A Study on Making Onion a Gentleman

Course Name: Product Planning and Development

Course Code: 4202

Submitted by Name: Nusrat Jahan Marin

Roll No: 2025171081

Batch:2020

Section:A

Submitted to:

Ashik Abdullah

Lecturer, Department of Business studies in Marketing

Faculty of Business Administration

Date of Submission: 17.10.2023

Table of Contents

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No. Name of the CONTENTS Page No.

1. Introduction: 3-5
What is a commodity good?
Types of Commodities

2. Is onion a commodity good? 5

3. Can onions be branded or de-commoditized? 5-6

4. How can we de-commoditize onions? 6-8

5. Advantages of Decommoditizing onions 8-9

6. Possible complications 9-10

7. Conclusion 11

Introduction

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What is a commodity good?
A commodity is any good or service that is interchangeable with another good or service of the
same type. It is any good or service that is interchangeable with another good or service of the
same type. The definition of a commodity is simply any valuable item for commercial purposes
in a market or economy. It is also defined as the grouping of a product that depicts minimal
differentiation and is generic in nature. Generic means there is a similarity in value that applies
to the entire group of that commodity. A commodity is characterized by minimal price changes
but is basically purchased at the same price regardless of the variance in purchase location. For
instance, when purchasing a commodity like natural gas, the bill reflects on how much gas the
consumer used and not on where it came from.

Another characteristic is that a commodity has little differentiation where a commodity in a

particular area is the same as a commodity in a different area. It is a trait known as fungibility,
which means that the commodities are not differentiated or distinguished from each other based
on factors like the benefits derived from them or the brand. It makes it easy for commodities to
be sold and traded easily across the globe. The primary purpose of commodities is for use in the
production process. They act as inputs that aid in the production of other market products.

Commodity Meaning

The word commodity is traced from the Latin language word commoditas, which means
adaptation, advantage, and convenience. Commoditas also came from Commodus, which means
proper, convenient, and fit. From the word commoditas in the Latin language, it was translated
into French as commodity and later translated into English and used in the 15th century as a
commodity.

In the economics world, the term is used to describe economic goods. A commodity, in this
sense, is explained as an item that bears market value and can thus be sold or traded at a price.
Due to the market value of commodities, countries can engage in trade for them because some
commodities are only produced or grown in particular countries. Therefore, it is necessary to
establish good relationships with countries worldwide because some commodities are only
grown in particular countries. When a country has a good trade relationship with another that
produces a certain commodity, it is easy to access it, hence improving international trade.

Types of Commodities

There are three major types of commodities; agriculture, energy, and metals.

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Agricultural Commodities:

Wheat: A staple food grain used in various food products, from bread to pasta.
Corn (Maize): Widely used as food for humans and animals, as well as for various industrial
products.
Soybeans: A versatile commodity used for oil, animal feed, and various food products.
Coffee: One of the most traded commodities globally, used for the production of coffee
beverages.
Cotton: Used in the textile industry for the production of fabrics and clothing.
Energy Commodities:
Crude Oil: A primary source of energy used in the production of fuels like gasoline, diesel, and
jet fuel.
Natural Gas: Used for heating, electricity generation, and as a fuel for vehicles.
Coal: A fossil fuel used primarily for electricity generation and industrial processes.
Metals:
Gold: Valued for its rarity and aesthetic appeal, gold is used in jewelry, as a store of value, and
in electronics.
Silver: Used in various industrial applications, jewelry, and as an investment.
Copper: A key industrial metal used in construction, electronics, and electrical wiring.
Aluminum: Widely used in the aerospace, automotive, and construction industries.

Homogeneity: Commodity goods are uniform and standardized. They are not distinguishable by
brand, producer, or origin. For example, a barrel of crude oil or a bushel of wheat of a particular
grade is the same, regardless of where it comes from.

Price Uniformity: Due to their homogeneity, commodity goods tend to have consistent and
transparent prices in the market. Prices are determined by supply and demand dynamics and are
widely available to the public.

Fungibility: Commodity goods are interchangeable. One unit of a commodity can be substituted
for another with little to no difference in quality or functionality. This interchangeability is a
fundamental characteristic of commodities.

Low Profit Margins: Commodity markets are typically characterized by lower profit margins
for producers because of intense competition and price transparency. Producers have limited
pricing power because the products are essentially the same as those of their competitors.

Well-Established Markets: Commodity markets often have well-established trading systems

and infrastructure for buying and selling these goods. This can include commodity exchanges,

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such as the Chicago Mercantile Exchange (CME) for commodities like grains and livestock, and
the New York Mercantile Exchange (NYMEX) for energy and metals.

Price Volatility: Commodity prices can be subject to significant fluctuations due to factors such
as changes in supply and demand, geopolitical events, weather conditions, and more. These
fluctuations can make commodity markets more unpredictable.

Limited Branding: Commodity goods typically lack branding or packaging that distinguishes
them from others of the same type. Unlike branded consumer products, such as electronics or
clothing, commodities are often sold in basic packaging or in bulk.

Primary and Raw Materials: Many commodities are primary or raw materials that serve as
inputs for other industries. For example, crude oil is a key input in the production of gasoline,
plastics, and various other products.

Global Trade: Commodity goods are often traded on a global scale, with international markets
influencing their prices. They are subject to international supply and demand dynamics, making
them susceptible to global economic trends and events.

Long-Term Storage: Some commodity goods, like grains and metals, are conducive to long-
term storage, which can help stabilize supply and demand in times of scarcity or excess.

Is onion a commodity good?

Yes, onions can be considered a commodity. A commodity is a basic, uniform product that is
typically interchangeable with other similar products, regardless of its source or origin. In
Bangladesh, onions are widely grown and traded in standardized forms, and consumers typically
purchase them based on their size and variety rather than brand or origin. The uniformity and
interchangeability of onions make them fit the definition of a commodity good in the context of
Bangladesh.

Can onions be branded or de-commoditized?

De-commoditizing can be addressed as differentiating the product from the regular consumer
market. Specifically saying, it's actually branding an unbranded product.

Onions can be branded or "de-commoditized" to differentiate them from standard, commodity

onions. This is a common strategy in the agricultural and food industry to add value to products
and command higher prices. Here's how it can be done:

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Branding: Branding involves creating a distinct identity for the onions that sets them apart from
generic, commodity onions. This can include developing a brand name, logo, and packaging that
communicates certain qualities or attributes associated with the onions. For example, a brand
might be created to emphasize that the onions are locally sourced, organic, sustainably grown, or
of a specific variety known for its exceptional flavor.

Quality and Varietal Differentiation: Onions can be marketed based on their unique qualities
or variety. For example, sweet onions like Vidalia onions or Walla Walla onions are known for
their distinct flavor and are often branded and sold at a premium. Similarly, organic onions or
those with specific certifications can be marketed as such.

Packaging and Presentation: High-quality packaging and presentation can help differentiate
onions. Attractive packaging with relevant information about the product, such as its origin,
sustainability practices, and cooking tips, can make the product more appealing to consumers.

Marketing and Promotion: Effective marketing campaigns can create demand for branded
onions. This may include advertising, social media promotion, and other marketing efforts to
highlight the unique qualities and benefits of the branded onions.

Targeted Distribution: Branded or specialty onions may be distributed to specific markets or

retailers that cater to consumers seeking high-quality, unique, or specialty food products.

Price Premium: Branded onions are often sold at a higher price compared to standard
commodity onions, reflecting the perceived value and unique qualities associated with the brand.

By employing these strategies, onions can be transformed from generic, commodity goods into
higher-value, branded or specialty products. However, it's important to recognize that this
differentiation often requires additional investments in marketing, quality control, and
distribution. Additionally, the success of branding or decommoditizing onions will depend on
consumer preferences and market demand for differentiated onion products.

How can we de-commoditize onions?

Decommoditizing onions in Bangladesh, or in any region, can be a strategic move to add value to
the product and enhance its market appeal. Here are some steps to consider when
decommoditizing onions in Bangladesh:

Quality Improvement: Start by focusing on improving the quality of the onions. This could
involve using better farming practices, selecting high-quality onion varieties, and ensuring that
the onions are well-sized, free from defects, and have a good shelf life.

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Branding and Packaging: Create a unique brand identity for your onions. Develop a brand
name, logo, and packaging that reflects the qualities and attributes you want to associate with
your onions. Consider using packaging that protects the onions and provides information about
the product, such as its origin, quality, and benefits.

Certifications and Standards: Seek relevant certifications or adhere to quality standards that
are recognized and trusted by consumers. Organic certification, for example, can help position
your onions as high-quality, environmentally friendly products.

Market Research: Conduct market research to understand the preferences and demands of
consumers in Bangladesh. Identify what qualities or characteristics are highly valued, whether
it's taste, freshness, local sourcing, or sustainability.

Value-Added Processing: Consider adding value to the onions by offering pre-cut or pre-
packaged options for convenience. These processed onion products can be sold at a premium.

Local Sourcing and Storytelling: Emphasize the local origin of your onions and the story
behind their production. Consumers often appreciate knowing where their food comes from and
the people behind its cultivation.

Marketing and Promotion: Develop a marketing and promotional strategy that highlights the
unique qualities and benefits of your branded onions. Use digital marketing, social media, and
local advertising to create awareness and generate interest.

Distribution Channels: Select distribution channels that align with your target market. You may
want to focus on specialty grocery stores, farmers' markets, or restaurants that value high-quality,
locally-sourced ingredients.

Pricing Strategy: Set a pricing strategy that reflects the added value of your branded onions. Be
prepared to sell them at a premium compared to standard, commodity onions.

Consumer Education: Educate consumers about the benefits of your branded onions. Offer
cooking tips, recipes, and information about how your onions stand out from the competition.

Feedback and Adaptation: Continuously gather feedback from customers and the market to
make adjustments as needed. Be open to evolving your product and brand based on consumer
preferences.

Collaboration and Partnerships: Consider partnering with local restaurants, food service
providers, or retailers to feature your branded onions in their dishes or products.

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Advantages of Decommoditizing Onions:

Stability of marketplace: Decommoditizing onions WILL allow producers to sell their onions
at a fixed and convenient price compared to standard commodity onions. People won't be able to
raise the price every now and then. This will result in higher stability in the marketplace.

Product Differentiation: By branding and highlighting the unique qualities of the onions,
consumers can better distinguish them from standard onions. This product differentiation can
attract consumers who are willing to pay more for higher-quality or specialty onions.

Market Stability: Commodity onions are often subject to price fluctuations based on supply and
demand dynamics. Decommoditizing onions can help stabilize prices, as they are less influenced
by market trends and more dependent on their unique attributes.

Local and Sustainable Sourcing: Emphasizing the local and sustainable sourcing of onions can
appeal to consumers who prioritize supporting local farmers and environmentally friendly
practices. This can also foster a sense of community and social responsibility.

Improved Quality Control: Decommoditization often involves a focus on quality improvement.

Producers pay more attention to growing and storing the onions, resulting in a higher-quality
product.

Consumer Satisfaction: When consumers purchase de-commoditized onions, they are more
likely to be satisfied with the product, as it meets specific quality and taste expectations. This can
lead to increased customer loyalty and repeat business.

Economic Diversification: For farmers and producers, decommoditization can offer an

opportunity to diversify their income sources. Instead of relying solely on the fluctuating prices
of standard onions, they can generate additional revenue by selling branded, premium onions.

Rural Development: Decommoditizing onions can benefit rural communities by creating

economic opportunities, providing better income for local farmers, and potentially generating
new jobs in the value chain, such as in packaging and distribution.

Export Potential: High-quality, branded onions may have export potential, especially if they
meet international quality and safety standards. This can open up new markets and revenue
streams for producers.

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Consumer Education: Decommoditizing onions can provide an opportunity to educate
consumers about the quality, origin, and benefits of the product. This helps create a more
informed and discerning customer base.

Environmental Benefits: Sustainable and environmentally friendly practices associated with

decommoditization can have positive ecological impacts by reducing the use of harmful
chemicals and promoting eco-friendly farming methods.

Regional Identity: Branded onions can promote the unique characteristics and regional identity
of a particular area in Bangladesh, which can contribute to a sense of pride and cultural
significance.

Possible complications:
Some complications you might face in this specific scenario:

Consumer Education: Educating consumers about the benefits and uniqueness of your branded
onions can be challenging. Many consumers are accustomed to buying standard, low-cost
onions, and convincing them to pay a premium for your branded onions will require significant
marketing and education efforts.

Market Acceptance: Convincing consumers to embrace the idea of paying more for onions
when they are price-sensitive can be difficult. You will need to build trust and demonstrate the
added value of your product.

Supply Chain and Sourcing: Ensuring a consistent supply of high-quality onions that meet
your brand's standards can be challenging. It may require careful sourcing and relationships with
reliable suppliers, which can be challenging to establish and maintain.

Quality Control: Maintaining consistent quality and size in agricultural products can be
complicated. Weather conditions, pest outbreaks, and other factors can affect the quality of the
onions you receive.

Pricing Strategy: Setting the right price point for your branded onions is crucial. If your prices
are too high, it may deter cost-conscious consumers, but if they are too low, it may not justify the
premium nature of your product.

Distribution Challenges: Establishing effective distribution channels for your branded onions
and ensuring consistent availability in your retail shop can be complex and may require
investments in logistics.

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Competition: Other retailers or producers may also aim to de-commoditize onions, leading to
increased competition in the branded onion market. This competition can affect both pricing and
market share.

Regulatory Compliance: Meeting regulatory standards and ensuring compliance with food
safety and labeling requirements is essential but can be complex and may involve additional
costs.

Consumer Expectations: Once you establish a reputation for high-quality onions, consumers
will have higher expectations, and any decline in quality can harm your brand and consumer
trust.

Market Volatility: External factors like weather conditions, geopolitical events, and global
market dynamics can still impact the onion market and influence supply and demand for branded
onions.

Risk Management: De-commoditizing onions involves risks, such as the risk of consumer
rejection, or the risk of market saturation if many retailers and producers enter the niche market
simultaneously.

Seasonal Variations: Onions are typically seasonal crops. Managing a consistent supply and
quality year-round can be challenging and may require strategies for off-season storage or
sourcing.

Brand Reputation: Building and maintaining a positive brand reputation is essential. Negative
publicity or quality issues can harm your brand and consumer trust, affecting sales and market
share.

Market Research: Conducting in-depth market research to understand consumer preferences

and demand for branded onions in the local context is essential but can be time-consuming and
resource-intensive.

Conclusion

In this paper, we have explored the multifaceted concept of de-commoditizing onions, a practice
that involves transforming a standardized agricultural product into a branded, value-added
commodity. Through this analysis, we have delved into the complexities and opportunities
associated with de-commoditizing onions, particularly in the context of a retail shop in
Bangladesh. The process of de-commoditization is not without its challenges. Educating
consumers about the unique qualities of branded onions, convincing them to accept premium
prices, and competing in a price-sensitive market can be formidable hurdles. Moreover,

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maintaining quality and consistency while navigating seasonal variations and supply chain
intricacies requires careful planning and execution.

However, the rewards of de-commoditizing onions can be substantial. By establishing a strong

brand identity, highlighting the attributes that set your onions apart, and delivering on quality
promises, retailers in Bangladesh have the potential to command higher profit margins and build
customer loyalty. This approach contributes to a more stable and resilient market, with the added
benefits of supporting local agriculture and promoting sustainability.

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