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With the improvement of living standards, people have become increasingly sensitive to food safety. As such, organic food is increasingly sought after by the market. Through this case, “How to Explore the Market of Organic Products in China? Organic and Beyond Corporation (OABC)’s Way Forward”, written by Professor Yichi Zhang and Mr. Xiaolong Wang of Guanghua School of Management, Peking University, we review the entrepreneurial history of OABC, a leading company engaged in the production and marketing of organic products in China.
This case is officially included in the business case collections of Peking University and is also the first piece of the “A+case” project initiated by Guanghua School of Management, with the aim of focusing on alumni enterprises specifically. For its typically entrepreneurial nature, the example of OABC can be used by business schools in courses such as entrepreneurship, innovation, strategy, and marketing, allowing students to understand the process of starting a business and challenges in its journey of scaling-up.
“The healthy growth of a startup entails the internal consistency among various elements of its business model, as well as the external consistency between its overall business model and socio-economic environment wherein it operates.” One author of the case, Professor Yichi Zhang, points out, “We seek to use the case of OABC to exemplify the importance of the latter point.”

Below is an excerpt adapted from the case.
1. What is organic food?
Domestic agricultural products in China mainly include pollution-free agricultural products, green food products, and organic products. Each type of products abides by its own set of standards, with organic products facing the most stringent requirements among them. However, an average consumer is usually unable to differentiate between the three.
At its core, organic agriculture seeks to address the long-term environmental concern brought by the production techniques for cheap and popular crops. The application of manual weeding in place of herbicides, the annual certification expenses, and the marketing costs, etc., all of them would translate into the significantly higher prices of organic products compared to ordinary products.
Given the difficulty in distinguishing the three types of products, it is hard to establish a clear image for organic foods. for companies who produce and sell organic products like OABC, time is apparently needed to build up consumers’ confidence in an organic brand. More fundamentally, expanding the market for organic foods is closely linked with socioeconomic development indicators such as the per capita income, the level of public awareness of environmental protection, and even the overall living conditions. Hence, the organic food market in China is far from being mature.
2. The Founding of OABC
During his living and studying in the United States, Zhang Xiangdong, a native of Wenzhou, Zhejiang Province, noticed the popularity of organic foods in their booming production and sales. More and more people also clearly perceived the positive impacts organic products had on their health. Bearing these observations in mind, in 2005, Xiangdong returned to China and started planning for a start-up project related to organic agriculture. It was also during that period that China witnessed some major food safety scandals, leading to severe anxiety of the whole society. The public attention directed towards food safety, along with the establishment of China’s unified certification system for organic products, reminded him of the right time to start a business of organic foods.
In 2007, OABC was founded in Beijing, with the clear goal of becoming the leading brand of organic products in China. Among the eight co-founders, four have a background in agricultural research or agricultural planting. At that time, OABC had established three of its own plantations in Miyun (Beijing), Shandong, and Shaanxi.
For its business model at the early stage, OABC originally envisioned to serve regular customers, with the hope of collecting orders by the means of word-of-mouth-based network effects and fulfilling via self-built distribution channels.
On the supply side, OABC established four channels: their own plantations, cooperatives with farmers, outsourcing festive product processing to factories with ready formulae and raw materials, and cooperatives with foreign suppliers.
For sales, OABC implemented a membership system where members purchase products from its weekly distribution list to enjoy a more favorable price.
Due to the high price of organic products, OABC’s initial target groups were families with annual income exceeding 500,000 yuan. OABC held free tasting events and other marketing activities in collaboration with governmental or high-end institutions. The founding team also tried to attract users by word of mouth. However, these efforts were still insufficient. In the financial year of 2007, OABC’s total sales volume was only 800,000 yuan.
3. Breakthrough
In the summer of 2008, a suggestion was put forth to promote organic products in the corporate gift market, resulting in a significant change in OABC’s marketing strategy. Soon after, organic mooncakes were launched for the Mid-Autumn Festival in 2008, and OABC concentrated on selling to corporate customers. The team marketed gift cards with prices ranging from 298 to 1998 yuan mainly targeted at business institutions, which proved to be a huge success. In 2008, the sales volume of OABC exceeded 5 million yuan and reached 50 million yuan in 2009. They realized profit in that same year.
Optimistic about their future prospects, the team began to expand its business on a larger scale. On the supply side, they diversified their products. They introduced gift cards with more options for the price level and catered customized services to the corporate gift market. While attracting more and more large corporate clients, OABC also reached out to regular consumers through third-party online platforms.
During this period, OABC was at the peak of its achievements in the gift market. By 2012, OABC’s agricultural sales reached 200 million, with nearly 10,000 corporate clients. Although the absolute sales volume was not comparable with companies from many other industries, the survival of OABC in this typically unprofitable business attracted attention.

4. Changes in the Environment
The governmental regulation on the expenditure of public money in 2013 struck a hard blow to the business model of OABC, whose customer base included many state-owned enterprises. In 2013, OABC’s sales volume plummeted from 200 million yuan to about 60 million yuan.
Despite the dim prospects, the team insisted on ensuring the high quality of its organic products. However, the crux of the problem has yet to be solved—the difficulty in securing the trust of its customers, as well as wide recognition in the value of organic products.
The team’s efforts to achieve breakthroughs resulted in mixed outcomes. The overwhelming amount of advertisements, the mixed product qualities, and the main selling point of low prices prevalent in WeChat marketing, etc., all of those proved to the team that the strategies were inherently incompatible with OABC’s brand and product positioning. OABC also experimented with organic restaurants and other services outside its core businesses. Unfortunately, the low frequency of organic food consumption largely increased OABC’s marketing and operation costs.
“Due to the production cost and resultant price level of organic agricultural products, OABC focused on the corporate gift market at its early stage. However, with restrictions on the expenditure of public funds, its sales volume descended suddenly from several hundred million yuan to 60 million yuan only,” Professor Yichi Zhang discerns, “After losing the bulk of its corporate clients, should OABC reposition its market segment? If so, how should this be carried out?”
Professor Zhang also reminds the audience’s attention to evaluating the performance of startups adequately. “According to OABC’s present financial performance, combined with its duration, some people may think that its performance is far from that of a ‘unicorn startup’ and regard it as an unsuccessful startup,” Professor Zhang notes, “In essence, OABC’s achievements should be applaudable in view of such factors as its specific industrial context, the current per capita income, and the successive failures of its competitors.”
5. Opportunities and Challenges
With the outbreak of the COVID-19 pandemic, online shopping for vegetables and healthy diets became hot topic. OABC admitted in the interview that it did not make too many arrangements other than coordinating with overseas partners and domestic supply chains for conservative stockpiling. Overall, the pandemic has not brought significant business growth to the organic product industry.
“After all, we are still an agricultural enterprise, not an internet company. It is impossible to make spontaneous and system-level adjustments as and when,” Dr. Xing Jianping from OABC explained, “We are also trying hard to expand in different directions, but we remain focused in our core beliefs, so there is less flexibility. Of course, seen from another angle, this is actually one of the reasons why we have persisted in this industry for more than ten years.”
“Did the surge in online sales of agricultural products due to the COVID-19 outbreak offer a good opportunity for its transformation?” Professor Zhang prompts the audience to contemplate, “Is the conservative mindset of the senior management team an asset to the company at the current stage?”
As concluding remarks, Professor Zhang emphasizes that the founding team of OABC is composed of several agronomists with strong beliefs in environmental conservation and health of human beings.“In de facto, they are following their deeply embedded life interests with the OABC business,” Professor Zhang observes, “With the continuous economic growth and emergent trends of consumption, OABC could be on a way to their own tipping point. Let us sincerely look forward to their great success in the foreseeable future!”

About the Author
Dr. Yichi Zhang is a Professor of Management at PKU Guanghua School of Management. His teaching and research focus on innovation, entrepreneurship, and strategic HRM. He has published over 50 articles in academic journals. Currently, he serves as an editorial board member of HRD Quarterly and director of the Center for Innovation & Entrepreneurship (CIE) of the school.

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