1. Threat of New Entrants – The organic farm/organic food industry is filled with lots of small companies trying to make it big, the barriers of entry to this industry are enough to put off all but very serious farmer, companies and individuals. Organic food producers require large amounts of funding to finance the purchase or growing of organic base foods, production plants, packaging and distribution. Large well established companies are therefore advantaged. However, there is evidence that there are changes within the organic food industry, smaller organic food companies are forming alliances with larger more established firms and conventional food organisations for the distribution of their products.
2. Power of Suppliers – The organic food industry is dominated by a small number of larger suppliers. These suppliers have vertically integrated their businesses. This vertical integration has significant impact on a businesses position in its industry with respect to cost, differentiation and distribution. Supermarkets have also developed the organic food market and supply sources, and in doing so encouraged the growth of small independent specialists which are now offering a similar one-stop-shop approach for oranic products.
3. Power of Buyers – Organic food and drink is now one of the biggest growth area of the food retail market. As well as catering to consumers’ increasing demand for good quality, unadulterated food, it ties in with lifestyle and leisure patterns concerned with health and well being which makes it a distinctive food sector1. The succession of recent food crises (for example genetically modified foods) has seen the increased demand for organic foods. However, there is some sign of an organic backlash with certain groups and media questioning, not only the validity of the term organic, but whether there can ever be sufficient volume production to rival conventional production2.
4. Availability of Substitutes – The only substitute for organic food is conventional food. Conventional food is readily available through many distribution outlets and can be obtained at cheaper prices than organic foods. Conventional foods will continue to be more appealing to the masses even though there has been exponential growth in the consumption of organic foods in recent years.
5. Competitive Rivalry – The large growth in the organic food industry in recent years means that more and more firms are trying to enter this growth market. Private firms are seeking to buyout other small to mid-size firms. Larger food companies are also likely to produce organic food lines buy purchasing smaller companies. Sales have also moved into the mainstream retail trade, and the convential food industry is becoming increasingly involved. The rivalry in this industry is intense and will continue to be so whilst the demand for organic foods increases.
One of the greatest strengths of Paradise Farm Organics is the ability to adapt to the ever-changing global market. With increased worldwide demand for foods, Paradise Farm recognised the need for the company to be true to its roots as a top quality organic food producer. It has continued to produce an extensive range of foods not only for the traditional organic food consumers but for the general population. As the general American population spends less and less time preparing meals “44 percent of weekday meals were prepared in 30 minutes or less.”, Paradise Farms has provided complete meal solutions, which involves a small amount of preparation and cooking3.
Concentrating its marketing on its image as a wholesome American company enables Paradise Farm to promote itself as one of America’s original homegrown organic food producers. Its founder’s aversion to traditional forms of marketing can also be interpreted by the consumer to mean “good old fashioned values”.
Other strengths attributed to Paradise Farms have been the environmentally friendly packaging, more nutritious, more tasty (just like real food), more convenient foods and the support of local farms and economies.
The founder of Paradise Farms herself, Mary Jane and other business associates are seen to be actively involved in environmental causes. In 1986 Mary Jane founded the Palouse Clearwater Environmental Institute (PCEI), an organisation committed to sustainable agriculture, environmental preservation and consumer education4. Upon leaving PCEI Mary Jane pursued her own business interests and in doing so encouraged more farmers to convert to sustainable agriculture, she created a market for their harvest5. This active involvement from the grassroots level of organic food production has enabled Paradise Farm to be viewed, by the consumer, as not being too interested in high profits and slick marketing, but as an active participant in sustainable agriculture.
The obvious weakness of Paradise Farms is the limits of season and the capacity of its own farm size and that of other organic food producers. Trends in the organic segment of the food industry demonstrated that demand reguarly exceeds supply6.
Mary Jane’s reluctance to embrace traditional marketing may be detrimental to Paradise Farm Organics . With the growing demand for organic foods and the importance of taking your message to the consumer, Mary Jane’s approach of releasing her message and products and letting interested customers find her may mean that consumers, who are generally time poor, may purchase organic foods from those companies that reach out to them through marketing, rather than them finding the supplier. With increased competition in the organic food industry, Paradise Farm Organics will need to adopt new marketing methods to stay competitive and in business.
Paradise Farm Organics is a farm and food manufacturing business that runs a mail order produce business, manufactures Eco-Cuisine backpacking foods, and runs an organic farming and marketing apprentice school. Founder Mary Jane Butters is passionate about creating markets for organic growers and buying from and supporting local organic farmers. She bought her five acre farm on the Palouse prairie in 1985 to grow food for her family. In 1991, she met a garbanzo bean farmer told her he was about to stop farming organically, because he couldn’t find a market for his aztec garbanzo beans. This prompted Mary to tackle organic farming marketing. She bought the farmer’s beans, made dried felafel mix, and went into the dried food manufacturing business with great success. Soon she was able to expand her product line and begin buying from other farmers7.
The Value Chain
A value chain is a partnership between all players in the chain, from farmers, to processors and distribution outlets dealing with the consumers. Value Chains should even take into account the input of the consumer. For this type of partnership to be beneficial, all participants should have input in developments
A strong Value chain will have the trust and confidence of all contributors and participants. They too need to be bold, but their emphasis is on collaboration, building relationships and creating social supports.
Paradise Farm Organics works intensively at both ends of the value chain – the grower of the raw material, buyer, processor and distributor of organic foods. Paradise Farm Organics works with organic farmers, supporting the re-introduction of organic farming practices. It also works at adding value to organic fruit and vegetables, by identifying appropriate end products and setting up ethical organic value chains which link the organic farmer through Paradise Farm Organics for the supply of end products to consumers. Paradise Farm Organics analyses each link in the chain of activity – from the time when the product is only an idea to the time when it is disposed of after use. A value chain for any product it products extends from reseach and development, through raw materials supply and production to delivery to consumers, and beyond to disposal and recycling.
Managing the Value Chain more effectively
When Paradise Farm Organic was founded in 1989, it was established as a mail order company. It later entered into a private label contract with an equipment company to provide dehydrated food.
Since the inception of Paradise Farm Organics, the organic food industry has been completely transformed.
* Fresh vegetables are now mainly sold through large supermarkets.
* Cash-rich but time-poor consumers buy products that are easy-to-use – ready-trimmed, washed and mixed with other ingredients.
* Product freshness and shelf life have been enhanced by speedier passage through the supply chain. Levels of quality, continuity of supply and consistency of quality across the whole year have become the objectives.
* Food safety requirements and standards are much stricter, particularly with regard to pesticides and minimum residue.
* Traceability now goes from the supermarket shelf to a grower’s field (literally).
None of the new requiremens for the value chain could have been obtained through continued reliance on a single private contract. Paradise Farm Organic can manage the value chain more effectively by understanding that:
* Production is only one of a number of value-adding links; supply, budgetory policy, transportation and distribution must be aligned to support Paradise Farm Organics performance.
* Mapping the flow of inputs and outputs in the production chain allows Paradise Farm Organics to determine what specific activities play an important role in its success.
Paradise Farm Organics can retain or capture more earnings by evaluating performance gaps, noting where value could be added at each link in the chain. Also noting the needs for business support and upgrading of particular activities. Paradise Farm Organics should focus on the following to enhance its value chain:
* Increase efficiency and effectiveness of internal processes so that these are significantly better than those of competitors, both within individual links in the chain (for example, lower wastage) and between the links in the chain.
* Introduction of new product lines or improve old products more quickly than rivals. This involves changing new product development processes both within individual links in the value chain and in the relationship between different chain links.
* Increase value-added by changing the mix of activities conducted within the firm (for example outsourcing design functions).
* Move to a new value chain. A new value chain can be assoicated with an existing chain, thereby creating new product opportunities.