Farmer Owned Brands: New Value Added Opportunities

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Farmer Owned Brands New Value Added
Opportunities?

• Dermot Hayes
• Sergio Lence
• Iowa State University

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Overview

• Advantages and disadvantages of a commodity
  system
• Farmer owned brands
• EU examples and experience
• Possible applications in Iowa
• Franchise farming

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The Commodity System

• Extremely efficient, source of a lot of U.S.
  prosperity
• More recent than many realize (meats in last 40
  years)
• It does have its problems
• It involves co-mingling
• Consumer signals cannot be transmitted
• Little incentive to improve quality (Trichina)
• Little of no economic profit for producers
  (Wheaties)
• Encourages producers to expand size
• Consumers are starting to get bored with
  homogenous products

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Farmer Owned Brands

• Groups of producers who work together to produce
  a high quality local product
• Key is to limit supplies from within and without
• Supply restriction needs to be justified to
  antitrust authorities emphasis on quality
• Production can be limited by area (Parma)
• Or by trade secret (Baileys)

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FOBS

• Use market forces supplemented by government
  protection of property rights
• Producers who improve quality are rewarded
• Marketing and research people would live in Iowa
• Positive economic profits can be maintained
• Consumer is given access to more variety and
  better quality
• Some U.S. consumers are ready to spend more on
  food to show that they care
• Enormous recent successes in the EU

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EU examples

• Main lesson the marketing must begin early
• Development of Origin Labelled Products
  Humanity, Innovation and Sustainability
• Consumer wants to be given a reason, and this
  reason can appear dishonest to Midwestern ears
• But it works!

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EU Brands

• Baileys owned by Waterford Co-op is a simple
  mixture of whiskey and cream but these
  ingredients are very Irish
• Parma ham an enormous success now imported into
  Iowa
• Parma depends on the wind from the mountains (but
  the windows are never opened)
• Brunello di Montalcino
• 120,000 per acre versus 25,000 for Super Tuscan
  vineyards right next door

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EU Brands

• Cinta Senese pork a recent innovation
• Lentils from Castellucchio
• Beef from Italian Chianina cattle
• Almost every wine olive oil cheese and dairy
  product is protected at the national level
• Few are protected by the EU yet
• Negative example Holstein beef in the UK

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Ideas for Midwest Brands

• Market not yet ready for extra virgin corn oil,
  or wine from the bottom of the Skunk
• We should brand I-80 beef
• N.E. Iowa should have a few cheeses
• Muscatine melons
• High quality pork or processed pork (should have
  an FCE greater then 4)
• Chicken from scratch
• Whatever the East coast consumer pictures when
  they think of Iowa 50-100 years ago

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Should we do anything

• Betsy Hertz has started an inventory of
  traditional brands and processes in Story County
• We should open our laws and minds to franchise
  farming
• My bet is that every audience member has at least
  on good idea
• shlence_at_iastate.edu