=Paper=
{{Paper
|id=Vol-2761/HAICTA_2020_paper1
|storemode=property
|title=Analysis of the External Environment of a Vertical Dried Herbs Business and the Role of E-Commerce Tools
|pdfUrl=https://ceur-ws.org/Vol-2761/HAICTA_2020_paper1.pdf
|volume=Vol-2761
|authors=Dimitrios Skordos,Efstratios Michalis,Athanasios Ragkos
|dblpUrl=https://dblp.org/rec/conf/haicta/SkordosMR20
}}
==Analysis of the External Environment of a Vertical Dried Herbs Business and the Role of E-Commerce Tools==
https://ceur-ws.org/Vol-2761/HAICTA_2020_paper1.pdf
Analysis of the External Environment of a Vertical
Dried Herbs Business and the Role of E-Commerce Tools
Dimitrios Skordos1, Efstratios Michalis1, Athanasios Ragkos1
1
Agricultural Economics Research Institute, Hellenic Agriculture Organization “Demeter”,
Terma Alkmanos, 115 28, Ilisia, Athens, Greece
Abstract. In recent years, citizens’ growing awareness about environmental
issues in combination with their shift to a healthier lifestyle has created growth
prospects for the medicinal and aromatic plants (MAPs) sector worldwide.
Although the climatic conditions of Greece are a comparative advantage for
MAPs, the sector has not grown significantly. The main objective of this paper
is to give an insight into the external environment of a vertically organized dried
herbs business as well as to examine e-commerce tools and applications which
can contribute to its development. The results of this paper in combination with
further research about the internal business environment and its viability consist
a useful guide for newcomers in the MAPs sector in order to make the right
decisions as regard the structure and the production process of their business.
Keywords: Information and Communication Technologies; Medicinal &
Aromatic Plants; Consumers Trends; Sustainability.
1 Introduction
The increasing global demand for medicinal and aromatic plants (MAPs) generates
significant opportunities for the development of rural and less-favoured areas.
Although MAPs constitute one of the best cultivation options for these areas - as they
use soils of low value with minimum inputs for high quality products - the sector has
not been significantly developed (Kalfas, 2018). Further investigation and analysis of
the external environment as well as the prospects, risks, strengths and weaknesses -
both at regional and business level - is the basis for planning actions, that will bring
the desired results in terms of smart entrepreneurship and sustainable rural
development.
Based on the Strategic Plan for MAPs (SP-MAPs - Ministry of Rural Development
and Food, 2017), the adoption and widespread use of Information and Communication
Technologies (ICT) in the production and manufacturing of MAPs constitutes a
significant opportunity for the sector. The rapid growth of ICT has provided new tools
and opportunities for businesses at all links of the value chain, which play an important
role in the development of the agri-food sector in general. In addition, ICT can provide
solutions across the whole range of the activities of a farm, such as cultivation, field
monitoring, management of resources etc. (Ragkos et al., 2017).
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Ε-commerce is one of the most important ICT applications with particular
applicability to the primary sector. E-commerce is not just the online presence of a
business but rather a form of entrepreneurship, which includes all the principles of
management and finance. Indeed, it is a system that integrates some or all commercial
transactions (distribution, service, sale, purchase, marketing of products and services)
through Internet platforms or other networks (Andreopoulou et al., 2011). According
to the E-Business Research Center (2017) an increasing number of consumers use the
internet to make purchases, while an increasing number of businesses utilize e-
commerce to promote their goods and services. In fact, in many cases such as the case
of the Coronavirus pandemic (COVID-19), e-commerce is of utmost importance for
the operation of businesses that engage in the food industry, as it is the only channel
for the distribution of their products.
The purpose of this paper is to describe the external environment of a business
which engages in the production and manufacturing of dried herbs and to analyze the
role of e-commerce in its development. For this purpose, industry and consumer trends
are presented aiming to provide an overview of the current situation in Greek MAPs
sector and giving insights of potential for future development. In addition, the role of
e-commerce tools and applications is described in formulating effective e-marketing
strategy.
2 Methodology
The external environment of a business has a significant impact on its viability, so
it must be considered thoroughly. In this paper, the external environment of a farm
business which produces and processes dried herbs is analyzed with a qualitative
approach. The analysis focuses on, (i) the Greek MAPs Sector, (ii) Consumer trends
concerning dried herbs and seasonings and (iii) the applicability of e-commerce at the
business level.
3 Results
3.1 The Greek Medicinal & Aromatic Plants Sector
The main MAPs cultivated in Greece are reported in Table 1. In terms of acreage
oregano, lavender and anise are the most important crops while in terms of number of
farms oregano, crocus and sideritis are the most widespread. Other MAPs are
cultivated by few farmers in small areas (Kalfas, 2018). Apart from cultivation, most
farmers are also engaged in processing. According to the Ministry of Rural
Development and Food (2017), there are few small processing units, most of which
exhibit backward vertical integration. However, there are some major processing
plants, mainly in Northern Greece, whose main activity is the production of essential
oils from lavender, oregano and rose (in smaller quantities). Some of them are HERBS
& OILS, Vessel essential oils, Alpha lavender, PANAROMA LTD, Dioscourides,
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Coop of Medicinal and Aromatic plants of Voio, Eth-oil. There is also an industry -
Vergina Brewery- based in Komotini which produces ready-to-drink cold tea.
Furthermore, two companies (KORRES S.A. NATURAL PRODUCTS and APIVITA
SA) are engaged in the production of natural cosmetics and fragrances, offering a wide
range of products. These companies export the largest part of their production, so they
have a remarkable presence in foreign countries (Vasilikiotis et al., 2015).
Table 1. Number of MAPs farmers and average area per farmer in Greece
Average
cultivated
Crops Number of Farmers Land Area (Hectares) area per
Farmer
(Hectares)
Oregano 1335 1366,99 1,02
Crocus 728 390,43 0,54
Sideritis 618 305,36 0,49
Lavender 580 628,38 1,08
Melissa 468 96,40 0,21
Anise 312 509,14 1,63
Salvia 285 63,72 0,22
Thyme 276 57,88 0,21
Mint 247 24,47 0,10
Rosemary 246 46,80 0,19
Other crops 1317 339,45 -
Total 6412 3829,02 -
Source: Kalfas 2018
The value chain of Greek MAPs is characterized by a relative lack of collective
action both in primary production and in sales. Some examples of collective
organizations are: (i) the Agricultural Cooperative of Aromatic, Pharmaceutical and
Energy Plants of Aetolia-Acarnania, the members of which founded in 2009 the
company «ANTHIR», which engages in the production, processing and marketing of
dried MAPs, (ii) the Association of Aromatic and Medicinal Plants of Greece, (iii) the
association of producers in Kilkis and (iv) the Cooperative of Aromatic and
Pharmaceutical plants, Fruits and Vegetables of Voio, Kozani. This lack of collective
action is linked to restrictions on the viability of farms, which due to their small size
cannot take advantage of economies of scale and are faced with high production costs
and reduced bargaining power. Under these restrictions, farms - as well as processing
plants - have a low potential for investment, certification and access to innovation and
restricted access to niche markets. In addition, the lack of cooperative relations and
organizations - from the supply of propagating material to the sale of the final product
-is a disincentive for new growers and entrepreneurs, who wish to engage in the MAPs
sector (Ministry of Rural Development and Food, 2017).
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3.2 Consumers Trends
There is a variety of reasons why consumers purchase MAPs. Indeed, these products
have an extensive range of uses, for instance as raw materials in the food, beverage,
pharmaceutics and cosmetics industries (Kalfas 2018). Despite their diverse uses, there
is limited scientific research about consumer behavior concerning culinary herbs and
spices. However, according to a CBI research (2019), consumers are looking for
convenience as regard the preparation of their meals. Indeed, due to busy schedules
they want to spend less time on preparing meals and therefore dried herbs companies
are increasingly shifting towards the production of ready-to-use spices and herbs
mixtures. In addition, consumers prefer spices and herbs in smaller portions as they
often need to try a recipe, so a small package covers better their needs. In recent years,
small packaging options have increasingly appeared in retail chains across Europe.
Also, certifications on the package are essential, as they prove the method of
cultivation and facilitate the traceability of the products. In particular, the information
that should be included on package are (i) the name of the product, (ii) details of the
manufacturer, (iii) batch number, (iv) date of manufacture, (v) product grade, (vi)
producing country, (vii) harvest date and (viii) net weight (CBI, 2019).
Furthermore, based on the SP-MAPs, more and more consumers are shifting
towards a healthier lifestyle. In this process, consumers tend to prefer organic foods
over conventional ones and MAP-based products are no exception to this trend. In
France and Germany, there are organic retail chains (Bio C Bon in France, Naturkost
& Bio company in Germany), which are growing rapidly and covering a wider
consumer audience. Another motive for choosing organic food are environmental
factors, as growing awareness for issues such as climate change and the sustainable
use of natural resources has also affected consumption patterns and consumers are
turning towards products that have undergone minimum processing with minimum
environmental footprint (M. Korkmaz et al. 2011).
3.3 E – Commerce Tools for MAPs entrepreneurship
A dried herbs business can utilize a wide range of e-commerce tools and
applications such as e-mail, enterprise content management, messaging systems and
monitoring services to sell products online. The variety and security of these tools are
important characteristics for businesses in the MAPs sector, as they allow to reach
specialized audiences that use such technologies at a relatively low cost. Condition for
the successful operation of an online store is the creation of a comprehensive marketing
plan. In what follows, some of these tools and applications are briefly presented.
• Rational use of social media can have a significant impact on product promotion
and sales. In particular, a dried herbs business using social media can (i)
perform market research regarding consumer trends and competitors’ products,
(ii) manage complaints effectively due to direct interaction with consumers (iii)
increase traffic to its website or online store and (iv) increase brand recognition.
• E – marketplaces, where consumers can purchase products from multiple
producers at wholesale prices. The e-marketplaces are responsible for the
promotion of the platform as well as the successful performance of transactions,
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while the third-party vendors deal with production and positioning. Some
examples of e – marketplaces which are used by agri-businesses are Amazon,
eBay and e-bloko in Greece.
• Close to the philosophy and structure of e-marketplaces are price comparison
sites (PCS), which are mostly oriented towards comparing products based on
price or other criteria. PCS are popular among businesses in the agri-food
sector, which register their products and store information on search engines,
so they are more visible to potential consumers. One of the most popular PCS
is “Google shopping” through which the user is led by the search results to the
online store of the company.
• Affiliate marketing is a type of performance-based marketing where an affiliate
(publisher) promotes a site of a vendor to its audience and is paid only if some
of them perform a pre-agreed action (Duffy, 2005). Chefs are the main affiliates
of the food industry due to their increasing popularity (Clarke, et al., 2016). The
most common promotion strategy is cooking recipes based on the advertised
product. The recipes are usually posted on their social media -mainly in video
format - or even are presented on their TV cooking shows.
• Content marketing constitutes a particularly significant choice with high
applicability potential for MAP-related businesses. Content marketing is a
strategic marketing approach on creating and distributing content related to the
company's products and services, with the aim of converting potential
customers into repeat ones (Baltes, 2015). The purpose of content marketing is
not the direct sale but the provision of content that has value for the receivers.
This content can be distributed through the company's website and social media
as well as relevant blogs. For a company that operates in the MAPs sector
nutritional advice, online fitness and yoga lessons as well as recipes constitute
significant forms of content marketing, especially if the business targets organic
consumers.
To sum up, e-commerce is expected to provide great benefits for the companies in
the MAPs sector including access to global markets, better approach and
communication with consumers as well as efficient product promotion. The effective
use of some of all the above methods can have a notable impact on a company’s
profitability and sustainability.
4 Conclusion
The Greek MAPs sector is not significantly developed; however, it shows
increasing trends as it pertains to the Greek soil and climate conditions. External
environment analysis is crucial for the successful entry of a business in this sector. In
particular, the analysis of the market-industry and consumer trends are important tools
for the rational design of the business strategy and decision-making. Furthermore, ICT
applications, particularly e-commerce, contribute to the implementation of the selected
strategy, as they can lead to better market segmentation, targeting (selection of the
target market) and product positioning. Social media, e -marketplaces, PCS, affiliate
and content marketing are some of the tools that help agri-businesses to promote their
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products. The discussion in this paper highlighted opportunities for a MAPs business,
but further research is required to analyze the company's internal environment as well
as its viability in order to render them applicable.
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