Sixth-Sector Industrialization for Farmers | OEM Guide to Processing Your Own Agricultural Products

Sixth-sector industrialization (integration of primary, secondary, and tertiary industries) refers to the initiative where agricultural, forestry, and fishery operators (primary industry) also take on processing (secondary industry) and sales (tertiary industry) themselves, adding value to increase their income. The term comes from the multiplication 1 × 2 × 3 = 6, hence "sixth-sector industrialization."

Japan's Sixth-Sector Industrialization and Local Production for Local Consumption Act

The formal title is the "Act on Creation of New Business by Utilizing Agricultural, Forestry and Fishery Resources and Promotion of Local Agricultural, Forestry and Fishery Product Utilization." When agricultural, forestry, or fishery operators submit a comprehensive business plan and receive national certification, they become eligible for the following types of support:

• Dispatch of sixth-sector industrialization planners: Free expert support for product planning, marketing, and sales channel development
• Subsidies for diversifying sales channels of agricultural, forestry, and fishery products: Subsidies covering costs for processing equipment installation and sales channel development
• Low-interest loans from the Japan Finance Corporation: Long-term, low-interest financing for processing and sales facility development
• Agricultural Improvement Fund (interest-free loans): Interest-free loans for new processing business initiatives

Why OEM Is Ideal for Sixth-Sector Industrialization

When pursuing sixth-sector industrialization (integration of primary, secondary, and tertiary industries), building your own processing facility is one option, but the initial investment can be enormous—tens of millions to hundreds of millions of yen. With OEM outsourcing, on the other hand, no investment in processing equipment is needed, allowing farmers to focus on supplying raw agricultural materials.

• In-house processing: Large capital investment required, HACCP-compliant facility needed, manufacturing expertise takes time to develop
• OEM outsourcing: Low initial investment, access to professional manufacturing expertise, flexible ordering based on demand

Especially for small-scale farmers taking their first steps, a phased approach is the most practical: first build a track record through OEM outsourcing, then consider investing in in-house processing facilities once sales are on a solid footing. In subsidy applications, business plans based on OEM outsourcing for product commercialization are accepted for review.

The optimal product category varies depending on the type of agricultural product. Product planning that leverages the unique characteristics of each crop is the key to successful sixth-sector industrialization (integration of primary, secondary, and tertiary industries).

Fruits

• Jams and confiture: The most classic processed product. Premium jams with high fruit content are easy to differentiate. Some manufacturers accommodate minimum lots of 100 to 300 jars.
• Dried fruits: Lightweight, shelf-stable, and perfect for e-commerce and gifting. No added sugar and no additives serve as value-added selling points.
• 100% fruit juice and smoothies: Fewer manufacturers hold the necessary production permits for juice beverages, but these are popular as high-priced premium products.
• Fruit sauces and syrups: Products with specific uses, such as for pancakes or shaved ice, make effective product concepts.
• Fruit wines and liqueurs: A liquor manufacturing license is required, so collaboration with a licensed OEM manufacturer is a prerequisite.

Vegetables

• Pickles and vinegar-preserved vegetables: Traditional processing methods that easily leverage regional character.
• Dressings and sauces: Versatile vegetables such as tomatoes, onions, and carrots work well, and many OEM manufacturers handle this category.
• Dried vegetables and powders: Ideal for utilizing irregularly shaped or off-grade produce. Can also be used as ingredients for soup mixes and furikake seasoning.
• Frozen cut vegetables: Demand is growing for both commercial and household use. Production is outsourced to OEM manufacturers with freezing equipment.

Rice and Grains

• Rice flour and rice flour confections: Growing interest due to rising gluten-free demand. Products such as rice flour bread and rice flour cookies are viable.
• Mochi, okaki, and senbei (rice crackers): Steady demand as gifts and tourist souvenirs.
• Amazake and sake: Requires collaboration with a sake brewery but can be developed as a high-value product.

How Raw-Material-Supply OEM Works

When farmers use OEM, the most common arrangement is called raw-material-supply OEM. The farmer supplies their own agricultural products as raw materials to the OEM manufacturer, who handles processing and packaging. The farmer pays the raw material cost (typically pegged to the market shipping price) plus processing fees, receives the finished products, and sells them under their own brand. Quality control of the raw materials is the farmer's responsibility, while quality control of the processing is the OEM manufacturer's responsibility.

Agriculture is inherently seasonal. Carefully coordinating OEM food manufacturing schedules with crop harvest timing is essential.

Coordinating Harvest Timing with Manufacturing Schedules

Fruits and vegetables have peak seasons, and the window for supplying raw agricultural materials is limited. Here are key points for smooth OEM manufacturing:

• Annual production planning: The standard approach is to produce 1–2 times per year during the harvest season, securing the year's supply in bulk. For example, a peach farmer would supply jam raw materials during the July–August harvest and produce the entire year's inventory at once.
• Frozen storage of raw materials: Harvested produce can be frozen and supplied to the OEM manufacturer when needed. However, some agricultural products change quality through freezing and thawing, so conduct quality tests with the OEM manufacturer in advance.
• Utilizing off-grade produce: Produce that cannot be shipped to market due to irregular shapes or small sizes can be diverted to processing. This simultaneously reduces food waste and generates additional revenue. Since appearance does not matter for processed products, off-grade produce with no quality issues is perfectly usable.
• Watch for the OEM manufacturer's peak seasons: Food OEM manufacturers have their own busy periods. Production lines get congested before the mid-year and year-end gift seasons in Japan, so early ordering and planning are necessary.

JAS Certification and Organic Processed Foods

For farmers who grow organic produce, obtaining Organic JAS certification for their processed products adds significant value.

To obtain Organic JAS certification for processed foods, the following requirements must be met:

• At least 95% of raw materials must be organic agricultural products
• Avoid using chemically synthesized food additives and processing aids during processing (limited use is permitted when unavoidable)
• The manufacturing facility must be a certified organic processed food operator
• Measures to prevent mixing of organic and non-organic raw materials must be in place

When producing organic processed foods through OEM, the OEM manufacturer itself must be a JAS-certified organic factory. Not all OEM manufacturers hold this certification, so it is important to identify capable manufacturers in advance. Products manufactured at non-certified facilities cannot bear the Organic JAS mark.

Additionally, obtaining and maintaining Organic JAS certification costs approximately ¥100,000–300,000 (approx. $700–$2,100) per year, so calculate in advance whether the organic premium on your selling price will recoup this expense.

When developing sales channels for OEM processed foods, farmers should leverage existing agricultural product sales channels while also pursuing new channels unique to processed products.

Farm Stands and Roadside Stations (Michi-no-Eki)

These are the most familiar sales channels for farmers. Farm stands attract consumers seeking local agricultural products, so processed products made from locally grown ingredients have strong appeal.

• Advantages: Relatively low sales commissions (around 15–20% of sales), ability to explain products face-to-face, building a local fan base
• Disadvantages: Limited geographic reach, display space constraints, competition with other vendors
• Keys to success: Actively offer tastings. Display POP signs that tell the story of origin, such as "Made with produce from this very farm."

E-Commerce (Own Site and Marketplaces)

Compared to fresh produce, processed foods are room-temperature shippable and shelf-stable, making them exceptionally well-suited for e-commerce.

• Own e-commerce site: Launch with Shopify, BASE, or STORES. Full freedom to express the farm's story and philosophy, with high profit margins. However, driving traffic requires your own effort.
• Rakuten and Amazon: High traffic but commissions apply. You can capture users searching in "direct from farm" and "direct from producer" categories.
• Tabechoku and Pocket Marche: Farm-to-consumer direct-sale platforms in Japan. Processed products can also be listed, enabling cross-selling to customers who already buy your fresh produce.

Furusato Nozei (Hometown Tax Donation Return Gifts)

Farm-produced processed foods are a highly popular category for furusato nozei return gifts. Apply to register as a return gift with your municipality's furusato nozei department.

• Requirements for return gifts: Must be a local product (OEM-processed products using local raw materials are generally accepted). Procurement cost must be 30% or less of the donation amount.
• Advantages: Listed on furusato nozei portal sites (Satofull, Furusato Choice, etc.) for nationwide reach. Payment from the municipality is guaranteed.
• Caution: Orders peak in December, so sufficient inventory must be secured. Shipping delays become a credibility issue for the municipality, so plan manufacturing and logistics carefully.

Wholesale to Local Restaurants and Lodging Facilities

Selling processed products wholesale to local restaurants, hotels, and ryokan is another option. For example, having locally farmed dressings or jams used at local restaurant tables or hotel breakfasts achieves both stable B2B revenue and consumer brand awareness.