by Sally Colby
Nearly everyone has concocted a product, served it to their friends and received praise that led them to believe they might be able to sell that product.
Ginger Myers, marketing specialist and director of the Rural Enterprise Development Center with the University of Maryland Extension, said there’s more to value-added products than simply adding value.
“We’re seeing value-added at the farm level with a change of product and shelf life,” said Myers. “We’re seeing a lot of food entrepreneurs who are looking at value-added as the way things are being produced. Also, there’s value-added from the standpoint of values and ethics as to how products are being made.”
Myers pointed out the fact that just because you ‘can’ make a product doesn’t necessarily mean you should pursue production on a larger scale. “Sometimes we need to massage the product we thought we were going to start with when we start to do some real market research,” she said. “Keep your mind open and flexible to change.”
When Myers discussed value-added options with producers, she asked whether they’re making a product or making a job for themselves. “We have to remember that products that add value are a customer-driven process,” she said. “There has to be a market for what you’re going to make. You’re going to retain more of the food dollar by processing, packaging and marketing, but it also has to be a product that sells.”
Degrees of added value include a minimal change of state, such as products that extend shelf life. This includes dried herbs, beef jerky and frozen products; often items that require little preparation by the consumer. Production methods can also define added value, such as organic, grass-fed or heirloom varieties. Production methods also include gluten-free production or using only certain varieties of fruits in jams or jellies.
The other way to add value is through the purchasing experience. Myers said that people love to shop, but they want to have a good experience doing it. “Farmers markets are not convenient for most folks,” she said, “but they stop for the buying experience, talking with the farmers and picking their own product.” Purchasing experiences include agritourism, wineries with tasting rooms and the aggregation of food purchasing areas at city farmers markets.
Why add value to a product? There’s the potential to increase farm viability, expand the market season and open new markets. “Seasonality is one of the challenges we see for folks who are used to producing to the season,” said Myers. “I also see folks who are making products sometimes forget there’s a seasonality for almost everything. There are certain times of the year we’re looking for jams, jellies and sauces. Do you have a product that fits into someone’s holiday cook-out?”
The pros of adding value include potentially higher profits and the ability to control your own product. “You enjoy taking a raw material and turning it into a different product that has great flavor and quality,” said Myers. “You’re making the connection of making a food item, which is really important. We’re feeding our neighbors and our communities, and we’re looking for folks who value these products.” Myers added that entrepreneurs often hole up and work on their own, and derive satisfaction when they see others enjoying products that took time to develop and market.
While the concept of value-added is attractive to many, coming up with a unique product is challenging. “With just about any product you get into, you’re going to have some competition,” said Myers. “I see very few brand-new food products hit the market. Your challenge is ‘how are you going to get folks to take money from their pocket and put it into yours’, and also, how are you going to get market share for what’s out there already?”
Myers said that while salsas are extremely popular, there are about 1,800 salsas already on the market. “It’s the number one condiment in the United States,” she said. “Every year, there’s a new product that comes onto grocery shelves. If you think about salsas, it’s a broad category. Look at the sub-categories. We have fruit salsas, blends of specific vegetables, salsas that are to be added to stand-alone salsas or mixed into a product.”
Why do some value-added products fail? Even though people are more knowledgeable about food and seeking a food-purchasing experience, sometimes the product doesn’t match the customers’ wants or needs. “Remember the original description of value-added is that it’s a customer-driven proposition,” said Myers. “You have to produce something folks want.”
Another consideration is that 80 percent of consumers assume that government regulations on food will keep food safe. Myers said that if your product doesn’t look like what consumers are used to seeing in the store, they might perceive you as someone who produces ‘on the side’. They don’t believe you are producing food under certain regulations or standards, and there’s mistrust. She added that from the start, your story has to include the fact that your food is professionally produced and that you meet all regulations, with a label (including allergen listing) that people can read and understand.
Another potential downfall for first-time value-added producers is product pricing. One common thought is to enter the market with a lower cost product than others, then increase the price when the product is established. “It is very, very difficult to move prices up once you’ve trained customers to the prices you have,” said Myers, adding that producers often look at what the market will bear or what they see at the farmers market to establish pricing. Myers suggests a pricing process that considers variable costs, fixed costs and the breaking point — how do you break even?
Myers said entrepreneurs should realize that they need to make enough product to get beyond the break even point and make a profit. “When you think about what it takes to sell, how much of that product can you make?” she said. “Can you make enough to go to farmers markets on a regular basis? You’ll need enough product for busy days, and there will be some slow days. It’s difficult to build loyal customers if you are hit-or-miss on supply or there’s a particular flavor or package size you have trouble making sufficient amount.”
Selling online is an option if there’s a good plan for distribution. Some items are heavy and may be difficult to ship. Consider an appropriate method for secure payment. Think about which days you’ll ship so the product arrives in time and doesn’t sit on a truck over the weekend. Be clear about shipping with customers and get an estimate of shipping costs before you close the sale.
“A high-quality product is the number one marketing asset,” said Myers. “There are so many products on our grocery shelves that there’s no room for a product that isn’t perfect. Perception is reality.”
Just because you can doesn’t mean you should
by Sally Colby