Global Summit of Women 2003
Marrakech, Morocco

GROWING MICROENTERPRISES INTO THE MAINSTREAM MARKET
 Joan Uy, Head of the Marketing Management Group of the Northern Mindanao
Vegetable Producers Association (Philippines)

Good afternoon everyone.

I shall share with you the story of how small vegetable growers worked together to break into the good markets, the institutional buyers comprised of the fastfood processor, the hotels and restaurants, and the supermarkets.

Down in Southern Philippines, in the island of Mindanao, small growers located in different barangays (villages) within the highland province of Bukidnon harvest vegetables every week.  I am one of these growers and my farm is called Green Haven Farm.  On it are grown lettuce, carrots, garden pea and sweet corn. 

Every Tuesday, we go through this routine together.  We harvest our vegetables, pack them neatly in plastic crates that are individually labeled with each farm’s name, send them through a refrigerated truck to a centrally located consolidation area in our province, turn over our vegetables with their packing list to the consolidation in-charge who puts them into a refrigerated container van. The vegetables in the van are shipped the same day of harvest to our buyers in Manila, our country’s capital and biggest demand center, and are delivered to our buyers’ cold storage rooms in their highest “farm-fresh cut” quality. 

To keep our promise to supply high quality vegetables, we always produce 20% more than our committed volume to our buyers so that we can sort our products. The extra vegetables comprising our “off-sizes” after sorting are brought to our local market-trading center and sold to various contracted traders.

A marketing office handles the flow of documents with the buyers from vegetable shipment until the payments are collected and turned over to each grower.  The buyer’s price is given to the grower and this is her/his incentive to produce quality products.  S/he only pays a marketing service fee of 5% to cover costs and a group contribution of 1%, both percentages based on the sale value of whatever product was accepted in the market.

We have gone through this routine for the past year and have gradually built a name as a reliable supplier of quality vegetables.  It is a source of pride whenever we think that the lettuce we harvest is found in the fastfoods’ hamburger sandwiches and salad bars, the broccoli we grow is served in the hotels and restaurants, and our various vegetables are starting to be displayed in the chillers of our country’s premier supermarkets.  We know we have made our mark when our vegetables started to replace the imports of our buyers.

The Beginnings – Laying the Ground for Farm Enterprise Development

Green Haven Farm started growing lettuce in 1999 with just a weekly production of 100 kgs.  Our initial buyers were local traders at the vegetable trading post.  They were a difficult market because they bought at low prices and deducted outright 25% from the weight as allowance for trimmings even if our produce had relatively better quality.  Unhappy with this situation, we looked for alternative markets.  Thus began our experiment in 2000 to directly supply local restaurants and fastfoods.

Our lettuce volume gradually increased. Six months after our experiment, we started to supply 200 kgs lettuce weekly by boat to the fastfood outlets in the neighboring island of Cebu, our country’s second biggest demand center.  And a year after, we started to send 400 kgs vegetables by plane to an additional market, a fastfood processor in Manila.  We kept our commitment to deliver weekly by planting also weekly.

Attaining the quality standards of the fastfood processor was difficult and we had to go through a learning period. With the innovations and adjustments that we implemented, our buyer recognized our determination to succeed.  It reached out halfway by giving us technical advice on production and postharvest practices.  And it strongly suggested refrigeration with shipping to preserve quality, and also to bring down freight cost.  The problem was how to consistently fill up a 20-feet container van with 3.5 metric tons weekly.  The solution was to convince other lettuce growers to join us and to consolidate our delivery. 

By the end of 2001, we had formed a cluster of growers called the lettuce cluster, all sharing production technologies so we could come up with a common quality standard.  And by the middle of 2002, we sent our first refrigerated container van of vegetables to our buyers and have since consistently kept our promise to deliver weekly.

Satisfied with our supply performance, several other buyers contacted us this year for various vegetables.  This was the beginning of our expansion. New growers joined us and more clusters were formed.  

Organization – The Vehicle for Market Mainstreaming

How large can small become?

At present, we have 9 clusters of growers investing in 9 kinds of crops now on field in preparation for more markets by the second half of this year.  Consolidated weekly market volume we target is 20 tons.  This is 5 times what we currently supply.  Each cluster is a self-organizing group of growers acting like a business unit.  But all these 9 clusters are joined together, embedded in the bigger organization of vegetable growers called the Northern Mindanao Vegetable Producers Association, Inc. (NORMIN VEGGIES).  To date, there are 70 members made up of both the independent growers and farmers groups.

We continue to operate our small farmholdings but we enjoy access as a group to competence enhancing linkages, namely:  (a) Business – the providers of farm inputs and services and also our business support organization which is the Chamber of Agriculture, Fisheries and Food Industries of Northern Mindanao or CAFFINORMIN to which our vegetable association is a member, (b) Government – Department of Agriculture and the Department of Trade and Industry, and (c) Private Resource Organizations – Growth with Equity in Mindanao/United States Assistance for International Development or GEM/USAID assisting us in institution building and technology development; the Local Government Support Program/Canada International Development Agency or LGSP/CIDA supporting the capacity building of our local government units in the field of enterprise promotion; and the Lutheran World Relief Services or LWR undertaking pilot testing of a financing scheme with market matching for small farmers.  

Reflections – Our Lessons

I did not imagine when I started farming 4 years ago that developments would take this momentum and that from managing one farm, I would take the long jump to head the marketing management group of the whole vegetable association.  It was a point of reflection when we started to confront tight competition from the big corporate farms that wanted to replace us in our markets.

The challenge has been difficult from the “big players” but we also take it positively as a sign that we have grown to a level where our presence is now starting to be felt in the institutional markets. So far, we have held our markets, and with additional orders from new buyers, we are poised for growth.  Looking back, these are the strategies that have proved very effective for us.

1.      We invest time and resources to build an organization for it is what draws in capacity building opportunities that enable us to make the “shortcuts” from “small scale into large scale” 

Our vegetable association is a point of attraction for business linkages (markets, farm input/service providers, technology providers), for government assistance, and for private resource organization support.  The basic value of unity is what we always emphasize in NORMIN VEGGIES. 

2.      Within a bigger organization, we have institutionalized self-managed small business units through the formation of clusters of growers.

A cluster that is made up of 5 to 10 growers facilitates that resources can be focused on a particular vegetable, production programming can be done more easily, and improvements in product quality based on type of market supplied can be addressed adequately.  The cluster is small enough so it can easily stimulate innovations, and more importantly, the sharing and helping of one another.

There are times that growers experience crop damage that reduces the week’s harvest.  When this happens, a grower’s supply deficiency is matched with another’s surplus to be able to come up with a stable volume.  This has been our strength in the market.  This cooperation has been formalized through a Grower’s Agreement and the Code of Business that are signed by all growers in a cluster. 

3.      We always work for customer satisfaction because it is the key to keep our farm business going.

Each cluster exerts effort to establish quality at the field and at postharvest because quality improvement opens up our market options. We recognize technology as capital and so we tap resource persons and consultants with experience from corporate farms that teach us better ways of doing things.

Each grower is guided by a Quality Assurance Plan, which provide her/him the details of how activities are to be done within the cluster for a particular product and market. In packing vegetables, we employ labeling of the farm in each plastic crate container so that we have a tracking mechanism for quality from each farm, and we can correct customer complaints fast.    

4.      We adopt a supply chain approach that enables us to understand how our products move from the farm to our buyers, and what it means in terms of costs and returns for the growers.

We supply each grower with a Supply Chain Diagram that identifies all activities in the chain with their corresponding unit costs and returns.  Each grower in the cluster knows the bottomline figures (breakeven point) and other benchmark information so s/he can evaluate her/his operational efficiency.  Since the buyer’s price is given to the grower given, and s/he is required only to pay a marketing fee for the service done, the grower can easily appreciate that the benefits of quality and efficiency translates into higher returns for her/him. 

5.      In our association, we foster the entrepreneurial abilities of a marketing management group that can unleash the income potentials for the organization.

In the mainstream markets, competition is very tight.  The organization recognizes the need for highly creative and innovative persons (i.e. the entrepreneurs) to handle the marketing for the whole association. This marketing management group is given room by the association to make decisions autonomously, and they are paid the marketing fee to be able to manage the operations well for the whole association.

Conclusion

Our small farms through our clusters and our vegetable association have joined the mainstream market.  The full potential of this development remains only partly realized at this stage.  But what is important is that we have found the viable means for us to successfully penetrate the institutional markets, and we continue to take slow but steady steps further in the path toward this particular development.