In brandchannel’s new series with Yale University, a team of MBA students proposes how Fargreen can continue to expand its product offerings while providing income to local farmers. Their case study below reflects the views of the authors and not brandchannel or Interbrand.
Every year, up to 50 million tons of rice straw are burned after the rice harvest in Vietnam, resulting in car accidents due to poor visibility, respiratory problems and the release of greenhouse gases. Witnessing this as a child growing up in Vietnam, Trang Tran decided to make it her mission to find a way to reduce the need for burning rice straw.
In 2013, Trang founded Fargreen, which has developed an innovative rice farming practice in which farmers use rice straw as a substrate to grow mushrooms, therefore eliminating the need to burn rice straw. Fargreen then packages and sells these mushrooms to restaurants, providing farmers with an additional source of income. Fargreen also freeze dries mushrooms, allowing consumers to purchase mushrooms year round. Vietnam generates $25 million to $30 million annually from exporting mushrooms and there is an opportunity to bolster its mushroom production.
Under Fargreen’s business model, farmers earn “up to 50%” more in annual income, consumers can purchase trustworthy mushrooms year-round, and the environmental and public health risks associated with burning practices are reduced.
Fargreen’s model has clearly resonated with investors, as the company has won a number of prizes. Now, with startup capital secured, Fargreen should turn its attention toward streamlining its marketing strategy to focus in on its business-to-business (B2B) customers. In addition, larger companies can learn from Fargreen’s unique approach to combining social mission with profit.
Fargreen markets primarily to restaurants, supermarkets and other businesses. As Trang Tran states, “We want to work with companies that take social responsibility as seriously as we do. Our ideal customers want to reduce their carbon footprint, so they would opt to buy local products made in an environmentally friendly process. Together we can build sustainable farming in Vietnam and tackle climate change challenges.”
Fargreen offers straw and oyster mushrooms at a premium price. Fargreen currently works exclusively with rice farmers. To date, Fargreen has relied primarily on advertising from coverage in news outlets and blogs. The startup focuses its messaging on its social purpose of eliminating rice straw burning and increasing income for farmers.
Following are recommendations to help Fargreen bolster its marketing plan and increase its impact as it grows. Overall, Fargreen needs to create its brand and image, and communicate this successfully to consumers. It also needs to ensure that all Fargreen staff—sales and marketing—understand the brand and are better equipped to work hand-in-hand to achieve Fargreen’s goals.
- Fargreen should continue offering high-quality mushrooms to its customers, including both oyster and straw mushrooms.
- Fargreen should also consider offering additional types of mushrooms as appropriate as it enters into new markets.
- We recommend that Fargreen retains its premium pricing in the short term, but consider other pricing mechanisms to target new customers as the company grows. For example, it should consider offering discounts on bulk purchases of mushrooms or discounts for repeat customers.
- Fargreen is currently using exclusive or selective distribution. We recommend that it continue with its plans for expansion into their supermarkets and restaurants customers.
- Fargreen also needs to decide where it wants to sell to maximize its profit. Younger customers may be more likely to shop using a smartphone or on a website. Older customers might prefer to shop at retail outlets, supermarkets, etc.
- Fargreen is currently thriving on PR coverage, including press releases, exhibitions, conferences, seminars, trade fairs, and events.
- Fargreen should consider some traditional advertising such as radio, print, and leverage word-of-mouth advertising from current customers and distributors to drive awareness.
To date, Fargreen’s marketing has focused on selling their social impact to investors: how the mushroom harvest benefits the community and the world. To strengthen its business proposition, we recommend that Fargreen take its marketing one step further to include its customers, primarily B2B customers such as supermarkets and restaurants.
Fargreen currently tells its story in three parts: farmer benefits from added income, community benefits from the mushroom harvest and the products it creates. We recommend the following:
- Feature customers on the website interacting with the product. Featuring customers at restaurants or supermarket displays, for instance, will better enable website visitors to see the link between Fargreen and its mushroom consumers. This will also enable Fargreen to more clearly define its target consumer by featuring images of young professionals, families or others depending on which segment it is targeting.
- Quantify the impact of each mushroom purchase to further appeal to consumers. A label on the mushroom packaging could say something like: “By purchasing this package of mushrooms, you have prevented the need to burn X quantity of rice straw and have helped a farmer earn Y more in income.” While consumers are likely aware of Fargreen’s overall social purpose, this will help them understand their individual contributions.
- Use quality and taste as a differentiating factor. Recently, significant amounts of chemicals have been discovered on vegetables imported from China into Vietnam. Consumers in Vietnam have therefore become much more focused on food safety. Fargreen has already recognized that one of the value propositions for its mushrooms is the “trust gap” to emphasize that the origin and safety of its mushrooms can be confirmed, unlike many other vegetables. We recommend that Fargreen emphasize this point in its marketing to restaurants and consumers, through messaging on its packaging or through advertisements that appeal to families who use mushrooms in cooking and may care most about food safety.
- Make improvements to the Fargreen website to attract more traffic. Vietnamese consumers are increasingly turning to online marketing channels as a way to better understand businesses and make purchases. A recent eMarketer 2016 study found that “more than half (55%) of businesses in Vietnam made more than 20% of their sales online, with 20% indicating they made more than half of all their sales online.” Fargreen can make low effort adjustments to its website that would have a large impact on the website functionality:
- The website should clearly and prominently state how and where to purchase mushrooms. Surprisingly, this information is absent from the website.
- Clicking on the tabs on the menu bar in the website scrolls down the main page to that particular content. We recommend that each tab link to a new page. This is a more intuitive user interface that will create a clear delineation of content.
- The blog and social media links should be placed in a permanent sidebar. This will attract traffic to these pages and enable website visitors to see up-to-date information as they navigate through the website.
Growth Strategy. We recommend that Fargreen refine its growth strategy, beginning with a full market penetration in the current Vietnam. The company should then concentrate on developing their product range by introducing other types of edible mushrooms. Next, as Fargreen formulates a market development strategy for expanding existing products into new markets, it should aim for a more diversified portfolio of products and markets. Expansion may be a risky strategy in cases where certain markets or products are not yet proven. Fargreen should do further research on the needs and potential demand in each market before determining its growth strategy.
LESSONS FOR LARGE COMPANIES
Large corporations can learn from startups to create new, efficient ways to do things. Fargreen showcases several sustainability ideas that bigger companies can emulate:
- Closed-loop business model. Fargreen saw an opportunity in the waste of the current rice farmers’ business model and created a few steps to close the loop. This is a big win financially and environmentally. Bigger companies can invest more time on possible innovations with the current waste they produce and possibly even find new revenue streams from it.
The textile and the fashion industry could benefit from the closed-loop business model. For instance, fashion companies can use biodegradable products in their products, offer free repairs on garments, or institute an exchange policy to enable products to be recycled in-house.
- Creating shared value (CSV) around sustainability vs. corporate social responsibility (CSR). Most CSR divisions in large companies are seen as a cost center, not a profit center. Fargreen found a way to create shared value (CSV) with suppliers and other stakeholders from its sustainability initiatives. The farmers not only receive a new source of income and increased productivity year round, but also lessen the pollution they produce in their own local areas. Profit-sharing with different stakeholders is a great way to get buy-in for the changes and movements a company wants undergo.
- Quick, tangible and visible benefits for stakeholders. Fargreen produces visible, quick wins like eliminating the straw burning process and increasing farmers’ incomes. These tangible benefits promote buy-in of the product and the company.
By Valerie Akude, Kim Jackson, Grace Lange, Abdul Majeed Osman, Ernesto Reyes, Julia Reyes in partnership with Professor Kosuke Uetake of the Yale School of Management, Yale Center for Business and the Environment and Yale Center for Customer Insights.