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Case Study – Beckett
Organics
John Beckett enjoys vegetables, so much so that he has given up
his full-time job as a lawyer to concentrate on growing and marketing organic
vegetables. He started growing vegetables 20 years ago in his back garden and
eventually became fully self-sufficient in supplying vegetables for the
family. Partly bored with his legal job and tempted by an attractive
severance package, John decided he would try to establish his own vegetable
supply business. Eighteen months ago he looked around for two fields to lease
in which he could grow organic vegetables. Organic products including
vegetables, is a growth market in the UK. Growers must adhere to strict
guidelines in order to gain organic certification. Increasing awareness of
the problems associated with many pesticides and fertilizers, coupled with an
increased interest in healthy eating habits and ‘wholesome’ food, has meant
that many consumers are now either purchasing or interested in purchasing
organic vegetables. This is true not only of household customers, but in
addition, many restaurants are using the lure of organic produce to give them
a distinctive edge in the market place. All this has meant that many of the
larger supermarkets in the UK have begun to stock more and more organic
produce from what was a relatively specialized market in the 1990s; the
market has grown to where overall organic produce accounts for some 12% of
the total UK grocery market and in worldwide terms as of January 2010 it
accounts for approximately 3% of all food sales. The market for organic
vegetables has grown more rapidly than other organic products and it is
estimated that by 2014 some 25% of all vegetables marketed in the UK will be
organic. This growth has been sustained at a rate of around 20% per year in
developed countries. However, organic yields are between 10% and 20% lower
than conventional agriculture, with crops like potatoes some 40% lower.
Unsurprisingly, this makes organic produce on average around 40% more
expensive than non-organic produce.
A.C.Nielsen Co. cite the
case of the United States where organic sales eased in the second half of
2009 as middle- and upper-income families have felt the strain of layoffs and
declining investment portfolios. Sales in December 2009 were up 5.6 percent,
year on year, against a 25.6 percent rise a year earlier. Organic vegetables
offer several advantages over their non-organic counterparts:
• They are generally
tastier, and because they are not treated in the same way, are usually
fresher than nonorganic products. • They are good for a healthy lifestyle as
they contain no pesticides and chemicals.
• The fact that no
pesticides or herbicides are used in their production means that they are
much ‘greener’. For example, they help to reduce the problems associated with
nitrates in the soil and water supplies.
• On the downside, organic
vegetables are generally less uniform, and as far as some consumers are
concerned, are less attractive in appearance. This lack of uniformity has
also been a problem in the past with supermarket buyers who have
traditionally looked for uniformity in fresh products to aid merchandising
and marketing in retail outlets.
• Generally, organic vegetables are more expensive than their
non-organic counterparts. Currently, on average they are somewhere in the
region of 40% more expensive. In the UK, anyone wishing to claim that their
produce is organic, and market it in this way, needs to obtain the approval of
the Soil Association, which checks the organic credentials of a supplier. For
example, in this case, they check the conditions under which the produce is
grown and how the seeds used. Two interesting developments are taking place
in the organic produce market. One is the growth of home supplies. This is
where the producer supplies direct to the householder. There are a variety of
ways of doing this. Some smaller growers use mail-shots and leafleting to
build up a client base. They then deliver locally to customers who order from
a list. Very often the supplier will simply make up a box of a pre-determined
value or weight containing a selection of vegetables which are in season and
ready for picking. Other suppliers are using a similar system, but take their
orders via the Internet. This is particularly suitable for this type of
product as customers can check on a regular basis what is available and order
from home. The produce is then delivered at a pre-arranged time. The second
development in the organic produce market is the growth of farmers’ markets.
These markets are usually run by local authorities, often on Saturdays or
Sundays. Local and other producers attend these markets, paying a small fee
for a stall and then sell their produce direct to the consumer. These
farmers’ markets partly came about as a result of the frustration felt by
many farmers and growers at the way they were being treated by retailers and
at the margins they were receiving. In addition, such markets have been
successful because consumers feel they are getting fresh produce at lower
prices than they might be able to obtain through supermarkets. Despite the
growth in the market for organic vegetables, after 18 months in his business,
John is worried. Quite simply, his business has not been as successful as he
envisaged it would be, and as a result he is not earning enough to make a
living. The real worry is that he is not sure why this is the case. His
produce, he believes, is as good as anything in the business. He is a very
good grower and the land he has leased is perfect for the range of produce he
wishes to grow. Starting with organic potatoes he now produces a range of
organic vegetables including beans, sprouts, carrots, lettuce and his latest
venture organic tomatoes and corn grown in poly-tunnels. Although customers
he currently supplies are very loyal to John, indeed many are friends and
acquaintances he has known over the years when he grew vegetables in his back
garden, there are simply not enough of them. As a result, his turnover which
increased rapidly over the first year of the business has for the last six
months has stagnated. He mainly supplies locally and has tried to increase
his customer base by taking leaflets out and posting them through letterboxes
in the area. He has done this by dividing up the housing areas in a ten-mile
radius around his growing area and dropping leaflets throughout the area to
as many houses as he can cover on a systematic basis. Only some 2% of
customers have responded with an order, usually contacting by telephone.
These customers seem to come from the middle class areas.
He has considered taking a stall at one of the farmers’ markets,
the nearest of which is some 40 miles away and operates one day per month,
but he realises this would not be enough to reach the turnover levels he
requires. He has in the past supplied one or two local restaurants and
hotels, but usually only when they have contacted him because they have had a
problem with their existing supplier. He has never followed these up. His
growing area is currently too small to supply a major retailer, although he
has been approached on an informal basis by the buyer of a voluntary chain of
local grocers representing some 40 retail outlets in the county. John is
wondering where he goes from here. He cannot understand why his superior
products are not selling well. A friend has suggested that John needs a more
strategic approach to marketing. John is not convinced. He feels his business
is too small to warrant any kind of marketing, never mind strategic
marketing, and he has always felt that a good product should sell itself. He
is, however, anxious to grow the business and become a leading organic
vegetable supplier.
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