Japanese Convenience Stores Join Agriculture Agricultural Product Supply Depends on Enterprises

Japanese Convenience Stores Join Agriculture Agricultural Product Supply Depends on Enterprises

I HSIN CHEN(China Productivity Center Smart Agriculture Promotion Department)

  The agricultural structure in Japan is similar to that of Taiwan, facing challenges of aging agricultural population, serious situation of fallow land and arable land abandonment, and the impact of economic and trade liberalization. In 2014, the agricultural population in Japan was about 2.266 million, with 64% of them over the age of 65, and 400,000 hectares of abandoned farmland, about twice the area of ​​Tokyo. The poor agricultural efficiency in Japan is largely due to the small scale farming run by individuals and families, lack of organization, the fragmentation of farmland, and the consequent higher cost of cultivation. The agricultural products are mostly sold through local farmers’ associations, which could not generate higher revenue. Therefore, the total income of full-time farmers is much lower than that of average citizens, and young people are reluctant to engage in agriculture.

  Considering the serious aging of farmers, the increasing area of abandoned farmland, the reduction of farming population, and the consequent shortage of agricultural product supplies, retail channels in Japan have made investment in agriculture in conjunction with contract farmers or even set up their own brand farms to collaborate with farm operators to ensure the stable supply of quality products. For example, AEON AGRI CREATE was set up in 2009 by AEON, the largest retail group in Japan for production, processing and management of agricultural products. It now has 18 farms of its own, starting from Ibaraki Ushiku Farm, spread from Hokkaido to Kyushu, with a total farm area of 280 hectares. This makes AEON the largest vegetable grower in Japan, with an annual production of about 20,000 metric tons of fruits and vegetables, directly delivered to and sold in its own supermarkets. The marketing channel Ito-Yokado, under Seven & I Holdings, began to invest in agriculture in 2008 by starting the "SEVEN FARM", which has by now expanded to 10 farms. The harvested crops are sold in the Ito-Yokado stores, where food wastes are recycled, composted, and sent back to farms as fertilizers, to form an "environmental recycling agriculture".

  LAWSON, the second largest convenience store chain in Japan, has set up LAWSON farms since 2010 in collaboration with farmers. There are now a total of 23 farms spread from the northernmost Hokkaido to the southernmost Kagoshima, all over Japan. With the advantage of the different regional climates, relayed agricultural production is realized to maintain stable supply throughout the year. As the farms are scattered all over Japan, LAWSON uses cloud management systems on all the farms, including the accounting system and cultivation system, so that the financial status and cultivation status of each farm is monitored in real time through the Internet, and farm operators receive information on the structure of production costs as well as consulting services on the improvement of farm operations. In the future, systematic planned production and sales that is not possible in traditional agriculture may be eventually realized and the amount and dates of shipment can also be controlled.

  Each LAWSON farm can be of different sizes but has its specific functions, operating a single product or diversified cultivation, depending on the market demand, commodity potential and other factors. The three main criteria for selecting farming partners are: (1) Young farmers have the priority, as they would be the head of the farm to take charge of the farm management and crop cultivation, (2) the existing mode of marketing cannot be solely through the farmers' association, and the operator should have experience with other marketing channels, so as to be a capable manager and not just a producer, and (3) the operator must have strong will and capability to actively develop and improve agricultural techniques. With a consensus of the above ideas, LAWSON and the farm operator would then enter a joint venture, with 75% of investment from the farmer, 15% from LAWSON, and 10% of LAWSON's subsidiaries.

  In this collaboration, farmers are totally engaged in production and LAWSON does the selling. LAWSON purchases all the products on the farm and even bears all the losses in case of natural disasters. LAWSON is involved in all steps of operation from cultivation to sales, and even product development. Effort is also made to promote the sixth industrialization of local farming products, to make more job opportunities, increase farmers' income, and activate local industries. For example, the LAWSON farm in Tottori produces daikon and potatoes, which are processed into oden ingredients in a nearby processing plant and then distributed to LAWSON stores across the country for sale. This has developed a cross-sector integration model that prioritizes the freshness of vegetables.

  The joint ventures of Japanese retail distributors and farm operators have changed the mode of farm operation. The distributors are involved in the management from cultivation, processing, up to the sales of the food products. This ensures a better control of the production management, supply, and quality of the crops, so as to better respond to consumers' expectations for food safety with improved competitiveness. The retail channel operators in Taiwan most often maintain stabilized agricultural product supplies with contract farmers. In view of the many common problems faced by the agricultural sector in Japan and Taiwan, the model of joint ventures between Japanese retailers and farmers can be a reference for future agricultural development and cross-sector collaboration.