A 2013 report from the World Bank — Where have all the poor gone? — showed that the single factor that lifted more Cambodians out of poverty than anything else, over the last decade, was a global increase in the price of rice. The report also concluded that Cambodia could not expect such global price increases to continue. However, a global increase in the price of everyone’s rice is not necessary for Cambodia’s regional development.

All that’s necessary to lift even more Cambodians even higher out of poverty is:

1. An increase in the price of Cambodian Jasmine Rice, and
2. An increase in the amount of Cambodian Jasmine Rice that is sold at that higher price.

Here’s why price matters, how to get a higher price, and how to increase the amount of rice sold at a higher price.

Poverty and the Price of Rice

Most Cambodians are subsistence farmers, growing barely enough rice for their families to eat plus a little bit extra to sell. Selling that “little bit” is their primary source of cash income. In the last decade, getting a higher price for that “little bit” has lifted many of them out of poverty…but only just barely. If the global price of rice falls back to its previous levels, most Cambodians will fall back into poverty.

However, Cambodia has a unique opportunity to establish a new and higher price for its rice, independent of the global price of “commodity” rice. This new opportunity is the result of two recent developments:

1. The World’s Best Rice™
2. The global cold chain

Let’s look at each of these developments in turn, and then see how, together, they enable a new strategy for Cambodian regional development.

The World’s Best Rice™

Cambodian Jasmine Rice is the world’s best rice. That’s not an opinion; it is an established fact. In The Rice Trader’s international “The World’s Best Rice™” competition, for three years in a row 2012, 2013, & 2014), different judges, from different countries, all reached the same conclusion: Cambodian Jasmine Rice is The World’s Best Rice.

Even Cambodia’s leading competitors agree that Cambodian rice is better. In 2014, Mr. Chookiat Ophaswongse, an Honorary President of the Thai Rice Exporters’ Association, said: “Honestly, Cambodian fragrant Jasmine Rice nowadays, its quality is somehow better than Thai.” Mr. Ophaswongse deserves credit for making such a startlingly-honest admission. Marketers will rarely admit, as he did, that their competitor’s product is superior.

However, the superiority of Cambodian Jasmine Rice — even if widely known among consumers — is not sufficient, because under today’s typical packaging, storage, and shipping conditions, the superior quality of all jasmine rice fades away before it reaches its high-value export markets.

Jasmine Rice: Best When Fresh

The unique qualities of all jasmine rice — its unique flavor, fragrance, and tenderness — are due to a complex suite of naturally-occurring aromatic compounds, notably 2-Acetyl-1-Pyrroline, abbreviated “2AP” (for details, see The Science of Jasmine Rice).

Under typical conditions, these aromatic compounds fade away very quickly. Within just two or three months, they’re half gone; within six months, they’re nearly all gone (see figure below).

Even worse, while jasmine rice is losing its “good” aromatic compounds, it is also accumulating “bad” aromatic compounds, with cognates like “cardboard” and “sewer/animal.”

Clearly, then, to capitalize on the recognized quality of Cambodian Jasmine Rice, it must not be shipped and stored in “typical conditions.” Instead, it must be shipped and stored in conditions that preserve its flavor, fragrance, and tenderness.

Fortunately, the necessary conditions are already well-known: refrigeration.

The Global Cold Chain

In the last decade, temperature-controlled containerized shipping has revolutionized the international food industry. To the American consumer, nothing is ever “out of season.” Table grapes from Chile, truffles from New Zealand, lamb from Australia — everything from everywhere is available at all times.

Cambodia’s decades of civil war delayed its integration with this new global cold chain, but now it has reached Cambodia, too.

Scientific studies have repeatedly shown that refrigeration — at temperatures near or below freezing — is the only storage condition that can retain the special qualities of jasmine rice for an entire year.

Historically, refrigeration has been unaffordably expensive for rice, because rice is a low-margin bulk commodity, like wheat.

However, recent developments — such as 2015’s collapse in the cost of energy and cost of containerized shipping — have made refrigerated shipping much more affordable. Similarly, the conversion of old limestone mines into underground cold storage facilities has significantly reduced the cost of such storage.

The new affordability of cold shipping and storage, combined with Cambodian Jasmine Rice’s new status as The World’s Best Rice, enables Cambodia the unique opportunity to de-commoditize Cambodian Jasmine Rice.

De-Commoditization

A commodity is a product that is differentiated by price alone. Once international grading standards are established and enforced, all products of a given grade are, by definition, “the same” (i.e., fungible).

If you and another vendor supply “the same” product, then the only differentiating factor, ultimately, is price.

Vendors often imagine that service, reputation, and other factors can affect price, but this is only true insofar that buyers buying from vendors with poor service and reputation run the risk of incurring additional costs that must be added to the vendor’s listed price. Ultimately, in a commodity market, price is the only factor. Such a product is said to be “commoditized” by the emergence of international grading standards.

De-commoditization reverses this process, by creating a new differentiating factor — beyond price — or a product that is currently a commodity.

Examples of de-commoditization include:

• Colombian coffee
• NutraSweet
• Intel Inside
• Pure New Zealand
• Fair Trade
• Organic

De-commoditization requires establishing within the mind of each targeted consumer that the product has a unique benefit that justifies its higher-than-commodity price.

As previously stated, being recognized as “The World’s Best Rice™” is not, by itself, sufficient to de-commodidize Cambodian Jasmine Rice, because — in typical conditions — its “world’s best” qualities fade too quickly.

However, the new combination of (1) Being recognized as “The World’s Best Rice”, plus (2) Refrigerated shipping and storage, makes the de-commoditization of Cambodian Jasmine Rice possible for the first time.

Benefits of De-Commoditization

The key benefit of de-commoditization is a higher-than-commodity profit for everyone in Cambodia’s rice value chain from seed provider to exporter. Because that value chain embraces half of Cambodia’s population, increasing its profitability can have immense impact on Cambodian poverty. Just as a global increase in the price of rice helped lift Cambodians out of poverty in the last decade, de-commoditization can help lift more Cambodians even farther out of poverty in the next decade.

Furthermore, de-commoditization can keep Cambodians from falling back into poverty if the global price ofcommodity rice declines. Studies have shown that the price of premium rice has been more stable than the price of non-premium rice.

Lastly, Cambodian may have no choice. Some experts are already projecting that Cambodia’s commodity-focused export strategy cannot succeed, and indeed may collapse within seven years.

Cambodia simply cannot succeed at the commodity game. Thailand’s infrastructure is so much more efficient, that although its farmgate prices are higher, its Free On Board costs (including milling, storage, transportation, & port costs) are lower.

Cambodia’s only price advantage is its lower farmgate prices — that is, Cambodian rice farmers are so desperately poor that they’ll accept nearly any price. The desperation of one’s farmers is not a sustainable competitive advantage.

How High is the De-Commoditized Price of Cambodian Jasmine Rice?

No one knows. At the time I’m writing this, I am conducting an experiment to find out: an American KickStarter campaign for AwardBest quick-frozen Phka Rumduol (the best variety of Cambodian Jasmine Rice) at $22/kg. If that experiment is successful, it will establish two things:

1. The AwardBest company, and
2. A very high “upper bound” — $20 for a 2-pound bag (907g, hence $22/kg) — for de-commoditized Cambodian Jasmine Rice.

If my KickStarter campaign succeeds, then the upper bound is at least that high; maybe it’s even higher.

If my KickStarter campaign fails, then the upper bound is likely to be somewhat lower — maybe $20/kg, $18/kg, or $16/kg. Later crowdfunding campaigns, on other platforms, can explore demand for different combinations of price & benefit (frozen, refrigerated, blended, vacuum-packed, organic, brown, whatever). In any case, the upper bound is likely to be much higher than the $1/kg often sought as  “good price” for 50kg bags of Cambodian Jasmine Rice today.

Pricing Down, Not Up

Today, Cambodia’s rice exporters have high costs, but are unable to command a correspondingly high price. They are attempting to “price up” from the low prices at which Vietnamese rice is profitable, and the slightly higher price at which Thailand’s rice is profitable. This is a strategic error.

Once the upper-bound on the price of de-commoditized “world’s best, harvest fresh” Cambodian Jasmine Rice has been established, other Cambodian Jasmine Rice exporters can “price down” from that upper bound.

For example, after AwardBest’s success establishing frozen Phka Rumduol at $22/kg, a Cambodian exporter might find success offering

1. A 2kg bag of refrigerated Sen Kra Oub at $18/kg  (New Opportunity 1 below).
2. A 2kg bag of a refrigerated varietal blend at $12/kg (New Opportunity 2 below).
3. A 50kg bag of a refrigerated varietal blend, targeted at top-end restaurants, at $5/kg (New Opportunity 3 below).

This post was written by Jim Plamondon and first appeared on Award Best.