Kasem Bundit Journal (Special Edition) October 2017

A Model of Thai Agricultural Co-Operative Product Development and

Marketing for Niche Markets

Sakchai Rakkarn1
Chiratus Ratanamaneichat2
Senee Suwandee3
Wilailuk Nakrungrueng4

Abstract
This article focused on Thai agricultural co-operative product development and
marketing for niche markets. Based upon practical experience at Phak Hai Agricultural Co-
Operative Ltd., and using branding strategies and niche marketing concept, “On-Wan rice
product development model was developed. The “On-Wan Rice Brand” was successfully
distributed in niche markets, such as hospital patients, elderly people, and health – concerned
people in both traditional and modern marketing channels.

Keywords: rice, product development, agricultural co-operatives, niche markets

1
Director,Master of Engineering Programme on Engineering Management, Kasem Bundit University,
1761 Patanakarn Road, Suan Luang, Bangkok 10250
E-mail: sakchai.rak@kbu.ac.th
2
Assistant Professor (Economics), Kasam Bundit University
1761 Patanakarn Road, Suan Luang, Bangkok 10250
E-mail: chiratus@gmail.com
3
Vice President for Planning and Development, Kasem Bundit University.
1761 Patanakarn Road, Suan Luang, Bangkok 10250
E-mail: senee.suw@kbu.ac.th
4
Manager, Phak Hai Agricultural Co-Operative Ltd., Thailand
E-mail: wilailuk8699@gmail.com
Kasem Bundit Journal (Special Edition) October 2017

Introduction two largest rice consumers in the world.

One of the most powerful tools (Foreign Agriculture Services, 2015)
used to end severe poverty, boost Generally speaking, agriculture in
shared prosperity, and feed nine billion Thailand was highly competitive, well-
people in the world by 2050 is diversified, and specialized. Rice was the
agricultural development (World Bank, most important agricultural export of
2015). Growth in the agricultural sector is Thailand in the world market. Thailand
about two to four times more effective was a main source of the United States’
in raising incomes among the poorest imported rice, being valued at $436.4
compared to other sectors, particularly million in 2012, a four percent increase
for 78 percent of the world’s poor who from 2011.
live in rural areas and depend mainly on Agricultural co-operatives could
farming to make a living. Agriculture. is be regarded necessary catalysts to
also crucial for economic growth. enhance economic benefits. They
However, agriculture driven growth and improved farners’ bargaining power in
poverty reduction, as well as global food the marketplace, helped reduc costs of
security, are currently at risk. Agriculture production, and provided such services
is more vulnerable to climate change as marketing, all of which were essential
than any other sectors. A warming for success in agriculture. (Suwandee, et
climate could cut crop yields by more al., 2013) . For these reasons, agricultural
than 25 percent. co-operatives should be established in
As far as rice production and regions where there were a weak and/or
consumption were concerned, annual failing market, high input costs, and a
global rice consumption was lack of input and product marketing
approximately 437 million metric tons services (Ortmann and King, 2006).
(MT) on average for the last five years. In
less-developed countries, increasing per Research Objectives
capita income typically resulted in This paper aimed mainly to
decreased per capita rice consumption analyze the supply chain of rice, using
because increased income led to dietary Phak Hai Cooperative Ltd. as a case
diversification and an ability to purchase study, i.e, rice farming process, rice
more expensive foods. China and India product development, branding strategy
accounted for 51 percent of the world’s and marketing.
consumption of rice in 2011, being the
Kasem Bundit Journal (Special Edition) October 2017

Methodology inspectors. In addition, it had advisors

Besed on data collected from providing suggestions on such matters as
Phak Hai Agricultural Co-operative in agriculture in general, production, and
Ayutthaya province, the methodology of marketing. The majority of the co-
this research were classified into 2 parts. operative members were farmers. The
The first part dealed with seeking the planting areas for the major rice crop
appropriate rice variety that was able to and the second rice crop were 72,000
tolerate floods annually. The second and 8,000 rais, respectively. The major
part was concerned with applying rice production areas were normally a
business strategies: stories, images and natural buffer zone, a water retention
associations to form the marketing area from the Chao Phraya River and the
model to increase sell volume of the Noi River, or the so – called “Monkey
rice product. Cheek” area. During the flooding season,
the cultivated areas were reduced to
History of the Phak Hai Agricultural only 8,000 rais. Farmers who were
Co-Operative affected by the disastrous flood were
The Phak Hai Agricultural Co- unemployed and usually were forced to
operative was located at 217/1 Moo 4, leave their homes to seek employment
Tambon Phak Hai, Ampher Phakhai, in the industrial sector in Ayuttaya or
Ayutthaya Province. It was registered elsewhere. The co-operative also played
with the Ministry of Agriculture and a role in alleviating these farmers from
Cooperatives under the Co-operative Act the burden of the flood damage.
on October 1, 1970. The Co-operative
was established by merging 39 co- Rice Farming
operatives with the intention to help and During 2011 and 2012, there were
strengthen its members. As of April 30, nearly 4,160 families registered as
2012, there were 1,975 members. The farmers in the Phak Hai area. There were
available working capital was 69,130 rais (11,060 hectars) of rice fields
approximately 89 million baht while the that could be planted twice a year. The
shared capital was almost 18 million major rice crop was grown from June to
baht. There were 14 people in the October while the second rice crop from
administrative committee, 15 people November to March annually. The yield
being responsible for management, and of each crop was approximately 50,745
three people in charge of co-operative metriction, which was estimated to
Kasem Bundit Journal (Special Edition) October 2017

worth approximately 507 million baht. approximately 40 percent of the average

Therefore, the total value of production yield.
was approximately 1.015 billion baht per In the past, Thai farmers
year. There were 2,000 households collected paddy seeds from their fields
registered as Phak Hai Agricultural Co- for plantation in the following year. This
operative members. The total area of activity, which had been practiced
rice fields was roughly 64,000 rais which continuously from the time of their
was about 93 percent of the total ancestors, resulted in the deterioration
planted area in Phak Hai. of the quality of paddy seeds, low
In 2013, the Co-operative owned productivity and poorer grain quality.
a 200 ton-per-day rice mill, a 140 ton- Rice Varieties.
per-day fluidized bed paddy dryer, and a Facing floods every year, a suitable
30 ton-per-day seed screening plant. The flood-tolerant local rice variety was
National Center for Genetic Engineering investigated to isolate the gene
and Biotechnology (BIOTEC), under the responsible for flood endurance, high
National Science and Technology yield, and good grain quality, plus
Development Agency (NSTDA) and the pest/disease resistance. Using the
Ministry of Science and Technology, technique known as “marker-assisted
provided the budget for the paddy dryer backcrossing”, scientists transferred the
and the seed screening plant. The Co- water tolerance trait of interest into
operative was self-sufficient when it was commercially valuable local rice
able to produce Homchonlasit paddy varieties, without losing any useful
seeds in the ratio of 550 tons per 1,000 characteristics, which made these
rais. The ability to produce the paddy varieties prevalent among rice farmers
seeds helped to reduce paddy (Clayton, 2010). The Rice Gene Discovery
production cost, the total of which was Unit (RGDU), a joint laboratory between
approximately 250 baht per rai. In the the National Center for Genetic
past, farmers had to buy paddy seeds Engineering and Biotechnology (BIOTEC)
from outside. In addition, Farmers used and Kasetsart University, played an
15 kilograms of paddy seeds per rai, a important role in Thailand’s rice research
reduction from the previous 25 kilograms activities. The researchers identified
per rai. Moreover when a flooding valuable characteristics for rice breeding,
disaster took place, they were able to including tolerance to antibiotics,
harvest at least 320 kilograms per rai or advancing Thai’s rice agriculture through
Kasem Bundit Journal (Special Edition) October 2017

molecular breeding with regard to Homcholasit rice with flash flooding

stresses like submergence, drought, and resistance was bred from IR57514 with a
salinity. They also recognized other resistant gene and KDML105. Biomarkers
useful characteristics, including resistance were used in order to select rice seeds
to diseases, e.g., bacterial leaf blight, with superior quality, such as flash
blast, and pest, as well as those flooding tolerance, satisfying flavor, ease
characteristics that improved rice quality of cooking, and non-photoperiod
and nutritional value. The genes and sensitivity. In addition, the selected seed
quantitative trait loci (QTLs) controlling could be planted for more than one
these useful characteristics were crop per year. Homcholasit rice could
identified and used in molecular-marker endure flooding for two to three weeks
assisted selection rice breeding programs and yield 900-1,000 kilograms per rai.
to create new and improved rice Therefore, this variety is suitable for the
varieties. Two rice varieties that were central land that normally faces flash
commonly targeted for improvements floods.
were the jasmine rice called Khao Dawk In 2009 the National Center for
Mali 105 (KDML 105) and the glutinous Genetic Engineering and Biotechnology
jasmine rice (RD6), both of which were (BIOTEC) began to transfer the
highly adaptable to the rain-fed lowland technology needed to enhance the
areas of Thailand. Molecular breeding quality of seed production, from
programs in Thailand so far have registered seeds to certified seeds, to the
produced many improved rice varieties. farmers who were members of the Phak
Among them, three showed great Hai Agricultural Co-operative. This project
promises: Homali 80, Homcholasit, and boosted the farmers’ capability to
Thanyasirin. Homali 80, an improved produce these registered seeds by
version of KDML 105, was tolerant to themselves. Farmers planted paddy
flash floods and could survive being stalks into submerged fields and
submerged for as much as three to four laboriously harvest the ears of the
weeks. It could be planted only during paddy. The Technology transferred to
the wet season,though. Homcholasit was farmers by NSTDA and BIOTEC was
also derived from KDML 105 and was helpful in that it alleviated the distress
tolerant to flash floods (Toojonja and of the Co-operative’s members and
Lanceras-Siangliw, 2013). people who faced a flooding problem,
Kasem Bundit Journal (Special Edition) October 2017

resulting in sufficient income for their differentiated product is lost with

families increased competition. Eventually, every
agricultural brand needs to find a distinct
Branding and Niche Marketing Strategy differentiator to retain its niche (Lakshmi,
Branding accounts for one of the 2013).
most important aspects of business There are three basic
strategies. Branding is sometimes requirements that co-operatives must
considered to be merely an advertising satisfy in order to form the foundation
function. In addition, many managers for an effective marketing program. First,
and business writers hold the view that there needs to be a well-thought-out
branding is about the management of plan which utilizes a niche strategy and
product image. It is also a supplementary has a competitive orientation. Second,
task that can be isolated from the main the plan and its supporting programs
business of product management. There should be market-oriented rather than
are three forms of branding: stories, producer-oriented. Third, co-operatives
images, and associations. Stories and must have management personnel who
images are the more potent sources of are experienced with value-added
brand culture. Brand stories and images products, possessing broad expertise and
have plots and characters. They rely perspective, as they strive to be value-
heavily upon metaphor to communicate added marketers (Hardesty, 1992). Niche
and spur our imaginations. Thinking of a markets are created as consumers
brand is associated with the residue of become more sophisticated and can
these stories and images. We may afford to pay a premium for exotic,
overlook the specifics of a product story novel, or specialty products. These new
but still attribute some product types of “lifestyle” products, i.e., those
characteristics to the brand (Holt, 2003; that fulfill the needs of an elite
Thompson, et al., 2006). Moreover, consumer group, have created a new
organic farming and specialty agricultural market segment, namely niche products.
productions are some ways used to Specialty coffee produced from a limited
create a differentiated product offering, a number of farms is an example of a
brand which commands a premium product that is in such scarce supply
pricing, for example, special rice for that it can command a price many times
diabetics, fortified milk, and organic higher than mainstream coffee products
vegetables. However, the advantage of a (Ferris, 2012). Thus, Niche market is an
Kasem Bundit Journal (Special Edition) October 2017

attractive opportunity available to small strategies while creating new revenue

businesses forced to compete against streams (Dawn, 2012).
the scale economies that larger The Phak Hai Agricultural Co-operative
competitors are able to achieve. In Ltd. created the stories and image
agricultural sector, there are a few of the strategies under the brand “On-wann,”
alternative product choices sought by which in the Thai language means less
specific consumer segments. Exploring sugar, or less sweetening. In addition, the
niche markets is representative of the set stories of the flooded area and healthy
of management strategic choices, as food were identified on the product’s
niche marketing provides creative package. The modern (right figure) and
managers with a means to use new traditional (left figure) packaging are
management skills and marketing compared in the figure below:

Figure 1. Comparison between Traditional and Modern Packaging

Marketing Development Model consumed their products. The Co-

The Phak Hai Agricultural Co- operative’s marketing strategies foused
operative Ltd. would be regaraed as an on the niche markets and merit
ideal co-operative. Its products were perception. For example, the Co-
sold in department stores and in general operative’s target customers were
wholesale and retail shops under the hospital patients, elderly people, and
brand “On-wann.” In addition, the Co- healthy people. It also created merit
operative brought members together. perception by supporting and purchasing
They were self-sufficient throughout the farmers’ products planted in the flooded
whole process as they planted, areas. Buyers were satisfied from
collected, transformed, sold and supporting the farmers and healthy
Kasem Bundit Journal (Special Edition) October 2017

health from the consumption of area, and farmers at that time were
nourishing rice. The Co-operative aimd to often unemployed and mostly
support its members by promoting encountering poverty. They investigated
productivity and enhancing marketing the rice varieties which had the
capability. The activities started from characteristics of flood endurance and
preparing the superior quality of rice pest resistance. The Homcholasit rice
seeds, arranging budgetary and seed was provided by the National
production factors, transforming Center for Genetic Engineering and
products, and selling products to Biotechnology (BIOTEC). In addition,
members and nearby communities. The BIOTEC transferred the technology to
increased revenue was returned to the enhance the quality of seed production
Co-operative and its members. so that the seeds could tolerate flooding
Members’ participation was the for two to three weeks with a yield of
foundation of the Co-operative. 900-1,000 kilograms per rai. Branding was
Therefore, group participation led to created in the form of modern packaging
shared benefits for the members and the under the brand “On-wann,” which
Co-operative’s longevity. As a result, the described all stories and product
members of the co-epperative were features. Healthy food and merit
increasingly engagd in rice farming as perception became the popular aspects
their main activity. of this product which was launched into
the niche markets, such as hospitals and
Conclusion nursing homes. Moreover, the product
Phak Hai Agricultural Co-operative was sold in wholesale and retail
Ltd. was a case study of a product businesses in national and international
development and marketing model for trading. As a result, the Co-operative
realizing economic benefits. The Co- earned an increasing return and gained
operative was located on the flooded more registered members.
Kasem Bundit Journal (Special Edition) October 2017

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