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Being market-oriented is “job one” for today’s farmer
As this Michigan company’s experience shows, taking the time to find out what the consumer really wants and focusing firmly on it is the secret for success today
by CARL FLETCHER
What makes a business created to capture added value from farm produce a success?
Jim LeCureux, general manager of Heartlands Ingredients LLC of Ubly, Mich., recently shared his insights into what makes a successful value-added business at the 2007 Southwest Agriculture Conference in Ridgetown.
Heartland Ingredients produces products from white navy bean flour for the gluten-free market. Jim LeCureux took on the general manager role in this new company after retiring from an extension position with Michigan State University, where he assisted in the development of value-added coops.
Jim’s first success factor is that your business must be market-oriented and you must provide real and unique added value for a real consumer need.
The reality of the food system is that consumer needs drive what retailers sell, which then creates the market for the food processors. This, in turn, creates the market for farmers, which determines what farm inputs farmers purchase.
Put another way, the chain is:
- consumers
- retailers
- wholesalers
- food processors
- commodity handlers
- agricultural production
- agricultural inputs.
This mindset is understandable when the majority of a farmer’s time, energy and investment is currently devoted to maintaining and improving the existing production system.
How did the people who formed Heartland Ingredients find out what the real consumer needs were? They asked! They asked people with gluten allergies what kind of products they desired, what products they couldn’t get and what were the limitations of the existing products in the market place.
They also surveyed retailers and food processors with similar questions. To their surprise, people responded even to the point of some individuals phoning back to continue discussing the issues beyond the original survey questions. As a result, real consumer needs were identified as well as the market volume potential.
Now how to create a unique true value-added product line?
The white navy bean flour provided protein, fibre and gluten-free attributes. The market research indicated that consumers who had developed gluten allergies longed for gluten-free products that looked, tasted and cooked like the grain-based products they were used to.
By researching the needs of the entire value chain, Heartland was able to identify that not only was new food-processing technology needed in order to make navy bean flour pasta products comparable to wheat-based products, but that this technology had already been developed though not yet commercialized in this market.
Bingo! Investing in a unique processing technology could create products to meet the gluten-free needs of a target market. Heartland had a real business game plan with real opportunities.
Jim noted that taste is a mandatory requirement of all food products. Pricing also plays a role in capturing market share. Quality is whatever the end-consumer says is preferred and quality is also what each business along the value chain needs in order to meet the end consumer needs.
The question Jim poses, whether you are a co-op member owner or are filling a contract to a supplier, is: “Are farmers willing to change the farm operation to generate the differentiation - to meet the market needs?” This could mean being able to identity-preserve crops and maintain traceability information systems.
This article has focused on the importance of being market-oriented, because creating a business that focuses on meeting the needs of consumers really is “job one.” My next article will share some of Jim LeCureux’s insights into other success factors, such as co-op/company board leadership, processor location, member communication, cash and equity requirements and the importance of having an exit strategy before you even start.
As in the Heartland Ingredients story, food-processing technology is one aspect that contributes to the uniqueness of a food product or service. The Guelph Food Technology Centre located at the University of Guelph is a resource that provides a variety of services, including market research and finding food-processing technology solutions.
Understanding success factors needed to create and capture truly unique value-added markets leads to Better Decisions. Better Decisions lead to Better Farming. BF
Carl Fletcher is a Program Lead in Strategic Business Planning with the Ontario Ministry of Agriculture, Food and Rural Affairs, Guelph. He can be reached at 1-888-466-2372, ext. 3235, or by email at: carl.fletcher@ontario.ca
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