Consumers join the fight for fair remuneration to farmers

Introduction

Fact1: The world population is currently 7.6 billion and expected to reach 8.6 Billion by 2030. As per FAO, 815 million of the 7.6 billion people, or one in ten are suffering from chronic hunger

Fact2: According to UN Intergovernmental Panel on Climate Change (IPCC), the planet will reach the crucial threshold of 1.5 degrees Celsius (2.7 degrees Fahrenheit) above pre-industrial levels by as early as 2030, precipitating the risk of extreme drought, wildfires, floods and food shortages for hundreds of millions of people

Fact3: Without urgent and concerted political action, it is projected that global resource extraction could grow to 190 billion tons by 2060; In 2015, almost 12 tons of resources were extracted per person

As the world population continues to grow, much effort and innovation are needed to increase agricultural production sustainably. The global supply chain needs to improve, food losses and waste have to decrease. Above all, those who are suffering from hunger and malnutrition have access to nutritious food. Extreme poverty and hunger are predominantly rural, with smallholder farmers and their families making up a very significant proportion of the poor and hungry. Thus, eradicating poverty and hunger are integrally linked to boosting food production, agricultural productivity, and rural incomes. Agriculture systems worldwide must become more productive and less wasteful. Strengthening the resilience and adaptive capacity of small-scale and family farmers, whose productivity is systematically lower than all other food producers, is critical to reversing the rise in hunger.

Furthermore, worldwide material consumption has expanded rapidly, as has material footprint per capita, resulting in undue pressure on natural resources, including extreme climate change. Urgent action is needed to ensure that current material needs do not lead to the over-extraction of resources or the degradation of environmental resources. It calls for mainstream sustainability practices across all sectors of the economy.

We believe that a focus on food and agriculture for the next five years is crucial to address the issues mentioned above.

The French farmer’s situation and the answer from the consumers

As is the case in many countries, the French farmers have become increasingly marginalized over recent years, as large corporations have gained in size within the food industry. Despite France’s revolutionary history giving rise to a constitution firmly centered around the organization of labor as a way to fight against tyranny, farmers find themselves losing their bargaining power against grocery stores and consequently suffer from diluted financial returns.
On average, supermarket chains such as Carrefour and Casino pocket a margin of 30-40% on farmers’ products and control the retail price within a range acceptable to consumers that maximize quantities sold. Additionally, the proliferation of producers operating in the same product categories results in a scarcity of shelve space, further deteriorating the bargaining power of individual producers.
These dynamics result in a competition so intense that farmers are often selling at a loss or around break-even. A well of mental health issues ensues from these financial pressures, with suicide rates ranging at 30% higher among farmers than the national average. Farmers organized protests and demonstrations where they demanded an increased price floor and curbed promotional offers. Nicolas Chabanne, founder of «C’est qui le patron», believes that such a revolution can also come from the consumer side. He realized that there is sufficient receptiveness from customers to pay for a fair price, not the lowest price, for quality products that have the exact specifications as they demand.

CQLP and the SDG goals

“C’est qui le patron” ( CQLP) is an initiative that aims at re-establishing the transparency between farmers, processors, retailers, and consumers. It empowers the consumers to purchase and consume products by fully being aware of the impact they are having on the world through their consumption. At the same time, the organization ensures that various stakeholders along the food production chain are compensated relatively in return for high quality and eco-friendly produce. CQLP, through its produce-to-order model, also provides a minimum or zero wastage in food consumption. Thus, CQLP, by focusing on sustainable agricultural production and consumption, ensuring a fair share of income to the producers, reducing the climate impact of agriculture is capable in a way, of achieving the entire set of SDGs indirectly. More specifically, it has succeeded in attaining UN SDG2 and UN SDG8.

UN SDG2 Target 2.3: By 2030, double the agricultural productivity and incomes of small-scale food producers, in particular women, indigenous peoples, family farmers, pastoralists and fishers, including through secure and equal access to land, other productive resources and inputs, knowledge, financial services, markets and opportunities for value addition and non-farm employment

Achievements:

In just three years the brand has boosted the incomes of more than 3000 farmers
Prices for each product are determined through voting, and one can demand payslips as proof that farmers received their fair share of the produce

UN SDG Target 2.5: By 2020, maintain the genetic diversity of seeds, cultivated plants and farmed and domesticated animals and their related wild species, including through soundly managed and diversified seed and plant banks at the national, regional and international levels, and promote access to and fair and equitable sharing of benefits arising from the utilization of genetic resources and associated traditional knowledge, as internationally agreed

Achievement:

For each pot of honey sold, 11 cents go to the FSAB. The fund’s mission is to help develop projects in favor of biodiversity

UN SDG TARGET 8.4: Improve progressively, through 2030, global resource efficiency in consumption and production and endeavor to decouple economic growth from environmental degradation, per the 10-year framework of programs on sustainable consumption and production, with developed countries taking the lead

The cooperative’s business model

CQLP is an organization that brings together environmentally conscious consumers, producers, and retailers to help promote a sustainability-driven production process. The organization includes a cooperative of consumers who choose what products they would like to see produced, what methods and specifications need to be followed by producers, and how much they are willing to pay. Consumers pay a nominal fee of 1 euro to join the cooperative. General consumers vote on the selection of products and their specifications through a survey. CQLP analyses and triages the answers and takes them to partner organizations, including farmers, manufacturers, retailers. CQLP ensures that the producing partners can fulfill the requirements and share the values CQLP advocates. Once the products finish their manufacturing cycle, partnering retailers sell them under the CQLP brand.

In essence, CQLP functions as a platform that connects consumers willing to pay more for sustainably grown products to producers, processors, and retailers. CQLP’s main activities include maintaining its platform, running the survey, communicating results to the participating partners, fostering partner relationships, and negotiating on the producers’ behalf and ensures they get a fair price for products.

Its main communication channels include its website as well as promotional events at participating retailers. By utilizing social networking platforms and its network of retailers, CQLP saves money on advertising.

CQLP’s “customer segments” include 1) environmentally conscious consumers, likely middle-upper class, who are willing to pay a premium for higher quality products, 2) small farmers who are squeezed out by large retail chains, and are looking for ways to produce profitably.

CQLP’s primary sources of revenue include the one-time subscription fee paid by consumers and a 5% commission on every product sold. CQLP’s costs include maintaining its website, staff, marketing (though limited), as well as office overhead.

This business model incorporates several business model innovations. It effectively applies the build-to-order model to the agriculture and food manufacturing industry. The traditional production process is re-sequenced and starts with customers choosing the products. The “produced-to-order” model reduces demand uncertainty while controls that the right product quantity reaches the market. This approach allows for customization by involving consumers in the production planning process and allowing them to choose the exact product specifications they desire.

CQLP also leverages the platform model by positioning itself among consumers, producers, and retailers, facilitating the interaction and negotiations. The platform aims to align the incentives among the various stakeholders.

CQLP’s primary goal is to ensure high-quality, healthy, and sustainably sourced products. It achieves this goal by identifying sustainability-conscious consumers and partnering with producers and retailers who share CQLPs values. This method aligns financial and sustainability goals. The more sustainable and high-quality goods are produced, the more consumers would be willing to join the cooperative, and the more money producers would be able to receive for their goods.

There are many sources of uncertainty associated with this business model. The model assumes that consumers would be willing to pay a premium for sustainably produced goods. The assumption may not reflect reality, especially in the aftermath of the COVID crisis, when consumers saw their income reduced. This uncertainty is partially offset by the “produced-to-order” approach, which allows assessing demand more accurately before initiating production. Another approach CQLP can consider is entering into longer-term contracts with restaurants and other establishments to enable a more predictable and stable demand.

Another possible uncertainty is the underlying cost of raw materials. Prices are voted on by consumers upfront, but there are several months between the price decision and production completion when significant cost fluctuations may impact the profitability of producers. A substantial, unpredictable increase in the cost of input may require an increase in the price expected from consumers, but not all may be willing to pay the extra premium. To mitigate this risk, CLQP can work with producers and processors to implement risk mitigation plans, including financial hedges and operational hedges, to control how raw materials are purchased.

A third possible risk is that producers save costs by not following the sustainability specifications desired by participating consumers. This risk can be mitigated by CQLP effectively screening partner producers, reviewing documentation and certifications attesting to the producers’ capabilities for sustainable production, and implementing random audits to corroborate that suppliers comply with the sustainability requirements.

Downsides to the business model

There are few downsides to CQLP’s business model, though scalability toward an international brand would be chief amongst them. As food retailing remains a somewhat opaque process, consumer awareness on food ethics, regulation, pricing, and quality issues may be at opening stages in many jurisdictions. As an example, Fair-trade products have picked up significant momentum in recent years and now amounts to $9 bn worth of sales globally; the penetration rates remain low in developing countries and rural communities of developed countries. Scalability, therefore, requires careful study of market and supply chain characteristics and consumer receptiveness to responsible purchasing behavior. However, the scale is possible to achieve, as proven by the emergence of similar initiatives in markets such as the US, UK, Belgium, and Spain.

As CQLP corrects for shortcomings in government regulations and fulfills its role in protecting the interests of producers, an unintended consequence from such social enterprise is further government oversight and complacency. As an example, farmers’ demonstrations in France ultimately led to legislation changes in February 2019 that include the increase of floor pricing on certain food items. It would be unclear whether farmers’ requests would be met with the same urgency if consumers partially protect their interests via CQLP and similar initiatives.

CQLP’s goal of producing products according to consumer specifications while generating an acceptable return to producers is already a success story. It will likely remain so in the next five years given current momentum with food retailers and large food multinationals such as Nestle and Danone, all eager to carry its products and develop additional CQLP-labelled products based on the same principles.

How can CQLP scale-up?

International scaling-up

Local variations of “CQLP” exist in Italy, Spain, Belgium, Greece, Germany, UK, and Morocco. The process to export the concept starts with someone or an association contacting the French cooperative about deploying the concept in their home countries. A representative comes to the French headquarters to meet the founding team. Together, they evaluate the feasibility of the idea. They check the concept feasibility in the country, the IT backend duplication, and the questionnaires for choosing the products. The last point is the most difficult one, though. The effectiveness relies on the consumer’s answers, conditioned by the culture and the environment. For instance, CQLP France’s first product was milk, whereas CQLP Italy’s was pasta.

Barriers for international scale-up

Individuals and organizations currently exporting the CQLP model outside of France knew about the model through media articles. The movement is not as widespread as expected given the niche market (French/European sustainable consumption) in which the brand is present
Low or lack of consumers adhering to the cause. If the brand cannot engage with local costumers, it results in low participation in the product launch questionnaire. Therefore, the risk of launching a product unable to drive demand increases
Resistance from international distributors to agree with reduced margins
Ineffectiveness of mouth-to-mouth marketing campaigns. One of CQLP’s strong marketing strategy is not to invest in marketing campaigns while letting the consumer be the brand’s ambassador.
Lack of qualified local producers: If the brand doesn’t find skilled local producers, either the cooperative develops a producer or changes its promotional message

Concept experimentation and deployment

The new cooperative has to find costumers and producers adhering to the brand. The customer profile is someone educated who cares about fair trade cause, and it is willing to pay the additional cost that brings a CQLP brand. Such customers usually belong to upper-middle classes. The cooperative can carry out surveys with university students, young adults, and families, particularly those who have a relationship with France or the sustainable development field.
Once the first product has been identified, the cooperative would have to prospect competent producers throughout the country. The company could approach local universities for such contacts since some have manufactured and sold products directly to the customer.
The new cooperative could also replicate CQLP’s approach with Monoprix: a fair-trade label. Supervise the production of distributors’ generic products according to a specific set of requirements. Then, the product will have the cooperative’s logo in the packaging.
“CQLP” France could also carry out the study and offer it to the new cooperative through a fee. The operation could be repeated for as many products as the cooperative wants to add to the brand.

The resources needed

IT team to develop and adapt the IT backend
Marketing team to design and analyze consumers’ answers to the questionnaire and create a distinctive packaging
Experienced local supply chain professionals in the FMCG sector to negotiate with the distributors about product prices and volumes sold as well as identifying potential producers and manufacturers

Scaling-up through new products offering

“CQLP” France can also scale up by expanding to other types of consumer products. They can experiment with edible seasonal local products such as fruits and vegetables. They can also try with sustainable hygiene products and act as a marketplace for made-in-France sustainable products.

Barriers to add new products

Losses due to selling products with a short time lifespan
Entering in an overcrowded market that features similar competitors
Low interest from customers
Absence of qualified manufacturers

New product development and deployment

Bringing new products to “CQLP” catalog might take time as consumers are the ones who chose which product to market. Nevertheless, “CQLP” could carry out a consumer study to understand whether its loyal customer base can also buy new products. If they choose to follow their standard production structure, they have to find local raw material producers and manufacturers. “CQLP” can also take the route of a “label”. The manufacturer of a well-known brand and “CQLP” will have a lower margin in unit sales, yet the volumes sales can compensate for the loss.
In terms of deployment, “CQLP” launched a mobile application for direct sales delivery in the last month. The cooperative can build its new product offering with this app. It can feature rotate seasonal new products. If one of them is successful, then it can become a permanent item in the catalog. The mobile app is also an enabler for a potential sustainable marketplace or crowdfunding platform in which consumers can gather and pay in advance for local production.