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.

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.

Mid-Atlantic Consumer Demand for Ethnic Produce is on the Rise

Why is demand increasing for ethnic produce in the mid-Atlantic?  U.S. Census data indicates New York City, Washington DC, and Philadelphia are among the top ten cities that are majority-minority in population, meaning ethnic minorities account for more than half of the population (Census 2010). U.S. Census data also shows that the mainstream population only increased by 9.7% from 2000 to 2010 as compared to 43% for Asians and 43% for Hispanics (Census 2000, 2010). With this increase in population, there certainly would be an increased demand for ethnic produce and therefore more economic opportunities for producers, wholesalers, and retailers who grow and sell these products.  

To address this increased demand for ethnic produce, researchers at Penn State, Rutgers, the University of Florida, and the University of Massachusetts along with industry members (including farmers, retailers, wholesalers, distributors, etc) gathered earlier this year to discuss research data and trends related to ethnic crops in the mid-Atlantic at the 2014 Ethnic Greens and Herbs Workshop.  One of the projects developed by the research team was the Worldcrops.org website.  The World Crops site provides information about vegetables and herbs that can be grown in the northeastern United States. The emphasis is on crops that are popular among ethnic groups living here and can be grown here.  The site is organized by country. 

Another helpful aspect of the site is the glossary which is available in English to Spanish and vice versa.  A user can easily find the English or Spanish name for a particular type of produce as well as the genus and species of more than 350 entries.  Example 1 shows that an avocado is called an “aguacate” (Spanish), “pagua” (Mexican), or “pahua” (Mexican) and the genus and species is Persea americana.

Example 1.  Screenshot of English to Spanish glossary on Worldcrops.org.

Visitors can also find ethnic crops based on the country of origin.  In the “Go to region” box on the main page, visitors can click on a region and then select a country.  In example 2, Brazil is shown.  The language spoken is Portuguese and some of the main crops used in this country are listed including cilantro, maxixe, and okra. 

Example 2.  Screenshot of "Go to region" listing for Brazil on Worldcrops.org.

If you are an ag entrepreneur and are interested in exploring ethnic crop opportunities, it's imperative that you DO YOUR RESEARCH as you would with trying any new opportunity for your business.  Good luck!

Results from a survey on success factors for value-added dairy enterprises

by Sarah Cornelisse, Sr. Extension Associate, Dept. of Agricultural Economics, Sociology, and Education.

A Journal of Dairy Science article from 2013 reports out findings from a survey conducted by researchers at the University of Kentucky aimed at identifying "indicators of success for those considering on-farm processing."  The researchers sent out a 12 question survey to 120 value-added dairy processors across the U.S.  Thirty-one of those survey recipients responded, providing answers and comments on a range of questions, including; cash flow, products produced, information sources, and challenging aspects of starting the enterprise.

Cheese is the most popular value-added dairy product to process.

Of those who responded to the survey, 64% had been involved in their value-added processing enterprise for fewer than 10 years.  Cheese and milk were the two primary value-added dairy products.  And while 74% of farms were using milk only from their own dairy, 22% were using a combination of their own and an outside supply of milk.

An important consideration when starting a value-added enterprise is the length of time expected before you attain positive cash flow.  Of the respondents for this particular survey, the majority (32%) reached this point between 1 and 3 years after launch.  It is important to note however that while only nine percent of the respondents have been involved in on-farm processing for less than a year, 12.5% had not yet achieved positive cash flow and for another six percent, it took between five and ten years; giving weight to the fact that a value-added enterprise is not a quick solution to profitability issues for a dairy.

"Do not plan to get rich and support a dairy that is not making a profit."               - respondent advice for other farmers

Other additional findings from the survey include:

• Sources of funding to finance the value-added business primarily came from loans, personal savings, and family,
• Commodity milk price was a driving factor for the majority of respondents to start the new business, and
• Regulations, product marketing, manufacturing, and funding ranked as the top four most difficult aspects of starting the business.

When asked for advice that they would give to other dairy producers considering on-farm value-added processing, most responses fell into the following general categories (ordered by number of comments that fell into each category):

• Business planning
• Marketing research & planning
• Understanding regulations
• Time management
• Having a support system
• Entrepreneurial thinking

To end on a positive note, 97% of survey respondents indicated that they were either "extremely satisfied" or "satisfied" with their decision to start on on-farm value-added dairy enterprise.  If you are passionate about the value-added enterprise and well-researched and planned, you have increased your likelihood of success.

If you are considering a value-added dairy enterprise, our publication "Get More for Your Milk," has valuable planning information.

Margin Protection Program for Dairy Producers (MPP-Dairy)

Under the 2014 Farm Bill dairy producers now have the opportunity to participate in the Margin Protection Program for Dairy Producers or MPP-Dairy.  According to the United States Department of Agriculture Farm Service Agency’s website, “the Dairy Margin Protection Program replaces MILC and will be effective not later than September 1, 2014, through December 31, 2018.” The margin protection program offers dairy producers: (1) catastrophic coverage, at no cost to the producer, other than an annual $100 administrative fee; and (2) various levels of buy-up coverage. Catastrophic coverage provides payments to participating producers when the national dairy production margin is less than $4.00 per hundredweight (cwt). The national dairy production margin is the difference between the all-milk price and average feed costs. Producers may purchase buy-up coverage that provides payments when margins are between $4.00 and $8.00 per cwt. To participate in buy-up coverage, a producer must pay a premium that varies with the level of protection the producer elects.  

In addition, the 2014 Act creates the Dairy Product Donation Program. This program is triggered in times of low operating margins for dairy producers, and requires USDA to purchase dairy products for donation to food banks and other feeding programs.

The Penn State Dairy Extension Team and the Center for Dairy Excellence are offering information sessions across the state to help producers to answer questions on the program and walk through farm examples and the online decision tools developed by Dairy Markets and Policy members. Producers are encouraged to bring their production histories from their co-op from the years 2011, 2012 and 2013 to help determine MPP-Dairy coverage levels.

For program years 2014 and 2015, individuals must sign up between September 2 and November 28, 2014.  Now is a great opportunity to learn more about this new program before the deadline approaches.

For more information about these Farm Bill Margin Protection Program-Dairy Information Sessions and a location near you contact your local Penn State Extension Office or visit the Dairy Team’s website.

Penn State Extension Farm Executive Workshop: Building Management and Leadership Excellence

Everything we have previously learned about economics and business management must be applied on our farms. From conversations with farmers we believe this is the challenge for today’s farm managers and leaders. The difference in profitability of the top 20% and the bottom 20% of commercial farms continues to grow every year. Even the best and most successful farm businesses have issues.

“The future will always belong to those who see the possibilities

before they become obvious.” Danny Klinefelter

Penn State Extension recognizes that it is necessary to grow your knowledge and understanding of the dynamic management issues impacting the long term viability of your commercial farm. Skills required to adequately address the challenges of incorporating technological and regulatory change, analyzing market shifts, managing personnel and using appropriate fiscal oversight are increasingly complex in any business.

Join us January 13-14, 2015, at the Penn Stater Hotel and Conference Center in State College, PA for the Penn State Extension Farm Executive Workshop where you can enhance your management and leadership capacity as you strive to ensure the success of your business.

Most of the farm management education opportunities we have been exposed to teach us what to do. The purpose of this workshop is to broaden our understanding of how to implement what we know we should do. Gaining a sense of being on the right track, along with opportunities for follow-up add to the value of this unique learning event.

This workshop will sharpen your decision-making, leadership and management abilities through small group discussions, interactive sessions and engagement with world class industry professionals. The program curriculum includes a selection of agricultural management topics specifically chosen to address the needs of mid-Atlantic and north east agricultural business executives. As we work towards an ideal solution to the issues in our individual businesses; we grow our management and leadership skills. The concept is to stop treating the symptoms, and start fixing the problem.

The Penn State Extension Farm Executive Workshop will provide:

• Discussion and exploration of key business management challenges
• The opportunity to build on your understanding of core business management functions
• Networking with peers from across our region
• Discussion and exploration of industry issues with leading thinkers and researchers
• Enhancement of your ability to lead and manage your business

All sessions emphasize practical insights and practices that grow your capacity to implement classic business management processes. The year’s workshop sessions focus on:

• Enterprise Budget Use and Analysis
• Thinking and Acting Strategically
• Global Perspectives and Ag Policy Implications
• The Transition from Laborer to Manager to Leader
• Financial Statements: What can you do for me?
• Accountability in Family Businesses

We do not offer a guarantee of success. However, we are confident your active participation in this workshop will increase your appreciation of alternative perspectives, and build an understanding of the importance of including appropriate concepts in your farm management conversations.

If you understand that you do not manage a farm, but that you manage a farm business – this workshop is for you.

“The only truly sustainable competitive advantage is the ability

to learn and adapt faster than your competition.” Jack Welsh

The Penn State Extension Farm Executive Workshop is one component of a unique, full-featured learning opportunity. In addition to the two days of sessions in January, you have the chance to participate in an on-farm problem solving experience, and the opportunity to join a regional farm management peer discussion group. This full package is available for those farm managers and leaders that appreciate life-long learning.

	Penn State Extension Farm Executive Workshop Tuesday, January 13 and Wednesday, January 14, 2015 Penn Stater Hotel and Conference Center State College, PA Registration opens October 15, 2014

 

 

 

 

 

 

 

For additional information contact John Berry, 610.391.9840, johnberry@psu.edu

Starting a New Farm Business? Minimize Your Risk by Joining an Incubator

By Juliette Enfield
Penn State Extension Educator, Warren Co. 

You dream of being a farmer. You love working outside, growing your own food, and being your own boss, but then reality sets in. The time commitment, the loans, and the pressure to produce suddenly make starting a new farm seem like a crazy idea. The statistics aren’t on your side either. The Small Business Administration estimates that 54% of small businesses fail within the first 4 years. Some of the reasons for this high failure rate are insufficient start-up capital, lack of managerial experience, and lack of business planning. Business incubators can help an entrepreneur to develop managerial and business planning skills in an environment where the initial investments in the business are lower. According to the National Business Incubator Association, 87% of businesses that have graduated from incubators are still in existence today (NBIA, 2014).

Incubate your business for the first few years for a better chance of success.

Incubators provide services for a start-up business including mentorship, rental space and equipment, business planning assistance, easier access to start-up capital, lawyers and accounting services, secretarial services, and networking opportunities. The concept of the business incubator has grown in popularity in recent years. In 1980, there were just 12. Today there are over 1,250 (NBIA, 2014). Incubators foster many different types of businesses including technology, service, and manufacturing. Incubators are usually non-profit organizations which receive funding from grants and donors to stimulate business growth in local economies. Typically, businesses stay in incubators for 3 to 5 years until they are able to successfully run their business on their own.

There are incubators that are specific to farming. These incubators offer many of the same services as the multi-purpose incubator as well as rental space for land and equipment. Farmers who participate in these incubators have full or part time jobs off the farm to supplement their farm income. This allows them to gradually transition into full time farming, if they find that their business is successful. There are two farm incubators in Pennsylvania, The Seed Farm, located outside of Allentown, and the Horn Farm Center for Agricultural Education, located near York. The Seed Farm is for vegetable production using organic methods and Horn Farm is for vegetable and fruit production using organic methods.

The Seed Farm offers a farming apprenticeship program and an agricultural business incubator. New farmers at The Seed Farm are currently required to complete the 9 month internship before participating in the incubator. There is a cost associated with this apprenticeship and there is also an application process. This apprenticeship covers farm management training, tractor training, marketing experience, and business planning. The mentoring continues after the apprenticeship from a full time farmer who works at the incubator. The incubator program offers rental space of 1.5-3 acres at a low rate, which is gradually raised to the real market price after 2 years. Farmers in the incubator have access to shared farm equipment by paying a relatively small fee every month. They also have access to a greenhouse, cooler, and storage space. These farmers have their own insurance and business licenses, and market their own produce. They meet with the farm manager regularly to discuss their business plan. The Seed Farm is in its fifth year, currently has 2 farmers in the incubator and 1 graduate, and would like to expand the program. More information can be found at www.theseedfarm.org.

Aspiring new farmers working at The Seed Farm. Photo credit: The Seed Farm.

Horn Farm Center for Agricultural Education offers a farm incubator program where you can rent as small as 1/8^th of an acre to 2 acres at a low rental rate. To use the farm tractor, farmers pay $25 an hour instead of immediately investing in a $20,000 tractor. As with The Seed Farm, there is a full time farm manager who works on the farm and there is a business planning committee that meets with the incubator farmers regularly to discuss their business planning. Horn Farm is in its fourth year and currently has 4 farmers in the incubator. For more information about Horn Farm, see their website at www.hornfarmcenter.org.

As with other business incubators, farm incubators have multiplied across the country as well. In 2010 there were just 38 and now there are over 125 (NIFTI, 2014). Sometimes after participating in an incubator program, farmers decide that farming is not for them, which is also a valuable learning opportunity. If Horn Farm or The Seed Farm are not located near you, you could benefit from the business incubators that are located in your area of Pennsylvania. Business incubators are located throughout the state and are usually affiliated with a university or local municipality. The National Business Incubator Association has a comprehensive listing of incubators across the country which can be found at: www.nbia.org/links_to_member_incubators.

If you are already successfully farming and you are thinking about making an incubator a part of your farm, the New Entry Sustainable Farming Project out of Tufts University and the National Business Incubation Association have some great resources to help you get started.

Sources for this blog:

Scarborough, N. Effective Small Business Management: An Entrepreneurial Approach. Prentice Hall. New Jersey. April 2011. 10th Edition.

Brags and Blunders!

Often the conversation amongst direct-to-consumer farm marketers can turn to “So, what are you doing that’s new and exciting?” I was fortunate to be able to hear some new and exciting ideas recently.

As part of our recent Are You Crazy? bus tour we had a brief session titled “brags and blunders.” The purpose of this session is for everyone to have an opportunity for describing the very best and/or the very worst marketing idea they ever implemented. This session was a great way to learn from each other and get conversations going. I relate here what I heard.

Invisible Fence Maze

Yes, they buried that invisible pet fence in a maze pattern and turned the kids loose. They did replace the buzzer with flashing lights before they started. This project was discontinued after two years. The kids had to crawl along the ground for the collars to sense the buried wire. Blunder!

Burning Fire Truck

Who doesn’t like a fire truck? Well these folks wore a big floppy foam fireperson hat and were driving around when the truck started burning. Of course, the fire extinguisher had been removed recently, so every one at the farm watched as the fire smoldered. Blunder!

Pumpkin Cannon

Have you heard about Punkin’ Chunkin’ celebrations? The one I am familiar with is in Delaware the week after Halloween. A bunch of clever folks tinker up some mechanical devices for flinging pumpkins way down the field. This marketer did the same thing, except after the season was over they decided to see how far they could send a pumpkin. After fanfare and the launch - they never did find the 1^st piece of that flying fruit. Blunder!

Ground Hog Pumpkins

I don’t know about your fields, but ours can be full of ground hog living quarters. One year it seemed like most every pumpkin in this one field had ground hog damage. A few bites here and a few bites there. These folks told the touring elementary students to hunt up some of the “pumpkins with the ground hog autographs”. Well, the teachers later heard from the parents that if they were going to a farm could they at least find one that had decent pumpkins. Blunder!

Peach Smoothies

Many multi-generational farms experience family conflicts from time to time. At this roadside stand the elders did not think much at all about the new generation suggesting they start a peach smoothie enterprise. “Too much trouble!” “Who would buy that?” You might imagine the conversations. However, the younger folks persisted and today they can hardly keep up with demand for their simple and healthful recipe. Brag!

Zucchini Storm

Couple years ago when hail hit this farm they found themselves with what seemed like thousands of hail damaged zucchini. They were quite concerned if they would recover any of their production costs. Well, they advertised “zucchini storm” in all sorts of variations and sold every last fruit. Funny, but today they find it as difficult as you do to market perfectly good zucchini. Brag!

All my kitchen knives went to New York city

Many years back people were just beginning to build the NY Green Market. This country family saw the market potential but had no experience of actually being in the city. They had heard all the terrible news on how dangerous NY could be. On their very first market day at a brand new site they took every kitchen knife they owned as protection from whatever it was they might find. Today, over 20 years later they can laugh at themselves. They not only helped start the NY Green Markets movement – they continue to enjoy the experience and benefit from their efforts. Brag!

Selling butterflies

Wouldn’t you know it! Just as the potted plants in the greenhouse are ready to market an infestation of

caterpillars eats all the leaves and makes the remaining sticks very unattractive. Not one to let an opportunity pass, these folks decided to market the potted sticks as “buy a butterfly”. They quickly sold every last plant they had, and to this day still hear from customers what a wonderful time their families had raising their own butterflies. Brag!

“When’s the baby due?”

‘nough said. Blunder!

It goes to show – an excellent opportunity might be right around the corner, or maybe not.


For a photo series on this year's Tour, visit Are You Crazy Tour 2014

Mark Up versus Margin

Markup vs. Margin

What is the Difference? Is there a difference?

Absolutely!

These two terms are often used interchangeably by folks that do not value accounting skills. However, that misunderstanding can menace of the bottom line of your enterprise. A solid understanding and application of these two separate concepts can enhance our pricing model, and have a drastic effect on the bottom line.

By definition:

• markup percentage is the percentage difference between the actual cost and the selling price.

 

• gross margin percentage is the percentage difference between the selling price and the profit.

Photo credit:  Simon Cunningham

Mark up reflects your cost. Margin reflects your price.

 

Gross margin or gross profit is defined as sales minus cost of goods sold. If a retailer sells a product for $10 which had a cost of $8, the gross profit or gross margin is $2. In our example the gross margin ratio is 20% ($2 divided by $10).

 

In our example, the product had a cost of $8 and it had a markup of $2 resulting in a selling price of $10. The $2 markup is the same as the $2 gross profit. However, the markup percentage is often expressed as a percentage of cost. In our example the $2 markup is divided by the cost of $8 resulting in a markup of 25%.

 

Many people have a problem with accountants’ jargon and often get confused between the terms “profit margin” and “markup” which are often bandied about freely or used interchangeably. Although these two terms are used to express different things, they are also, in fact, two different ways of analyzing the cost and profit of a product or service in your small business.

 

“Profit” is the difference between what you sell it for and what you paid for it. “Margin” simple means you turn that into a percentage of the selling price. You do this so you can compare different items easily.

 

So the difference is that markup is your profit as a percentage of the cost price and profit margin is your profit as a percentage of your selling price.

 

For additional information and insight into the fascinating and powerful realm of prices, check these two research-based resources:

 

Pricing for Profit

 

Setting Your Price