Farmers receive a relatively small percentage of the consumer dollar paid for their products and are always on the lookout for ways to increase their margins.
An obvious way to achieve this is by increasing the size of the operation. Economies of scale are present in most types of farming, but higher total production does not always lead to greater margins. And for smaller producers who are producing a premium product, this may not be an option or even desirable.
The alternative to scaling up the operation is to move up the value chain. Most of the consumer dollar is earned beyond the farm gate, so it makes sense to add more value before selling the product into the rest of the chain or directly to the consumer.
In the US, it was found that farmers who marketed food directly to consumers were more likely to stay in business than similarly sized businesses that marketed through traditional channels. In New Zealand and abroad, consumers now have more opportunities than ever before to buy directly from producers.
Many lodges, hotels and boutique accommodation providers throughout New Zealand offer gourmet meals made from ingredients that are locally and sustainably produced for patrons who are increasingly discerning about where their food comes from.
More and more Kiwi chefs value the paddock to plate experience because of its focus on sustainability and responsibility.
They believe in serving meat from happy, healthy animals and sourcing fresh vegetables, fruit and herbs from local producers.
For farmers, these niche markets offer a more direct, less price sensitive pathway to the consumer and one that is willing to pay a premium for high quality products.
Virtually unknown 15 years ago, farmers’ markets are now an established part of the retail scene. They offer consumers the ability to source fresh, locally produced products while providing smaller producers with an affordable shop front where they can sell
their products direct to the consumer at a higher margin.
Niche markets can be highly lucrative, and some farmers are successfully targeting niches within the domestic market such as restaurants and farmers markets. The challenge lies in achieving volumes sufficient to support profitable small-scale production,
but opportunities to increase volumes to a viable level are presented by online selling and the growing potential for export to niche markets overseas.
The rise in online research and shopping means busy consumers can now be more discerning than ever before about where their vegetables and meat come from, while enjoying the added convenience of having it delivered to their home.
Normally as a producer of the product, farmers are price takers not price makers. Ensuring the unique attributes of their products are recognised in the marketplace, will help farmers increase the value of their production.
Paying attention to what markets are willing to pay for and ensuring that this value is captured and communicated down the value chain is vital. Ultimately the product’s point of difference needs to stand out, whether it is on the supermarket shelves, a restaurant menu or in the online world, if producers want to attract a premium.