Maybe there really isn’t anything new under the sun. For generations, farmers have looked at the yawning gap between what they get paid for their crops and livestock versus what consumers pay in the grocery store, and thought there’s got to be a way to capture more of the consumer dollar for the farm.
No one thinks it would necessarily be easy. More, the question is, “Is it possible?” Or, more precisely, “Could I do it? Can I realistically cut those middlemen out of the value chain and sell directly to consumers?”
First, the good news: according to the experts, vertically integrating your on-farm business can be a smart and profitable move.
But it isn’t a quick fix. So if you’re looking at opening a retail venture in order to pull your farm back from the financial brink, this may not be the strategy to do it.
Plus, it takes specific skills, attributes and ways of thinking to launch and maintain a successful enterprise.
In fact, the best place to start may be to ask yourself, “Would I enjoy it? Would I be passionate about a retail enterprise? Would I invest heart and soul in creating satisfied customers?”
“It’s a different mindset,” says Gary Morton, a food industry consultant, co-owner of SKUFood and author of Adding Value through Farm Diversification. “These people are forward-thinking, looking at trends and where they need to shift their business in the future.”
So here’s another way of looking at whether you’re the right candidate. Does your thinking start on the farm, or in the market?
Morton explains that rather than making a product and selling it on, successful food entrepreneurs work backwards by looking at the market, figuring out what people need and want, and making a product that will sell.
Jane Dummer agrees, saying, “They understand the market and how their product is going to fit a need in that market.”
Dummer is president of Jane Dummer Consulting, which provides “pod to plate” solutions to meet food organizations’ needs.
The two food business advisers recently shared their advice — and some reality checks — with Country Guide.
Plan and prototype
Doing serious market research is a must before embarking on a new business.
“You have to learn about customers — what they want — and figure out what success will look like,” Morton says.
Dummer adds that finding out what’s already in the market and what the competition is doing are vitally important, but she goes one step further by suggesting piloting a product before it goes to market to test how consumers react to it.
It’s too easy for entrepreneurs to get excited about their family recipe, she says, and they need to check it in the real world.
“Just because 30 people in your family and community like the product doesn’t mean it will be wildly successful in the long run,” Dummer says.
This kind of research can feed into a full business plan and be updated regularly to stay on top of shifts in customer needs, according to the Canada Business Network.
You’ll also need that time for other research too. Food is subject to a plethora of government regulatory requirements — including labelling and packaging — and it’s a must to find out ahead of time which ones are applicable and how to meet them.
Be patient and persistent
Getting food to market is a slower process than other consumer items. According to Dummer, it’s just a fact, and as a farm entrepreneur, you have to accommodate it.
“It’s all about relationships,” Dummer says. “You have to build relationships with your customers, suppliers and others in the food chain.”
Such relationships are especially valuable when it comes to piloting your products.
- “It’s all about relationships,” says Jane Dummer. “… with your customers, suppliers and others in the food chain.”
Even then, however, it’s good to be strategic about your research. Rather than launch 10 flavours of the product all at once, Dummer says, start small and scale up. (In a way, it’s similar to on-farm agronomic trials where you need to be sure, for instance, that a yield increase is due to the seed variety that you’re looking at, not because you have fertilized the plots differently.)
Then, be prepared to accept what the research tells you.
“It’s a circular process,” says Morton. “You work on a product and test it. If it flies, go forward, if not, go back and try again.”
Morton adds that even successful entrepreneurs have to evolve their products or find new customers.
Do what the numbers say
Both Morton and Dummer say you shouldn’t get too emotionally involved in the product. If your testing comes back and people don’t like it, you need to adapt and pivot. And don’t blame the consumer.
“I’ve seen people double-mortgage their home on a product that’s never going to sell — those are the ones that are unable to adapt,” Dummer says.
It’s another reason why having a great business plan is so essential.
In fact, it’s a big red flag if you don’t, Morton says.
In his experience, many first-time food producers get so focused on making and perfecting the one product, they run out of money before they can go to market.
Reaching out to others for advice is a critical step, and there are lots of successful food entrepreneurs who are willing to share experiences and ideas, according to Morton.
Incubator organizations like FoodStarter in Toronto, the Ontario Agri-Food Venture Centre in Cobourg, Ont., and the Food Processing Development Centre in Alberta have not only expert food industry advisers, but also commercial-scale equipment and facilities that can be rented for a fee.
Private consultants are also available, but Dummer cautions that it’s crucial to deal only with those who are credible and have a track record, because “some aren’t what they say they are.”
Food production can be very expensive, depending on what’s being made, and farmers often find that the approach to spending that they require for developing a food product is quite different from drawing up a crop budget.
Morton is blunt about the realities.
“You have to invest in marketing,” he says. “I’ve known farmers who wouldn’t blink at buying a $100,000 piece of machinery, but are shocked about spending that much on marketing a product.”
Dummer adds that equipment and facilities are also costly because they not only have to be up to the job, they have to adhere to strict food safety rules.
Morton emphasises that on-farm markets have to go the extra mile to invest in attractions that provide shoppers with an experience they can’t get in a grocery store or farmers’ market. “If people have to go out of their way to shop at your store, you have to differentiate yourself from your competitors and connect the product to your brand and story.”
Obtaining the kind of funding needed to get into retail also requires thoughtful planning.
For example, most government programs require a written business plan. The federal government recently rolled out the Canadian Agriculture Partnership initiative in several provinces. A total of $3 billion is available over five years to support the agri-food sector. Each province has different programming, so it’s best to check with local authorities.
The Business Development Bank of Canada is geared to providing both management advice and financing to entrepreneurs, and there are several provincial government agencies whose aim is to encourage and develop business startups, including Small Business Enterprise Centres that offer a wealth of expertise and help with finding funding.
Help for food startups
- Jane Dummer, food consultant (janedummer.com)
- Gary Morton, food consultant (SKUFood.com)
- Ontario Agri-Food Venture Centre (OAFVC.com)
- FoodStarter (foodstarter.ca)
- Food Processing Development Centre (agric.gov.ab.ca)
- • Business Development Bank of Canada (bdc.ca)
- Mentorworks – helps find and secure government funding (mentorworks.ca)
- Small Business Enterprise Centres (Google the centre for your province)