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ValueAdded Agriculture


Wedge Proof Underwear. Greenhouse helmet. Milk Gun. What is Value-Added Agriculture? Products and services processed/packaged/marketed in ways especially valued ... – PowerPoint PPT presentation

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Title: ValueAdded Agriculture

Value-Added Agriculture
  • Center for Agribusiness and Economic Development

Wedge Proof Underwear
Milk Gun
Greenhouse helmet
What is Value-Added Agriculture?
  • Products and services processed/packaged/marketed
    in ways especially valued by consumers
  • What some consider value added, others might not

  • Pick-your-own fresh-cut flowers
  • Bait fish production
  • Marine Shrimp Production
  • Riding Trail Facility
  • Goat processing
  • Fresh Salsa
  • Tack and Feed Store
  • Snail farm
  • Aquaculture Facility
  • Pelletized Poultry Litter

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What a dollar spent on food paid for in 2000

Value is beyond farmgate.
Farm Gate vs. Value Added
  • Value-Added Product
  • (De-commodify)
  • Convenience
  • Demand driven
  • Price setter
  • Marketing Marketing
  • Commodity
  • Apples
  • Price Taker - Supply Driven
  • Marketing Market Timing

Value Added Apple Slices
Value Added Product
Valued Added Process
Sliced Apples 1.19/2.5 oz. package
Apples 1.34/lb.
Processing, packaging, distribution, marketing
Value Added Food Opportunities
Value-Added Supermarket Trends
  • On a weekly basis, this fresh-cut vegetable
    category accounts for 10-15 of fresh produce
    retail sales.
  • The packaged salads outpace all others such as
    packaged broccoli, cauliflower, assorted
    vegetables, packaged greens such as collards,
    turnips, and mustards, and peeled mini-carrots.
  • Other fresh-cut items such as vegetable trays and
    fruit trays are also good sellers, especially
    during the holiday season.
  • Unique / innovative packaging- prompts consumers
    to purchase more produce - growing sector.
  • Stores are continually striving to increase
    product sales packaging is one method of
    achieving this goal.

Top 10 U.S. Food Trends(Source WebMD Medical
News, April 2003)
  • 1. Heat and Eat - Ready-to-eat, heat-and-eat,
    packaged foods with no utensils required for
    on-the-go consumption top America's "most wanted"
    list of new food product attributes, along with
    great taste. In fact, these qualities were all
    considered more important than nutrition or
  • 2. Retro Nutrition - Contrary to popular belief,
    interest in fat, sugar, calories, and dietary
    fiber did not die with the last decade. People
    are still interested in "avoidance products" --
    the "less evil" foods and beverages that promise
    "no, low, less than, reduced."
  • 3. Casual Indulgence - As the trend toward casual
    and comfort continues, frustrated food-savvy
    consumers are demanding that "everyday" foods
    should be a little more "gourmet." It's creating
    a wave of mildly upscale casual culinary concepts
    that are destined to be more indulgent,
    flavorful, festive, and fun.
  • 4. Country Charisma - "Plain American" still tops
    the list of foods and cooking styles that
    consumers say they "really" enjoy. But it's not
    surprising that Chinese, Italian, and
    Mexican/Tex-Mex are closing in fast. Ethnic
    trends are quietly merging with our own
    traditional and regional cuisines.

Top 10 U.S. Food Trends(Source WebMD Medical
News, April 2003)
  • 5. Table Talk - Exotic varieties or more highly
    flavored versions of favorite foods and
    ingredients -- especially cheeses, mustards,
    ketchups -- are gaining ground in food trends.
  • 6. Simple Solutions - People want easy fixes --
    food that's fast and fun. Those milk-and-cereal
    bars, grab-and-go snacks, meal-replacement bars,
    and "functional beverages" like Slim-Fast are
  • 7. Custom Catering - All those varieties of
    yogurt are converting non-users to yogurt lovers
    -- from super-decadent, dessert-like flavors to
    soy-based versions and kid-specific yogurts.
    Yogurt has become a cottage industry.

Top 10 U.S. Food Trends(Source WebMD Medical
News, April 2003)
  • 8. Correcting Conditions - Foods that prevent or
    even treat a condition are at an all-time high --
    like vitamin-fortified foods, soy products,
    weight-loss foods.
  • 9. Exceptionally Pure - Organic food is
    exploding, with nutrition bars, snack foods,
    nondairy beverages, and packaged foods posting
    the largest growth.
  • 10. Snacks Mini Meals - Convenient,
    ready-to-eat snacks and mini/mobile meals are the
    most popular food items. Virtually everyone
    snacks between meals -- especially teens, young
    adults, and latchkey kids.
  • Fruit has been in "growth mode" -- especially
    dried fruits. Also miniature veggies and very
    young versions of veggies -- or veggies with a
    different look -- are popular food trends.

U.S. Food Trends
  • Americans say health concerns influence purchase
    decisions, but convenience and taste have more
    influence !!!

The Ultimate in Value Added
  • Bottled water consumption will soon overtake
    sodas in overall sales

Fresh Salsa
  • Two thirds (63) of U.S. households purchase
    salsa, buying an average of one jar every month
    and a half.
  • Trends- increased demand for high quality,
    specialty salsa.
  • Major processed salsa producers control 62.5 of
    the market. Pace (25.7), Old El Paso (23.8),
    and Tostitos (11.2), dominate the salsa market.
  • A major grocery chain buyer indicated he is
    approached by as many as 50 salsa makers
    annually. Of these products, he makes his
    purchase decision based not only on taste and
    demand, but the products uniqueness in the

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Direct to School Value-Added
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Agritourism is a Growth Industry
  • The tourism and travel industry is estimated to
    grow by 28 from 1997 to 20071.
  • Agricultural and nature based tourism growing at
    an anticipated 30 over the same time period1.
  • People are traveling frequently, however, the
    trips are to relaxing places that can be accessed
    by car not plane.
  • 1Source Kentucky Agrituorism Working Group,
    Issue White Paper Establishment of an
    Agritourism Industry in Kentucky.

Horse Trail Potential
Adding Value
  • Entrepreneur has many acres in pines
  • Land is not generating any income while pines are
  • Wanted to add value to the land and with minimal
    impact on trees
  • Property has fire breaks and roads established
  • Easily converted into trails, estimated to be
    10-20 miles

Adding Value to Growing Pines
  • Trail riders are willing to travel 153 or more
  • Trail riders take an average of 8 trips/year
  • Riders spend an average of 3 days and 2 nights at
    the facility
  • Riders spend an average of 14.91 per night to
    camp with trailer
  • Riders are paying 5, 10 and 15 for ½ day, full
    day and weekend rides, respectively

Hunting, Fishing and Wildlife Recreation Potential
Fishing in Georgia- Value-Added Opportunities
  • Anglers 1,086,000
  • Average days fished 13
  • Average Expenditure/day 18
  • Hunters 417,000
  • Average days hunted 19
  • Average expenditure/hunter 59
  • Wildlife Observation 1,494,000
  • Residential 411,000
  • Non-residential 1,305,000
  • Average expenditure/person 359

Fishing Cooperative
  • 150 acre lake in Southwest Georgia
  • Sells memberships to use the lake
  • 80 members currently
  • Sells tackle and equipment
  • Made 32,000 last year
  • Third largest revenue generator on farm

Value-Added Hunting
Leasing Land - Commodity
  • Lease land to Hunting club 10/acre
  • Assume 1,000 acres
  • Generate 10,000 per year
  • Safe
  • Consistent
  • Familiar

Adding Value
  • Guide Service
  • Lodging
  • Home Cooked Meals
  • These are amenities that the hunter will require
    if he travels to the area to hunt. Instead of
    staying in a nearby town, the farmer is capturing
    these expenditures and added value to the hunter.

Value-Added Hunting Activities
  • Pine Ridge Hunting Plantation
  • 3 day 4 day
  • Deer Rifle 1250 1500
  • Turkey 1500 1750
  • ½ day 1 day
  • Quail 300 450
  • Dove 80 NA

Elementary School Teacher Potential
Elementary School Children
  • Potential exists with school children
  • 95 of teachers take field trips
  • 78 are interested in taking a farm field trip
    (729,244 GA students PK-5th)
  • On average, teachers are willing to travel 51
    miles for field trips
  • 53 students is the average field trip size

Elementary School Children - Continued
  • Most popular activities
  • Farm Tours (53)
  • Livestock petting zoo and education program (50)
  • Hayride/wagon rides (47)
  • Exotic animal petting zoo and education program
  • Working Dairy (42)
  • Pumpkin Patch (41)
  • Need to incorporate QCCs - Quality Core
    Curriculum Standards and Resources

Elementary School Children - Continued
  • Field trips are mainly taken in April , March and
  • Teachers take an average of 2.5 field trips/year.
  • On average, the teachers plan on staying at the
    facility for 150 minutes, or 2 to 2.5 hours.
  • Teachers are willing to pay, on average, 5.82
    per student for an agricultural field trip.

Value-Added Aquaculture Potential
  • 53 eat fish once a week or more often
  • Roughly 19 purchase fresh fish weekly
  • The households eat roughly 4.0 pounds of fresh
    fish per month
  • Aided awareness of all species except tilapia was
    high (80 and 44, respectively)
  • One-quarter to one-third of respondents would be
    likely to purchase the various species (large
    mouth bass, perch, striped bass, prawn, and
    flounder) excluding tilapia and eel which was
    significantly lower (12).
  • Sixty percent or more of the respondents have
    eaten the various species (large mouth bass,
    perch, striped bass, prawn, and flounder), again
    excluding eel and tilapia where the number is
    significantly lower (20 and 34, respectively).
  • 42 would purchase live, unprocessed fish from a
    local fish market
  • Respondents would travel approximately 27 miles
    to a local fish farm

Local Market Customer Base
Local Market Estimated Potential
Supply and Demand Comparison
What Others Are Doing -Marketing Cooperative
  • Farm Fresh Tattnall, Inc. is a new farmer
    cooperative. It's members are folks that have
    been in the roadside market and U-Pick produce
    business for years. They are genuinely "good ole
    down home" farm families that you will enjoy
    visiting. And the scenery is beautiful too!

Farm Fresh Tattnall Marketing Cooperative
  • 18 farmers
  • Pooled resources for better marketing
  • Direct mail-out of cooperative brochure to 6,000
  • Developed website
  • Television and Newspaper advertising reaching
    Savannah market

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  • Additional growers are wanting to join
  • Preliminary results indicate sales increased 35
    - 65
  • Have attracted new people to the area not only
    benefitingb the cooperative members but other
    businesses in Tattnall County

A New Marketing Tool
  • Interactive and searchable website
  • http//
  • or
  • Can search by place, type of activity and more!
  • Can assist in creation of a web site
  • Sponsored by the Center for Agribusiness and
    Economic Development

  • Accessing
  • Georgias
  • Natural
  • Environmental/Agricultural
  • Treasures
  • http//

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  • Demand exists and is expected to grow for
    agritourism activities.
  • Potential exists across all parts of Georgia
    rural areas to large cities
  • Enjoyment of the farm experience is important
    including viewing the scenery, experiencing the
    environment and picking your own.
  • Survey shows activities/methods for attracting

Educational Materials
  • Available on-line at
  • Click on publications
  • Click on Agritourism for these and other related
  • Road Side Stand Marketing of Fruits and
  • Considerations for an Agritainment Enterprise in

If you build it, they will come....
  • It sells great at the local farmers market....
  • My family loves it....
  • The local Extension service featured it....
  • Ill build a web site......

If it was this easy, every body would be doing it
and making money!
Starting a Business
  • Idea
  • Feasibility
  • Business Plan
  • Begin Business

Do I have the resources?
  • Before beginning any new venture sit down with
    all involved, spouse, children, partner and
    evaluate your resources
  • Technical (equipment, machinery)
  • Capital (working capital, start up cost)
  • Market (distribution capabilities and contacts)
  • Labor
  • Size (economies of scale)

If you cant afford a feasibility study,
  • then you need to ask, is this the right time
  • then you need to pursue grants
  • enough to do a great analysis
  • then you need to pursue outside capital
  • requires a business plan
  • then you you may need to think smaller scale
  • then you may want to scrap the idea

p.s., Dont Waste Your Money.
Adding Value to Georgias Agricultural Economy
Through Research and Extension
  • College of Agricultural Environmental Sciences

If you build it, they will come....
  • It sells great at the local farmers market....
  • My family loves it....
  • The local Extension service featured it....
  • Ill build a web site......

Economic Analysis
  • Requires an understanding of the cost drivers to
    determine breakeven analysis.
  • Fixed, variable and step costs. You need to know
    your production cost
  • This includes producing the commodity and
    modifying the good to a value added product
  • Production costs can include packaging
    equipment(cooking, mixing, cutting), growing
    cost(refer to enterprise budgets).

Marketing Concepts
  • Market analysis - understand the market
  • Who (customers, specially target market)
  • Where (store, web, catalog)
  • When (seasonality, lifestyle change)
  • Why (convenience, status, necessity)
  • what (form, packaging)

Marketing Channels
  • Broker
  • Distributor
  • Wholesaler
  • Agent Wholesaler
  • Merchant Wholesaler
  • Retailer
  • Consignment
  • Direct To consumer
  • Farmers Market
  • Internet
  • Catalogs

Marketing mix and Advertising strategy
  • Where and when does my target market look for
  • What is the most effective means of reaching my
    target market ? i.e., television, radio, print
    material, etc..

Hire a Professional
  • Value-added agriculture is different from
    traditional agriculture.
  • Get an third party to perform the feasibility
  • Important to obtain someone familiar with the
  • Remember, cheaper is not always better. You get
    what you pay for!

You CANT afford not to have a feasibility study
  • Ask Is this the right time?
  • Pursue grants
  • enough to do a great analysis
  • Pursue outside capital
  • requires a business plan
  • Consider scraping the idea

Thank You - Questions or Comments?
Feasibility Analysis will help to Understand the
  • Understand your market in order to know
  • Who (customers, specially target market)
  • Where (store, web, catalog)
  • When (seasonality, lifestyle change)
  • Why (convenience, status, necessity)
  • what (form, packaging)

Customers (who, why, when, what)
  • 3 basic questions
  • Who are your customers (target market) ?
  • Demographic
  • Geographic
  • Psychographic
  • Behavioral

  • Age
  • under 6, 6-11, 12-17, 18-34, 50-64, 65
  • Income
  • under 10,000, 10,000-19,999,
  • Education
  • graduated high school, college,
  • Race
  • White, Black, Hispanic, etc.
  • Occupation
  • farmers, managers, students
  • Family size
  • 1-2, 3-4, 5

  • Urban
  • Suburban
  • Rural
  • Regional population distribution
  • Atlantic, Southeast, Pacific, Mountain, New
  • City size
  • Under 5,000, 5,000-19,999, 20,000-49,999,

  • Social Economic class
  • Republican/Democrat
  • Conservative/Liberal
  • Values
  • Lifestyle

Behavioral Variables
  • Benefits desired
  • Convenience, economy, status, dependability
  • Usage rate
  • Nonuser, light, medium, heavy
  • Brand loyalty
  • None, weak, strong

Target Markets
  • 3 basic questions
  • 2. Where are your customers? City, County,
    Region, State, Nation, Globe
  • Miles 20 15 10
  • Population 82,683 59,644 36,409
  • Households 31,974 22,806 13,773
  • White Population 77,003 56,126 34,497
  • Black Population 4,881 2,901 1,506
  • Asian Population 623 473
  • Hispanic Population 719 518 275
  • Median Age 37.0 36.7
  • Med. HH Inc.() 29,572 30226 32,214
  • Av. HH Inc. () 40,855 41,877 43,165

Estimating Market Potential
  • To estimate
  • Define target market
  • Determine size of market
  • Determine consumption/usage
  • Determine usage rate

  • 3 basic questions
  • Can you access your customers?
  • Distribution

Getting Products to Market
  • Direct to consumer- i.e, roadside stands, direct
    mail, open retail establishment
  • Direct to retailer work with food retailer,
    gift shops or other outlet (specialty food shows)
  • Distributor - i.e, Sysco
  • Wholesaler
  • Broker- i.e., Specialty food brokers

Direct to Consumer
  • Sell products directly to consumer
  • Sell out of your home office/business (mail
    order, website)
  • Establish a retail outlet (I.e., roadside stand)
  • Cuts out middlemen
  • Retain control of your product (positioning)
  • May not provide the market exposure your desire
  • Your are solely responsible for advertising and
    promotion not only of your product, but your
    retail outlet
  • Retail outlet location is critical
  • Expensive to open and operate a retail outlet

Direct to Retailer
  • Sell products directly to retailers
  • Supply products directly to retailers on
  • Cut out middlemen
  • Provides more price flexibility
  • You are responsible for product delivery
  • Retain control of your product (positioning)
  • You are responsible for stocking and monitoring
    product movement and condition - consignment
  • Retailers are looking to consolidate their
    suppliers and reduce invoice and delivery
  • Specialty food shows good way to hit many
    retailers efficiently

  • Distributors warehouse, deliver, take orders and
    invoice products.
  • They are not responsible for selling products.
  • A Generally involved with various product lines
    and are usually regionalized.
  • Distributors are not necessarily interested in
    carrying new products if they do not have a track
    record, with data indicating that the product
    actually sells.
  • There are about 60 distributors who are involved
    with retail specialty foods in the United States.

  • Wholesalers sell to retailers, other wholesalers
    and industrial users but do not sell directly to
    the end user or consumer.
  • Two types of wholesalers
  • Agent Wholesalers
  • Merchant Wholesalers

Cost of Getting Products to Market
  • The more people that handle a product, the
    greater the marketing margin.

Marketing Channel Mark-ups
  • Organization Mark-Up Percentage
  • Broker 5-15
  • Distributor 25-30
  • Wholesaler 10-20
  • Retail 30-50
  • May charge an up-front fee ranging from 1,000
    (broker) to a 10,000 large distributor

Mark-up Example
  • Brokers have personal and established contacts
    with buyers
  • Distributors
  • Retail grocery chains
  • Food service
  • Reduced sales costs vs. hiring full time sales
  • Provide packaging and product sizing advice
  • Handle product promotion
  • Work on a fee basis (5-15)
  • Some require as start-up fee (1,000)
  • Time is divided among many manufacturers

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  • Value- Added Produce Opportunities
  • Interviewed 125 companies involved with food

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  • Bagged cabbage now generated 70 million dollars
  • Coleslaw 45
  • Fresh head 35
  • Sauerkraut 12
  • Fresh-cut ingredient 5
  • Bagged 4
  • 13 of 66 companies purchase pre-processed cabbage
  • Average Purchase 492,088 pounds monthly, with
    quantities ranging from 2,000 to 950,000 pounds
    per month.
  • Pay an average of 0.34 per pound
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