Wednesday, January 14, 2015

Getting ahead of consumer buying behavior.


Consumer Trends: why bother?

Identifying what buyers want today and tomorrow is powerful!          
photo credit: snivdesign
As a farm / food retailer we may occasionally wonder what drives not only our current customers, but also those elusive potential customers. One source of insight is “consumer trends.” While these trends may not exactly match the demographics we chase with our retail products; they can be quite helpful in understanding what is happening and what might happen next in the retail shopping environment. You never know – you may actually get ahead of a trend, and end up being the next big thing?

When I consider some research into consumer buying behaviors I check with a hand full of widely recognized experts. Many of these experts are willing to share quite a bit of research and guidance at no-cost.

Listed in no particular order are possible sources:









And don’t forget to participate with your local Extension Education system when exploring consumer trends. For example; at the widely acclaimed Mid Atlantic Fruit & Vegetable Conference  at Hershey   Penn State Extension Educator Heather Mikulas will be sharing her research on Food Trends the morning of Tuesday, January 27th .

One axiom of retail I stick by is that our customers are telling us what to do. Our challenge is to listen to them. Consider spending some time and effort understanding purchasing expectations of your customers – you will likely be well rewarded.

Tuesday, January 6, 2015

An Agricultural Nonprofit Still Has to Make a Profit


By Juliette Enfield, Penn State Extension Educator, Warren Co

A farm can provide benefits to a community that are not always easy to measure in economic terms. A farm can keep land in agricultural production, be used as a teaching tool or be used to grow food for charity. A for-profit farm may not have the capacity or time to focus on these types of educational or charitable activities. Quiet Creek Herb Farm and School for Country Living in Brookville, PA, Lundale Farm in Kimberton, PA, and The Rodale Institute in Kutztown, PA are a few examples of nonprofit agricultural organizations in Pennsylvania.  Quiet Creek Herb Farm and The Rodale Institute focus on agricultural and homesteading education through classes, publications, and research. Lundale Farm preserves farmland by leasing land to farmers.

A farm can be a valuable teaching tool.
What is a Nonprofit?
Churches, public schools, public clinics and hospitals, political organizations, research institutes, chambers of commerce, fraternal organizations, private foundations, museums, and public charities are all nonprofits. Nonprofits contribute to society by providing social and educational opportunities that we all enjoy. The most significant differences between a nonprofit organization and a for-profit business is that the nonprofit organization does not have to pay property tax, sales tax, or corporate income tax, and they have a charitable mission that drives the organization. The tax code used by nonprofit corporations is 501c3, which you may have heard of already. A typical for-profit business will pay the IRS taxes that amount to between 15-35% of their annual revenue. However, both nonprofits and for-profits have to earn enough revenue to cover their costs in order to function. Just like with any business, the nonprofit must fill a unique niche in order to earn its revenues, and should have a business plan. To determine whether or not your organization would fill a unique niche, research what other nonprofits in Pennsylvania are doing at
www.guidestar.org .

The revenue made by a nonprofit organization is used for sustaining the organization and accomplishing its charitable mission, not for distribution to employees or shareholders. The only type of nonprofit organization structure that exists in Pennsylvania is a nonprofit corporation. Corporations have a unique structure that is very different from a sole proprietorship or a partnership. In contrast to sole proprietorships and partnerships, corporations allow business owners to claim the business’s assets instead of the owners’ personal assets if debt or legal issues arise. The state in which the corporation is created assumes some liability for the business and therefore, all finances of the corporation, including salaries, expenditures and revenues must be made publicly accessible. The nonprofit corporation can work with an accountant to keep detailed financial records which they must submit to the IRS and the Department of State every year. These agencies could take away tax exempt status if the nonprofit fails to file these records or if they are generating income that does not relate to their stated mission. In addition to having a sustainable business plan, nonprofit corporations are required to have a board of directors and a fundraising plan.

The Board of Directors
The board of directors must have a protocol for voting on operating procedures for the organization as well as a president, a treasurer, and a secretary. The operating procedures, or bylaws, are voted in and agreed upon by the board. A business attorney can help with the creation of the bylaws. The complexity of the bylaws is up to the organization but they can include rules such as board meeting procedures and roles of employees.  Board directors are either employees of the nonprofit or volunteers who share a passion for the organizations’ mission. The board is responsible for keeping the organization true to its mission, and it ensures that programs and plans are implemented. Although the board of directors is a mandatory part of a nonprofit, offering additional board memberships is optional. Additional members can help to steer the organization, offer diverse skill sets, and help with fundraising by paying membership dues. Board members have to be at least 18 years old and do not have to be residents of Pennsylvania. NOLO gives some great considerations for forming a board
.

The board is responsible for keeping the organization true to its mission and it ensures that programs and plans are implemented.
Fundraising
Fundraising is an essential activity for nonprofits to engage in since revenues are low and accomplishing any mission costs money. Fundraising includes soliciting donations and applying for grants. Nonprofit organizations accept donations from businesses and individuals. These donations are tax-deductible for the donor, which is an incentive to donate. Many public and private grants are available for nonprofit organizations.  Since fundraising is an important part of a nonprofit organization, there should be a fundraising coordinator or grant writer on staff or on the board. For example, if the goal of your agricultural organization is education, you may need to seek grants that will cover the costs for school children to come to your farm. Penn State Extension offers grant writing workshops.
Look online for dates and locations.

Although a nonprofit organization is mission driven and tax exempt, it has to be just as competitive as a for-profit business in order to succeed. Critical components of a nonprofit include a well thought out mission and business plan, a committed board of directors, a fundraising plan, an attorney and an accountant.

For more information on nonprofit management, The Pennsylvania Association of Nonprofit Organizations offers workshops, publications, and conferences. Additional questions about forming an agricultural nonprofit in Pennsylvania can be directed to the Penn State Agricultural Law Resource and Reference Center.

Monday, December 29, 2014

Encouraging Consumer Purchasing, Part II

Last week I wrote about providing your customers with ideas on how your fresh and processed products can be used in ways other than their primary purpose.  This week I have a couple of more ideas that might just work for your business.

Value-added, but “light”

Processing your own value-added products (for example, processing tomatoes and other ingredients into pasta sauce, salsa, etc.) may seem overwhelming, but you do have another option for offering “meal solutions.”

What might you do if you have most, if not all, of the ingredients for salsa or pasta sauce, but you don’t feel that the private label approach (an item manufactured by another business but labeled as your own branded product) is appropriate for your business?  Or, perhaps you have an idea for a processed product and cannot find the right “finished” product offered by a private label company?

One option is to create a “light” version of a value-added product by selecting a recipe and assembling ingredients in the amounts appropriate for the recipe.  

For example, I’m sure that your customers would probably like to make your family’s award-winning salsa for their New Year’s Eve or Super Bowl party.  What you would need to do to accommodate them would be to assemble enough of each of the ingredients so that your customer would only need to refer to your recipe and prepare the salsa from all that was provided in the package.

If your recipe calls for salt and/or pepper or another pantry staple, you could omit it from the value-added light package and alert the customer that they need to add these one or two ingredients to make the dish.

What food trend does your product pair with or complement? 


Along with suggesting additional ways that your fresh and value-added products can be used as an ingredient or in a unique way, consider how you can link your goods with longstanding and/or the latest food trends.  According to a couple of sources, “fermented” foods such as kimchee and sauerkraut will gain notice in 2015.  Which of your foods would complement these dishes, or what ingredients could consumers buy from you to make their own?

Perhaps you do not make and sell your own alcoholic beverages, but your product would be a perfect pairing for a local wine, craft beer, hard cider, or even a distillery’s hard liquor (we've seen great growth in consumption - and will continue to see interest in these beverages continue).  Where can you find information as to potential pairings that you could suggest to your customers?  Here is a short list of resources:
  • Gourmetsleuth.com offers suggestions for a fair number of fresh or dried fruits, while 

    Foodrepublic.com provides an Infographic on pairing wine and vegetables.
  • WineFolly posted a wine guide that also provides a list of what prepared foods (e.g. salty foods, vegetable dishes, roasted foods, sweets). 
  • •A downloadable chart created by the Brewers Association shows what beers pair with salads and a wide variety of meat dishes, while a list of foods that pair well with hard ciders can be found here: http://www.matchingfoodandwine.com/

While these are just a few ideas, these strategies can help you provide your customers with one, two, three, or more ways to use the products you sell.  You’re really only limited by your imagination.

Monday, December 22, 2014

Encouraging Consumer Purchasing, Part I

In past blogs, our group has discussed the importance of providing food samples, mass customization, benefits of offering value-added products, and other strategies to encourage customers to purchase your products.  Each of these is designed to alert and remind customers about what you sell and increase consumer purchases.   In today’s blog, I wanted to provide a few more ideas that can also help increase purchasing.

How many different ways can customers use your products?


Your customers probably have a pretty good idea of how to use most of your products.  Fresh fruit are eaten without any preparation or they can be used as an ingredient in more common dishes, the same with vegetables.  The value-added products that you offer, such as jams and chutneys, can be spread on toast or crackers. 

There is at least a primary and a secondary food use for everything you sell.  But, there are probably many more ways that your products could be used, and the more ways that a customer can use your products – the more products they might purchase.

You might have noticed this strategy on packages of products you buy for your own household or in magazine advertisements.  For example:

  • A well-know brand of an instant coffee drink suggests using the powder as a creamer in other drinks.
  • “Gourmet” jars of peanut butter suggest uses that go well beyond sandwiches.   Peanut butter is a perfect ingredient for Thai food, African peanut stew, and what would be better than a peanut butter and chocolate s’more (though expect it to be a bit more “gooey”)?  
  • Cereals are no longer just from breakfast - they can be used in casseroles, as breading for meats, and so much more.  
  • Maybe your soy sauce bottle has been in your pantry or fridge for quite a while and only gets used to flavor rice?  A more prominent soy sauce company developed magazines and online ads with Thanksgiving meal recipes that listed their product as one of the ingredients. 

Of course some of these ideas are not new and novel; and consumers probably have a similar recipe already saved.  But, many times consumers need to be reminded about the multiple uses that a product can provide, or the recipe needs to be promoted at the right time of the year.  Might the turkey basting recipe appeal to consumers during the summer?  Maybe or maybe not, but when a consumer (who is not a vegetarian/vegan or one who doesn’t like turkey) thinks about the meal they will have on Thanksgiving, a majority think of turkey and how to give it flavor and keep the meat moist.  Soy sauce, apparently, can do just that.  

So, how many different ways can a consumer use fresh produce and value-added products you sell?  A search on recipe websites, review of any recipes you may have provided customers in the past, or just brainstorming can provide a fair number of ideas.  Another approach is to look at more traditional recipes and substitute one or two of the ingredients listed with your products to change the flavor, texture, or other attribute. 

Once your list of ideas is complete, think about the timing of when you should promote them on your website, via social media, in newsletters, and using in-store signage.

Next week I will take about a couple of other ways that can increase consumer purchasing.

Monday, December 15, 2014

Anything is possible.


As we wrap up our 2014 farm business management experiences, and look to 2015 and beyond – we may consider expanding something we already do, or we may explore a new enterprise. We may even transition to something outside of agriculture.

Our farm business choices are only limited by our imagination!
It is important to keep in mind that “anything is possible!”  Examples easy to recall when emphasizing the openness of potential markets include; 1) bottled water, 2) pet rocks, and 3) gourmet dog treats.

Sticking with the family-companion theme, let’s examine the potential of moving up a marketing channel. I’ll focus on simple hard wood here.

            1,000 board feet of pallet grade hardwood = $240
This same wood as firewood = $580
            Same wood as 1 cubic foot bundles of firewood = $2,760
            Same wood as hamster houses = $2,121,400

Maybe an overly simplistic example, but you get the point – anything is possible. The challenges revolve around actually making a profit with whatever it is we decide to do.

My preferred process for gauging the probability of success for expanding or starting a business is summarized here:

What is the objective?
Can you describe to me (very briefly) what it is you are going to accomplish?

Start at the end
            How much net income would it take to call this effort worth while?

As we develop budgets and project revenues let’s remember some concepts from economics:
Cash costs
            People that operate out of a check book only use this method. If they can pay the input bills they believe they are successful.
Accounting costs
            Folks that use accepted accounting methods to manage their business recognize there are costs other than cash when gauging profitability.
Economic costs
            It may also be meaningful to consider our opportunity costs. I’m not the sharpest spoon in the drawer, but I could work as a laborer somewhere in town and forego my farm income. Am I content with the trade off?

Feasibility
Sure, anything is possible, but is it feasible? I can make all the hamster houses I want. Is it reasonable to assume I could sell them?

I do believe our opportunities are only limited by our imagination! However, the risks are great and we must be considerate before we bet all our assets on a new venture.

Monday, December 1, 2014

New farm risk management tool!


Basics of the new Whole Farm Revenue Protection (WFRP) policy

 
Diverse family farms now have an additional risk management tool available.



WFRP is a new crop insurance policy called for in the 2014 Farm Bill and developed by the USDA, Risk Management Agency. This newly available crop insurance product is not intended for a single specific crop, but for all the crops, livestock, and products that are grown, raised, or produced on your farms.This product may be of special interest to diversified and organic farms that do not have single crop policies or organic price elections available.
 
This new crop insurance product is available as one response to the needs of many farm families that previously had fewer choices of risk management tools because of their highly diverse enterprises.
 
Producers should start talking with their crop insurance agent if they are interested in the policy to be prepared for the March 16th sales closing date for WFRP.
 
WFRP is available in all states and counties of the eastern U.S.Some of the most notable benefits this new insurance option offers include:
  • An $8.5 million liability limit (an increase from $6.5 million under AGR and $1 million under AGR-Lite);
  • 85% of historical revenue coverage level when at least three crops are grown (an increase over the previous 80% cap);
  • a premium subsidy of up to 80% when at least two crops are grown (a significant increase over the highest subsidy rate of 59% provided under AGR-Lite);
  • a premium discount for increased diversification stair stepped up to 7 crops;
  • coverage for both crops and livestock (capped at 35% of expected revenue up to $1 million);
  • inclusion of some incidental processing expenses necessary to make the commodity ready for market, such as washing, trimming, and packaging;
  • replant coverage for a crop losses early enough for replanting; and
  • the continued option to insure individual crops under separate crop policies (cannot be CAT level coverage).
The paperwork responsibilities for the farmer will include:
  • The WFRP Application
  • Whole Farm History Report (last 5 tax years)
  • IRS Tax Form 1040 Schedule F
  • Farm Operation Report (Intended, Revised, Final)
  • Allowable Expenses Worksheet
  • Allowable Revenue Worksheet
  • Beginning and end of year Inventory Reports (if applicable)
  • Accounts Receivable and Payable Reports for beginning and end of year (if applicable)
  • Market Animal and Nursery Inventory/Accounting Worksheet (if applicable)
  • Verifiable complete marketing record for each commodity

The USDA, RMA fact sheet on this new risk management tool is available at: http://www.rma.usda.gov/policies/2015/wfrpfactsheet.pdf

RMA provides this web site so we can search for certified crop insurance sales agents:
http://www.rma.usda.gov/tools/agent.html

Saturday, November 22, 2014


Assessing available marketing opportunities

How do you gauge the value of a marketing channel?


Of the roughly $700 billion annual food system value in the U.S., slightly over $100 billion is the farm gate value for all the food farmers produce. The remaining $600 billion covers the processing, packaging, marketing, storage, distribution and transportation between the farm gate and our dinner table. This difference is what excites many farmers about getting closer to the final consumer through value-added and direct-to-consumer farm marketing.

Of course, all this added revenue also comes with added expenses. If we are considering a new revenue generating enterprise it is best if we also consider the potential added costs. The challenges of farm production are many and vary from year to year. When we add the potential issues associated with our also managing the processing, marketing and distribution components of a farm-food business our challenges can increase exponentially.

One method to use for evaluating some of these potential challenges and the associated costs is referred to as “market channel assessment.”  With this method we explore the available market channels we could use as both sources of revenue and expense.

There is an excellent opportunity to enhance your understanding of accessing marketing channels the second week of December.

Penn State Extension is pleased to announce a workshop devoted to enhancing farmers’ knowledge and skills for assessing the potential economic return from the many marketing methods available to them. Those interested in direct-to-consumer sales will learn with industry experts from Pennsylvania and New York.

As we probably recognize, there are many ways to sell direct-to-consumer farm products: farmers’ market, CSA, farm stand, wholesale, direct to institution, online, u-pick, and more. This workshop will help you match the right market mix to your customers, your business goals and your personal skills and resources.

For additional information on this unique program go to

PROFITS: Choosing Your Marketing Methods Workshop  or call Brian at 610.391.9840