Shared Kitchen Incubators - A Great Place to Start Your Business

By Winifred McGee, Penn State Extension Educator, Dauphin County

A new year signals the time to think about new enterprises – exploring how, and where, to begin profiting from a “family favorite” recipe. The 2011 Food Safety Modernization Act, and subsequent FDA rules, have made it a bit more challenging (but not impossible) to start a food business, in that even if state regulations allow a food product to be made in an inspected home kitchen (in Pennsylvania, referred to as a “limited food establishment”), when the food goes regional or national, FDA requires that all products be made in a commercial kitchen.

For the start-up food venture, a shared kitchen offers an affordable, safe, legal place to launch. Instead of investing a large amount of money in designing and equipping your kitchen, a modest fee allows access an established commercial kitchen on a timeslot basis.

Loading the food dehydrator at Field to Fork Ag Incubator
Photo by Katie Kinka, Southern Alleghenies Planning & Development Commission

As you begin to search, you will learn that not all shared kitchens are created equally – and knowing the type of assistance you need makes a world of difference when searching for the “right place.” For instance, you may just need a shared use kitchen – that is, a place that provides space and equipment to multiple food business owners for the commercial preparation and handling of food that will be sold. This type of kitchen will likely be accessed very affordably, because no other services beside kitchen access will be offered. In a fast-changing environment like food business, you will have to keep up on food code and the current acceptable methods of production, as well as making, marketing and selling your product if you select a shared use kitchen – but many food businesses have gotten their start in just such a place.



The next step up is a shared kitchen incubator – at which you will not only access commercial equipment and facilities, but also benefit from “supportive services,” that apply to food production and business management. There will be an on-site manager who can help you navigate the complex network of regulation, packaging and distribution to have the best opportunity for a profitable enterprise. Because of the increased level of service, the per-hour rate will probably be higher than that of a shared use kitchen – but depending on the complexity of product and marketplace, this can be money well-spent.



You may also determine the need for small-scale co-packing – allowing trained workers who are already familiar with commercial equipment and recipe conversions to make valuable contributions to your venture. One such facility here in Pennsylvania is the “Field to Fork Agricultural Incubator,” which opened its doors at the Greater Johnstown Career and Technology Center in Johnstown Pennsylvania in September 2016. Joining “Field to Fork” not only means accessing the CTC’s commercial kitchen, but allows you to enlist the knowledge and skills of culinary arts students who are working towards their ProStart Certification, and are available to work side by side with kitchen tenants. As with all shared kitchens, “Field to Fork” is focused on specific targeted groups – local value-added producers with smaller crop yields and food entrepreneurs who need a place to start. Products that can be most easily created in this kitchen are non-organic, jarred fruits and vegetables, dried foods, and baked goods. During its pilot phase, use of the kitchen will be available on a first come, first serve basis. Dry storage and cold storage are also available for a monthly fee. 



In short, shared kitchen incubators do provide the environment necessary for food businesses to start, grow and succeed – by offering not only the right equipment and environment but many services that simplify and economically provide just what is needed in today’s food industry.

Should You Consider Producing Flavored Milk?

By Sarah Cornelisse, Sr. Extension Associate, Dept. of Agricultural Economics, Sociology, and Education, Penn State University

Source: http://www.hugheslink.com/blog/?m=201412

As we move into the holiday season, we traditionally see an increase in the purchases of dairy products - cheese, milk, etc.  Eggnog tends to be the popular beverage at this time of year.  However, non-eggnog drinkers may be wishing for a festive alternative.  This is where developing flavored milks may be an alternative for dairy processes to consider.

For lovers of baseball, you may have seen Missouri's Shatto Dairy capializing on the successful playoff run by the Kansas City Royals.  Shatto Dairy produced a special edition french vanilla flavored, blue-colored milk (turned just blue-colored by the time the team made it to the World Series).

Source: http://www.berryondairy.com/Milk.html

Shatto Dairy isn't alone in producing flavored milk.  As consumers turn away from soft drinks and sports drinks, many are returning to milk for its nutritious properties while expressing a desire for more varied flavors beyond the normal flavor and traditional flavors of chocolate and strawberry.  We now see flavors from grape to cotton candy to black cherry to banana and blueberry.

A 2014 Mintel survey showed that 61% of respondents agreed with the statement "Flavored dairy milk is a healthy alternative to soda."  Additionally, 39% of respondents indicated that they were interested in "sophisticated" flavors for milk such as hazelnut, dark chocolate, etc..  This interest was most pronounced with the Millennial generation, with 50% indicating such interest.  As consumer age increases, the interest in flavored milk decreased, with only 12% of those aged 69 and above interested in flavored milk.

Source: http://www.smilinghill.com/Dairy_Store_milk.html

For dairies that already bottle milk, flavored milk is something that they may want to consider as a way of drawing in younger consumers interested in a healthy, but flavorful, drink.

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.

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.

Adding Value to Farm Food Production

by John Berry, Extension Educator, Lehigh County

Most farmers are on the lookout for ways to generate more net revenue. The question is something close to “What can we do to utilize our resources to their best advantage?” Many opportunities exist, but in order to be feasible they must match the values of the farm family. One common method is the move to identify farm crops as being sustainable. The challenge is how to verify claims and meet the documentation requirements to satisfy buyers. There are several competing verification systems in place that are trying to address this very concern. Some are driven by a singular philosophical mission and others are more inclusive of all those businesses along the chain from farm to fork.

As an example, individual farm operations within the specialty crop supply chain are experiencing increasing demands to demonstrate "sustainability" to their customers. These demands have resulted in a growing number of certification and/or supplier education programs and thus the potential for redundant or even conflicting requirements. Most of these programs focus on a niche market, a limited set of crops, and/or a specific link in the supply chain, and thus are not designed to provide the specialty crops industry as a whole with a comprehensive system for measuring sustainable performance. However, The Stewardship Index aims to provide such a system.

The StewardshipIndex for Specialty Crops project is a multi-stakeholder initiative developing a system for measuring sustainable performance throughout the specialty crop supply chain. The project offers a suite of outcomes-based metrics to enable operators at any point along the supply chain to benchmark, compare, and communicate their own performance. The Stewardship Index does not seek to provide standards, but instead provides a yardstick for measuring sustainable outcomes. In the future, the project may also provide tools and resources to help specialty crop companies advance sustainability goals.

For this project "specialty crops" is defined broadly to include fruits, vegetables, nuts, and horticulture. The founding members of the project regard sustainability as an ongoing process to advance environmental, socially responsible, and economic values. The project does not aim to identify a level of performance that is "sustainable," but instead to provide measures to help all participants implement sustainable values.

Quantitative sustainability metrics, developed collaboratively, can offer significant benefits to specialty crop industry participants, and the eventual consumer. As envisioned, this project will:

·         Help operations across the supply chain (farms, distributors, processors, retailers, etc) identify opportunities for increasing efficiency and reducing costs;

·         Provide a standardized system for measuring performance, thus reducing the potential for duplicate monitoring and reporting systems;

·         Allow individual operators to engage in the sustainability journey starting at (and regardless of) their current level of performance;

·         Address the unique needs of the specialty crop industry while demonstrably improving environmental and social impacts;

·         Enable verifiable marketing claims backed by measurable performance data;

·         Help reduce the likelihood of future industry regulation by solving problems and demonstrating improved performance to regulators.

Collaborate and Stand Out – Differentiating Your Product through Partnerships

Carla Snyder, Penn State Extension Educator – Ag Entrepreneurship and Marketing

When enjoying ice cream made with tree-ripened peaches at a roadside farm market it’s easy to appreciate the local flavor of our community. However, what may not be realized are the unique partnerships and business savvy it took to get that food from seed to delicious first bite.

Producer partnerships to create superb value added products are not a new concept. An easy example is the ice cream cone, delicious, recognized, and hard to be improved upon. Or is it? By adding local ingredients and producing it at a local facility the standard ice cream cone is improved upon and more enticing to the consumer. Creation of a value added product by this model creates greater benefit for both consumers and producers alike.

Consumers determine value based on their benefit from the product and its ability to fulfill their needs and wants for a certain cost. In the ice cream example a fruit based flavor is created through a partnership with a local orchard and ice cream entrepreneur. The most inherent benefit that keeps consumers anticipating this product year after year is the unique taste that comes from the local agricultural ingredients. It is the best selling flavor when it’s available for about 6 weeks out of the year when peaches are ripe.

Partnering with local producers on the creation and marketing of value added items, such as this ice cream, is certainly not new but is enjoying resurgence in many regions. So how do you continue to offer a product that creates sustained benefit to the customer when value added products are now so plentiful in the marketplace? According to the Michigan State University Product Center that studies value added products, innovation in the bundle of product benefits is key to differentiation. As value added products become continually more “commoditized,” meaning there are so many similar products on the market that consumers are reverting to differentiating product based solely on price, pairing with another producer can make you stand out.

Consider a common value added product such as apple cider. If the consumer is not educated on what makes one producer’s cider different from another then in most cases their typical deciding factor comes down to price. However, if that consumer was educated about specific benefits of one cider over another through tasting samples, recognizing a trusted third party certification logo on the label or even just an attractive label itself, they would not be forced to differentiate solely based on price.

Partnership with another producer will allow you to begin your marketing or new product development from the ground up rather than the traditional top down approach. By evaluating the customer base of both yours and your partners you can tailor your new product to fit the specific needs of a consumer group. By fulfilling exact needs through the creation of specific product benefits you will be directly catering to your consumers. Such as in the apple cider example if your product will be sold in an area where consumers value cooking in their homes or entertaining, consider attaching or printing a recipe for mulled cider on your label or partnering with the producer of mulling spices to sell your cider as part of a package. This may be just the push necessary to achieve the sale of your product at the price point you require.

By partnering with other local food producers, many growers are able to provide value added products to their communities. This marketing method not only results in more direct to consumer sales but also builds on existing producer to consumer relationships had by each producer, thereby extending the reach of agricultural products in the region.

In addition there are also inherent economic benefits. In the production of a typical value added product that is processed at an off-farm or even out of state facility the farmer’s share of the consumer dollar is shrinking, according to the Penn State College of Agricultural Sciences. Decreasing from 40% in the 1950s to closer to 20% in the past decade, the producer’s share of per item income is less, however profits overall are increasing in part due to innovative partnerships as described above in the creation of that special once a year peach ice cream.

The development of the partnership to create the ice cream was simple. The ice cream entrepreneur learned about the orchard on a class field trip to the farm with his children. He was in search of a way to differentiate his product from other producers in the area as larger corporations moved in. Based on his knowledge of the community he chose to go local with ingredients, knowing that his customer outreach would be extended by just the inclusion of this popular orchard’s fruit. What resulted was an exclusive once a year product that customers anticipate all season, giving him and the orchard an edge on competition. And by keeping the dollars for not only purchasing the peach ice cream at either partner’s location but the cost for producing it as well, peach ice cream is doing its part to further the agricultural economy in their region.

Do You Offer Mass Customization?

Among the many topics we discuss in this blog, we often write about differentiation and unique products.  One way to take this concept further is to implement mass customization – a way of allowing customers to select from a limited number of components to create product that is “their own.”  An easy way to think of mass customization is to visualize a food gift basket – individual items (e.g., candy, food products, cooking utensils) are bundled together in a container and then wrapped or decorated to match the theme.  Someone had to develop the idea/theme/look for the gift basket – why not let it be your customers?

So, what are some examples of mass customization?

Several retailers have done well with the concept and according to a 2011 Forrester report, and subsequent blog postings, “Mass customization is (finally) the future of products” (http://tinyurl.com/3mgxxoh).  Perhaps you have even been involved in mass customization yourself.

• Have you ever created a colorful blend of M&M’s?  If yes, you had a mass customization experience.  There are 24 colors to choose from.  Not every imaginable color is available, but M&M’s is probably pretty certain that most customers will find a mix of colors that appeals to them.  
• Are you a devoted Converse sneaker customer – one that has a pair in almost every color or style?  Now you can design your own.  Again, you will 24 colors and 24 prints to choose from for the outside body of the sneaker and the same options for the inside, heel stripe, tongue, lining and other sneaker parts.  
• Or, have you ever created a “My American Girl” doll for a young child?  You can select the hair color (10 options for blond hair), eye color (10 eye colors available for blond haired dolls), and hair styles (seven straight and three curly/wavy options for blonds).  

                                   What is the key to mass customization for small or independent ag. businesses?  

Limiting the number of options (e.g., colors, types of items) that the consumer can select from.

Why is this important?  If too many choices are offered it is likely that customers will be overwhelmed with what they can select from.  For American Girl, if all combinations were available (49 hair colors, 3 skin tones, 40 eye colors, and 40 hair styles) customers would have several thousand different dolls to choose from.  Most likely, the colors/prints/options available for mass customization are those that have been popular in the past.  By narrowing the options to a more manageable number the process is much easier for both customer and retailer– hence, it is called “mass” customization.

If you explore these or other examples of mass customization you may notice that the price point for the completed product is higher than off-the-shelf (not customized) products or the total price for all individual pieces used to make the final product.  Why is that?  Since you are offering customers a convenience (1. for assembling the components, 2. for coming up with the concept) and there are added labor costs for putting the final product together – you need to account for these “costs.”

So, what can an ag. business do to capitalize on mass customization?  

If you are not already offering customers the option to build their own gift basket – it is suggested that the interest in giving gift baskets will continue to be strong – this may be a way to foray into mass customization.  Gift baskets can be offered for a number of holiday (Valentine’s Day) and non-holiday (anniversaries, thank you) occasions.  So, the possibilities are endless.

Dean & Deluca is an example of a retailer that allows customers to build baskets in-store and on-line.  Consider a customer who wants to buy a thank you gift for a friend who is passionate about coffee.  Well, Dean & Deluca can help with that.  The gift giver starts the process by first selecting the container (limited number of options available).  Each container holds a certain number of items based on each item’s size which helps the customer determine how big the final gift will be and not overstuff the basket.  Wrapping and decorating finish the product’s look.

What are a couple of other mass customization options for ag. businesses?

• Table-top Christmas trees have been a popular for a number of years – the convenience they offer customers is very appealing.  Consider offering customers the ability to designing their own decorated table top tree.  Allow them to select from three or four species, three or four decorations styles, and three or four container options.  
• Offer customers mass customization for planters, containers, or small landscape designs. 

Look though your own inventory and think about how you could help customers create a product that has been customized - just for them.  

We’re eating smaller, frequent meals. Do you have a snack for that?

Quite a few reports have been published lately that describe how the U.S. consumers’ eating habits are changing.  One noticeable trend is that we are snacking more. 

If you are a food retailer, manufacturer, producers, restaurateur, or have another role in the food industry offering snacks could be a huge opportunity.  Think about how you, too, could meet consumer need for mid-meal or meal replacement products.  

Some reasons we are snacking more: 

• Boredom, food budget,
• our hectic grab-and-go lifestyles,
• increased availability of portion controlled packaged items,
• and weight loss/weight management programs and experts suggesting that more frequent, smaller    meals may be the key to a healthier lifestyle. 

Regardless of the cause, snacking has become a norm.  According to the USDA Agriculture Research Service, most U.S. consumers (90%) snack at least once a daily  and 62% of men and 68% of men snack two or more times a day (http://tinyurl.com/7tzt4qt).  

Not only has the research been published as to how often we snack, but recently the Hartman Group (www.hartman-group.com) held an online webinar about snacking, titled “The future of snacking and the influence of global flavors.” During the webinar, the presenter indicated that consumers have an interest in snacks made with authentic “global” or “ethnic” flavors.  Current popular ethnic flavors included:

• Korean/kimchi, 
• Lebanese/falafel, and



Photo source: http://tinyurl.com/7os9k8e



• British gastro pub/pig trotters.  

Some of the flavors that we should expect to 
enjoy in the future are:

• Nordic/caraway rye crisps, 
• Moroccan/fennel crisps, 
• Ethiopian/puffed millet, and 
• Cambodian/lychee juice.  

It is easy to understand why U.S. consumers embrace ethnic flavors.  We are traveling more and are influence by the cuisines we try.  Some of us then return home and share meals made with these ingredients with family and friends.  It is also very likely that a consumer is embracing their heritage and preparing meals associated with their culture.  Or, like my family, cultures have been blended by marriage.  My sister-in-law is from South Korea and I can tell you that bulgogi (marinated beef) is delicious (especially when she uses kiwi and Sprit in the marinade).  

Whatever the reason – if consumers are eating foods with ethnic flavors at traditional meal times it only makes sense that they have an interest in snacks with a bit of these spices and tastes. 

Certainly, there are several other snack food trends that need to be considered including:

Photo Source: http://www.elskitchen.com/

• Consumer interest in “natural” snacks, 
• gluten-free options, 
• sweet and salty combinations, and
• low calorie options, for example. 

Deciding on the best snack for your business hinges on a few factors:

• Snacks that complement your current offering (do you already offer seasoned popcorn, nuts or other crunch snacks?), 
• your core products (e.g. fresh fruits/vegetables, meats, breads) and what snacks make sense for your business (if you are known for local fruits and vegetables does it make sense to offer your own brand of dried pineapple slices?), 
• flavors or cuisine you currently focus on (can you incorporate Asian flavored products with what you current off?), 
• your customer base (do you or could you tap into a local ethnic community that new snack offerings may appeal?), and
• what equipment you need to process (or can your outsource manufacturing?) and stock new snack items (do you have or will you need freezers or coolers for dips and other perishables?).

Just a few things to think about as you explore how you could use trends, such as snacking, to increase sales.  

Leading the Way

Sometimes being an entrepreneur means having to tackle the challenges that come with being the first to do something a particular way.  As in the story shared below, this meant taking the time and effort to work with state regulators to demonstrate that a particular processing method, while not in large-scale use, is safe and effective.  Not only did this farmer's efforts help him achieve his goals, but it allowed others to follow his path.

GA dairy farmer helps pave the way for other small-scale operators

Selling your ag products to the Muslim market

As an ag entrepreneur, there are many, many different niche markets to explore. Religious beliefs can play a big part in product choices for many Americans, and you as an entrepreneur may see this as an opportunity to market your product. According to the article "Tapping the Growing Muslim-American Market", Muslim-Americans are an under-served audience.





There are an estimated 6 to 8 million Muslims in America with an estimated market value of about $200 billion. When purchasing products, a major concern for Muslims is Halal certification. Halal means "what is permitted" in Arabic and can include food as well cosmetics,personal care, and cleaning products. Muslims may only consume goods and services which are Halal. Some estimates show that 70% of all Muslims worldwide follow Halal principles. To learn more about what Halal means and how to obtain Halal certification, please download this publication.

Lisa Mabe, principal of Hewar Social Communications, a digital marketing agency in Washington D.C., describes marketing to Muslim-Americans. "When companies target the Muslim community in their marketing communications, we see them flock to engage with that brand -- not only to purchase its products, but to become loyal brand advocates."

As an ag entrepreneur, are you looking for new niche markets? Have you explored marketing your products to Muslims? If you currently market to Muslims, how would you describe the Halal certification process? Has Halal certification grown your customer base?