Quinoa
Posted - February 1, 2008
Are Prices Fair Along Quinoa’s Supply Chain?
By Leah Dobkin - as printed in O.W.N. Spring 2008
Last September, Organic & Wellness News took part in a press mission to Ecuador that included visiting organic projects, quinoa farmer cooperatives from Riobamba among them. The cooperatives receive 39 cents/lb for organic quinoa (27cents/lb for conventional).
Back in Canada on a trip to Farm Boy, a local grocery store chain in Ottawa, Adriana Michael, publisher of Organic & Wellness News, discovered organic quinoa from Bob’s Red Mill, a US based wholesaler who buys the organic quinoa from ERPE’s cooperatives in Ecuador, via Importer Inca Organics. The quinoa package of 725 grms on the retail shelf had a price tag of 8,99 CAD ($8,89 US).
Surprised of the difference in price from producer to end consumer for a product with no significant added value, Michael wondered what the costs were along the distribution chain, and if the system and price structure is fair to farmers and consumers? Are there hidden costs, or are there just too many links in the chain?
The quinoa’s supply chain, as with other food ingredients, includes the farmers, cooperatives, processors, exporters, importers, wholesalers and retailers. Some of these links are more forthcoming than others about costs and profit margins.
ERPE, a nonprofit foundation concerned with malnutrition and living standards of indigenous communities in Ecuador, started the Coprobich cooperative consisting of 3,000 quinoa farmers. The cooperative sells quinoa to Sumak Life, a nonprofit facility which cleans and packages the quinoa in Riobamba, Ecuador and pays the fees for organic and fair trade certifications.Sumak Life receives 26 cents/lb to clean and process the quinoa. The fair trade product is exported to France. The organic certified harvest goes to the UK and the U.S.
Marjorie and Bob Leventry, owners of Inca Organics in the U.S. buy the quinoa FOB Riobamba for 0.70 cents/lb from Erpe/Sumak Life. They sell the quinoa to distributors such as wholesaler Bob’s Red Mill at 0.87 cents/lb. Inca Organics pays for shipping to port, shipping to USA, England and Canada, insurance and warehousing. The quinoa enjoys duty-free status.
Bob’s Red Mill Natural Food’s quinoa sells for 8.99 CAD (8.89 US) for 725 grams at Canada’s retail stores. Taken together the wholesaler, distributors and retailer have created over a 600% mark-up. The farmer receives approximately seven percent of the profit.
Infinity Foods of Brighton, UK is the European importer, wholesaler, and packer of the organic quinoa coming from ERPE’s cooperatives in Ecuador. According to Infinity representative, Robin FitzGibbon, Infinity’s profit margin is between 10-25%.
Matthew Cox, Marketing Manager from Bob’s Red Mill Natural Foods, says “I can tell you that the margin is typical for our industry and consistent with margins for the other products in our line. You should keep in mind that between Bob’s Red Mill and retailers, there are distributors that elevate the final cost for retailers.”
Prices can vary from country to country, and as exchange rates change. Packaged quinoa is selling in the U.S. at $5.17 /lb at a small food cooperative and $3.45/lb at Whole Foods. Packaged quinoa is selling for $3.49/lb to $4.79/lb on various web sites (not including S & H). Bulk quinoa in health food stores goes for anywhere from $1.59 pound for white quinoa to $2.49 pound for red quinoa. The health food store pays around 0.70 to 0.95 cent/pound for bulk quinoa.
The best deal for consumers is buying quinoa in bulk at health food stores, where often costs are minimized because the health food store buys directly from the importer, and skips the distributor and wholesaler.
There are many factors that influence costs, such as labour, cleaning and processing, manufacturing, packaging, international and national shipping, inventory/storage and insurance. It is difficult to determine if mark-up and profit margins are out of line without full disclosure of all of these costs. “Weather, natural disasters, insects, poor grain processing, and improper storage can affect the quality and costs of quinoa,” says Cox.
For example, farmers can face enormous problems growing quinoa because of more extreme weather systems caused by global warming. In 2006 frosts came late in the year and a volcano spit ash over the fields last year, killing the small plants and ruining most of the crop.
FitzGibbon says there has been a 5% increase in quinoa prices over the last six months, and believes it could increase by 10-20% in 2008. Juan Perez Sarmiento, executive president of ERPE, says “Prices may increase abroad… here we have a set up price, but no protection for the farmer if the harvest goes wrong.”
It seems that quinoa costs and profit margins are consistent with other whole food grains. And costs can be slightly higher because of the difficulty of transporting the quinoa from high mountainous regions, and the processing cost to remove the saponin, a bitter coating on the quinoa.
Never-the-less, sticker-shocked consumers like Adriana Michael, who buy packaged organic quinoa from stores, can’t help but wonder if there is any way to stream line the quinoa chain to lower costs to consumers, and increase profits for farmers.
Pablo Laguna, is a quinoa consultant and researcher who developed the quinoa standard for the Fair Trade Labeling Organization (FLO) in 2004. He believes that FLO needs to review the standard, and to increase the fair trade price that farmers receive for their quinoa. For quinoa to truly become a sustainable crop for the indigenous people of the Andes, and a sustainable business for everyone else involved, perhaps a careful review of the distribution chain might be in order as well. It would definitely help if interested consumers could find out more easily, what portion of their dollars goes to the farmers, and how.
Responsible Production
Posted - February 1, 2008
The Responsible Production Route
O.W.N. News Network - as printed in O.W.N. Spring 2008
Every TV network, magazine publication, radio newscast, and several international conferences are putting an enormous amount of attention on social responsibility and environmental sustainability these days, making it a daily part of major corporate discussion.
Over 30 years ago Dr. Ignacy Sachs launched some of the fundamentals of today’s debate regarding the need for a new development paradigm, based on the convergence amongst economy, ecology, cultural anthropology and political science. His ideas are more clearly understood today in the scenery of climatic change and world social and political crisis, as a result of which economic and financial policies are forcing corporations to behave more responsibly and sustainably.
This change is due primarily to the fact that mainly European consumers and hence retailers and their suppliers, including buyers of large scale commodities, have begun to demand proof of accomplishment of such sustainability, as is the case of certified Brazilian soy and derivatives, palm oil, and sugar among others.
The demand inspired companies like Cert ID®, an international certifier leader in non-GMO certification, traceability and Identity Preservation (IP) Systems, to start programs to address the issue.
Cert ID® created the ProTerra® Certification Program for Environmental Sustainability and Social Responsibility in 2005. The Certification Standard was developed based on the Basel Criteria for Responsible Soy, an initiative driven by the World Wildlife Fund (WWF ) and Swiss retailer COOP. Designed to harmonize several standards, including Fairtrade, EurepGap, and the Codex Alimentarius, ProTerra allowed Cert ID® to focus on any agricultural commodity in the marketplace, not just soy.
Augusto Freire, Cert ID®’s CEO for Brazil, explains that “ProTerra® covers areas such as child labor, fair wages, living conditions, social security, freedom of organization and association among workers, protection of non-crop vegetation and high value preservation areas such as the Amazon Biome, waste and water management, energy management and greenhouse gases, toxic and polluting materials”.
ProTerra® was responsible for the inspection of a large number of farms in Brazil in 2006 and 2007 totaling almost US$ 1 billion of certified soy volume. In 2008, Cert ID® is taking ProTerra® to different areas. The company is finalizing negotiations with sugar mills in different countries, an American organic vitamins producer, and palm oil and derivatives in Brazil and Asia.
“The program has also been a target for European producers of sustainable BioFuels,” says Freire. Cert ID® expects to close a deal in the field by year-end. Cert ID® has headquarters in the USA with offices in Brazil, UK, and Japan. “ProTerra is a means to ensure implementation and monitoring of responsible practices in agriculture, transport, storage, and industrial processing of food and feed”, added Freire.
Bionade
Posted - February 1, 2008
“Made in Germany” Bionade Takes a Thirsty World by Storm
By Adriana Michael - as printed in O.W.N. Spring 2008
Bionade, a unique line of organic certified, healthy soft drinks is ready to enter the North American market following rapid European expansion from 2005 onwards.
Bionade is brewed in the small village of Ostheim vor der Rhon in Bavaria through an innovative fermentation process designed by German master brewer Dieter Leipold. When Leipold’s Beer business became threatened by more modern, universal beer brands he knew he needed something fresh that would renew his business.
Leipold discovered a special brewing method that intensifies sugar`s sweetness but not its calories; the fermentation transforms sugar into gluconic acid, a natural occurring substance in honey and fruits, that could replace alcohol in his new formula. Gluconic acid reacts with minerals in the water and generates calcium and magnesium. As a result of the ingenuous combination of a few simple and natural ingredients malt, water, sugar, and fruit essences, Bionade was born, a truly healthy drink!
Bionade is certified organic and is made with local ingredients when ever possible. Now available in Lychee, Elderberry, Ginger-Orange (the flavour most favoured by several taste-testing awards), Herbs and sporty Forte flavours, the brand has taken off in Germany through the high-end consumer and health food markets and is now rapidly expanding through Europe. Bionade is sold in many major retail chains such as Rewe, Tegut, Edeka, Metro and Ikea.
Initially, Bionade was conceived as a natural and healthy soft drink for children. It was then branded as a health-food drink and sold mainly through health retailers. Sales were lacklustre. A change of strategy was needed.
The brand’s tipping point in Germany came in 2005, says Wolfgang Blum, associate partner and chief marketing officer of Bionade International. That year, influential consumers began to spread the news about Bionade through word of mouth. Its popularity quickly snowballed amongst the young, the hip and the health-conscious. The firm became unable to keep up with demand.
Blum describes the new marketing strategy as follows: “Let the brand speak for itself.” This involves spreading positive information about the brand through the mass media and individual opinion leaders. The goal? To have more and more people “discover it and talk about it, and make them ambassadors of the brand,” Blum says. The change in strategy helped the product to take off by attracting a critical mass of consumers rather than a niche market.
The drink, which Blum describes as “the most contemporary soft drink for the lifestyle of health and sustainability,” also sold based on its uniqueness. “Bionade is an original, like Coca-Cola and Red Bull, and originals are always much more charismatic and attractive than copies,” Blum says.
Original enough that the Coca-Cola firm itself offered to buy out Bionade in 2004. Bionade’s owners declined the offer. Coca-Cola is currently “just one of our distributors,” Blum says.
Bionade has won several awards at home and abroad, such as Best Carbonated Beverage from beverage industry trade publisher BevNet in 2007.
North American expansion was delayed by the brand’s European success. Some US distributors have been sitting on the edge of their seats after discovering the beverage through European contacts years ago.
“The most frustrating thing has been the length of time to get it,” says Andreas Hildebrandt, a Western US distributor who has been awaiting the first full US Bionade shipment in March 2008.
“Bionade could not keep up with the demand in the markets they had entered,” says Hildebrandt, who owns Chrissa Imports. The drink-maker waited until it was better able to satisfy anticipated US demand.
Its manufacturing facilities are working at high capacity. According to Blum, the firm runs two 8-hour shifts plus occasional overtime. Altogether, it has about 180 employees. From 2 million bottles in 2003, the company filled around 200 million in 2007, a juicy annual growth of 300 percent.
Bionade and its distributors are optimistic about the US expansion. “As the smallest importer with only three states, I still receive e-mails every day from consumers who have heard about Bionade and want to know when and where they can get it in America,” says Ken Weeks. His firm Liquid Access covers the states of Georgia, North Carolina and South Carolina.
Having promoted Bionade at two US trade shows in the past few months Weeks says: “The reaction from consumers, distributors, buyers, and other exhibitors is very positive.” Blum reports that the firm will not hesitate to open a US bottling plant if and when it makes both economical and ecological sense.
Managing director Peter Kowalski, sales manager Eike Buschmann and their team will be exhibiting this season at Biofach Nuremberg, Expo West Annaheim, Natural Products Europe in London and All Things Organic in Chicago.
Besides developing its strong brand and logo, the Bionade firm sponsors various organizations. The firm focuses on ones that advance the needs of culture, children, nutrition, general health and popular sports, Blum says. For instance, Bionade is the official partner of Germany’s national school sports foundation.
First Europe, now the North American and Asian markets: not bad for the brainchild of a small German family brewery, nor for the many consumers and health food retailers who benefit from the nutrition of Bionade’s sparkling healthful drinks.
