Wednesday, June 24, 2009

Local Foods: A Balanced Approach is Needed

Over the past couple of years, I have become increasingly involved with different projects that involve some aspect of local food system development. Given my interest and expertise, most of the focus has been on differentiating products by promoting the fact that they were produced locally. That is, consumer demand for locally-produced goods creates an opportunity for agricultural and food producers to realize higher margins. How big is this market, though? How much are consumers really willing and able to pay for local foods? Do consumers perceive "local" as being synonymous with other notions such as "small, family farms?"

Recently, I attended the National Value-Added Agriculture Conference. The keynote speaker was Gary Zimmer, a farmer, consultant, speaker, marketer... Gary owns and operates Midwest Bio-Ag, with offices in the upper Midwest. He is an organic farmer who markets a great deal of products in his local region. However, he presented a pragmatic, balanced view on the topic of local foods. What follows is a bit of Gary's thoughts with some of my own mixed in. I'll not presume that Gary would support everything below, so I'll take full responsibility for it. One word of caution: do not infer anything other than what I have written.

It's difficult to argue that there are not very real economic motivations behind how most food is grown and distributed in this country. The US climate is diverse and some things just naturally grow better in some areas than they do in others. We also have distinct growing seasons in most regions. This has led to large-scale production in areas where specific foods can be produced at low cost. That production can also be transported relatively quickly and efficiently to just about anywhere else in the country because of our distribution system. This has led to low-cost food at the retail level, an important objective in this country.

Because the low cost objective has been a key driver of how our food system works today, then it's almost by definition that, in most cases, locally produced foods are not going to be cheaper than if they were grown elsewhere. Scale economies, which lead to lower unit costs, are real. So, from a production cost standpoint, bigger is better. Local foods, in many cases, have been purchased primarily by those with relatively high incomes. They are somewhat of a luxury good, embodying not only freshness but support for local economies, etc. This begs the question, if locally produced foods are healthier and fresher, how can they be produced in a way that makes them accessible by everyone, even those with relatively low incomes?

We can't really expect the government to make this happen, can we? Is it the government's role to provide the BEST food or food that is GOOD ENOUGH? If the role is not for government to fill, then will the market make it happen? The market rewards production and marketing efficiency. The market got us to where we are. It's tough to fight the market! Consumers vote with their dollars. While many would love to buy food locally, many just can't afford it. Unless costs are lowered, they will continue to buy primarily from large-scale retail outlets. Many argue that we Americans spend less on food than consumers in most other developed countries, and that's somehow not what should be. We also seem to love to spend on our homes, cars, vacations, entertainment, and other items. Getting most people to shift expenses from other things toward food is an uphill fight.

Here's my bottom line: I strongly believe that locally-produced foods are demanded by most consumers. We have a long way to go before we'll be able to have a variety of local foods available to everyone who wants them at prices they can afford. To get there will take an approach that balances market fundamentals (like scale economies, transportation costs, consumer sovereignty) to make it happen.

Tuesday, June 23, 2009

E.coli outbreak in cookie dough-- How are you keeping your customers safe?

On Friday, June 12, Nestle recalled all of its refrigerated cookie dough after receiving a product recall recommendation from the FDA. It has yet to be proven what product has been contaminated, but 70 people in 30 states with E.coli strain O157 have eaten raw Nestle cookie dough. E.coli O157 is a very dangerous strain of E.coli that is usually found in contaminated meat. Most adults get better in about a week, but serious kidney damage and death can also occur. Of the 70 known to be infected, 25 had to be hospitalized and 7 had developed hemolytic uremic syndrome, a type of kidney failure.

Dr. David Acheson, associate professor for foods at the FDA has said, "You can't assume it's the usual ground beef or fresh produce." In the past 2 years, there have been major recalls involving peanut butter, pistachios, and frozen pot pies. With a growing list of contaminated product types, identifying a specific contaminant has gotten increasingly more difficult. The FDA is still investigating the cause of the E.coli O157 contamination. They are unsure if a certain ingredient was contaminated or if it was the facility. The facility has been closed temporarily and will lay off more than 200 workers.

NY Times article


CNN article

As a food producer, what are you doing to keep your customers safe? Do you inspect your ingredients (both produced externally and those produced by you) for potential pathogens? Do you have frequent food safety audits (both internally and by an outside lab)? Have your customers raised more concerns recently about food safety?

As a consumer, have you become more concerned about food safety? What can a food producer do to make you feel more reassured about the safety of your food?

Monday, June 15, 2009

Bing!

Just this past week, Microsoft has unveiled a new search engine called Bing (www.bing.com) which they are calling a decision engine. According to Microsoft, "Bing is specifically designed to build on the benefits of today's search engines but begins to move beyond this experience with a new approach to user experience and intuitive tools to help customers make better decisions, focusing initially on four key vertical areas: making a purchase decision, planning a trip, researching a health condition, or finding a local business."

As a frequent search engine user, you know (as do I) how most searches are getting to the point of information overload. A recent study by comScore ( a market research company that "provides marketing data and services to many of the internet's largest businesses") revealed that 30% of searches are deserted without a suitable result. Also, comScore discovered that over 65% of searches require a refinement (or requery) on the results page (please see the first link below to watch a video about Bing).

What does this new search engine have to do with you, the ag entrepreneur? Microsoft's research showed that users wanted more help in making decisions with shopping, travel, local businesses, and health. As an ag entrepreneur, you can take this opportunity to add your product/business/service to the Bing Local Listing Center (please check the second link below which will describe how to create a listing for your business). When a Bing user searches for your business, the search results with display driving directions, a 3D aerial view of your business, customer reviews, and more information if it applicable like hours of operation, web pages, email address, payment methods, type of cuisine, languages spoken, parking options, etc.

Bing video

Creating your own Bing listing


Building a web presence is an important part of marketing. Customers are demanding more information about the products and services they use. As an ag entrepreneur, what types of internet marketing are you using? Do you believe Bing (or any other search engine) will bring more customers to you? What are customers saying about your web presence (is it easy or hard to find info on your business)?