FARMER TO CONSUMER DIRECT
In developed economies the concept of "Farmer to Consumer" with one
intermediary (such as a hotel, restaurant or supermarket) is well
established. Such a system has a number of clear benefits. The product is
fresh from harvest, the farmer understands the quality of the product
required by the consumer and a high proportion of the final sales price is
returned to the grower. The consumer also benefits via the price paid for
the quality required because the more efficient the system the lower the
price able to be offered. Often the fresh product is packed on the farm
and delivered directly to the shelf at the supermarket without further
processing or traders standing between consumers and producers.
In developing countries, such as the Philippines, direct sales happen to some extent locally via the municipal or City wet market. But this works only when the farmer is located in close proximity to the market. Our farm for example, located at Sto Nino, Batangas is about 20 minutes from Lipa City's local market. However most farmers are small scale and lack capital for storage and transport facilities. Often these farmers cannot cost effectively access the market and must by necessity use intermediary traders even for local access. For example, some farmers in our area grow citrus trees. The cost to transport small amounts of fruit to Lipa City is prohibitive and so they "sell the tree" to a trader. That trader offers a fixed price for whatever they can harvest from that particular tree in the season. Another example is coconut sales. Again, small producers cannot afford to transport their crop directly to the processing factory and so sell to local intermediaries who in turn transport and sell.
Beyond the local level, the major market by far is Metro Manila. Manila is beyond the direct reach of almost all farmers. Traders pool product from a number of farmers locally and transport it to Manila for sale in the major produce markets such as Divisoria, Nepa Q Mart and Balintawak. They sell to market wholesalers who then sell to restaurants, hotels and package for supermarkets-or to intermediaries who then do so. Manila is, as they say, where the money is.
On the one hand this process works. Vast quantities are produced, delivered and sold every day. On the other, the Farmer might receive between 15% to 50% of the final sales price. There is disconnect between the quality the consumer demands and the quality the farmer perceives he needs to supply. Transportation is not time sensitive and almost always not chilled. A lettuce harvested in Baguio might not arrive at the Supermarket until 30 hours after harvest,8 of which are in a diesel Jeepney that has amazingly passed its annual emissions test. As a consequence a significant percentage of the crop is wasted although this varies tremendously based upon the particular product. The bottom line of this status quo is that farmers struggle to make a reasonable living, there are too many steps in the process and the farmer is not incentivized to produce the quality the consumer demands.
Our objective is to develop a business that grows for and sells directly to select Hotels, restaurants and supermarkets in Manila.
We believe that by selling direct we can:
Deliver a fresher high quality product- we harvest typically after 3.30 pm in the afternoon and deliver before 11am the next day. We can fully control the conditions of transport and packaging (primarily cooling).
Train and develop our staff to recognize and manage to higher quality standards and therefore develop their transferable skills.
Return more income to our workers, farmer partners and their families than they would otherwise earn in the local area.
Our "Leaf Products team" for example, earn higher than the minimum wage
and also receive monthly bonuses based upon the quality and quantity of
their output. Each is allocated a particular crop and is responsible from
seed to harvest. They are taught how to recognize disease symptoms, what
nutrients to apply, how to properly harvest and manage their production.
While this may sound quite basic, our farm endeavors to bring modern farming
techniques into play in a locality where such practices have not
objective is also to bring more local farmers into our system as partners
with the objective of making a contribution to raising local farmer incomes
beyond direct employment. Our "Purong" black pepper for example is supplied
not only from our farm but also other farmers in Sto Nino who follow
acceptable farming practices.
From the perspective of our customers, Hotels and Supermarkets in particular, dealing directly with a farm producer is more complex than the traditional route. While there are clear benefits there are also added complexities. For example, we can only sell what we can produce. We produce specific volumes against agreed demand and significant fluctuations are difficult to deal with. Our customers therefore have a higher level of commitment to supporting the farming community and we want to recognize that.
For key customers such as South Supermarket, we gold label our product packaging to indicate to consumers that their supplier is going the extra mile to make the "farmer to consumer direct" concept work.