic organizations take advantages from this kind of “word of mouth advertisement” in their start up phase. When the consumers are satisfied with the particular organic products, market or shop, they may recommend them to their family members, friends and colleagues. This would also help spread information about organic agriculture and the organic products respectively.

• Field visits: Many retailers organize regular meetings between consumers and organic producers. By sharing experiences and offering recommendations, these meetings are very useful to both parties. For example, Organic Thai Co.,Ltd has initiated family organic field trip to its organic farm in order to promote organic agriculture awareness and its organic products at the same time.

• Newsletters: Some organic retailers send regular newsletters to their members or regular customers. These newsletters include information about discounted products and upcoming events, articles about organic agriculture or health issues, and organic food recipes.

• Event: Organic producers could display and sell their products at these events. They are regularly organized in most countries at both the national and local level, for example, Thaifex- World of Food Asia in Bangkok, Organic and Natural Expo, and Organic Symposium.

5.3.4.2 Factors in Setting the Marketing Communications Mix

Companies must consider several factors in developing their promotion mix including stage in product life cycle, push and pull strategy, consumer readiness to make a purchase, type of product market and the company’s market rank.

• Product Life Cycle Stage

Communication tools also change in cost-effectiveness at different stages of the product life cycle. In the introduction stage, advertising, events, experiences, and publicity have the highest cost effectiveness. Followed by personal selling to gain distribution coverage, sales promotion and direct marketing to induce trial. In the growth stage, demand has its own momentum through word of mouth and sale promotion. In maturity stage, sponsorship, events, personal selling, and experiences grow more important. In the decline stage, personal selling continues strong and other communication tools reduce, and salespeople give the products only minimal attention. Figure 48 illustrates when integrated marketing communication can be implemented in the product life cycle.

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Figure 47: Advantages and Disadvantages of 9 modes of Integrated Marketing Communications

Figure 48: Integrated Marketing Communications and Product Life Cycle

IMC$Tools:$Advantages$VS$Disadvantages$$$$$$$$$$$$IMC$Tools$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$Advantages$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$Disadvantages$

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•  High$cost$

•  Low$cost$•  Access$to$wider$audiences$

•  Low$cost$•  Access$to$specific$group$•  Able$to$control$message$•  Successful$sale$

•  Low$cost$•  Access$to$sale$point$effec7vely$•  Arouse$buying$decision$at$sale$point$

•  Access$to$specific$group$effec7vely$•  Successful$sale$

•  Arouse$buying$decision$effec7vely$

•  Access$to$specific$group$effec7vely$•  Create$image$

•  Access$to$wider$audiences$•  Create$image$

•  Access$to$specific$group$effec7vely$•  Create$image$

•  Not$able$to$control$message$

•  Not$able$to$access$wider$audiences$•  Not$able$to$create$image$



•  Not$able$to$create$image$

•  Not$able$to$access$wider$audiences$

•  High$cost$

•  Able$to$access$only$online$users$

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Adver8sing,$$PR$Direct$Marke8ng,$

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Sponsorship,$PR$Direct$Marke8ng,$

P.O.P,$Personal$Selling,$Event$&$Online$Marke8ng$

Personal$Selling,$P.O.P$&$Online$Marke8ng$

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• Push and Pull Strategy The marketing communication mix is greatly influenced by whether the company chooses the push or pull strategy to create sales. Push Strategy conducts sale promotion in order to push the products or service to customers. Sales representatives may get commissions or incentives so that they have the motivation to sell more. This is especially suitable where there is low brand loyalty in a category; brand choice is made in the store; the product is an impulse item; and product benefits are well understood.

Pull Strategy advertises and conducts public relations using various marketing tools to attract customers to buy the products or service. This is especially appropriate when there is high brand loyalty and high involvement in the category; people perceive differences between brands; and people choose the brand before they go to the store. Some organic retailers use either pull or push strategy, some of them use both strategies. The author summarizes pull and push strategy of organic organizations of Green Net and Organic Thailand Co.,Ltd from the interview, displaying consumer campaign, public relations, direct marketing, consumer-producer linkages and product design and packaging as shown in Table 27.

Table 27: Pull and Push Strategy of Organic Organizations

Pull Strategy Push Strategy

Consumer Campaign 1. Direct mail 2. Brochures and leaflets 3. Ads board at point of

purchase in order to get consumers to know about concept green products and the brand

4. Get consumers to know where to access organic retail shop

5. Market promotion through organic retail shop and new product demonstration

Public relations 1. Activity news 2. Mass media 3. Environment and

health campaign together with marketing team at point of purchase (e.g. retail shop and organic exhibition)

Direct Marketing 1. Sale promotion for membership and for seasonal products

1. Newsletters 2. Fax 3. Telemarketing 4. Sales representatives

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Consumer-producer linkages

1. “Opening New

Organic Retail Shop” workshop

2. Eco-tourism in suburb part of Thailand

3. Organic farming, business training and workshop to interested people and producers

4. Get consumers and retailers to know about the production source, characteristics of green products, promote social enterprise and fair trade

Product design and package

1. Design package, which meets consumers’ need

2. Logo and label about product benefits, production source and expiry date

• Consumer-readiness Stage

Promotional tools vary in cost effectiveness at different stages of buyer readiness. As shown in Figure 49 [62], advertising and publicity play the most important roles in the awareness-building stage. Primarily, advertising affects customer with comprehension, while personal selling influences convicted customer. Personal selling and sales promotion influence customer in order stage. Customers in reorder stage are affected mostly by personal selling and sales promotion, and somewhat by reminder advertising.

According to Green Net’s interview, it adapts different Buyer-readiness Stage into its objectives. Most of the problems are about organic consume awareness, which are mentioned as follows:

1) Consumers do not consume seasonal fruits and vegetables 2) Consumers do not like expensive produces and do not aware about the basic

cost of organic production and farmer’s benefits 3) Consumers consume a few kinds of vegetables and do not know how to cook

season vegetables. 4) Consumers focus more on appearance rather than quality of products 5) Consumers cannot distinguish between “pesticide -free” and “organic”

vegetables 6) Consumers cannot access to organic retail shops 7) Consumers have a high education and a high income

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Figure 49: Cost-Effective of Three Different Communication Tools at Different

Buyer-Readiness Stages

Therefore, Green Net sets its objectives considering Consumer-readiness Stage as shown in Table 28.

Table 28: Green Net’s objectives about Consumer-readiness Stage

Objectives Note 1) Consumers understand about organic products (awareness and comprehension stage)

2) Consumers realize about chemical in food (awareness and comprehension stage)

*Understand that organic products are good for their health, producers’ health and environment

3) Consumers know about organic agriculture and organic standard (awareness and comprehension stage)

4) Consumers understand farmers and producers (awareness and comprehension stage)

* Know the differences between “pesticide-free” and ”organic” vegetables

5) Consumers know where to find organic retail shop (order stage)

* Fair trade to farmers

6) Consumers change their consumption habits (conviction and (re) order stage)

* Consume seasonal fruits and vegetables

7) Consumers realize their duty to society and environment as Green Consumers (conviction and (re) order stage)

Cost%Effe

c*vene

ss%

Stages%of%Buyer%Readiness%

!!!!Awareness!!!!!!!Comprehension!!!!!!!!!Convic1on!!!!!!!!!!!!Order!!!!!!!!!!!!!!!!!Reorder!

Adver1sing!and!publicity! Sales!promo1on! Personal!selling!

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• Type of product market As Figure 50 [62] illustrates, promotional allocations vary between consumer and business markets. Even though advertising is used less than sales calls in business markets, it still plays a significant role in building awareness and comprehension, serving as an efficient reminder of the product, generating leads, legitimizing the company and products, and reassuring customers about their purchases. Personal selling can also make a strong contribution in consumer-goods marketing by helping to arouse dealers to take more stock and display more of the product, build dealer enthusiasm, sign up more dealers, and grow sales at existing accounts.

• The company’s market rank Market leaders acquire more advantages from advertising than from sales promotion. The reason may be that market leaders have more budgets to spend for advertising. On the other hand, smaller competitors obtain more by utilizing sales promotion in their marketing communications mix.

Figure 50: Relative Spending on Promotion Tools in Consumer versus Business

Markets

5.4 Blue Ocean Strategy The concept of Blue Ocean Strategy is an expanding market to uncontested market space for an unknown industry. This is to avoid a growing number of competitors with a relatively constant number of consumers in the conventional market (red ocean) [93]. By creating new market niches for organic products, the organic organizations can raise the high potential demand of health, environment and social concerned consumers and reduce the influence of competition. The organic retailers need to create value innovation of the organic products, which is good for health, safe to consume and with high traceability. Cost management is made by eliminating the cost of chemical and pesticide input, and by reducing the cost of grading and sorting because most organic products are already graded as high quality.

Consumer)Goods) Industrial)Goods)

))))Rela2ve)Spending) )))Rela2ve)Spending)

Sale)Promo2on) Personal)Selling)

Adver2sing) Sale)Promo2on)

Adver2sing)

Public)Rela2ons)

Personal)Selling)

Public)Rela2ons)

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According to the author’s result, there are 85% of the respondents have bought the organic products hence the author assumes that organic market is already mature in Thailand. Therefore, the Blue Ocean Strategy may not applicable for Thai organic market. Nevertheless, from the author’s interview, most organic organizations and retailers realized and used the Blue Ocean Strategy in the past, when the organic market was in the early stage. This could be the reason that organic market in Thailand has grown successfully.

5.5 Green Net Case Study The Green Net Case Study is a good example of how an organic retailers and organizations are able to closely monitor and implement most, if not all, of the embraced theories and frameworks presented in this thesis. Due to a strong market position in a highly competitive food retailing industry, the Green Net Case Study underlines that a broad spectrum of theories, strategies and marketing techniques needs to be taken into consideration. Green Net’s expertise in segmenting, targeting, positioning, marketing and planning for its organic products, describe below. Those capabilities are considered as a preferable benchmark for the organic food industry.

Organic retailers, and organizations that are currently competing with their organic products or will launch new own organic products should take Green Net example into account and learn from its success. Nevertheless, other players cannot apply Green Net’s capabilities, for example, their abilities to use company owned retail chain to promote and market their own private label organic product line. Only organic retail industry players that can also integrate backwards within the production chain could achieve this expertness. However, Green Net’s market success can still be accomplished by understanding consumer behavior against organic products and by executing the right marketing mix strategies.

Figure 51 depicts Green Net Organization Chart and Table 29 shows the position and responsibility in Green Net. Green Net has four main objectives as follows:

1) Marketing: Green Net acts as a marketing intermediary for Thai locals, who is doing organic agriculture. It aims to create an ideal fair trade market for farmers. Farmers are able to name the price of their local products, gain their finance without moving to a big city away from their home. Green Net therefore can gain enough support financially instead of getting help from other foreign organization. These make Green Net stays under social policy solving producers’ marketing, process, information and customer service issues.

2) Social: Creating activities and distributing information about organic agriculture to consumers as much as possible, Green Net is a link between producers and consumers. These lead to economic, social, culture and environment collaboration. Consequently, these will lead to consumers’ adapting consumption behavior according to season and environment. Once consumers’ demand is high, Green Net then tries to maintain production supply to be high by increasing more organic producers.

3) Collaborate with organic agriculture network: It consists of private and local development organization, which pushes organic agriculture constantly as a result they can stand on their feet sustainably according to Figure 52.

4) Marketing development and organic agriculture: Green Net supports farmers’ learning process about marketing and organic agriculture, for example, process technique, product quality improvement, production plan, community business and organic certification (Organic Thailand Certification). Moreover, Green Net

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cooperates with private research organizations in order to make organic agriculture accessible to family and community members, highlight importance of body of local knowledge as well as gender equality.

Figure 51: Green Net Organization Chart

Figure 52: Organic Agriculture Network

Green%Net%Organiza-on%Chart%

Coordina-on%1%person%

Marke-ng%6%persons% Campaign%5%persons%

Consumer%Plan%Marke-ng%Plan% Produc-on%Plan%

Marke&ng)Management)>Purchase%>Packaging%>Sale%>Internal%Control%>Marke-ng%

Alterna&ve)Market)>  Retail%Shop%>  Agro>%

Tourism%>  Promo-on%>  Packages%

Environmental)friendly))consumer)>  Campaign%>  Radio%>  Producer%and%

Consumer%Collabora-on%

Community)Business)>  Product%

Development%>  Product%%%%%%%%Process%

Ins&tute)and)Network)Building:)1)%Organic%Agriculture%Network%2)%Collaborate%with%interna-onal%organic%union%3)%Establish%organic%standard%%%4)%Consumer%Group%%%%%5)%Database%and%leaflets%

Green%Net%Organic%Agriculture%Network%

30,000%farming%family% 84%NGOs%

Alterna<ve%Marke<ng%with%Annual%turn%over%of%16.2%million%baht%%

20%Green%Shops%

Home%delivery%for%100%members%in%the%household%

5%mobile%Stores%

50%Convenience%stores%

€0.105%million%Export%

Consumer%Campaign%through%media,%exhibi<on%and%newsleNer%etc.%

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Table 29: Green Net position and responsibility

Position Responsibility Division of work Marketing Campaign

Director ✓ ✓ - Policy and plans setting - Finance and marketing

Management - Rice export coordination - Organic Agriculture

Coordination Head of Campaign Department

✓ - Coordinate with producers and consumers

- Campaign management Data base officer ✓ - Product and store data base

management Organic Marketing Coordinator

✓ - Organic Marketing management

Food specialist/R&D

✓ - Community Business - Research and Development

of products and packages Consumer Campaigner

✓ - Initiate campaign - Consumer activities

Marketing Manager

✓ - Marketing Management

Administrative Staff

✓ - Support general marketing tasks

- Internal control Accountant ✓ - Account and finance Driver ✓ - Transportation

- Bill and money collection Packer1 ✓ - Pack, sale, stock

management and house keeping

Packer2 ✓ - Pack, sale, stock management and house keeping

Part-time staff ✓ - Pack, sale, stock management and house keeping

5.5.1 SWOT Analysis of Green Net’s Marketing SWOT Analysis, as indicated in Table 30, gives Green Net to work in the right direction in such a way that consumer, producer and private organization work together harmoniously. Moreover, it develops and educates its employees, producers, distribution channels and consumers at the same time about organic agriculture and marketing.

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Table 30: SWOT Analysis of Green Net’s Marketing

Strengths Weaknesses Opportunities Threats 1. Green Net has

strong connection with more than 30,000 local farmer families in the network.

2. Strong relationship between producers and marketing organization

3. Information about products in terms of usefulness, ingredients and social enterprise are greatly available

4. Organic agriculture is developed continuously

5. International network

1. Lack of marketing and management experience

2. Consumers lack of organic agriculture knowledge

3. Small number of organic food distribution channels

4. Insufficient product’s variety and quality

5. Packaging issue has to be improved

6. Lack of financial to run marketing campaigns

1. Thailand Act number 11 (2012-2016) supports sustainable agriculture

2. Consumers grow more interest in green and organic products

3. Higher channels for export market

4. Number of companies are interested to co-invest

1. Competition from large agriculture and large discounts store businesses

2. International standard is controlled by foreign country

3. Limited investment from foreign country

4. Effects of economic crisis

5.5.2 Green Net’s Targeted Market 1. Market Segmentation Green Net’s market segmentation is a niche. It focuses on 2 main segments: Green consumers and Pedestrians. Green Net’s market segment strategy distinguishes it from other competitors by presenting information about the organic product process, quality, and fair trade. Table 31 depicts Green Net’s target group, which is similar to the consumer survey of the author in several points. 2. Targeting Target groups of Green Net are consumers with a health concern. It educates a health-concern group about environmental and fair-trade issues. Its target groups include:

1) Middle to higher class of consumers with a high education, €250-€400 or higher income per month, live in a big city such as Bangkok, Korat and Sataheep.

2) Middle age women (aged above 30 years old), have a bachelor degree or higher, married, have children in the household, work outside and their jobs are usually about health and environment.

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Table 31: Green Net’s target group

Green Net’s Why, Who, When, Where, How

Answers

Why do consumers buy organic products?

1) Safety food is basic need to survive 2) City life style 3) Health concern 4) Fashion

Who are the influencers?

1) Consumers themselves 2) Family members e.g. children, elders, sick person.

When do consumers buy organic products?

1) Usually buy a few times per week, often on weekends

Where do consumers buy organic products?

1) Supermarket 2) Minimart 3) Green shops

How do consumers know about organic products?

1) Through mass media 2) Through Internet 3) Through talking with friends, family

members and person with organic knowledge

4) Through product packages, logo and labels

3. Positioning Green Net focuses on the environmental issues than other competitors. Figure 53 indicates that Green Net’s market position is in high quality and environmentally friendly.

Figure 53: Green Net’s Market Position

5.5.3 Development of Green Net’s Marketing Concept Green Net has its development in marketing concept. It mentions that marketing is one of a tool to develop organic agriculture in Thailand. For example, technology

Green%Net’s%Market%Posi0oning%

Quality%

Environment%

★ Green%Net’s%Marke0ng%Posi0on%

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and knowledge transfer, building product line and basic marketing structure, information circulation of the organic products, services and lifestyle development. However, Green Net also has to take demand and supply into consideration. It concentrates on the five issues as follows. 1) Promoting organic agriculture network that has no market support Green Net’s organic agriculture marketing started from promoting and supporting farmers and producers to convert to organic farming as well as educate them to realize about health and environment issues. So, they can grow their produces for themselves to consume within their household. When the products are too much, they can sell the products to a local market without intermediaries. Nevertheless, the farmers are not able to sale their products since they are lack of marketing, financial management knowledge and market support. Therefore, only promoting and supporting farmers are not sufficient for the farmers to succeed in the market. Green Net also needs to consider about the market support. 2) Marketing Management does not go with production There is insufficient amount of fair market supporting organic products as a result the organic produces cannot be sold extensively. The market is a lack of organization, which supports the organic produces and can cooperate among consumers and the market. Consequently, it is unlikely that organic market can be completely developed and produced in Thailand. 3) A need of organic marketing organization, which can take full responsibility Since Mr. Vitoon, a founder of Green Net, was a student in a university, he had a chance to interact with local farmers in rural areas and pointed out the problems of organic agriculture and initiated the solution of the organic marketing organization. 4) Building compiling and distributing systems of organic products The core activity of Green Net are that acting as an intermediary, which collects the products from organic producers and distributes to the consumers in the city. Green Net accepts all kinds of organic produces and aims not to focus on profits but on social enterprise. It establishes the fair trade to support the farmers, who grow the organic produces. Green Net first started organic market on 15th November 1993 in Chiengmia province, and on 2nd December 1993 in Supanburi province. Green Net received around 1,000 kilograms of the products per week, which valued around €300/week. For the first few years, Green Net did not focus on profits but it tried to expand organic market as much as possible by educating local people about organic farming and coordinating with local organization. These helped Green Net to connect with local market in each province of Thailand. 5) Promoting production and consumption of organic products Green Net promotes people who interested in opening organic retail shop to expand its fair distribution channels broadly. It also supports the program called “city farm” which people in Bangkok grow their own organic produces in their garden. This project attracts people who are interested in organic agriculture, health and environment issues. As a result, the organic network in Bangkok expands vastly. 5.5.4 Green Net’s Marketing Process Green Net considers how environmental problems affect consumers and producers. It finds the solution and develops marketing mix to fulfill organic consumers’ and producers’ needs. Green Net focuses on 2 main issues: customer satisfaction and

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environment. Figure 54 describes Green Net’s marketing process. It identifies and analyzes its target market using marketing mix planning and following its marketing objectives. The author divides the topic, which include market analysis, market opportunity, and situation analysis as follows.

Figure 54: Green Net’ s Marketing Process

5.5.4.1 Market Analysis Market Analysis is the first step of marketing process. Green Net analyzes the organic market with marketing coordinator, marketing manager and head of campaign department. Market Analysis considers the following topics. 1. Market Opportunity Analyzing through documents, news and literature review from various institute, Green Net estimates and concludes marketing opportunity to satisfy organic customers’ needs. The organic consumers are expected to increase therefore organic marketing need to increase in order that consumer have health benefits and producers have financial benefits. There are a number of surveys, which Green Net supported. For example, Thai Farmers Research Centre’s, Asian Institute of Technology’s and King Mongkut’s Institute of Technology’s research reported about the demographics, perceptions and attitudes of organic and green consumers in Thailand. These surveys studied about organic market opportunity. For example, when farmers produce their products, they need to find distribution channels to sell their products. Therefore, Green Net helps them to indicate marketing channels, recommend the best technology and give them how to market their organic products.

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Marke%ng(Objec%ves(

Marke%ng(mix(planning(

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((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((1.  Product(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((2.  Price((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((3.  Place(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((4.  Promo%on(((((((((((((((((((((((((((((((((((((((((((((((((((((((((

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2. Situation Analysis Green Net conducts a situation analysis in areas of marketing, product, competitiveness, distribution and environment from various sources e.g. conference proceedings, financial report, retail shop listings, interview and surveys from retailers and consumers. Marketing coordinator, marketing manager, data base officer, food specialist /R&D, accountant and marketing officer are responsible for situation analysis. There are 5 important situations to consider as follows: 1) Market Situation There is a significant growth in terms of organic retail shop in Thailand. From year 2009 to 2011, there is an increase of organic product volume from 19,222 to 21,939 hectares [Figure 8]. Long-term growth of organic products is expected to increase, as consumers concern more about health and environment issues. During economic crisis, organic products are expected to affect in positive and negative side. For negative side, consumers tend to spend less for unnecessary things, which affects some part of organic market. However, for positive side, consumers may change their lifestyle, where they mostly cook at home. Thus, fresh vegetables, fruits and rice will be basic foods they buy and such products will be sold more. 2) Product Situation There are problems about product that Green Net tries solve in various aspects as follows. - Most products are seasonal grown and they cannot be sold for the entire lot.

Hence, the price would be very low since supply is more than demand. On the contrary, outside that season, those products are not at all available.

- Most products are lower than grade C and most consumers buy grade A organic products.

- Unstable product’s quality - Limited variety of products hence Green Net needs to improve new products

especially processed organic food. 3) Competition Situation Organic market has started recently so the market is not yet mature and competitive. Providing a constant and a variety of product supply may be a big issue for competitive situation. Nevertheless, the organic marketing organization can join together and finds the new distribution channels. Once the organic market is mature, the competitive issues will be moved to product and service’s quality. 4) Distribution Situation Organic products are usually sold through organic retailers or organic corner of department store. Organic retailers have an advantage over department store due to the fact that they can interact with customers. On the other hand, department store has more branches and can be easily accessed by customers in terms of transportation and product variety. Moreover, there are other distribution channels, for example, green market, home delivery, direct marketing, exhibiting events, which allowed producers to directly connect with customers to know the customers’ feedbacks. Then the organic retailers can improve their products and services. 5) Environment Situation Environment is concerned as a big issue especially in the big city since most consumers in the big city are highly educated. Therefore, organic and green products are promising products for people in the big city due to their concern about health

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and environment. However, some retailers mislead consumers that pesticide-free products are the same as organic products, which makes consumers refused to buy organic products since it is more expensive than pesticide-free products. 5.5.5 Green Net Plan Green Net collaborates between marketing and consumer plan, whose objectives are sale promotion based on social and environment issues. According to Green Net’s objectives from year 1997-2000, it focused on three following plans: 1) Marketing Plan

- Increase sale to €75,000/year (1997-2000), gross profits not below €7,500/year

- Get consumers to know about Green Net 2) Consumer Plan

- Access 100,000 persons/year through mass media e.g. magazines, radio, exhibitions and newsletters

- Organic consumer event e.g. Organic Agro Tour, Organic Seminar 3) Production Plan

- Add product diversity up to 12 products - Add 6 Community businesses

The results of Green Net’s objectives from 2nd September 1997-2000 were as follows: 1) Organic market expanded to 50% in year 2000 2) Marketing department could fully support themselves financially in the next 3

years 3) Consumers realized about an importance of organic consumption 4) At least 3 groups of producers were able to create their own production

processes, activities in developing and processing of organic products, and expanded the distribution channels.

5) Organic Thailand Certification initiated Green Net’s Activities can be categorized into 3 main activities as shows in Table 32.

Table 32: Green Net’ Promotion Activities 1995-1998

Activities Number of Times Total 1995-1996 1996-1997 1997-1998

1. Marketing (4Ps)

13 7 4 24

2. Public Relations (Newsletters, Radio, Exhibitions and Eco-Tourism)

6 11 - 17

3. Collaboration with other organizations (government, private and NGOs)

1 9 2 12

Total 20 27 6 53

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6. Conclusion, Outlook, and Future Works

6.1 Conclusion and Outlook The characteristics of organic consumers are likely to be women, tend to have children in the household, age above 40 years old, with higher level of education with a degree and with monthly income over THB 10,000 or €250. According to the result, the main reasons that the consumers buy the organic products are health concerns, followed by the products contain no pesticides. There is a significant relationship between the consumers who are concerned about pesticide residues in food products and those purchasing organic foods.

As the organic consumers buy organic vegetables & fruits the most, cross promotion between the products is recommended. In order to make a market impact and the products stand out from the crowd, the organic retailers should make their product in high standard with perfect quality control and certification, as well as strong logo and packaging. Solving the difficulties of non-continuity of products, the organic retailers are suggested to set up more than one producer group within one category of product and they are also encouraged to do contract farming with the farmers.

The organic retailers should indicate the benefits of organic food and give clear picture why the prices of the organic products are high due to the additional environmental and social cost.

The selection of distribution channel should be ideally prioritized the consumers’ convenience. However, the organic organizations need to consider their company size, readiness and limitation.

As most successful organic retailers focus on Social Enterprise, Fair Trade, Health, Environment and Social aspects, the common communication tools are mainly less costly, that include, social media, internal mass media, organic tourism, direct marketing, memberships and exhibition. Moreover, the organic retailers should take the factors in setting marketing communication mix into consideration.

According to the leading retailers, Thai Organic Market is growing rapidly so as their competitors, and the more competitors, the better the organic market to grow and expand to capture the attention of the consumers. The main strength of the organic business in Thailand is that Thailand has suitable climate and area as well as a growing number of organic consumers. The major weakness is that organic farming is still small compared to the whole agriculture area in Thailand since most producers do not have confidence to make transition to organic farming. The crucial opportunities are that domestic and export market are growing and there is lots of support from governmental bodies. The important threats are that the consumers are lack of knowledge about organic, unstable and unpredictable products. Moreover, the government and organic organizations cannot corporate.

Consumer awareness, quality of product and market are some of the issues, which have to be developed in Thai organic market. Therefore, consumers have to be educated through constant communication about the information of organic products VS low-pesticide products. Usually consumers buy conventional products since they only concern about the cheaper prices and do not care about the benefits of their health and the environment. There are challenges, which organic products cannot compete with the conventional ones. An amount of organic consumers is very small

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and organic retailers are competing for the same people. Furthermore, there is limited expertise in marketing and organic suppliers are smaller than conventional ones.

6.2 Future Works This master thesis is a starting point of further organic product industry research in Thailand. The author suggests that making expansion of the organic consumers’ survey to collect the data from other major provinces in Thailand such as Chaing Mai, Kon Kaen and Ko Rat, instead of only collecting the data in Bangkok. For the results representing Thailand as a whole, further analysis on Thailand organic agriculture is necessary to be carried out. It should be noted that there is insufficient data on the economic costs and viewpoints of organic brands, which makes it difficult to judge its success in Thai markets. Furthermore, the consumer survey could be conducted through a research on the subject of psychology, which may unveil the consumers’ psychological behaviors. If marketers have this comprehensive insight into psychological characteristics, marketing of the organic products will be simplified. However, the author believes that even though these problems and issues are out of scope of this master thesis, these subjects can be carried on as a research area of marketing PhD or by professional researchers.

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8. Appendices

8.1 List of Expert Interview 1. Mr. Vitoon R. Panyakul, the Thai Organic Trader Association (TOTA) Chairperson 2. Mr. Kitipong Pataraturanan, the Aden CEO 3. Mr. Karn Reitkajorn, the general manager of Thai Organic Co.,Ltd 4. Mr. Parinya Pornsirichaiwattana, the Rangsit Farm CEO 5. Ms.Suwanna Langnamsung, the Health Society Co.,Ltd CEO 6. Mr Sithiporn Bangkaew, Thailand Ministry of Commerce in Surin Province

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8.2 Questionnaire

Survey of Organic Food for People in Bangkok I am a student from University of Applied Science Berlin conducting a survey on Developing Marketing Strategy for Small and Medium Organic Product Retailers in Bangkok. I would be pleased if you could contribute to my survey and answer some questions for me. The questionnaire will take about 10 minutes. Thank you very much for your participation.

Section A) Demographic Information

1) Age: < 20 years 20 - 30 years 30 - 40 years < 40 years

2) Gender : Female Male 3) Do you hav children in the household?

Yes No If yes: What is the age of the younges child ? ____ Years

4) What is the highest education level you have completed? Secondary School High School Bachelor Degree MSc and above

5) Monthly Family Income

>10,000 Thai Baht 10,000 - 20,000 Thai Baht 20,001 - 30,000 Thai Baht < 30,000 Thai Baht

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Section B) Purchase and consumption of organic products

6) Have you and/or your family ever buy organic products? Yes No

7) How long have you buy organic products? _________________

8) How often have you and/or your family buy organic products?

Every week Once a month Once every few months Never

9) What is the reason you buy organic products?

I buy organic products because... Yes No better taste


good for my health



want to try somethcing new



I have a record disease

10) Are you concerned about the use of GMO in food products? Very much Often Sometimes Not at all

11) Are you concerned about pesticide residues on vegetables and fruit?

Very much Often Sometimes Not at all

12) Do you think that organic and pesticides-free products are the same? Yes No

13) When you are sick, do you think about organic products?

Yes No

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Section C) Consumer’s satisfaction and decision in choosing 4Ps of organic products

Product

14) Are you satisfied with the range of organic products offered in the supermarkets?

yes, I can find all the products I would like to buy no, I would like to buy more organic products

15) Which organic products do you buy the most?

Fruits&Vegetable Eggs Rice&Cereals Dairy Products Bread&Pasta Meat Juice Canned Food

16) Are brands and labels important for you in buying organic products?

Yes No

Price

17) Is the price of organic products a problem for you? Yes No

18) How many more percent are you willing to pay for organic products

compared to normal products? 1-3% 5% 10% 20% 30% 40%

Place

19) Where do you buy organic products?

Carrefour Villa Tops Lemon Farm Au Tor Kor Market Bonmache Market Royal Project Foodland Gourmet Market Green market Hospital Market Organic Exhibition Organic Farm _______________________________ Organic Retailer______________________________

20) Why do you choose to buy organic products at the above places? Close to home Reliable Variety of products Fair price

Good service Fresh products Certified products

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21) Do you prefer organic retailers to department store?

Yes No

22) Why do you think organic retailers are better compared to department store?

Better quality More variety Have specialist Promotion

23) Which channels are the most effective for you in knowing about organic products?

TV Radio Books and Magazines Social Media SMS Organic Exhibition Internet Ads Board Asking specialist in the shop Shop Booth

24) Which services do you like the most?

Home Delivery Giving Information about organic Specialist in the shop Product replacement Discount Suggestion Box

Thanks very much for your cooperation

104

8.3 Consultation hour With First Supervisor: Prof. Dr. Sven Prüser 1. On 23rd January 2013: Discussed generally about the listed of proposed topic and was given comments on the proposed topic 2. On 6th February 2013: Handed in the updated listed of proposed topic and chose one topic from the list and was asked to write an expose and a table of content 3. On 27th February 2013: Handed in the expose and table of contents, discussed about the chosen topic, and got feedback about the expose and table of content. 4. On 6th March 2013: Refined and updated the expose and the table of contents, discussd about the methodology. 5. On 20th March 2013: Discussed about collecting data in Thailand and asked the recommendations about the questionairres and key actor interview questions. 6. On 19th June 2013: Reported what were done so far in Thailand e.g the updated conceptual framework, the result of the consumers’ questionaires and Thailand’s marketing channels for organic business etc. 7. On 14th August 2013: Last checked on the table of contents and subject topics, discussed regarding the overview of thesis report, second supervisor issue and presentation 8. On 11th Semptember 2013: Discussed about the overall of Master Thesis final version With Second Supervisor: Mr. Chusak Suvimolstien 1. On 27th February 2013: Discussed about the proposed topic and asked Mr. Suvimolstien to support the author as the second supervisor. 2. On 25th March 2013: Discussed about the first draft of questionnaires and interview of key actors in Thai and English and the author was recommended to add and change some questions in the survey. 3. On 1st April 2013: Sent the final version of the survey questionnaires and Mr. Suvimolstien confirmed that the questionnaires were ready. 4. On 10th April 2013: Field research interview and organic market observation in Santi Asok Organic Market in Bangkok. 5. On 23th April 2013: A second field research at organic retailer called Namon Organic Shop and Restaurant in Bangkok and discussed about organic product business in Thailand. 6. On 29th May 2013: The author presented the results of the survey and the interview and was given some feedback. 7. On 31st August 2013: Reported about the overview of thesis report 8. On 1st September 2013: Sent the final version of the master thesis and reported the final results.

Developing Marketing Strategies for Organic Products Employed by Small and Medium Retailers in...

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