Pandemic Challenges Reveal Cambodian Adaptability: A Case Study in the Vegetable Sector

As COVID-19 circumvented the globe impacting every nation, sector, business, and family, it brought numerous challenges in its wake.  In developing countries – where market systems are often fragmented, connections between market actors weak, and businesses’ reserves limited – perishable products like vegetables were particularly hard hit. Both the supply and demand were affected by the shock. As the crisis deepened, some market actors lost considerable revenue and some went out of business. Yet others were able to adapt – identifying and creating new pathways to cope with shifting conditions and efficiently respond to market requirements. This case study takes a look at how Feed the Future Cambodia Harvest II "Harvest II" and three of its partners in the vegetable sector are coping with the crisis, showcasing how these companies innovated to ensure the viability of their business.

The Harvest II Approach

Harvest II utilizes a blended approach to accelerate growth in Cambodia’s horticulture sector. First, Harvest II’s “buyer-led” approach involves working with individual buyers, their suppliers and companies providing services to them. In addition, the project takes a “market systems” perspective, working with an array of market actors to address broader systemic constraints in the horticulture sector and advance priority system-level changes. This flexible approach is proving advantageous in the face of the COVID-19 shock, as it allows the project to work with specific partners on specific challenges, while also helping key players in each of its four horticulture subsectors work

The Vegetable Subsector Encounters Challenges

The effects of COVID-19 began to be felt across Cambodia in early March 2020, leading to abrupt closures of schools, offices and businesses. Traditional “wet markets” which normally provide a bountiful array of fresh fruit, vegetables, seafood, meats, and home supplies, experienced drastically reduced foot-traffic due to social interaction fears and distancing guidelines. Market actors who supplied these markets experienced business disruptions from farm labor shortages, constrained logistics, fluctuating demand, mobility challenges, and international border closures. Farmers, collectors, processors, and retailers were all affected.

Facing numerous challenges and extreme disruption from every angle, Harvest II and its partners were highly motivated to seek and build unique and contemporary solutions to address and weather these unprecedented challenges.

Market Actors Provide More Services to Customers

From the beginning, much of Harvest II’s work has involved helping market actors invest their ingenuity and resources to develop more efficient supply chains and more differentiated products. In the last seven months of the COVID crisis, the project has noticed that companies committed to these sorts of improvements were among those most able to weather the shock and indeed prosper. The following examples provide a glimpse of how three companies were able to continue improving and innovating in a way that created real value for their customers.

Expanding Markets & Services - Natural Agriculture Village

Natural Agriculture Village (NAV) is an innovative company, long committed to working with farmers in Battambang, Pursat, and Siem Reap provinces to promote the production and sale of higher quality, safe, and organic produce. It is also attuned to its customers’ needs, most of whom are in the Phnom Penh area.

As COVID struck, noting dramatically fewer customers in traditional markets, NAV established a home delivery service to reach its customers directly, allowing them to select their fresh fruits and vegetables online.  As people practiced more social distancing, the demand for NAV’s home delivered products skyrocketed.  NAV’s ability to rapidly adapt and expand its capacity to accommodate new demand allowed it to double its profits from direct sales to household consumers.

NAV not only experienced massive growth from its direct delivery service, but expanded market reach, connecting with high-end markets that resulted in a surge of demand for NAV’s organic products.  NAV connected six traders and retail shops to reliable farmers who were able to reliably supply vegetables. In FY20, NAV generated sales of $283,660 bringing their sales since they began working with Harvest II to $423,618. The bulk of these sales involved providing PGS-GAP aligned vegetables and fruits to seven supermarkets such as Aeon, Lucky, Makro, Chip Mong, Bayon, Cambodia Superstore, and Phnom Penh Superstore. In addition, NAV has also supplied to 20 mini marts, wet markets, and restaurants. NAV’s demand for vegetables, which had averaged 2 tons per day in March, experienced a threefold increase during the pandemic.  

The growth of NAV’s home-delivery service and its expansion into high end markets demonstrates their determination to provide Cambodians with access to local and organic produce. Harvest II’s grant helped NAV work to rigorously improve farmer capacity and improve their supply chain management over the course of more than a year. As a result, NAV was in a better position to gear up production when the occasion arose during pandemic.

Adopting New Services & Approaches - Laey Baitong

Laey Baitong, another Harvest II partner that adopted new services and approaches to address COVID-19 constraints, is the first agribusiness enterprise in Battambang that connects with local producers, consumers, and other key business stakeholders to provide local, fresh, safe, and organic agricultural products.

As the outbreak of the coronavirus pandemic temporarily shut down Cambodia’s wet markets, making it hard for consumers to find fresh vegetables. Like NAV, Laey Baitong identified the opportunity and implemented a convenient home delivery service. Observing social distancing guidelines and consumers’ unwillingness to leave their homes, Laey Baitong began catering to customers in and outside Battambang utilizing the delivery option. Noting the increased demand for home delivery over the past year, Laey Baitong plans to expand the home delivery service operating from new outlets in Battambang and other provinces. 

Though Laey Baitong made a triple sales increase through its home delivery service, the company continued working with Harvest II to identify other untapped markets.  To promote awareness and educate consumers on the benefits of safe and organic products, Harvest II facilitated Laey Baitong’s participation in a new weekly farmers market venture and in several trade fairs organized by government ministries. 

Laey Baitong experienced an increase in sales during COVID-19 by expanding their target market as well as offering new services. Laey Baitong’s success provided multiple growth and development opportunities to not only the agribusiness enterprise but other market system actors along the way. Working closely with Harvest II, the company continued to build the technical capacity of their producers and promote access to quality inputs. The progress fostered through these collaborations demonstrates the expanding demand for safe and organic products across Cambodia. 

Developing an Online Presence - Azaylla

As Cambodia’s wet markets began to experience gradual closures and decreased demand for vegetables, another Harvest II partner, Azaylla identified its own distinct adaptation technique. Azaylla is a relatively young agri-business company focused on the development of sustainable supply chains from sourcing from around 30 farmers to reliably supply retail markets such as Chip Mong, and Super Duper. As the company began experiencing disruptions caused by COVID-19, it used this time to increase purchases to supply Grocerdel, the B2C home-delivery platform that ramped up sales during this pandemic. Azaylla’s work to aggressively to sign up customers and establish dependable and efficient sourcing proved key in strategically navigating the pandemic’s constraints and grow quickly in its first year.

Quick decision making enabled the company to make a fluid shift from face-to-face interactions to an interactive online presence, creating a welcoming virtual space for their customers. The small company engaged in online ordering, support, feedback, and delivery services in response to market closures and social distancing guidelines. The digital platform provided customers the opportunity to place detailed orders and interact quickly with the company. Additionally, as comfort with the digital platform grew, feedback from their customers increased. This constructive function generated by the new online system equipped Azaylla with a better understanding of each of its customers' product and quality expectations which they quickly integrated to provide customized products and services.

Though the pandemic limited social interactions with their customers, the commitment and dependability demonstrated by Azaylla fostered increased rapport and trust with their clients, yielding a 150-200% increase in sales over the past nine months.  The new personalized platform strengthened relationships with vendors, suppliers, and customers resulting in exponential growth which has led to potential expansion opportunities to Battambang province. In July, Azaylla was awarded a small pay-for-performance grant under Harvest II’s Investment Accelerator program to incentivize its investment in a refrigerated truck and cold storage, a washing and processing statin, a cutting and packing line, and other equipment to better serve its expanding business. Azaylla also partnered with Harvest II’s grantee AMK micro-finance institution to utilize its supply chain financing product and acquire additional working capital.

Continuing to work through and adapt to the constraints presented by the pandemic, Azaylla has recognized the significance of agility in responding to challenges and has created a diversified portfolio to survive unforeseen challenges.  Though the past year has created challenges across Cambodia’s horticulture sector, the preparedness and flexibility demonstrated by Azaylla explains the significant success that this new business has experienced.

Pandemic Constraints Yield a More Agile Market System

Harvest II partners’ swift reaction and targeted responses to COVID-19 constraints illustrate each actor’s ability to not only learn from the pandemic but to adapt and thrive by creating new value for customers. Incredibly, the abrupt closure of traditional markets opened new opportunities for risk-taking entrepreneurs in the value chain. When markets collapsed, these innovators were able to recognize and seize the new opportunities, not only expanding sales by 200-300% to traditional customers, but also expanding to new markets, targeting new product offerings for new consumer segments.  To be successful, they relied on a whole cadre of partnerships: with farmers with whom they forged tighter relationships, with technology companies to rapidly develop their web presence and branding, with non-traditional logistics providers who could handle small-lot customer deliveries, with newly formed centralized aggregation centers to facilitate the distribution network, and partnerships with firms that facilitated value chain financing, increasing their capacity to grow.  

This constellation of partnerships around newly formed business models had an immediate impact on the entire market system, introducing new ways of thinking about the vegetable business.  A new-found closeness to the customer has instilled greater emphasis on customer-service and reliability; direct sourcing from farming communities has allowed innovators to rapidly introduce differentiated products that generate premium pricing for vegetable farmers, such as for chemical-free and organic products. Modern grocery retailers have recognized this trend and are now pivoting to some of these innovators for supplies. As the coronavirus pandemic reverberated across Cambodia’s market systems, it served as a catalyst for change.  Harvest II continues to actively work with its partners across the horticulture sector to explore and promote the adoption of these new behaviors and practices, fostering a more agile market system.