Driving Sustainability: Rakuten Farm’s Shinobu Endo is on a mission to empower rural Japan
In this series, the Rakuten Today team sits down with leaders working on sustainability across the Rakuten Group to better understand their organization’s mission and how they are driving Rakuten’s vision of a sustainable future for all.
Rakuten Farm CEO Shinobu Endo is on a mission of sustainability – in more ways than one.
In 2017, Rakuten launched a remote farming service to connect consumers directly with small-scale organic farmers, delivering organic vegetables and involving customers in the growing process.
Under the new name Rakuten Farm*1, Endo has set his young team an even more ambitious goal: to leverage the power of sustainable produce to revitalize Japan’s rural communities.
Taking on Japan’s rural depopulation crisis
Originally from Ehime Prefecture in Japan’s southwest, Endo once worked as a traveling medical technician.
“I spent a lot of time in Japan’s countryside,” he says. “I’d visit schools, do EKGs (electrocardiogram tests) and the like. I’d travel to rural communities and perform health checkups for elderly residents.”
The work gave Endo a close-up view of the challenges facing Japan’s rural areas.
“Every year I went back somewhere for health checkups, I would see Japan’s depopulation before me – there’d be another school that had closed, more elderly residents who had died alone,” he recalls. “I realized that we needed to create new industries and new jobs to attract young people. Otherwise, these rural communities would just fade away.”
One highly visible symptom of Japan’s rural depopulation is abandoned farmland.
“There was abandoned farmland all over the place. I thought, couldn’t we use that land to make new jobs for young people? And that’s how we started this agricultural project.”
Endo sees this as another way to achieve Rakuten’s founding mission of empowering small businesses through the power of the internet.
“I also believe in the power of the internet to energize Japan’s rural economies,” Endo reveals. “Combined with the power of agriculture, Rakuten can help to energize rural, depopulated areas. I think we’re chasing a goal that harmonizes perfectly with Rakuten Group’s philosophy.”
“Organic produce needs to be promoted in order to protect the environment and achieve sustainability. Right now, no frameworks exist in this country to make that happen. That’s where Rakuten Farm comes in.”Shinobu Endo, CEO of Rakuten Farm
Challenges of rural depopulation and agriculture go hand in hand, Endo believes.
“Japan’s farming industry has a problem with successors. Some statistics show that 86% of farmers are over 65 years old and the average age is 68*2.” The current economic framework does not incentivize young people to consider farming as a career, says Endo.
“A lot of young people simply go to university in Tokyo and get a job at a large company,” he laughs. “This leaves fewer and fewer people in the countryside.”
It’s clear what needs to be done to address this alarming prospect: “In order to bring new agricultural workers in, we need to make farming into an industry that actually makes money.”
Voices from the Farm – Takuto Yasui
“When I was a student, I gained experience in rural areas worldwide through local agriculture and aspired to start my own business after finishing university. Despite a lot of challenges, at 25 I was able to start up my own farm with a friend. We were supplying about 30 restaurants in Tokyo annually with over 150 types of vegetables.
After a year studying tomato farming and management, I then joined Rakuten and now manage the Gotemba Farm, while tapping into my farming experience. I understand the struggles of agriculture – yet find true joy in farming. Together with our CEO Endo, I’m striving to create a strong agri-business and build career opportunities for future farmers in Japan.”
A blue ocean of organic veggies
Endo sees two main reasons why consumers might choose organic over traditional produce: They’re healthier and more environmentally friendly.
But for the rural communities he’s looking to revitalize, these benefits mean little if organic vegetables can’t turn a profit. Fortunately, Endo has a strong economic argument for why organic farming makes business sense.
“In order to make money in this industry, you can’t do the same thing that everyone else is doing. Organic farming, on the other hand, is a blue ocean. There is little price competition and there are hardly any strong competitors. It is the ideal space for new farmers to start an agricultural business.”
What’s more, the small community of organic farmers Japan does have faces the same problem as the rest of the industry: an aging population. Endo says that as these farmers retire, Japan could soon be left with just a handful of organic producers. A proactive company like Rakuten could well capture a significant share of an important industry.
Economies of scale: Japan needs more organic infrastructure
In Japan, farmers growing conventional produce benefit from a range of support structures, including subsidized training, education systems and loan programs.
“But for organic agriculture, these systems are limited in number” Endo laments. “What we’re working toward is a profitable industry in an age of SDGs, in which organic produce needs to be promoted in order to protect the environment and achieve sustainability. Right now, no frameworks exist in this country to make that happen. That’s where Rakuten Farm comes in.”
“People say organic vegetables are expensive, right? That’s what we hear from retailers. But if we could make them just as cheap as regular vegetables, more consumers would choose organic,” he argues. “But organic is not expensive just because it’s organic. One of the major reasons it’s expensive is logistics. There are very few large wholesale markets and agricultural platforms for organic produce and perhaps the most crucial role these organizations can play is in collecting and transporting produce.”
Endo emphasizes that without a logistics network, organic farmers must pay a steep price on every bag of vegetables simply to have it transported to supermarket shelves.
“Delivery might add another 100 yen per bag of vegetables. If your product is only worth 100 yen, you have to sell it for 200 yen,” he says.
Regular farmers, meanwhile, benefit from the economies of scale that come with having their produce consolidated with that of other farmers.
“If you’re operating at a large scale, shipping might cost you only 5 yen per bag of vegetables,” Endo explains.”
For organic farming to be profitable in Japan, it needs to achieve a similar level of efficiency. A recent milestone of Rakuten Farm’s journey has been the construction of a refrigeration plant.
“Why a refrigeration plant?” It’s the next best thing to a large wholesale market and agricultural platform. Endo says. “Farmers can bring in 1kg, 10kg, or 10 tons of produce on any given day – it doesn’t matter; the plant allows us to buy it all. They can bring whatever they have, we can freeze it and store it for up to two years. When the time comes, we can load it up on semi-trucks and send it away efficiently. This is how we can solve those transportation challenges.”
The plant will allow Rakuten Farm’s partners to operate on a similar level of logistical efficiency to large-scale agricultural operations that send produce out on semi-trucks each day. Endo believes it’s another step towards normalizing the presence of organic vegetables on supermarket shelves in Japan.
“In Europe, organic products are everywhere, right? But in Japan, it’s still something special, and therefore expensive,” Endo laments. “The refrigeration plant will play a major role in bringing costs down.”
Sustainable in more ways than one
Environmental sustainability is one major advantage of organic farming, but Endo hasn’t lost sight of the other kind of sustainability he is chasing: that of Japan’s rural economies. He feels a strange sense of hope in the fact that most of Rakuten Farm’s young team isn’t there out of a sense of moral obligation.
“I don’t think any of our young staff are here just because they’re interested in organic vegetables,” he laughs. “It’s more people who are on a journey to find their path in life and have taken an interest in farming.”
Rakuten’s own brand power may also be playing a role in re-popularizing the agricultural trade.
“These young people see that Rakuten Group is getting involved with agriculture and think, ‘That looks exciting!'” he says. “Normally, farming companies attract people of retirement age. But about 70% of the Rakuten Farm team are in their 20s and 30s, which is extremely rare in this industry. I think that if we can build a framework to teach them the skills to continue this business into the future, Rakuten can become a significant player in the organic space.”
*1 Rakuten Farm produces vegetables in Japan certified organic by Japanese Agricultural Standard (JAS).
*2 Ministry of Agriculture, Forestry and Fisheries: Statistics on Agricultural Labor Force https://www.maff.go.jp/j/tokei/sihyo/data/08.html (Japanese language only)
*3 Rakuten Farm uses no chemical fertilizers or pesticides other than those permitted under JAS criteria.
*4 Ministry of Agriculture, Forestry and Fisheries: Japanese Agricultural Standards for Organic Agricultural Products
https://www.maff.go.jp/j/jas/jas_kikaku/attach/pdf/yuuki-266.pdf (Japanese language only)