Environmentally-friendly agricultural products (EFAPs) are on an increasing trend of supply, but not much enhancing the rate of consumption due to higher premiums and safety concerns. Recently, the overall domestic market is rapidly changing into a consumer-oriented one with increasing preferences for branded produce, large retailers, and e-commerce. To cope with marketing shifts and develop environmentally-friendly farming, marketing strategies should be properly prepared on the basis of consumption trends, purchase patterns, and the interlinked sectors of production, distribution, and consumption.
The purpose of this study is to present marketing strategies for stimulating the consumption of EFAPs based on consumption trends and purchase patterns. To this end, an online survey was carried out on 1,000 housewives living in the capital region and five metropolitan cities.
The contents of this report include the following: chapter 1, the purpose, scope, methods, and necessity of study and previous studies; chapter 2, trends of production volume and pricing, distribution situation, and the market volume of EFAPs for 2020; chapter 3, consumption trends and purchase patterns, and marketing conditions based on the survey results; chapter 4, basic directions for revitalizing the market, strategies for purchasers, shipment in producing areas, and distributors of and policies for marketing channels; and chapter 5, summary and conclusion.
The volume of certified EFAPs recorded 35,406 tons in 1999 and 1,785,874 tons in 2007, up about 67 times compared to the base year with an annual increase rate of 69% on average. The prices vary depending on the types of certification and distributors. Compared to conventional agricultural products, the average prices of EFAPs amounted to two times for onions, 1.8 times for cucumber and tangerines, 1.6 times for rice and pepper, and 1.5 times for lettuce and tomatoes.
It is assumed that the market volume of EFAPs reached about 1.9 trillion won in 2007, an increase of about 45% compared to the previous year to account for about 6.2% of the overall market volume of agricultural products. It is estimated that the volume will roughly amount to 2.4 trillion won in 2008 (a 24% increase from the previous year), 2.9 trillion won in 2009, 2.1 trillion won in 2010 (a decline from the previous year due to the scheduled abolition of the need to certify low-pesticide products), and 6.1 trillion won in 2020 to account for 20% of the overall transaction amount of the agricultural retail market in the same year.
The major targeted consumers are the middle class in the 40s and 50s in Seoul and metropolitan areas and large-income earners in the 20s and 30s; and EFAPs are being purchased at hypermarkets (45%), discount stores (21.8%) such as Hanaro Club and Hanaro Mart run by agricultural cooperatives, specialty stores of organic products (10.8%), department stores (5.6%), and through direct trading (6.7%).
The consumers seemed to be hesitant to purchase EFAPs mainly due to higher prices (45.5%) and low confidence on production and distribution (31%). Some consumers (59.9%) preferred branded products, but others (40.1%) did not. This report shows that consumers prefer brands from famous producing areas, choosing specialty stores for grains, large distributors and consumer groups' retail shops for vegetables, and specialty stores and cooperative discount stores for fruit.
The most important tasks in exploring marketing channels for EFAPs are to extend the supply of EFAPs to schools for meal services (58.1%), develop processed foods using organic materials (9.5%), and encourage promotional activities (3.6%). The consumers preferred to get information on EFAPs through TV and radio (27.3%), hypermarkets (24%), the Internet (20.3%), and newspapers and magazines (11.5%).
According to the survey, most respondents thought that the EFAP exhibitions or events, which were held by the central or local governments to promote the consumption of EFAPs, are helpful: 6.1% of the respondents said they are very helpful, and 42.3% thought the events to be more or less helpful while 38.6% said they are helpful in a moderate way.
The key tasks for stimulating the demand for EFAPs are outlined as follows: classification of buyers (segmentation of markets), provision of information and safety assurance, labelling of brands and reference prices, shopping convenience for consumers, and low pricing.
In order to motivate consumers to buy more EFAPs, the products' safety should be verified and they should be made to sell at specialty stores and department stores.
To lower the prices of EFAPs, production units should be systematized to improve marketability and reduce the costs. The marketability should be raised through the standardization of environmentally-friendly farming, and the costs should be lessened by joint purchase of environmentally-friendly resources.
Consumers appraise the reliability of products based on suppliers (distributors), and they prefer the brands of large distributors; thus it is necessary to use agricultural cooperatives in producing and consuming areas for popular marketing. The suppliers should set up marketing strategies on consumer trust, special handling of EFAPs, and convenient shopping in cooperation with themselves.
The certification system should be thoroughly managed, and a history tracking system should be established to ensure consumers’ trust on EFAPs. The production and distribution sectors should take measures to ensure that the prices are lowered by 20~30%. A distribution center should be built to reduce distribution costs, raise reliability, and revitalize the wholesale and retail sectors. Agricultural cooperatives should play their respective roles in maintaining the premium and exploring marketing channels in producing and consuming regions.
Meal services at schools play an important role in exploring marketing channels for EFAPs. Many parents could afford to pay a 10% overcharge if EFAPs are used for lunch at schools, and the plans should be properly prepared and carried out.
Taking into account the fact that agricultural products are less consumed in Korea nowadays, EFAPs will drive consumers to purchase more of the products if their safety is verified and if the premium is maintained at a reasonable level. For the continued consumption of EFAPs, marketing strategies should be established based on a consumer-oriented marketing environment, and feasible programs should be carried out accordingly.
It is necessary that policymakers, producers, consumers, academic researchers and distributors play their respective roles in developing feasible programs for marketing EFAPs. The survey showed that the roles and brands of agricultural cooperatives are very important in consumer markets. Innovative plans are under deliberation by a number of groups, and if the groups can serve as the key leader in implementing marketing strategies for EFAPs, they will greatly contribute to the development of environmentally- friendly farming and to raising their standings.
Researchers: Kim Chang-Gil, Yong-Sun Lee and Sang-Gun Lee
Research period: 2007. 12. - 2008. 2.
E-mail address: changgil@krei.re.kr