Southeast Asia: Navigating through a competitive market

“We do realize that we’re growing leafy greens, but we want to elevate the category by adding more fruits and veggies. As a vertical farm, we attain a certain brand position and have bargaining power in the supermarkets. We invite other farms into our brand that don’t necessarily grow the same way as we do, or co-brand with us as we promote their products in-store,” Jesper Hansen, CCO of YesHealth Group, stated.

Joining a panel of the Asia-Pacific Agri-Food Innovation Summit, Jesper and four other panelists shared their thoughts on navigating through a competitive market as CEA players. Jesper continued by elaborating on the fact. “Adopting such an approach, we can increase our SKUs (Store Keeping Units) and only produce about 50% of them on our farm. This approach allows agricultural produce to get into the market profitably by leveraging a business model for the benefit of smaller farmers.”

Jesper Hansen

Fixed prices are crucial
Ever since its foundation, Common Farms has set fixed prices for its produce, positioning itself as the quality produce on shelves, being able to give customers exactly what they want. Jessica Naomi Fong, Founder and CEO, stated, “Once you start cutting prices, it’s impossible to have customers pay the original price again. Given our D2C (Direct to Consumer), we’re meeting specific consumer requests, which might sound niche, but there’s a sizeable market for us, and therefore, we focus on customer’s needs, especially in such a competitive environment.”

Dave Chen, CEO of Equilibrium Capital, concluded that CEA is on its way to changing human behavior, yet growers have to keep in mind that, unlike technology, human behavior doesn’t change rapidly at all. “Sometimes, we’re confusing the fact that we’re talking about a head of lettuce. At the end of the day, it’s about selecting human behavior and selected targeting, but consumers do that too.”

Jessica Naomi Fong

Segmenting in the greens section
Agreeing with that, Jesper said that Asia, in general, is a low-cost environment for vegetables and leafy greens. “Even though YesHealth Group could leverage its low-cost technology to compete at a price, we’re not concerned about lowering product prices. Instead, we’re increasing them.”

Why? The agtech aims to disrupt the way consumers think about the leafy greens segment as a commodity in the supermarket. Given that leafy greens are sold based on price and weight, it’s a ‘no profit’ for all the actors involved in that transaction, including retailers. In comparison to products such as cosmetics, for example, the consumer will easily recognize the cheapest product compared to the best cosmetics in terms of pricing.

“We want the same to happen for fruits and veggies because they play an important role in our health. Expanding this market will allow us to supply products that are not only available to a select number of people. We’re in this for the coming 50-100 years to change how we as a society think about food,” he concluded.

What are the pain points?
Jay Desan, Co-founder of Boomgrow, said, ”The pain points in Southeast Asia are import costs, perished produce once it has arrived to the customer, and fluctuating prices. We can tap into that by locking in long-term contracts offering fixed prices.” According to Jay, for consumers, certified-, pesticide-free-and local products are the most important motivations for them to select the Boomgrow brand.

Covid drove Boomgrow to move into retail; however, it’s not that easy, as Jay explains, given customers don’t have any brand loyalty when it comes to fresh produce. “Unlike chocolate, e.g., you don’t go to a supermarket and get brand X for your fruits or vegetables. Penetrating deeper into the consumer’s hearts for us comes from the brand trust through traceability, consistency, and transparency of the product.