New opportunities for growers
Despite the faltering economy, there is reason for optimism. There has been an increased demand for locally grown and specialty food products, and consumers are willing to go the extra mile to get these products, according to a report issued by the U.S. Department of Agriculture’s (USDA) Agricultural Marketing Service (AMS).
According to the report, “Emerging Market Opportunities for Small-Scale Producers,” conventional supermarkets and grocery stores have seen steady decline in consumer demand since 1995. While some of this is due to a rise in consumer shopping at discount stores (super centers and dollar stores), the change also reflects a shift in the way people buy groceries: more people prefer to supplement their grocery shopping at specialty food shops and direct-to-consumer marketing outlets, such as farmers’ markets, roadside stands and community supported agriculture. According to the market research firm Packaged Facts, the demand for locally grown food has the potential to rise from $4 billion in sales in 2002 to $7 billion by 2012.
Some retail supermarket chains have succeeded in keeping more customers because of their ability to closely match their food product offerings to the specific needs of their customer base.
“Such firms offer promising marketing opportunities to small and medium-sized food suppliers who can meet their basic product requirements,” concludes the USDA report.
(The entire report can be viewed online at www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5076556&acct=wdmgeninfo.)
The evolving ethnic food market
There are many factors that are revolutionizing the food market, notes Musa Pinar, Ph.D., an expert in agricultural marketing and agribusiness and a professor of marketing at the College of Business Administration at Valparaiso University in Indiana.
“New technology, the Internet, cooking shows are all presenting new diets, foods and dishes for the customer,” says Pinar. “People are more aware of many choices they have.”
The rise in ethnic groups is creating a need for a wider selection of produce at supermarkets and specialty stores. Pinar, who is from Turkey, says he recently has been able to buy ingredients from a local ethnic store for traditional Turkish recipes.
“This ethnic market is spilling over to mainstream America; people are realizing that these dishes are healthier,” Pinar notes. Not only is Mediterranean cooking becoming more popular, but so are Hispanic and Asian dishes, with not only these particular ethnic groups, but to average Americans.
Larger retailers have had their eye on this trend and most now offer small sections, not only in natural and organic food, but also ethnic food.
As the demand for these products increases, so will the opportunities for small producers, says Pinar.
Eat local movement grows
Rich Pirog, associate director at the Leopold Center for Sustainable Agriculture at Iowa State University, agrees and says along with the ethnic markets, the eat local movement is fueling an even greater demand for local produce. “People are demanding healthier foods and foods they can trust to be safe. More than ever, they want to know where their food comes from, and how it was grown,” says Pirog.
The changes at the USDA with its “Know Your Food, Know Your Farmer” initiative point to a shift in government’s role to engage Americans in an active debate about eating healthier foods.
“Local foods, and local and organic produce will remain two of the top trends in food service and retail for 2010,” says Pirog.
Food trends mean opportunities for growers
There are several opportunities these trends offer growers to penetrate new markets and increase business.
For one, Pirog notes that growers need to take notice of what is being marketed in their regional area as “local,” since some retailers and food service companies are stretching—geographically—the use of this term to take advantage of this buying trend.
If growers are selling wholesale, they need to communicate with their buyers about what and how they market “local” in their stores and with their customers, says Pirog The “buy local” trend presents a perfect opportunity for local growers to jump in and do some market research and offer consumers the “real thing,” he says.
The buy local trend also dovetails with the ethnic trend, notes Pinar.
“Local growers can find out what ethnic ingredients are in demand, what is now being imported and what can be grown locally,” says Pinar.
“Growers need to do their own market research. Local growers can find out what is selling, what is currently imported, what they can grow themselves in a faster, cheaper and fresher way,” says Pinar.
Knowing trends important for growers
These trends are important because growers today need to be part of the entire food consumption chain, not just the growing part, says Pinar. “Growers need to be responsible to stay on top of food trends to stay competitive.”
Understanding these trends will help growers make important decisions about what to grow and where to market their produce.
“This is the challenge for a small regional grower,” notes Pinar. The best way to market products in this increasingly competitive arena, he says, is to band together with other local growers to provide more clout and a reliable source of produce for larger markets.
“Growers should be part of their community’s Chamber of Commerce, Rotary, Kiwanis, etc., and start presenting their case [for local food] to the community,” says Pinar. “Make yourself seen and heard at local events, fairs and festivals. Know how to promote yourself.”
However, the larger the market, the more likely the grower will need to comply with good agricultural practice certifications, and quality and consistency.
“Growers who are interested in scaling up to sell to larger- volume buyers need to do their homework and take a risk management approach to competing in these markets,” says Pirog. “Growers need to take stock of their own interest in marketing, tolerance of risk and willingness to take adequate time to understand and negotiate the transaction costs necessary to sell into these higher-volume markets.”
Private label opportunities
One promising new market the USDA report notes is the opportunity for entry into bigger markets through private label or store brand programs, which can be open to smaller food producers and processors.
While “private label” in the past has been associated with inferior quality, a recent study by CitiGroup/Smith Barney found that sales of private label products increased 48 percent from 1997 to 2003 (compared to a 22 to 25 percent increase for branded items).
These private label brands are becoming more important for supermarket buyers because they can offer exclusive food items that aren’t available to competitors. Plus, it allows retailers to let their customers know about the origin of the food in the event of a recall or other problem.
The USDA report found that small-scale producers are “ … in a good position, both geographically and operationally, to develop exclusive relationships with retailers that value, and are willing to pay for, products with assured quality characteristics that can quickly be traced back to their source.”
Payoff: more sales?
Staying savvy about new markets and buying trends is critical to a grower’s success today, says Pirog. Not only does the USDA provide these trends through reports, but local colleges, universities and cooperative extensions can offer insights into trends in a grower’s particular region of the country.
“The payoff is increased customer volume for products where profit margins are highest,” says Pirog. “This could be a long-term strategy to grow your enterprise.”
The author is a freelance writer from Keene, N.H.