CUSTOMER IN YANGON TO CONSUME ORGANIC FOOD

UTCC-UMFCCI GLOBAL OFFSHORE MBA PROGRAM BATCH 10, YANGON DETERMINANTS OF CUSTOMER IN YANGON TO CONSUME ORGANIC FOOD Submitted By Dr. Aung Tun Myat ID – 1720138101050 Supervised by: Associate Professor Dr. Li Li  Chapter 1: Introduction The Union of Myanmar is an agricultural country. Under British rule, Myanmar was once Asia’s largest exporter of rice and rice remains the country’s most crucial agricultural commodity. Agriculture and the processing of agriculture products provides a majority of the employment and income in Myanmar. Its sector generates 25 to 30 percent of total export earnings, according to the United Nations Food and Agriculture Organization and approximately two thirds of the country’s population continues to earn a living from the land. So its economy has traditionally been based on agriculture (FAO in Myanmar, 2015). Myanmar has a huge land area and wide variety of growing conditions. It has more than 65 million hectares of terra firma, among the highest in Southeast Asia. Cultivated land, covering 12.8 million hectares, has the potential to be increased by nearly 50 percent. It also have major rivers flowing from the North to South of the country emptying into the sea around the Western and Southern part of Myanmar. Myanmar is rich in fertile soils and abundant water sources are legendary in South-east Asia. Almost anything can be grown in the country, from fruits to vegetables, from rice to pulses. The seasonal Monsoons from the South-West brings rain to Myanmar for about five months every year, filling the rivers and creeks and watering the land for cultivation of rice, the principal crop of Myanmar. Myanmar’s extensive programme of dam construction, which will help to provide water security and increase access to electricity, has inundated up to 400,000 hectares of forest and arable land, according to estimates. Myanmar is trying to develop agriculture sector by implementing to achieve the vision in “Agricultural Development Strategy” by 2031, the following outcomes are sought: To achieve maximum market share in the domestic and world markets for specialty foods and other agro-based value-added products To improve food security of rural people To achieve green growth harmonizing with the natural environment Myanmar Government is implementing the following strategy for the growth of the agriculture sector. Figure 1: Strategic Framework of the Agricultural Development Strategy (Source: Myanmar Agriculture Development Strategy and Investment Plan (2018-19 ~ 2022-23)) Rice (including Myanmar’s most famous variety, paw san) and beans and pulses (especially chickpeas, green gram and black gram) are grown basically everywhere. Indeed, 80 percent of all Myanmar farmers grow rice and most plant beans and pulses after the paddy growing season. The rice production peaks around the Ayeyarwady Delta, while more beans and pulses (which can tolerate hotter, dryer conditions) are grown in the central dry zone. Maize comes a distant third in terms of area cultivated. Unlike beans and rice, maize thrives in the temperate highlands, especially in Shan State, Sagaing Region and Chin State. Myanmar produces a wide variety of other crops (Myanmar: Analysis of Farm Production Economics, 2016). Rice is the most commonly grown crop, the next in line, beans and pulses, for export revenue. Myanmar is second only to Canada in global exports of beans and pulses, exporting around US$1 billion of it in 2017, according to the Ministry of Commerce, versus only US$800 million in rice exports (Frontier Myanmar, Myanmar agriculture 101, 2018). Myanmar’s current agricultural performance offers opportunities for successful agricultural development. Average yield and labor productivity is still one of the lowest in Asia, but at the same time, the labor costs are low. Better inputs, better seeds and improvement of logistical and marketing arrangement can make rapid gains (Agriculture in Myanmar: published by Embassy of the Kingdom of the Netherlands, Yangon, 2015). "Organic agriculture is a holistic production management system which promotes and enhances agro-ecosystem health, including biodiversity, biological cycles, and soil biological activity. It emphasises the use of management practices in preference to the use of off-farm inputs, taking into account that regional conditions require locally adapted systems. This is accomplished by using, where possible, agronomic, biological, and mechanical methods, as opposed to using synthetic materials, to fulfil any specific function within the system." (FAO/WHO Codex Alimentarius Commission, 1999). Organic farming is a method of crop and livestock production that involves much more than choosing not to use pesticides, fertilizers, genetically modified organisms, antibiotics and growth hormones. Organic farming promotes the use of crop rotations and cover crops, and encourages balanced host/predator relationships. Organic residues and nutrients produced on the farm are recycled back to the soil. Cover crops and composted manure are used to maintain soil organic matter and fertility. Preventative insect and disease control methods are practiced, including crop rotation, improved genetics and resistant varieties. Integrated pest and weed management, and soil conservation systems are valuable tools on an organic farm. Organic agriculture, a worldwide growth industry, can be a profitable, sustainable business. People become aware the organic as the necessary for the health and environment and know how the chemicals in agriculture can harm their health. As Myanmar is the agriculture country, according to the benefit of organic agriculture like good agro-ecosystem health, it is the good opportunity to enter the organic market as the market is still growing (The World of Organic Agriculture Statistics and Emerging Trends, 2019). During the last four decades, a progressive increase in environmental consciousness has emerged as the environment moved from a fringe, to a mainstream issue (Grant, 2007; Goleman, 2009). Many people become aware that the organic food is much better in the health aspect than inorganic food. People become interesting in the organic agriculture and the rapid growth of demand for fresh and healthy foods make them to invest more in the organic sector. Background of the organic agriculture Traditional farming (of many particular kinds in different eras and places) was the original type of agriculture, and has been practiced for thousands of years. All traditional farming is now considered to be "organic farming" although at the time there were no known inorganic methods. For example, forest gardening, a fully organic food production system which dates from prehistoric times, is thought to be the world's oldest and most resilient agroecosystem. After the industrial revolution had introduced inorganic methods, most of which were not well developed and had serious side effects. The term “organic” can be broadly described as food that is not genetically engineered and grown without the assistance of toxic chemicals, including many synthetic pesticides, the use of arsenic, and fertilization using biosolids, which are often found to contain flame retardants and drugs among other things, even though they are processed (Wikipedia; Organic movement). Until the 1920, farmers produced food using natural way, controlling pests naturally and feeding the soil using traditional farming practices that conserved and regenerated the land. After the Second World War with finding the certain chemicals; Dichlorodiphenyltrichloroethane (DDT) in 1939, they changed the era of the agriculture by starting the use of DDT as insecticide (Wikipedia; DDT). As they discovered the heating problems of soil depletion by increased usage of chemicals and pesticides in farming, they realized that they need to focus in improving the soil’s health to improve low food quality and decline of crop varieties. The modern organic movement started in the early part of the twentieth century, primarily in Europe and later in the United States. In 1928, the largest certification organization for biodynamic agriculture; Demeter was founded. The movement has been continued to twenty-first century. People become aware more to the organic agriculture that sustains the health of soils, ecosystems, and people. It relies on ecological processes, biodiversity and cycles adapted to local conditions, rather than the use of inputs with adverse effects. Organic agriculture combines tradition, innovation and science to benefit the shared environment and promote fair relationships and a good quality of life for all involved. Through the research and history of organic agriculture, people become more understanding the principles and methods of the modern organic agriculture. The goal of organic farming is to reconnect people with nature, finding a sustainable method or producing food while nurturing the ecosystem and biodiversity (The History of Organic Farming, 2016). On account of the antiquated methods used, organic food takes longer to produce and requires more care. As a result, they cost more than other foods that are produced in less amount of time with the use of various chemicals and fertilizers. Consumers who consider health to be of paramount importance, do not mind paying more for organic food products. In addition to discerning consumers, an important factor driving the growth of the market are concerns about the environment. Pesticides used in the farm not just make their way into the human body but also accumulate in the soil and water. The market research company Ecovia Intelligence estimates that the global market for organic food reached 89.7 billion US dollars in 2016 (more than 80 billion euros). The United States is the leading market with 38.9 billion euros, followed by Germany (9.5 billion euros), France (6.7 billion euros), and China (5.9 billion euros). In 2016, most of the major markets continued to show double-digit growth rates, and the French organic market grew by 22 percent. The highest per capita spending was in Switzerland (274 Euros), and Denmark had the highest organic market share (9.7 percent of the total food market). In 2016, 2.7 million organic producers were reported. India continues to be the country with the highest number of producers (835’200), followed by Uganda (210’352), and Mexico (210’000). A total of 57.8 million hectares were organically managed at the end of 2016, representing a growth of 7.5 million hectares over 2015, the largest growth ever recorded. Australia is the country with the largest organic agricultural area (27.2 million hectares), followed by Argentina (3 million hectares), and China (2.3 million hectares). Almost haft of the global organic agricultural land is in Oceania (27.3 million hectares), followed by Europe (23 percent; 13.5 million hectares), and Latin America (12 percent; 7.1 million hectares). Figure 2: The World of Organic Agriculture 2016 (Source: The World of Organic Agriculture Statistics and Emerging Trends, 2019) Asia is a major exporter of organic products, but the domestic market is growing strongly. China is the largest market in the region. There is very dynamic development in many countries (The World of Organic Agriculture Statistics and Emerging Trends, 2019). Figure 3: Top Ten Countries with Largest Organic Trade Area in Asia (Source: The World of Organic Agriculture Statistics and Emerging Trends, 2019) Current situation in Myanmar Myanmar is an agricultural country, and the agriculture sector is the backbone of its economy. In 2012, the agriculture sector contributed to 39 percent of gross domestic product (GDP). Since the transition to a civilian government in 2011 and the subsequent easing of most Western sanctions led to accelerated growth, from under 6% in 2011 to roughly 7% in 2013 through 2017. Even there is so much increased GDP in industry and services sectors, the agriculture sector still take 24.1 percent in GDP. Also 70 percent of labor force is in the agriculture sector and it is still so much bigger comparing industry: 7 percent and services: 23 percent (CIA World Factbook, 2019). GDP- composition by sector Labor force – by occupation Agriculture 24.8% Agriculture 70% Industry 35.4% Industry 7% Services 39.9% (2017 est.) Services 23% (2001 est.) Figure 4: GDP composition – by sector and Labor force – by occupation (Source: Index mundi; Burma Economy Profile 2018) Myanmar’s GDP: Goods: Agriculture data was report at 13,964,771.200 MMK mn in March 2018. It has been increasing yearly since 1998 averaging 4,718,474.300 MMK mn. The agriculture will continue to be growing in next years. Figure 5: Myanmar's GDP: Goods: Agriculture from 2008 to 2018 (Source: www.ceicdata.com, central statistical organization, 2019) Nowadays, State Counsellor AUNG SAN SUU KYI and the ruling National League for Democracy is focusing on accelerating agricultural productivity and land reforms, modernizing and opening the financial sector, and developing transportation and electricity infrastructure. One major economic policy is “Establishing an economic model that balances agriculture and industry and supports the holistic development of the agriculture, livestock and industrial sectors, so as to enable rounded development, food security and increased exports” (Myanmar Sustainable Development Plan 2018 – 2030). As the government is trying to develop the agriculture sector by making policies, there is many opportunity in growth of the agriculture sector. As people are becoming aware how the importance of food in their health and how daily food can harm their health, they are finding the solutions to get the better health. Organic food is one of the solution they have found. As the organic food is chemical and pesticide-free, eco-friendly and very healthier compared to inorganic food and the market is still growing, it is good opportunity to pursue this organic market for Myanmar. It will provide not only the best export but also reduce the deteriorate of the soil due to usage of chemical and pesticide. 1.2.2 Organic Products in Yangon In Yangon, other available types of organic products are vegetable and fruit, herb, bean, honey, medicine and coffee. Some organic products can be found in supermarket chain such as City Mart and Marketplace. Some are available in Myay Paday Thar Island every Saturday and Yangon Farmers Market, a weekly market, held at Inya lake rowing and canoe club between 8:00 am to 12:00pm. From other routes such as organic specialty store and shop, organic purchase schemes like Community Supported Agricultural System (CSA), organic products can be accessed. There is customer buying a share or membership to the farm as exchange of a box of fresh vegetables every week for the length of the membership, direct relationship with the farmers who grow their food, learning together with the consumer through volunteering activities, field visit and home delivery. Statement of problem In Myanmar, the organic market is only at the introduction stage for commercialization of the organic products because the organic products are perceived as the luxury for the elite social class with higher incomes. The potential for organic market seem great because of the new available type of products such as organic Myanmar chicken and natural eggs are now being provided by Shwe Taung Nyo Gyi, Myanmar first organic certified poultry farm. Consumers buy organic food mainly because of health benefits. People who believe in health benefits, taste and protection of environment and believe to improve their life style can be potential consumers of organic food. Since the consumers have lost some trust in food derived from conventional production due to mad cow disease, food-and-mouth epidemic and concerns regarding use of pesticides in farming, they do have the positive perception and attitude towards organic products. Earlier studies has identified several factors that restrain consumers from buying more organic food. Apart from a lack of availability of organic products, a lack of trust in and awareness of organic food and the price premiums of organic compared with conventional products are considered as major barriers for customers to consume the organic food. “Growers here are aware of the dangers of chemicals, but they still must use lots of pesticides and preservatives to keep the foods fresh when transported from rural to urban areas. It is more expensive to store and transport organic produce so, up until now, farmers have planted organically for sale only in nearby areas,” said U Wann Tin, owner of Sein Le Oo Organic Farm, which produces organic mushrooms. He added that consumers in Myanmar are still not thinking about whether the fruits and vegetables they buy are organic or not. They are more concerned about buying at an affordable price. So, the market for organic food is still not developed or widespread in Myanmar.Organic produce must also be certified for quality before being cleared for sale in overseas markets. “It is very costly to obtain an international organic certificate. I spent US$2,500 to get a certificate from the USDA and spent a similar amount to get a European certificate,” said Mr Wuttipong Krobbuaban, managing director of Phuchiangta Organic Co. Organic foods are pricy because a lot of money is spent paying for those certificates (Myanmar Times; 2017). Income is very important for consumer to buy the organic food as they are very expensive. If the consumer have higher income, they can buy the expensive organic food. About two-thirds of the population earns between US$ 125 – US$ 500 each month. The typical Myanmar consumer allocates between 46% – 49% % of their monthly household spending to cover food and other groceries, household products, and personal care products (Eurocham Myanmar, Consumer Goods Guide 2019). Figure 6: Average monthly household income (Source: WPP. “Spotlight on Myanmar: The ‘Leapfrog’ Nation”. 2016) Figure 7: Breakdown of monthly household expenditures (Source: Deloitte. The Myanmar Consumer Survey. Harvest opportunities in the golden land, September 2017) Other important factors influencing the consumers are health concerns, environmental consciousness, taste preference and preferred origin of food. Age also play a major role to buy the organic product. Younger consumers have been found to hold more positive attitudes toward organically grown food (Magnusson, 2001), yet older consumers are more likely to be purchasers as the price premiums on organic food may be more affordable by older consumers. Objective of the study The main objective of this study are To explore and determine the factors influencing consumer to consume organic food To provide understanding and valuable insight into consumer behavior regarding organic food and create the opportunity of organic food in market Expected benefit of the study This study will benefit agriculture companies by Finding the factors that influence the consumer behavior to consume organic food Pointing out the barriers to the growth of organic market Establishing the market opportunity of organic food  Reference Myanmar GDP: Goods: Agriculture 1986 – 2017, yearly, MMK mn, Central Statistical Organization Available at: https://www.ceicdata.com/en/myanmar/gross-domestic-product-current-price/gdp-goods-agriculture [Accessed 22 April 2019] CIA World Factbook Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/bm.html [Accessed 22 April 2019] Myanmar Sustainable Development Plan 2018 - 2030 Agriculture in Myanmar published by: Embassy of the Kingdom of the Netherlands, Yangon, 2015 https://en.wikipedia.org/wiki/History_of_organic_farming Trends in Food Science & Technology 16 (2005) 332-343 http://www.fao.org/myanmar/fao-in-myanmar/myanmar/en/ Myanmar Agriculture Development Strategy and Investment Plan (2018-19 ~ 2022-23) FAO/WHO Codex Alimentarius Commission, 1999 Available at: http://www.fao.org/organicag/oa-faq/oa-faq1/en/ Myanmar: Analysis of Farm Production Economics, 2016 https://en.wikipedia.org/wiki/DDT The History of Organic Farming, 2016 Available at: https://www.organicnet.co/en/magazine/the-history-of-organic-farming Myanmar can raise value, volume of agriculture exports by going organic Available at: https://www.mmtimes.com/business/27209-myanmar-can-raise-value-volume-of-agriculture-exports-by-going-organic.html Consumer Goods Guide 2019 published by Eurocham Myanmar Maria K. Magnusson, Anne Arvola, Ulla‐Kaisa Koivisto Hursti, Lars Åberg, Per‐Olow Sjödén, (2001) "Attitudes towards organic foods among Swedish consumers", British Food Journal, Vol. 103 Issue: 3, pp.209-227