Innovation

It took the founders, Nguyen Thi Huyen, and her husband Nguyen Que Anh, nearly 10 years since their first family business in spice trading and 3 years since the establishment of Vina Samex to initiate the innovation in 2015. The business strategically chose to go organic for their cinnamon and star anise products to enter the world’s most demanding and high-end spice markets such as Europe, the USA, and Canada, Japan... etc. At the same time, the indirect relationship between Vina Samex and indigenous farmers was lifted up to business partners in-depth and breadth for the creation of mutual value. Vina Samex’s cinnamon and star anise were therefore grown, harvested, and collected, then processed within a strictly controlled process from seedling to packaging to achieve the highest quality in accordance with international organic certification standards.

Presently there are three focused raw material areas, Yen Bai, Lang Son, and Lao Cai provinces, which are famous for their variety of cinnamon and star anise with high productivity and quality. In these areas, there are established cooperatives that create a strong and close relationship between the farmers and business. The cooperatives are also a method to share risks with farmers as Vina Samex guarantees the purchase of all qualified output at 10 percent above market price for members of cooperatives. There are currently 1439 households engaging in Vina Samex’s value chain.

Since the start, the company has assessed that the hardest part in developing this modern value chain is to convince and train its key stakeholders – the ethnic minority farmers – to change their obsolete cultivation customs and follow strict organic processes. Therefore, Vina Samex has its team stay at the remote raw material fields to provide technical training and support for farmers on how to plant, care, trim, harvest, preprocess, etc. and rules such as non-pesticide or chemical fertilizers in accordance with requirements prescribed by organic certifications. Vina Samex also supplies the farmers with plant seeds, organic fertilizers, qualified containing bags that meet the product standards, and appropriate harvesting tools to improve efficiency and reduce occupational risks.

Besides the founders’ perseverance and passion, Vina Samex has received huge support from a variety of international and local NGOs based in Viet Nam to develop the value chain, obtain organic certifications, as well as implement other programs towards indigenous communities. Especially, a capacity-building project to equip ethnic female farmers with microfinance skills, to promote gender equality and women empowerment has been recently launched. Changing its business philosophy and model, Vina Samex identifies its two core missions. The first is to deliver the best Vietnamese organic spices to consumers all over the world. The second is to work with farmers in the uplands, bring benefits and care for a good life to each family, and to build long–term development cooperation.

“At the time we started, going organic was a brand-new concept in Viet Nam. Following this business model, we not only create values from sales but also make returns and reconcile by helping and sharing the burden with farmers. We believe that by doing well at our root, the values will be sustainable”, Huyen said.

Inspiration

In 2015, Huyen realized a bitter truth that her company gained no profits from years serving low-end markets with traditional customers. Around the same time, at international expos and through market research, Huyen discovered potential to promote her spices to the world’ high-end markets where high-quality and organic cinnamon and star anise were in significant demand in the medicine, cosmetics, and food processing industries. The businesswoman gradually learned and developed a new sense of pride in Vietnamese cinnamon and star anise as their applications and values went beyond her original awareness. Getting more deep dialogues with the farmers and witnessing actual cultivation practices at raw-material zones, she became also more concerned about the indigenous peoples’ position along the production chain. It came as a surprise to her that the farmers had very little knowledge about either their plants or farming techniques. In addition, they were vulnerable to market fluctuations and tricks of merchants who capitalized on their desperate need for cash to pay below-market prices, resulting in no profits to end poverty or improve their lives.

Since then, Huyen was motivated to innovate in order to promote local strengths, supply the highest quality products, raise the level of Vietnamese specialties in the international markets, and help local people to improve their lives by their own traditional resources. Like other business people, she shared common issues of how to sell products at both high quantity and prices to maximize the company’s profits. But instead of relying only on low-end market customers who put low prices as their top priority, Huyen preferred the challenge and change to serve the demanding markets. She discerned that by going organic and selling the highest-quality products, her business and stakeholders could be sustainably benefitted.

“After a period of time transformed and accompanied by NGOs, I learned about the corporate social impact and responsibility concepts that I and many other business people had never been concerned about. To us, it was either extraordinarily strange or not governed by any institutional policy and framework in Viet Nam at that time. I kept thinking about our farmers, especially about female ethnic people. I started to empathize when seeing the spice trade from their perspective and wanted to help them. That is the biggest motivation encouraging us to overcome many difficulties and go on this rough track to gain benefits for all.”

Overall impact

By 2016, Vina Samex’s cinnamon and star anise was certified organic by the EU. It was also among the first and limited number of Vietnamese enterprises awarded organic certifications by Korea and Japan in 2018 and 2019, respectively. Huyen highlighted: “These certifications are not only a passport for our entrance to targeted markets but also a guarantee and affirmation of our prestige in the international arena”. From a handful of households and farms in the pilot phase, the business now boasts 2600ha of organic-certified farms and contracts with 1439 indigenous households within its own organic ecology. Farmers are already seeing higher incomes now as buying prices for cinnamon and star anise have doubled or tripled since the organic scheme started. Consequently, Huyen and Vina Samex gains the trust of local farmers, especially the ethnics, tightening their partnership for development. In addition, more and more NGOs and Vietnamese enterprise leaders are interested in Huyen’s business model. They are among various evidence of to what extent Vina Samex’s innovation has made impacts. The short-term effects completely prove how judicious and dedicated Huyen and her husband are when choosing to run their business in a people-centered and sustainable manner.

In the next 5 years, to strengthen its leading position, the company continues to maintain and expand the organic cinnamon and star anise value chain, develop other spices’ organic production value chains, and steer towards 80-90% export share of organic products. Vina Samex meanwhile envisions its long-term impacts in several areas, including but not limited to:

Business:

• Improved product quality, productivity, and diversity: The business and farmers are getting more familiar and experienced in organic farming and manufacturing. More research is being conducted to create a number of value-added products from cinnamon, anise, and other spices.

• Increased market access at both national and international levels: Customers are not merely buying products for their quality or prices, but more and more concerned about the business’s contribution and responsibility for society and the environment.

• Increased profits: research reveals that organic agriculture systems are usually more profitable than conventional farming systems. Although plant yields in organic systems are below the conventional ones, their values are higher.

Society:

• Increased income: purchasing certified materials consistently well above market prices can ensure growth in the income of growers.

• Increased regular employment: more job opportunities are going to be created at raw material zones and manufacturing sites, resulting in an increase in employment rate and income of workers.

• Increased awareness and capabilities: the technical and social knowledge and skills provided via regular training (eg: on Biotrade, Fair Trade, organic farming… etc.) can be extended and applied in farmers’ daily lives to take care of their families’ crops, health, and residential communities.

• Promoted gender equity: through capacity building programs targeting female farmers, they can be encouraged, equipped with essential knowledge and skills to gain confidence, and play a key role in their families. The business is also planning to have women represent Vina Samex to purchase raw materials from growers around their living regions.

Environment:

• Promoted organic farming: the model can be replicated and applied to other types of plants and livestock at a wide range of scales.

• Conserved forestation: The health of plants, soil, and surrounding environment is prioritized.

• Tackled climate change: The use of energy, chemical, or the management of waste at both raw material zones and manufacturing sites are all concerned.

Business benefit

Vina Samex’s sustainability focus does form its competitive advantage and affirms its leading position in the spices market. The innovation serves a growing demand for organically farmed products. There is also an undeniably positive correlation between the innovation and the enterprise’s revenues as it lives up to customers’ expectations about business ethics. Huyen shared that her products were ever offered higher prices than the initial bargain when the customer recognized the processes involved in organic farming and their values shared with farmers.

The innovative business model has allowed Vina Samex to build capacity over the years with numbers in 2019 reported at:

• Revenue: USD 7 million, tripled from the first year (2016) it was certified organic

• Major exporting markets: EU, US-Canada, Japan, Korea, India

• Organic certified farming size: 2600 ha over three provinces

• Overall capacity: 3000 – 4000 tons

• Export volume of organic cinnamon and star anise: 1000 tons

• Contracted households for organic raw materials: 1439

• Manufacturing factory size: 15000 m2

• Employee’s net income: USD 220 – 240/month

• Offered an investment by a Dutch investment fund to increase working capital and invest further in factories, machinery, and technologies. The company is going to have 2 new factories to process cinnamon and star anise, creating 200 – 300 employment opportunities at each site.

Huyen also specified that her next big challenge would be to penetrate and conquer the domestic market. Although this task is admittedly even harder than the export business, there are positive signals and potentials as the awareness of customers about wide-ranging applications beyond the kitchen in Vietnam is gradually increased. Vina Samex’s products are now sold at organic stores and reputable supermarkets.

Social and environmental benefit

Playing a key role in the success of the organic value chain for cinnamon and star anise, ethnic minority people are specifically benefitting from Vina Samex’s innovation. The more households engage in and perform well, the wider benefits are spread among indigenous communities. The business is expecting to expand the beneficiary scope to 2439 households at three focused provinces by 2021. The first societal benefit to be counted is the increase in the income of growers. Huyen said that since the start of the organic scheme, members of cooperatives have never experienced the low or decreased buying prices for cinnamon and star anise. Nowadays, farmers can earn VND 30 million up to 40 million (USD 1290 to 1720) a year for selling organic harvested materials to Vina Samex. This is a growth in earnings of around 20% to 60% compared to the pre-cooperative period. Secondly, the health and safety of farmers are significantly improved as a result of following strict requirements for organic farming and utilizing supplied harvesting tools by the business. Thirdly, farmers’ awareness and capabilities are also radically changed as they get more frequent opportunities to learn and share during training provided by Vina Samex or associated NGOs. In addition, around 500 laborers, of which the proportion of female and ethnic minorities are 85% and 70% respectively, have been provided with either regular or seasonal jobs. Those fundamental resources enable beneficiaries to proactively grant themselves and their families better-living conditions, economic efficiency, and access to sustainable livelihoods. The communities have been united and empowered along with the development of the value chain.

The natural environment is another beneficiary from the organic farming or sustainable agriculture scheme. By focusing on the long-term health of cultivated land, water, soil, and plants, the business and farmers provide positive care for the environment. Huyen was proud to share that the certified organic areas are free of the routine use of synthetic pesticides or herbicides as the farmers now use tools to mow grass instead. Chemical fertilizers are also replaced by the organic compost from pruned cinnamon and star anise branches and leaves. Keeping forests healthy and moist, helping a lot of plants and animals keep their habitat, the organic growing process definitely contributes to tackling climate change and conserving biodiversity. In addition, Vina Samex is also passionate about eco-friendly operations by making a lot of changes in using energy, chemicals, and managing wastes at their manufacturing sites. Those are among a wide range of activities reflecting the enterprise’s business philosophy “big thinking in line with small but meticulous and whole-hearted actions”.

Interview

Nguyen Thi Huyen, CEO