Product Consolidation to Achieve Scale, Product Quality and Food Safety Requirements

and Marketing

The experience of small Korean Pear Producers

Association

Product Consolidation to Achieve Scale, Product Quality and Food Safety Requirements

and Marketing

The experience of small Korean Pear Producers

Association

Seo, Dong Woo

Speaker Introduction

Personal history • Founder(President) and board member of

Guri City National Cooperative Commodity Association(‘87~2000)

• President of Guri city Mukgeol(brand) Pear Commodity Association(‘94~’96)

• Best Farmer’s Association Technology University Pear Coursework (‘94~’96)

• Attend Seoul National University, Dept. of Agriculture, CEO MBA (‘99. Feb)

• Board member of Geongki-Do BFA (current)

• Board member of Farmer Leaders in Guri-city (current)

• Board member of Research Council on Pear in Guri (current)

• Board member of Seoul National Cooperative (current)

• Consultant for pear in Gyeongki farm crop(current)

What is pear association?

• Commodity association, commodity unit? – Based on the same commodity, farmers organize commodity

unit and association for co-production, co-sale to make bargaining power in trading and buying the supplies(farming machine, fertilizer)

– National Cooperative promote commodity unit in each village and association based on one crop since 1985 by providing financial support and giving several awards.

What is pear association?

• Purpose and development of organization– Need to get bargaining power with company of farming

supplies and buyer. – Increase the quality of agri-production– Increase and maximize sales volume– Government’s support and various incentive from national

organization such as technical education, field visit in advanced countries for learning, information sharing, sharing of farming machine

Org’n Introduction

• Current situation of Pear association in Guri city - Year of establishment: 2002, area of field: 40ha, No. of member: 36, Volume of production: 1,040ton, investment: 230,000$ for establishment of selection and store building ave. crop: 2,000box/15kg(30ton)

• Annual Export volume : 500ton

- Major exporting country: Taiwan, Indonesia, Singapore, Malaysia, Hong Kong

• Training: 2 technical education/year, 2 censorship/year GAP, education on food security

• Management revenue: 5% of profit, subsidy for exporting from NC

• Supporting org’n: local government, agri-technic center, dept. of agriculture, NC

선과장 전경

Commodity Unit Commodity Unit

Org’n Structure

National Coop

Private Coop

pear pear pear appleapple apple apple

Private Coop

pear

Distribution processes

• distribution steps

Producer Middle man

National Coop

Online, street vandor

Wholesaler

FranchiseWholesale market

Retailer

CUSTOMER

Major Distribution route

• From the emergence of franchised wholesale market• From the development of direct trade methods using

internet, online market

Middleman online, street

NC-Franchised wholesale

market

NC -wholesaler

5 20 50 25

Major distribution method %

Market condition• Product vs Consumption

1980 1990 1995 2000 2004 2005

생산 면적 (area)

(1000ha)

9 9 16 26 23 22

생산량(amount)

(1000t)

60 159 178 324 452 443

1 인당(consumption)

소비량 (kg)

1.5 3.6 3.9 6.7 9.0 8.6

농가판매가격(price)

신고중품 15kg($)

5.13 8.99 20.52 14.09 10.75 9.55

Market condition

• Export volume

• Major export country

1990 1995 2000 2004 2005

실적(1000$) 6,799 7,051 17,104 32,238 56,061

대만Taiwan

싱가폴Singapore

미국USA

인도네시아Indonesia

일본Japan

weight 3,110,648 7,266,591 10,439,664

4,812,558 13,202,656

(1000$)11,452,165 16,143,102 45,624,06

57,366,957 28,207,742

2008

Marketing Strategy

• Organize commodity unit and association and based on that, extend the market

• Use ICT for online trade and using delivery system

• Tour for farm, weekend farm as a marketing tool and direct trade with customer

• Make brand on each commodity unit or association

• Develop various packaging method based on the customer’s need

• Explore new market based on the quality and grade (for gift, individual household, juice)

Distribution strategy

• In Korea, the farming size is not big enough(ave. less than 1ha) to get economy of scale and there are several steps of distribution. The income of farmer was not big before(50~60% of retail price).

• Change of market and customer

- traditional small market  ⇨ whole saler ⇨ franchised wholesale market ⇨ trade via internet

- In conclusion, the income of farmer increased

• Development of storage techniques- Selection (330~660m2) and storage(200~330m2) place based on commodity unit and NC(5~10 times of commodity unit)

Production Strategy

• Information sharing (policy, support from the government, technical) from regular meeting of the member

•Quality Control - Adopt Certificate of agricultural crop such as GAP(Dept. of Agriculture), invent machine and supply for croping environmentally friend, make regulation and managing for chemical fertilizer and herbicide

- During the selection process, the farmer cannot attend. Develop storage method, the expire date can be extended. Bad crop will be 가공

Benefit sharing

• Based on the investment : 5~7% of investment • Based on the percentage of using for association

: 2% of selling amount

• Average income of individual household(per 1ha): around 23,000 USD)

Strength and weakness

• Strength - Purchase of farming machine as cooperative unit

- Improvement of the product quality

- Possibility of lobbying power to the government, Possible to explore the support from the national and local government

• Weakness - Member who have good sales condition will resign

- Not flexible for the environmental and market change(difficulty to adapt and to meet the requirements of franchised wholesale market)

- Easy to become a member or resign. When member violate the regulation, penalty cannot be apply easily.

Suggestion( 제언 )

• Decision of the product price depend on the situation of crop volume of the year and buyer, farmer cannot protect themselves and the differences of price each year is big.

• Therefore try to organize bigger commodity association and having bargaining power.

Suggestion( 제언 )

• Importance of leader’s sacrificing

• Importance of financial incentive

• In case of Korea,

after the Free

Trade Agreement,

government support

farmers in various

way

• Search for the

common goal

and interest

Thank you