A Bold Step into the Modern Economy

Overview

Background

PDCI is a cooperative for agrarian reform established in 1991, in Lanipa, Bula, a municipality in the province of Camarines Sur, the Philippines (Photo: International Rice Research Institute,IRRI)

Pecuaria Development Cooperative Inc. (PDCI) is a cooperative for agrarian reform established in 1991, in Lanipga, Bula, a municipality in the province of Camarines Sur, in the Republic of the Philippines (Philippines). Consisting of 426 producers (in 2012), the cooperative was created following land reforms in the country in the early 1990s. During this period, hundreds of hectares of arable land in Lanipga was made available for the organization’s use by the Philippine government.

Of 817 hectares, 25 hectares were designated for building homes – 600 square meters per farmer – and 754 hectares were set aside as farm-land – distributed to 426 farmers at 1.77 hectares per farmer-beneficiary. Ten percent of the total land, moreover, was dedicated to infrastructure development such as roads, warehouses, offices and schools (3 hectares were given to this purpose).  

Having initially struggled to implement an efficient, profitable and sustainable rice production process and strategy, PDCI subsequently managed a positive improvement in production in Lanipga while enhancing the environment and supporting the farming community.

The cooperative, moreover, has invested in new research and development (R&D) facilities and created new marketing polices and commercialization strategies for its rice farmers. To this end, PDCI entered strategic partnerships with local, national and international organizations. As a result, the cooperative’s rice farmers modernized and streamlined production processes, created quality brands and entered the niche market of organic rice produce.

PDCI’s members, furthermore, diversified their product-range to include sugar, organic fertilizer and poultry goods. By 2012, the organization had emerged from the margins of the Philippine economy to become a major player in the organic rice-producing industry in the country.

Research and Development 

The beginning for PDCI – formerly called (until 1991) the People’s Coalition for Unity on Agrarian Reform Integrated Action (PECUARIA) – was marked by risk, disunity and economic instability. Having been created in a region without modern utilities (not even electricity and running water) and with poor supply-chain systems (there were no direct access roads from Lanipga to major trading centers), the organization’s farmers eked a meager living on the margins of the modern economy. The cooperative’s production systems and farming methods, moreover, were old fashioned and cumbersome.

Having been created in a region without modern utilities, PDCI's farmers eked a meager living on the margins of the economy (Photo: IRRI)

Producers in the region, furthermore, relied on traditional and inefficient trading methods which included selling their products to a buyer (or middle-man) that was responsible for taking the goods to a rural wet market – a small-scale and localized trading center that is common in Asia and is noted for its watery floors after cleaning. During the cooperative’s formative years, in addition, there were not many opportunities for producers to interact with customers; nor was there an incentive for farmers to be innovative in order to meet market demands and changing consumer trends.

In order to overcome these often crippling challenges, PDCI diversified its use of assets (including land and products) and forged new partnerships with key organizations. In this way, the cooperative was also able to unite producers, invest in modern R&D facilities and open new credit lines and markets for its members.

To improve production processes, PDCI partnered with the Department of Agrarian Reform of the country and the Philippine Partnership for the Development of Human Resources in Rural Areas (PhilDHRRA) – a national network of 65 development non-governmental organizations (NGOs) that supports rural communities and is based in Quezon City, Philippines. Also known as the Tripartite Partnership for Agrarian Reform and Rural Development (TRIPARRD), the collaboration also engaged an agronomist (a plant-use expert) from the University of the Philippines in Los Banos (UP Los Banos) – one of the leading agricultural institutions in the country.  

PDCI, furthermore, collaborated with the Catholic Church of the Diocese of Caceres, under a social program affiliated to TRIPARRD, in order to facilitate dialogue and unity between producers in the community. Three years after these partnerships were established, the cooperative’s policies were beginning to bear fruit. PDCI, for example, won a legal battle that allowed its farmers to become the sole owners of the land (the area was previously partly inhabited by neighboring farmers). Indeed, a Certificate of Land Ownership Award was granted to PDCI’s farmers by the Philippine government’s Registry of Deeds. 

Having received title to their lands, the cooperative’s farmers divided themselves into five main production units – developed in order to avoid competition over the same products, these clusters specialized in different farming products such as vegetables and rice. Each farmer within these units was allocated a plot of land to farm and hundreds of acres were soon planted with rice, sugarcane and other produce.

During this period, PDCI farmers began experimenting with growing organic rice (further aided by a guaranteed premium price incentive offered to producers by the cooperative) and improving production processes and supply chains – including establishing a bio-organic fertilizer processing plant, building a rice-mill, renovating irrigation canals and paving roads to major trade centers.

In addition to investing in quality goods and streamlined structures, the cooperative experimented with new farming sectors including rearing livestock (such as poultry and cattle) and planting a variety of crops (including vegetables, sugarcane and bamboo).

However, in part due to a persistence of the aforementioned structural and strategic stumbling blocks (poor facilities and supply-chain systems), market access remained limited and growth continued to be sluggish – including some reversals in fortune such as poor yields. PDCI’s struggle was further compounded because of inexperience among producers. As the cooperative’s Board Secretary Julian Jollado, Jr. recalled, “We lacked careful study. We lacked experience.”

A new period of prosperity began in 1994, however, when the cooperative expanded its engagement with key partners within the community and in industry. PDCI benefited from membership of the Bicol chapter of Pambansang Kilusan ng mga Samahang Magsasaka (PAKISAMA) – a farmers’ confederation that aims to empower rural communities in the Philippines.

Working with PAKISAMA and others, PDCI was able to lobby relevant government agencies, win major legal concessions and open credit lines for producers. A major turning point was reached in 1999, moreover, when the cooperative collaborated with the Partnership for Development Assistance in the Philippines, Inc. (also known as PDAP) – a consortium of the Philippine and Canadian governments.

PDCI farmers began experimenting with growing organic rice and improving production processes and supply-chains, including establishing a bio-organic fertilizer processing plant (Photo: Jeff Werner)

PDAP, formerly known as Philippine Development Assistance Programme, provided 2 million Philippine pesos (PHP, approximately US$47,000) in financial loans which PDCI was able to invest in training assistance for its farmers. Indeed, 10,000 PHP (approximately US$230) was investment per hectare in a new rice-growing method.

This new farming method was provided by Magsasaka at Siyentipiko Para sa Pag-unlad ng Agrikultura (MASIPag), an organization of farmers and scientists that develops agriculture in the Philippines. The organization’s MASIPag Rice Technology (MRT) is a farming method (run over a two year period) which teaches farmers how to identify and cultivate rice varieties that are best suited for their land.

MRT, in addition, does not rely on chemical fertilizers; the technology utilizes a rice variety’s natural ability to thrive and soil quality maintenance methods instead (based on natural soil manure and planting diverse crops, for instance). Working with MASIPag and PAKISAMA, PDCI was able to implement the new technology systems in 86 of its farms.

With new production facilities and farming methods in place, PDCI’s farmers were able to select new rice varieties – known as Pecuaria Selections – that would become a signature product for the cooperative (these varieties came in several colors including white, red and black). Indeed, Pecuria Selections resulted in an increase by 100 hectares in rice yields in the region. Farmers were able, furthermore, to scale up production and to sell any surplus seeds to neighboring producers.  

In addition, having repaid 30 percent of the PDAP loan (it thereafter became a permanent grant, as per their agreement) and thereby gaining their creditor’s confidence, PDCI's farmers were then able to develop new products (including muscovado – a raw sugar naturally processed from sugarcane juice ) and explore new partnerships. Since 2006 (following a typhoon that destroyed a PDCI sugar processing plant), the cooperative’s muscovado productions were mainly managed via an affiliated organization in Mindanao, a large island in the Philippines.  

Having began as a community of tenant-farmers living a hand-to-mouth existence, the cooperative and its producers improved production processes, increased yields, opened new credit lines and developed market access. In 2002, for example, the cooperative traded a volume of 14.2 metric tons (MT) of rice with its main distributor (worth approximately PHP12.9 million or US$ 302,000). By 2011, that had reached 486 MT.  

PDCI, moreover, employed 22 fulltime staff and operated a number of production facilities including a rice mill, a fertilizer plant, a solar powered flatbed dryer (for rice grains) and delivery trucks.  As of 2012, the cooperative had not only created the opportunity for rice farmers in Bula to unite; the farmers’ cooperative had developed producers’ capacity to compete in a fast-changing and competitive global economy. 

Branding and Commercialization  

A key factor in the improved prospects of PDCI’s producers was the incorporation of a robust branding and commercialization strategy. As Mr. Jollado Jr. said, “[The cooperative’s members] thought that marketing only meant trading, how and where to sell. [They subsequently] realized that it also involved what to sell and how to develop and package the product.”  

As of 2012, PDCI and UMFI had a variety of value-added, branded products including organic white, brown, black and pink rice (Photo: IRRI)

In order to break into new markets with quality goods and brands, PDCI relied on the services of a marketing organization called Upland Marketing Foundation, Inc. (UMFI) – a brand creation NGO based in Manila, the capital of the Philippines. UMFI’s team of experts (who focus on linking small-scale producers to large-scale markets in the metropolis) initially helped the cooperative adapt to the modern economy in a number of ways. 

The company trained farmers on modern sales and procurement strategies (including identifying preferred wholesalers, distributors and supermarkets and conducting market research on consumer trends) and improved their competitiveness by implementing key technologies and adding value to products. 

The marketing organization, moreover, helped PDCI to develop a vertically integrated production system (from planting to processing to packaging products in one site) and to implement a professional organizational culture (including hiring expert staff with knowledge of modern business practices). Furthermore, UMFI trained the cooperative’s staff on the importance of nurturing trust and equity between producers, retailers and customers. 

Perhaps the most significant development in this partnership occurred when UMFI became PDCI’s official marketing partner. In this capacity, the branding organization took over the marketing and product development portfolio of the cooperative by helping PDCI identify primary products – goods that are high in demand and provide a good return on investment (RoI). 

To this end, UMFI has developed attractive, value-added brands for the cooperative’s raw materials while locating a niche market position for these goods. With lower production costs and higher prices and yields that have been on a par with conventional rice, PDCI and its partner decided to commercialize organic rice as one of the cooperative’s primary products; organic muscovado sugar (unrefined brown sugar) was to become the other primary product.  

Rather than positioning the cooperative’s rice and sugar goods in the “organic” foods sector, however, UMFI chose to position them as “healthy” food products.This decision was made following consumer surveys in Manila that showed a higher percentage of buyers were willing to pay premium prices for products labeled “healthy” than for those labeled “organic”. As a result, the marketing organization created a “Healthy Rice” brand for PDCI’s rice. A second rice brand –“High Fiber Rice”– was also created.  

The cooperative’s muscovado sugar, moreover, was positioned in the market as the perfect accompaniment for coffee drinks, as opposed to as an “organic” product – this can be seen from the “best for coffee” phrase that accompanies this product. Via such marketing innovations, PDCI farmers’ rice and sugars were distinguished and competitively positioned in a niche market of “healthy” goods. 

Furthermore, based on market research that showed a clear population shift from rural communities to urban locations, UMFI focused on supplying its brands to modern supermarkets in large cities of the Philippines instead of traditional wet markets in the countryside.  

PDCI and its partner decided to commercialize organic rice and muscovado sugar, pictured, as the cooperative's primary products (Photo: Dana Velden)

The marketing organization, in addition, recognized that metropolitan supermarkets, in contrast to rural wet markets, made more specific and stricter demands on product quality and consistency of supply. Indeed, not only do producers such as PDCI and suppliers including UMFI have to provide a predictable volume of goods if they are to enter an agreement with a major retailer; these goods have to meet high consumer expectations and strict national and international standards. 

To satisfy these ends, UMFI and the farmers’ cooperative incorporated internationally recognized quality standards in PDCI’s farms including those established by the World Fair Trade Organization Philippines (WFTO-Phils) – the Philippine branch of an international organization that ensures fairness between producers, marketers and consumers as well. Not only have the cooperative’s products been branded with the WFTO-Phils quality label; they have also featured certification marks by the Organic Certification Center of the Philippines (OCCP) – one of the organic certifying bodies in the country.  

With national and international labels of quality on its attractively designed rice and sugar products (which feature colorful illustrations of healthy-looking people on the packaging), the cooperative has reassured both business clients and end consumers of its products’ high standards. As of 2012, PDCI and UMFI had a variety of value-added, branded products including organic white, brown, black, and pink rice; unpolished violet rice; blended rice; premium polished red rice; muscovado sugar; sugar cane syrup; and bio-organic fertilizer. 

These products were promoted in international trade fairs, via advertising in supermarkets and through promotional flyers, brochures and posters in high footfall areas. In addition, 80% of the cooperative’s goods were distributed by UMFI in over 500 supermarkets and large trading centers in Metropolitan Manila, the most populous area in the Philippines. The remainder of PDCI’s products was commercialized via local supermarket chains and in towns surrounding the Bula municipality.

Also in 2012, the cooperative had entered regional markets including Hong Kong, the People’s Republic of China. 

Trademarks

In order to protect its hard-earned quality brands, and to keep its future prospects for commercialization and marketing open, UMFI has relied on the intellectual property (IP) system. To this end, the marketing company secured its position in the healthy foods market for rice and sugar products in the Philippines by registering trademarks for F&C Farms and Cottages (2009, for sugar and rice products), Healthy Rice (2010, for rice goods), and Fair Trade Quality That Cares & Device (2010, for muscovado sugar and rice products) via the Intellectual Property Office of the Philippines.

With secure IP assets, UMFI (and its farming partner) has been able to develop and promote organic rice and sugar brands with confidence across the Philippines and into the international market. Bringing brand recognition to the farmers of Bula, these trademarks have attracted new business clientele and end consumers while distinguishing the organization’s products from those of competitors.　

As a result, UMFI and PDCI have been able to command premium prices which, in turn, have led to increased profits for the branding company and raised incomes for the cooperative’s farmers. 

Environment and Public Health

Bula is an area renowned for its fruit, bamboo and forest trees. The region, in addition, contains over 400 of the cooperative's farming communities (Photo: IRRI)

Business Results

As a result of PDCI's partnerships, the cooperative's producers have seen their quality of life and farming capacity improved and their prospects of a better future placed on a firm footing (Photo: IRRI)

Separating the Rice from the Chaff 

Sources, References and Related Links