Value-added products, niche marketing, producer cooperatives – all sorts of new business opportunities are surfacing. But determining which, if any, of these projects work into your long-term strategy is a difficult task. Having access to a network of shared experiences between such groups would be a real bonus.
That's one objective the National Pork Producers Council is trying to fill with its value-added technical assistance team. The team meets with producer groups that are considering value-added opportunities to help evaluate the pros and cons, using successes and failures of other similar ventures.
For example, groups in Tennessee and Minnesota are both looking at filling niches in the Hispanic market. Since they won't be competing in the same geographic market, they might as well learn from each other.
The technical assistance team has drawn a lot of interest, as virtually every producer is looking to get more value from his or her hogs.
"For various reasons the producer's share of the retail pork dollar has been declining," says Jeff Ward, NPPC's producer education supervisor. "The best way to increase your share is to get closer to the consumer."
Brian Buhr, University of Minnesota agricultural economist and team member, says the idea for every value-added venture is to tap into a particular market and capture the consumer.
"A lot of people think that value-added means if pork chops are $2.20 per pound, you will get $2.50 per pound, but it's all about brand equity," says Buhr. "That's not something you can buy, it has to be built over time, and it can be destroyed by one bad experience for the consumer."
Only about 5 percent to 10 percent of the value-added groups make it to the point of selling a physical product. Of those, Buhr warns success rates will be the same as any other small business just starting out, which means the mortality rate can be high.
The team does not evaluate any group unless it has requested the service. The first visit is designed to check the producer group's progress. "On the second visit, we come back with ideas and try to get the producers to a point where we can work as more of a consultant," says Ward.
The evaluations are free to producers and provide a service you would otherwise have to obtain from private consultants. A handful of land-grant universities are starting to get into this arena as well.
A visit from a private consultant runs about $750 to $1,000 per person per day, not counting preparation time or travel expenses.
Mike Lemmon, an Indiana producer involved in a value-added group called Premium Marketing, has used the technical assistance team, and also has employed private consultants and university personnel.
Premium Marketing is a group of less than 100 producers from Indiana, Michigan and Ohio, who are interested in looking at opportunities to be involved in a production or marketing chain that will provide a market outlet while minimizing risk and maintaining some producer independence.
"The technical assistance team made us aware of some of the services available to help us do feasibility studies and to look deeper into the meat industry," says Lemmon.
Groups trying to organize a value-added effort should make the NPPC review team one of the early planning steps, says Lemon. Bringing in advice quickly can save steps along the way and open up options for the group.
"Most groups want to look at producing a product, but the first thing we try to get them to think about is the market they will supply," says Buhr. "In any business plan, first you have to determine where you're going to sell your product. From there you can move on to more management and production issues."
Taking those early steps is dependent on the group's leadership. Strong leadership is essential to all successful efforts, says Ward. Employing a full-time executive with knowledge of the meat industry, vs. pork production, can be a big benefit, he contends.
"Another vital part of the equation is the producers' willingness to change," says Ward. "A common reason these groups come unwound is that producers are not willing to change."
As part of the package, NPPC also will provide literature to help the group with future decisions. Two of the guidebooks include Case Studies in Value-Added Pork Products and the Front-End Guidance Manual.
The case studies outline the similarities and qualities of value-added groups that have already been successful. The guidance manual includes consumer preference data as well as niche market demographics and preferences.
For example, the manual studies the Hispanic market. It points out that demographics in the United States reflect that Hispanics are the youngest ethnic group, the second fastest growing, have the fastest growing income and they love to eat meat. These four characteristics point to an under-served niche market that is ripe for success.
The program also helps with the nuts and bolts of starting a new business. This can mean pointing groups in the right direction to address a brand label, distribution and pricing concerns.
While the NPPC program is helpful, Lemmon admits it will only take you so far, and it can only provide guidance. "You still have to do a lot of the leg work, and finance the project," says Lemmon. "It still takes time, effort and commitment on the producers' part. All the team can do is guide and give advice."
What you do with that advice is up to you. Certainly, not all value-added groups will be successful. Finding out ahead of time that a project may be ill-fated because the market conditions or timing is not right, could save you a lot of time and headaches. Or a little guidance may be the small push down the right direction that brings success. In either case, the more information you have the better choices you can make.
Is Value-Added Right For You?
Determining which value-added groups will succeed is a matter of evaluating their business plans, market access and marketing plans. Determining which of these value-added groups is right for you, is a less exact science.
The National Pork Producers Council technical assistance team generally deals with groups that have already formed, but Brian Buhr, University of Minnesota agricultural economist, says there are a few guidelines that you can use to decide which groups are right for you. Any group should have: a business plan that meets auditor standards, a solid marketing plan and preferably pre-existing market commitments.
"You have to be capable and willing to differentiate your product from the rest of the pork on the market," says Buhr. "Whether that's by raising organic pork, antibiotic-free pork, some kind of meat quality specifications or something else – it needs to stand apart from the other products."
Developing this product as part of a cooperative may mean you need to sacrifice some of your usual production methods. Some independence may be lost, in order to fit in with a cooperative to fill a niche market.
"Producers who think in terms of marketing in addition to or rather than production seem to fit value-added groups well," say Buhr.
While there is no group that you can call upon to analyze which value-added group is right for you, you can look for some warning signs. If lenders and government agencies that evaluate these groups start backing away from a business, that is a bad sign, says Buhr. He also warns that inactivity for the first two or three years may show that the venture will never get up and running.
Selecting which if any value-added group to join is your decision. You need to look at your operation and personality to see if you fit with a producer group and then begin evaluating that group to make sure it can be a profitable player long term.
For More Information
If you are interested in gathering more information on the value-added technical assistance team, call the National Pork Producers Council at (515) 223-2600 and ask for Jeff Ward. You can visit the NPPC Web site at www.nppc.com or e-mail Ward at email@example.com.