Friday, December 19, 2008

The Value of Management

The other day, I was talking with a colleague about the importance of business planning and, more generally, business management, in the success of entrepreneurial endeavors. That person told me that most farm business owners simply don't have the time to develop a plan or review their records. This wasn't the first time I've heard this and it won't be the last. But this general notion requires a response. I'm going to write directly to the entrepreneurs who may be reading this...

If it's important to you, you'll take the time to manage your farm business. Farming, like any other business, is not a right. It's a privilege! You can't expect to succeed by simply growing or making things. If you're in the commodity business, you can't control price too much (maybe only through premiums offered by your cooperative), so keep looking for ways to control your per-unit costs. Farmers, particularly dairy farmers, tell me that they are tired of hearing us farm management Extension folks preach the importance of production efficiency. Well, in a commodity world, that's the one key gauge you need to watch if you are to succeed. Track your unit costs and keep searching for ways to keep them low. That's pretty much the whole story. It's all about management!

It's clear that differentiating your product results in an even greater management burden. Once you try to capture the value associated with direct marketing or other "value-added" schemes, you move beyond production efficieny into the world of promotions, customer service, choosing product prices, etc. You now have many gauges to watch and adjusting one often affects several others. If you are unable to manage in the commodity world, don't think for a second that switching into some other market venue will be the key to success. You'll need to ratchet up your managerial capabilities before you will succeed in that arena.

If you want your farm business to be here in 5, 10, or 25 years, you need to steer your business toward that goal. Many of you are doing exactly that. But we in Extension, government, or industry sometimes have done you a disservice by not pushing you harder. We need to tell you in no uncertain terms that producing stuff is a necessary, but in no way sufficient, step toward profitability. Managing that production, your employees, your finances, your risks, and your marketing efforts together will provide the best chance of success. That sounds an awful lot like a business plan, to me.

I firmly believe that there is lots of space in the market for all diferent types of farmers. Consumers want a diverse array of foods. Some want cheap food, some organic, local, top-quality, etc. Other consumers want to vistit some of your farm markets, festivals, and pumpkin patches. There is no shortage of opportunities. It's your decision on whether or not you seize any of them. That decision can't be made without taking time to manage your business.

I realize many of you are already top flight managers, ready to move forward with great success. But many of you have a long way to go, yet. Take advantage of all opportunities to learn more and apply it in your business. You'll soon learn that taking time to review your records and make decisions is much more valuable than you think. By doing this, you'll strengthen your business and our industry. Extension is here to work with you to develop your skills.

Monday, December 15, 2008

New caging laws killing ag industry in California?

On November 4, 2008, California adopted a new law banning restrictive cages for egg-laying hens, veal calves, and pregnant pigs. "Restrictive caging" is defined as cages that prevent the animals from standing, lying, and stretching limbs. Cages like this are used by 95% of the industry.

Since California doesn't have a big veal or pork industry, the main effect is on the egg industry. The law will go into affect in 2015. Producers claim that the expenses to update caging facilities will drive egg prices up and make their egg prices uncompetitive with other states and Mexico.

If your state was thinking of instituting this law, how would this affect your farm? Would the result be so devastating in cost that you couldn't stay in business? Or, do you think being "cage free" would help you sell more product?

Caging article

Wednesday, December 3, 2008

Popular Flavors of 2009

Are you ready to try new flavors? Mintel International (a global consumer, product, and market research company) is predicting 2009's most popular flavors will favor exotic fruits and soothing tastes with a hint of spice. Lynn Dornblaser, Mintel's leading new product expert, predicts that "Today's manufacturer is looking for...tastes and aromas that...capture shoppers' imaginations. By adding exotic fruits and unusual ingredients to everyday products, companies give people the opportunity to experiment...without breaking the bank."

These new flavors include persimmon, starfruit, lavendar, cactus, chimichurri, peri-peri, and masala. How do you feel about these new flavors? Would you try adding them to your current products to give them an updated taste? Or, do these flavors seem too odd to add to your product line?

There seems to be a trend toward ingredients that take on a "natural" quality. Have you added any natural ingredients to your products recently? What are some natural ingredients you would like to see more frequently in products?

Food Trends article

Monday, November 24, 2008

"Sticky" Food Prices

I just finished a Washington Post article ("The Frugal Gourmets," Nov. 21) that offered some interesting views into retail food sales. As you might expect, many shoppers are seeking value, rather than top-quality, when searching for food. With increased economic uncertainty, as indicated by a continued fall in stock market indices, many buyers are looking to save money on food purchases.

The article cites research showing that consumers are shifting away from restaurants toward grocery stores, preparing more of their own meals. However, they are finding that lots of grocery item prices are "sticky." That is, the prices were quick to move upward with increases in commodity (oil, grain, meat) prices. However, grocery prices have been slow to follow commodity prices back down.

What does a shift in consumption mean for you? Does it signal a shift away from high-valued fruit or vegetable crops? Does it make it even more important to hone in on those consumers that will continue to purchase such items? Does it allow you to maintain higher prices; thereby increasing your profits? Whatever the case, the situation points out the importance of knowing the customers and the markets in which you operate.

Tuesday, November 18, 2008

Obama and Facebook: Why so successful?

As Jeff talked about in his last post, Obama changed the face of campaigning forever. No matter your political affiliation, we can all learn from Obama's campaigning techniques. One of the places Obama has a huge presence is Facebook. If you're not familiar with Facebook, click here to read about what it is and how to set it up.

Facebook is a free service that allows people to create personal profiles about themselves and join groups that interest them. You can then read other people's profiles and add them to your friend list. As of 1:30pm today, Obama has 3,167,461 friends and McCain has 608,657. How can Obama possibly have 5 times more friends than McCain? Check out both of their pages. The McCain page reads more like an advertisement and doesn't seem to be very dynamic. Also, his page only seems to be updated with new info (videos, messages, etc) about once a month. Obama, on the other hand, has turned his page into a place where people can come to see new posts almost daily. There are posts on his page from a few days before the election asking people to change their Facebook picture to an Obama graphic to encourage people to vote. McCain's page is static. If you saw it 3 months ago and not again until today, not much will have changed. Obama took his page to a level where people could visit daily and read new articles, see new videos, and read notes from Obama.

How did Obama's page become so dynamic and important to his campaigning strategy? He hired one of the original founder's of Facebook, Chris Hughes, to maintain his new-media presence. In an article in the NY Times, Obama credits the Internet’s social networking tools as a “big part” of his primary season success. He has also said that "there’s no more powerful tool for grass roots organizing than the Internet.”

Is Facebook a good advertising tool for your business? Because Facebook is free to use, I believe that developing a page for your business wouldn't hurt. To get people to your page (and create a buzz about your business), you need to keep your page dynamic. You don't need a Chris Hughes on staff to do this. All you need to do is keep people interested!

Sunday, November 16, 2008

Election 2008: A Lesson in Marketing

A disclaimer... This entry is by no means intended to reflect or endorse any particular political views. But I think some business owners can learn a lot about how Barack Obama and John McCain handled their respective campaigns. So let's take a brief look at each from a marketing perspective.

First, think about the consistency and clarity of their messages. Can you name either of their slogans? Do you recall the main themes of each campaign? By next election, most of us will probably remember "Change" or some version of it. But, who will remember "Country First?" (How many of you knew that was John McCain's campaign slogan?) The phrases "Change" or "Change We Can Believe In" or "Change We Need" were everywhere; signs, bumper stickers, internet ads, t-shirts, hats, mugs, pins, and just about anything else you might imagine. This point underscores the importance of clear and consistent messages about your products or business. No matter who your audience is, or how they receive the message, be sure they get the same message that you're sending to all others.

Next, think about market segmentation and promotional tools. McCain used traditional communication tools such as TV, radio, and a webpage. When he used these, they were typically in the form of an ad or commercial. He did a great job at reaching those who tend to get news from those sources. Unfortunately for the campaign, that is growing to be a relatively small number of voters. Obama used these tools as well. However, he also used tools, such as text messaging, to reach different (i.e., younger) audiences with his message. Recall that he announced Joe Biden as his running mate via text message. Everyone who signed up for it, the public and the media, received word at the same time. He also bought ad space in some video games. Obama also has more than 3.1 million supporters on Facebook.

What this indicates to me is that the campaign was able to zero in on their audiences and get their message to them where they were. Can you do this in your business? Will the young mother interested in your CSA learn about it the same way that the retired attorney will? If you want to sell your agritourism product, such as a corn maze, do you advertise to church groups in the same way that you would to families looking for a weekend activity? Probably not. Look for ways to target your message to your different segments.

Finally, think about how you might segment the market. Both campaigns segmented by age, race, gender, education level, political affiliation, religion, and all of the other factors that we have heard so much about. Here again, the McCain campaign was able to hit these different segments by appearing at rallies in different locations and venues. Obama did the same thing. However, Obama took it to another level. When a donation or purchase was made on his website, he required the user to provide contact and demographic information. He was able to use this to cross-reference users to solicit more donations and develop more targeted marketing strategies. What do you know about your customers? Who is buying your product? Where are they buying your product? What other products might you be able to sell to them? You should know your customers' profiles and you should be able to use that information to garner more sales.

Regardless of your political persuasion, you should be able to concede that the way presidential candidates will be marketed in the future is forever changed because of the success of Barack Obama's campaign. A Google search will yield a lot more information than what I've provided here. My message to you is; look for marketing tips wherever you can find them. In my view, the 2008 presidential election provides some nice case studies in marketing.

I welcome your feedback...

Thursday, November 13, 2008

Smart Choices Program

When you hear 'new nutrition guidelines', what is the first thing that pops into your head? For me, I think 'new government regulations'. Surprisingly, the newest nutrition guidelines are being implemented voluntarily by many major food producers.

What exactly are these new nutrition guidelines? The Keystone Center, a non-profit organization specializing in creating solutions to public health problems, unveiled a voluntary front-of-package nutrition labeling system called the Smart Choices Program on Oct 27.

The Smart Choices Program includes a front-of-package symbol that identifies more nutritious choices within specific product categories. The label also provides calories per serving and servings per container. The goal of the program is to help consumers stay within their daily calorie needs.

Some of the major proponents of this new labeling system include Coca-Cola, ConAgra, General Mills, Kelloggs, Kraft, Pepsi, Unilever, and Walmart. How do you feel about this new label? Will this change America's eating habits? Is this just another piece of clutter to add to packaging? Would you want to voluntarily put this label on your product?

Smart Choices Program article

Friday, October 24, 2008

The Credit Crisis and Agriculture

We've all heard the word "bailout" way more than we need to. Hearing it is a reminder of the economic problems we now face and what caused those problems. The credit markets are in turmoil predominantly because of the so-called "subprime" mortgage mess. But, what does it mean for agriculture?

With limited amounts of credit to provide, lenders will be looking for safe debt. Who is most likely to pay? Without direct government intervention, I don't believe that agriculture will be any different. As a farm operator, you will need to show your lender(s) that you are a safe bet. Clean up your credit report, be sure that you can cash flow your business operations, and make sure your balance sheet is in order. Talk to an accountant about ways to position yourself to be a better credit risk.

If used correctly, debt is a powerful tool that allows you to make money by using other people's money. So, avoiding debt entirely is unwise for most farm operations. But know how to manage your debt. If you do, you should be able to weather the storm.

Monday, October 20, 2008

Gluten-free Sales

Are gluten-free products a new direction for your business?

According to the article "Gluten-free Sales Jump More Than 20%", there are about 3 million Americans living with celiac disease. Celiac disease is a digestive and autoimmune disorder that results in damage to the lining of the small intestine when foods with gluten are eaten. Glutens are a form of protein found in some grains.

Gluten-free product sales have reached over $1.3 billion dollars in the past year. Read the article below and tell me what you think. Would you consider selling any gluten-free products?

Gluten-free article

Friday, October 10, 2008

Economic Conditions

As I write this, US stock markets are down ANOTHER 3.5 - 4.5%; This following a brutal start to October in which the Dow is down about 21% on the new month. Every day this week I've told myself we have to hit bottom soon. Who knows where that will be?

This has me wondering about what we're seeing in some of our value-added ag businesses. Will Fall Festivals be impacted by relatively high gas prices and a sour economy? Are consumers continuing to visit farm markets? What does this mean for our value-added ag and food businesses? Leave a comment to let us know your thoughts.

Thursday, October 9, 2008

Country of Origin Labeling

Growing concerns over the safety of imported goods has driven the USDA to mandate country-of-origin labeling (COOL). COOL must be placed on raw beef, veal, lamb, pork, chicken, goat, wild and farm-raised fish and shellfish, fresh or frozen fruits and vegetables, peanuts, pecans, macadamia nuts, and whole ginseng. There are exceptions however, including processed foods, mixed foods, and butcher shop/fish market products.

Read the article in the link below. How does this new law affect your ag business? In your opinion, is this law helpful to the public? Are the rules clear to you?

Foods to Get COOL: Country-of-Origin Labeling