|
|
Article: Value Chains Another Idea
|
|
Value Chains Another Idea - Jon Radojkovic
If a group of farmers got together to have a consistent quality supply of a product and found retailers that would sell that product or created their own retail outlets, it would cut out the middleman and create profits for the farmers. This type of linkage is called a value chain and it's growing all over the western world, including locally.
"These are tough times for agriculture, we buy retail and sell wholesale, one option is value chains," said Ray Robertson when he introduced the main speaker, Mark Gooch, at Mondays workshop in Markdale, one of only 10 across Canada.
"Our philosophy is that success on farms will be based on sound business management skills instead of producing a lot of something," said Gooch, of the George Morris Centre and Canada Farm Business Management Council.
In simple terms a value chain is a group of businesses, or producers getting together to increase the value of their product. "There are two ways of enhancing value," Gooch explained, "{increase the revenue or reduce cost " most successful businesses do both but at least they reduce cost," he said.
Understanding what the consumer wants is one of the most important lessons producers should learn and then they should grow or raise the product for that market. Most know that it's hard to do it alone, so that's when a group is formed through a co-operative or a collaboration to be able to grow or raise enough of a quality product consistently.
It's another idea that farmers are looking at to make ends meet, as it seems just growing a good grain or a top graded animal, and selling on the open market is not good enough to make a good dollar these days.
"Price is not the biggest issue," Gooch says. Although retailers and advertisers make you believe that low prices are the only thing that sells a product, Gooch pointed out through a demographic survey, that consumers do not feel that way. The survey showed only 16 percent of people buying food in a grocery store bought because of the lowest price. Most purchased food based on brand name preference (not necessarily the lowest price) and health. "Understand the market, study it before you make any moves," Gooch advised.
How consumers buy food was another lesson in what farmers could expect from the market place. Major stocking up of food, that is the basics such as flour and toilet paper accounted for only 13 percent of trips to the grocery store, while 'quick trips' accounted for 62 percent. These food buyers were less focused on price and more on taste and nutrition. Twenty- five percent of food shopping were 'fill-ins,' that is buying food supplies that the shopper had used up at home, but not necessarily based on the lowest price, either.
The average amount of different products in a large grocery store is about 24,000. Healthy food is a trend that is being taken up by the consumer, accounting for 61 percent of sales, where usually the food costs more. Baby boomers are getting older, which accounts partly for the health trend and also for smaller portions of food. Roasts, a traditional food, have declined in sales rapidly because of its large size and retailers are putting out instead, smaller cuts of roast, and prepared meats.
A good example locally of a value chain is West Grey Premium Beef, located just south of Durham. Started in 2003 by two local beef farmers, George Maxwell and Doug Calhoun and grocery store owner Peter Knipfel, the business has grown from four employees to forty today.
"Our business is just what you are talking about," said Chet Calhoun, at Monday's workshop. He explained how the idea of buying an abattoir south of Durham and then producing premium beef cuts from their own cows and selling through local retail stores, eliminated a lot of the middlemen, that were cutting into their profits.
"Who was making all the money before anyway. Not us," said Calhoun. By having the source (beef) and a production facility (abattoir) and retail outlets, (one in Chesley, Owen Sound, Brussels, and Durham) West Grey Premium Beef, has circumvented the wholesalers, truckers and warehouses, where all their profits were eaten up. In the end it has reduced their costs and created profits.
Not that it's easy. Local large grocery stores can't buy their beef and lamb because most (80 percent) are owned by the big three - Loblaws, Sobeys and A&P - and they get all their meat from a warehouse in Toronto. And most of that meat (90 percent) is from Alberta, the US or South America, even though Grey and Bruce Counties are the top two beef producers in Ontario.
Now, a lot of West Grey Premium Beef's sales are sold to the food restaurant business and Calhoun added that lamb demand is also getting higher, especially for the ethnic population in Toronto. The other thing he noted is that there is a huge demand for organic beef. "The greatest lesson we've learned is to be flexible," says Calhoun.
Although the value chain is a great idea, most farmers would agree that the basic problem is still not receiving enough money on the open market for a good product. That is still the number one issue.
|