ValueAdded Agriculture

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Value-Added Agriculture

• Center for Agribusiness and Economic Development

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Snoremuffler
Wedge Proof Underwear
Milk Gun
Greenhouse helmet
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What is Value-Added Agriculture?

• Products and services processed/packaged/marketed
  in ways especially valued by consumers
• What some consider value added, others might not

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Projects

• Pick-your-own fresh-cut flowers
• Bait fish production
• Marine Shrimp Production
• Riding Trail Facility
• Goat processing
• Fresh Salsa
• Tack and Feed Store
• Snail farm
• Aquaculture Facility
• Pelletized Poultry Litter

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What a dollar spent on food paid for in 2000
                                                  
                                                  
                                                
                                                  
                                        
                                                  
                                                  
                      
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Value is beyond farmgate.
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Farm Gate vs. Value Added

• Value-Added Product
• (De-commodify)
• Convenience
• Demand driven
• Price setter
• Marketing Marketing

• Commodity
• Apples
• Price Taker - Supply Driven
• Marketing Market Timing

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Value Added Apple Slices
Value Added Product
Commodity
Valued Added Process
Sliced Apples 1.19/2.5 oz. package
Apples 1.34/lb.
Processing, packaging, distribution, marketing
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Value Added Food Opportunities
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Value-Added Supermarket Trends

• On a weekly basis, this fresh-cut vegetable
  category accounts for 10-15 of fresh produce
  retail sales.
• The packaged salads outpace all others such as
  packaged broccoli, cauliflower, assorted
  vegetables, packaged greens such as collards,
  turnips, and mustards, and peeled mini-carrots.
• Other fresh-cut items such as vegetable trays and
  fruit trays are also good sellers, especially
  during the holiday season.
• Unique / innovative packaging- prompts consumers
  to purchase more produce - growing sector.
• Stores are continually striving to increase
  product sales packaging is one method of
  achieving this goal.

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Top 10 U.S. Food Trends(Source WebMD Medical
News, April 2003)

• 1. Heat and Eat - Ready-to-eat, heat-and-eat,
  packaged foods with no utensils required for
  on-the-go consumption top America's "most wanted"
  list of new food product attributes, along with
  great taste. In fact, these qualities were all
  considered more important than nutrition or
  health.
• 2. Retro Nutrition - Contrary to popular belief,
  interest in fat, sugar, calories, and dietary
  fiber did not die with the last decade. People
  are still interested in "avoidance products" --
  the "less evil" foods and beverages that promise
  "no, low, less than, reduced."
• 3. Casual Indulgence - As the trend toward casual
  and comfort continues, frustrated food-savvy
  consumers are demanding that "everyday" foods
  should be a little more "gourmet." It's creating
  a wave of mildly upscale casual culinary concepts
  that are destined to be more indulgent,
  flavorful, festive, and fun.
• 4. Country Charisma - "Plain American" still tops
  the list of foods and cooking styles that
  consumers say they "really" enjoy. But it's not
  surprising that Chinese, Italian, and
  Mexican/Tex-Mex are closing in fast. Ethnic
  trends are quietly merging with our own
  traditional and regional cuisines.

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Top 10 U.S. Food Trends(Source WebMD Medical
News, April 2003)

• 5. Table Talk - Exotic varieties or more highly
  flavored versions of favorite foods and
  ingredients -- especially cheeses, mustards,
  ketchups -- are gaining ground in food trends.
• 6. Simple Solutions - People want easy fixes --
  food that's fast and fun. Those milk-and-cereal
  bars, grab-and-go snacks, meal-replacement bars,
  and "functional beverages" like Slim-Fast are
  big.
• 7. Custom Catering - All those varieties of
  yogurt are converting non-users to yogurt lovers
  -- from super-decadent, dessert-like flavors to
  soy-based versions and kid-specific yogurts.
  Yogurt has become a cottage industry.

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Top 10 U.S. Food Trends(Source WebMD Medical
News, April 2003)

• 8. Correcting Conditions - Foods that prevent or
  even treat a condition are at an all-time high --
  like vitamin-fortified foods, soy products,
  weight-loss foods.
• 9. Exceptionally Pure - Organic food is
  exploding, with nutrition bars, snack foods,
  nondairy beverages, and packaged foods posting
  the largest growth.
• 10. Snacks Mini Meals - Convenient,
  ready-to-eat snacks and mini/mobile meals are the
  most popular food items. Virtually everyone
  snacks between meals -- especially teens, young
  adults, and latchkey kids.
• Fruit has been in "growth mode" -- especially
  dried fruits. Also miniature veggies and very
  young versions of veggies -- or veggies with a
  different look -- are popular food trends.

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U.S. Food Trends

• Americans say health concerns influence purchase
  decisions, but convenience and taste have more
  influence !!!

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The Ultimate in Value Added

• Bottled water consumption will soon overtake
  sodas in overall sales

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Fresh Salsa

• Two thirds (63) of U.S. households purchase
  salsa, buying an average of one jar every month
  and a half.
• Trends- increased demand for high quality,
  specialty salsa.
• Major processed salsa producers control 62.5 of
  the market. Pace (25.7), Old El Paso (23.8),
  and Tostitos (11.2), dominate the salsa market.
• A major grocery chain buyer indicated he is
  approached by as many as 50 salsa makers
  annually. Of these products, he makes his
  purchase decision based not only on taste and
  demand, but the products uniqueness in the
  marketplace.

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Direct to School Value-Added
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Agritourism is a Growth Industry

• The tourism and travel industry is estimated to
  grow by 28 from 1997 to 20071.
• Agricultural and nature based tourism growing at
  an anticipated 30 over the same time period1.
• People are traveling frequently, however, the
  trips are to relaxing places that can be accessed
  by car not plane.
• 1Source Kentucky Agrituorism Working Group,
  Issue White Paper Establishment of an
  Agritourism Industry in Kentucky.

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Horse Trail Potential
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Adding Value

• Entrepreneur has many acres in pines
• Land is not generating any income while pines are
  growing
• Wanted to add value to the land and with minimal
  impact on trees
• Property has fire breaks and roads established
  throughout
• Easily converted into trails, estimated to be
  10-20 miles

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Adding Value to Growing Pines

• Trail riders are willing to travel 153 or more
• Trail riders take an average of 8 trips/year
• Riders spend an average of 3 days and 2 nights at
  the facility
• Riders spend an average of 14.91 per night to
  camp with trailer
• Riders are paying 5, 10 and 15 for ½ day, full
  day and weekend rides, respectively

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Hunting, Fishing and Wildlife Recreation Potential
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Fishing in Georgia- Value-Added Opportunities

• Anglers 1,086,000
• Average days fished 13
• Average Expenditure/day 18
• Hunters 417,000
• Average days hunted 19
• Average expenditure/hunter 59
• Wildlife Observation 1,494,000
• Residential 411,000
• Non-residential 1,305,000
• Average expenditure/person 359

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Fishing Cooperative

• 150 acre lake in Southwest Georgia
• Sells memberships to use the lake
• 80 members currently
• Sells tackle and equipment
• Made 32,000 last year
• Third largest revenue generator on farm

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Value-Added Hunting
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Leasing Land - Commodity

• Lease land to Hunting club 10/acre
• Assume 1,000 acres
• Generate 10,000 per year
• Safe
• Consistent
• Familiar

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Adding Value

• Guide Service
• Lodging
• Home Cooked Meals
• These are amenities that the hunter will require
  if he travels to the area to hunt. Instead of
  staying in a nearby town, the farmer is capturing
  these expenditures and added value to the hunter.

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Value-Added Hunting Activities

• Pine Ridge Hunting Plantation
• 3 day 4 day
• Deer Rifle 1250 1500
• Turkey 1500 1750
• ½ day 1 day
• Quail 300 450
• Dove 80 NA

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Elementary School Teacher Potential
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Elementary School Children

• Potential exists with school children
• 95 of teachers take field trips
• 78 are interested in taking a farm field trip
  (729,244 GA students PK-5th)
• On average, teachers are willing to travel 51
  miles for field trips
• 53 students is the average field trip size

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Elementary School Children - Continued

• Most popular activities
• Farm Tours (53)
• Livestock petting zoo and education program (50)
• Hayride/wagon rides (47)
• Exotic animal petting zoo and education program
  (46)
• Working Dairy (42)
• Pumpkin Patch (41)
• Need to incorporate QCCs - Quality Core
  Curriculum Standards and Resources

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Elementary School Children - Continued

• Field trips are mainly taken in April , March and
  October.
• Teachers take an average of 2.5 field trips/year.
• On average, the teachers plan on staying at the
  facility for 150 minutes, or 2 to 2.5 hours.
• Teachers are willing to pay, on average, 5.82
  per student for an agricultural field trip.

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Value-Added Aquaculture Potential

• 53 eat fish once a week or more often
• Roughly 19 purchase fresh fish weekly
• The households eat roughly 4.0 pounds of fresh
  fish per month
• Aided awareness of all species except tilapia was
  high (80 and 44, respectively)
• One-quarter to one-third of respondents would be
  likely to purchase the various species (large
  mouth bass, perch, striped bass, prawn, and
  flounder) excluding tilapia and eel which was
  significantly lower (12).
• Sixty percent or more of the respondents have
  eaten the various species (large mouth bass,
  perch, striped bass, prawn, and flounder), again
  excluding eel and tilapia where the number is
  significantly lower (20 and 34, respectively).
• 42 would purchase live, unprocessed fish from a
  local fish market
• Respondents would travel approximately 27 miles
  to a local fish farm

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Local Market Customer Base
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Local Market Estimated Potential
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Supply and Demand Comparison
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What Others Are Doing -Marketing Cooperative

• Farm Fresh Tattnall, Inc. is a new farmer
  cooperative. It's members are folks that have
  been in the roadside market and U-Pick produce
  business for years. They are genuinely "good ole
  down home" farm families that you will enjoy
  visiting. And the scenery is beautiful too!

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Farm Fresh Tattnall Marketing Cooperative

• 18 farmers
• Pooled resources for better marketing
• Direct mail-out of cooperative brochure to 6,000
  households
• Developed website
• Television and Newspaper advertising reaching
  Savannah market

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Success

• Additional growers are wanting to join
• Preliminary results indicate sales increased 35
  - 65
• Have attracted new people to the area not only
  benefitingb the cooperative members but other
  businesses in Tattnall County

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A New Marketing Tool

• Interactive and searchable website
• http//www.iiseyes.org/agnet/
• or
• www.agecon.uga.edu/caed.
• Can search by place, type of activity and more!
• Can assist in creation of a web site
• Sponsored by the Center for Agribusiness and
  Economic Development

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AGNET

• Accessing
• Georgias
• Natural
• Environmental/Agricultural
• Treasures
• http//www.iiseyes.org/agnet/

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Conclusions

• Demand exists and is expected to grow for
  agritourism activities.
• Potential exists across all parts of Georgia
  rural areas to large cities
• Enjoyment of the farm experience is important
  including viewing the scenery, experiencing the
  environment and picking your own.
• Survey shows activities/methods for attracting
  consumers.

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Educational Materials

• Available on-line at www.agecon.uga.edu/caed.
• Click on publications
• Click on Agritourism for these and other related
  publications
• Road Side Stand Marketing of Fruits and
  Vegetables
• Considerations for an Agritainment Enterprise in
  Georgia

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If you build it, they will come....

• It sells great at the local farmers market....
• My family loves it....
• The local Extension service featured it....
• Ill build a web site......

If it was this easy, every body would be doing it
and making money!
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Starting a Business

• Idea
• Feasibility
• Business Plan
• Begin Business

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Do I have the resources?

• Before beginning any new venture sit down with
  all involved, spouse, children, partner and
  evaluate your resources
• Technical (equipment, machinery)
• Capital (working capital, start up cost)
• Market (distribution capabilities and contacts)
• Labor
• Size (economies of scale)

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If you cant afford a feasibility study,

• then you need to ask, is this the right time
• then you need to pursue grants
• enough to do a great analysis
• then you need to pursue outside capital
• requires a business plan
• then you you may need to think smaller scale
• then you may want to scrap the idea

p.s., Dont Waste Your Money.
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Adding Value to Georgias Agricultural Economy
Through Research and Extension

• www.agecon.uga.edu/caed/
• College of Agricultural Environmental Sciences

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If you build it, they will come....

• It sells great at the local farmers market....
• My family loves it....
• The local Extension service featured it....
• Ill build a web site......

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Economic Analysis

• Requires an understanding of the cost drivers to
  determine breakeven analysis.
• Fixed, variable and step costs. You need to know
  your production cost
• This includes producing the commodity and
  modifying the good to a value added product
• Production costs can include packaging
  equipment(cooking, mixing, cutting), growing
  cost(refer to enterprise budgets).

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Marketing Concepts

• Market analysis - understand the market
• Who (customers, specially target market)
• Where (store, web, catalog)
• When (seasonality, lifestyle change)
• Why (convenience, status, necessity)
• what (form, packaging)

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Marketing Channels

• Broker
• Distributor
• Wholesaler
• Agent Wholesaler
• Merchant Wholesaler
• Retailer
• Consignment
• Direct To consumer
• Farmers Market
• Internet
• Catalogs

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Marketing mix and Advertising strategy

• Where and when does my target market look for
  information
• What is the most effective means of reaching my
  target market ? i.e., television, radio, print
  material, etc..

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Hire a Professional

• Value-added agriculture is different from
  traditional agriculture.
• Get an third party to perform the feasibility
  analysis
• Important to obtain someone familiar with the
  industry
• Remember, cheaper is not always better. You get
  what you pay for!

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You CANT afford not to have a feasibility study

• Ask Is this the right time?
• Pursue grants
• enough to do a great analysis
• Pursue outside capital
• requires a business plan
• Consider scraping the idea

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Thank You - Questions or Comments?
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Feasibility Analysis will help to Understand the
Market

• Understand your market in order to know
• Who (customers, specially target market)
• Where (store, web, catalog)
• When (seasonality, lifestyle change)
• Why (convenience, status, necessity)
• what (form, packaging)

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Customers (who, why, when, what)

• 3 basic questions
• Who are your customers (target market) ?
• Demographic
• Geographic
• Psychographic
• Behavioral

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Demographic

• Age
• under 6, 6-11, 12-17, 18-34, 50-64, 65
• Income
• under 10,000, 10,000-19,999,
• Education
• graduated high school, college,
• Race
• White, Black, Hispanic, etc.
• Occupation
• farmers, managers, students
• Family size
• 1-2, 3-4, 5

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Geographic

• Urban
• Suburban
• Rural
• Regional population distribution
• Atlantic, Southeast, Pacific, Mountain, New
  England,
• City size
• Under 5,000, 5,000-19,999, 20,000-49,999,

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Psychographic

• Social Economic class
• Republican/Democrat
• Conservative/Liberal
• Values
• Lifestyle

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Behavioral Variables

• Benefits desired
• Convenience, economy, status, dependability
• Usage rate
• Nonuser, light, medium, heavy
• Brand loyalty
• None, weak, strong

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Target Markets
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Customers

• 3 basic questions
• 2. Where are your customers? City, County,
  Region, State, Nation, Globe

• Miles 20 15 10
• Population 82,683 59,644 36,409
• Households 31,974 22,806 13,773
• White Population 77,003 56,126 34,497
• Black Population 4,881 2,901 1,506
• Asian Population 623 473
  307
• Hispanic Population 719 518 275
• Median Age 37.0 36.7
  36.4
• Med. HH Inc.() 29,572 30226 32,214
• Av. HH Inc. () 40,855 41,877 43,165

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Estimating Market Potential

• To estimate
• Define target market
• Determine size of market
• Determine consumption/usage
• Determine usage rate

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Customers

• 3 basic questions
• Can you access your customers?
• Distribution

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Getting Products to Market

• Direct to consumer- i.e, roadside stands, direct
  mail, open retail establishment
• Direct to retailer work with food retailer,
  gift shops or other outlet (specialty food shows)
• Distributor - i.e, Sysco
• Wholesaler
• Broker- i.e., Specialty food brokers

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Direct to Consumer

• Sell products directly to consumer
• Sell out of your home office/business (mail
  order, website)
• Establish a retail outlet (I.e., roadside stand)
• Cuts out middlemen
• Retain control of your product (positioning)
• May not provide the market exposure your desire
• Your are solely responsible for advertising and
  promotion not only of your product, but your
  retail outlet
• Retail outlet location is critical
• Expensive to open and operate a retail outlet

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Direct to Retailer

• Sell products directly to retailers
• Supply products directly to retailers on
  consignment
• Cut out middlemen
• Provides more price flexibility
• You are responsible for product delivery
• Retain control of your product (positioning)
• You are responsible for stocking and monitoring
  product movement and condition - consignment
• Retailers are looking to consolidate their
  suppliers and reduce invoice and delivery
  paperwork
• Specialty food shows good way to hit many
  retailers efficiently

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Distributors

• Distributors warehouse, deliver, take orders and
  invoice products.
• They are not responsible for selling products.
• A Generally involved with various product lines
  and are usually regionalized.
• Distributors are not necessarily interested in
  carrying new products if they do not have a track
  record, with data indicating that the product
  actually sells.
• There are about 60 distributors who are involved
  with retail specialty foods in the United States.

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Wholesalers

• Wholesalers sell to retailers, other wholesalers
  and industrial users but do not sell directly to
  the end user or consumer.
• Two types of wholesalers
• Agent Wholesalers
• Merchant Wholesalers

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Cost of Getting Products to Market

• The more people that handle a product, the
  greater the marketing margin.

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Marketing Channel Mark-ups

• Organization Mark-Up Percentage
• Broker 5-15
• Distributor 25-30
• Wholesaler 10-20
• Retail 30-50
• May charge an up-front fee ranging from 1,000
  (broker) to a 10,000 large distributor

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Mark-up Example
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Brokers

• Brokers have personal and established contacts
  with buyers
• Distributors
• Retail grocery chains
• Food service
• Reduced sales costs vs. hiring full time sales
  person
• Provide packaging and product sizing advice
• Handle product promotion
• Work on a fee basis (5-15)
• Some require as start-up fee (1,000)
• Time is divided among many manufacturers

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• Value- Added Produce Opportunities
• Interviewed 125 companies involved with food
  processing

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Cabbage

• Bagged cabbage now generated 70 million dollars
  annually
• Coleslaw 45
• Fresh head 35
• Sauerkraut 12
• Fresh-cut ingredient 5
• Bagged 4
• 13 of 66 companies purchase pre-processed cabbage
• Average Purchase 492,088 pounds monthly, with
  quantities ranging from 2,000 to 950,000 pounds
  per month.
• Pay an average of 0.34 per pound