Co-packing your products
A growing demand for locally produced products has encouraged farmers to plant crops for value-added processing. Whether done in a commercial kitchen on the farmer’s property or at a co-packer’s facility, value-added processing transforms a year-end harvest into a product that can be sold at higher markup.
Consumers are making a conscious effort to purchase locally grown produce, be it fresh or processed. “People understand that there are taste differences and health benefits. And they also know it is important to support the farms and open space and that in turn leads to more jobs,” said Jim Hyland, co-founder of Farm to Table Co-Packers in Kingston, N.Y.
Traditionally, farms that process vegetables, fruits and nuts did so out of a kitchen or facility built on their property. In recent years, co-packing facilities have cropped up to fill a niche for smaller runs of processed foods. “Instead of a farm building a kitchen and keeping a staff, co-packing facilities absorb the overhead costs and produce a product for the farmers so they are able to focus on harvesting and selling the crop,” Hyland added.
Any fruit, vegetable or nut is a candidate for processing. It can be as simple as packaging frozen vegetables like corn and peas or more involved like a pureed squash for frozen, ready-to-use soups. Stews, granolas, pies, cookies, sauces and pickles are just a few of the end products that can be created for sale.
“One of the most exciting things is that farmers already have markets and customers. They just need more products to sell,” Hyland explained. “The other exciting thing is that most of the time farmers have raw materials that are especially abundant during harvesting seasons.”
What to expect—start-up costs
Start-up costs vary based on the produce and the end product. Cheryl Leach, an extension support specialist with Cornell University, suggests farmers choose an outlet that requires them to establish the product in the marketplace. “We recommend people stay away from broadband distribution unless they are willing to make a large investment, which could be up to a half million dollars,” she said. “When you process your own product or use a local co-packer, you can have a product to sell with a very low investment.”
Showcasing the product at farmers’ markets or offering taste testings can establish the product on the market. “Establishing the product on the market will take a lot of the farmer’s time, but it’s usually the best way to go unless you are willing to spend a lot of money,” she added.
Hyland uses pickles to provide an example. Pickles can be produced for as little as $700, or they can cost up to $2,000 to produce. (In this situation, the processing fee includes the cost of bottles and labels).
Remembering the economies of scale is critical when considering using a co-packing service. “The more produce that you process at the end of the day, the more cost-effective it will be,” Hyland added. Batches as small as 1,000 to 2,000 pounds can be processed, but Hyland recommends that farmers aim for processing 5,000 pounds of produce at one time to bring the cost per unit down, allowing for greater profitability.
Steps for getting started
Getting started can be daunting. There is more to the process than delivering the produce to the packing plant and returning to pick up an end product. A recipe and approval from your state agriculture and market organization is critical. Leach suggests preparing at least six months before the harvest will be ready. “Starting in January usually works out best,” she said.
Contact the Northeast Center for Food Entre-preneurship at Cornell University. Depending on the product you intend to create and your geographic area, you may need approval for your recipe or a scheduled process established to produce the product on a large scale. “New York state has the most regulation on food products, but other states are increasing regulations as well,” Leach noted. “If you bring your recipe and/or process to us we can help you get approved to process.”
Work with a small business development center in your community to develop a business plan and determine finance options if needed. Reach out to the co-packing service that best fits your needs, and decide if the product you have chosen is feasible in terms of time, taste and efficiency.
“Networking is the best way to find a co-packer that will meet your needs,” Leach said. “There are more co-packers establishing themselves every day, but not always within a reasonable distance from your farm.” Other farms may have a commercial kitchen established and may be willing to process for other farmers when the kitchen is not busy, she added.
Using a co-packing service can help any farm streamline the production process for bottling, freezing or baking sweets with their fruits, berries and nuts. A full-service co-packer allows for flexibility at the farm and a focus on harvesting, freeing up costly resources and the need to build a facility on site.
Leach recommends reading “From Kitchen To Market” by Stephen F. Hall (Dearborn Trade Publishing, 2000) and the online article “Choosing & Using a Copacker” by John E. Rushing (www.ces.ncsu.edu/depts/foodsci/ext/pubs/copackers.html). “These resources outline everything you need to know about using a co-packer, including estimated start-up costs, legal agreements, etc., and how to take your finished products to market.”
For more information on getting started, contact the Northeast Center for Food Entrepreneurship at Cornell University at 315-787-2273. For more information on Farm to Table Co-Packers visit www.farm2tablecopackers.com. There you can find a link titled “Getting Started.” Your local Cornell Cooperative Extension may also be able to provide direction.
Katie Navarra is a new contributor to Growingbased in Mechanicville, N.Y. She has worked with a variety of trade and specialty publications as well as with small businesses.