Abstract
©2006 clipart.com |
This publication suggests that sustainable hog producers consider
alternative marketing approaches for their pork. Sustainable hog
producers are creating products that many consumers can't find in
their grocery stores, but want to buy. Consumers perceive sustainably
raised pork to be healthier to eat. They are willing to pay hog
producers more for raising pigs in a manner that is humane, helps
sustain family farms, and is more environmentally friendly than
conventional production methods. Direct marketing and niche markets
are among the alternative marketing strategies discussed. Legal
considerations, labels, trademarks, processing regulations, and
obstacles are addressed. Sources of additional information are also
provided.
Table of Contents
Introduction
Successful marketing is a necessary part of any profitable enterprise,
and alternative marketing is often necessary for sustainable hog
producers to survive. Unfortunately, farmers who practice sustainable
and humane hog production often neglect marketing. Sustainable hog
producers need to realize that successful marketing efforts will
likely be as management-intensive as their production systems and
that those efforts will be directed toward specialty and niche markets,
not the conventional commodity market and distribution network.
There is an opportunity for producers of value-added and premium
pork products to realize sustainable profits, but only if they are
willing to develop the necessary marketing skills.
Kelly Klober, author of Storey's Guide to Raising Pigs
and himself a farmer and value-added marketer, believes that farmers
in the future should not expect to support a farming operation with
a 100 to 200 sow herd. Klober says, "A lot of folks are seeing
a time and means to fit a few hogs into their farming mix. Hogs
will be taken up by producers wanting to work with modest numbers
and also wanting to market them all across the swine production
spectrum…. To succeed on the small farm, a sow herd will have
to be quite small, fewer than 25—and perhaps as few as 3-5.
Even from small numbers, however, you will have to pursue as many
marketing opportunities as possible." (Klober,
2000)
In an article in
the Milwaukee Journal Sentinel, Mike Marr—who raises
and markets beef near Mineral Point, Wisconsin—comments,
"Historically, we take what someone is willing to give
us. Business sense tells you that they're not going to give
you any more than they have to." (Daykin,
2001) |
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Commodity vs. Niche Marketing
Before sustainable hog producers decide to pursue alternative marketing,
they need to understand the differences between commodity and niche
marketing. Commodity marketing is marketing hogs that are undifferentiated
from other hogs in the mass market. Niche marketing is differentiating
your pork product to a market that wants a unique or superior product.
Allan Nation, editor of Stockman Grass Farmer, has stated,
"A commodity orientation means that as long as you meet the
specs and can stand the price you pretty much tell everyone else
to go fly a kite. Such a selfish attitude absolutely will not work
in direct marketing." Nation further explains that direct niche
marketing is more about providing services to others by helping
them get what they want. He says:
In the U.S., consumers expect an attitude of
deference and responsiveness to their wants and needs. If you
are unable or unwilling to develop—or convincingly fake—such
an attitude, stay in commodity-priced agriculture. However, if
you see service to others as a noble calling, don't let the lack
of specific marketing or production skills deter you. Aptitudes
are rather easily learned. It is our attitudes that are difficult
to change and that most often determine our fate (Nation,
1999).
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What Is Direct Marketing?
Direct marketing involves selling products directly to consumers,
thus allowing the producer the chance to receive a better price.
This involves making a direct connection with consumers, determining
their wants or needs, and producing the products that meet these
needs.
Joel Salatin, a Virginia pastured-beef and -poultry producer, who
has written several books on this subject, suggests some factors
to help determine your sustainable pork pricing.
First, don't underprice your product. Sustainably produced pork
products are superior because they are more environmentally friendly,
are humanely produced, and are produced on family farms. Patronizing
local farmers ensures that the local economy is stimulated. Salatin
suggests that producers set a rewarding and satisfying gross margin
and then stick to it. This will allow the producer to build a customer
base with clients who appreciate the product for what it is, not
for what it costs. (Salatin, 1994)
Second, don't try to satisfy all customers' needs. Take into account
your time and the extra effort that is needed to accommodate their
requests. Salatin says, "We must appreciate that we cannot
compete with the big operators at every level, and learn to stop
our production or processing at the point where our quality/price
enhancement can't compete with the conventional alternatives."
(Salatin, 1994)
Finally, keep accounts receivable low. Operate on a cash and carry
basis as much as possible. Salatin concludes, "There you have
it. Set your prices so that no matter what your volume, your return
is both emotionally and financially rewarding; steer clear of the
temptation to do everything the customer wants; and let cash be
your business byword. By following these rules, your direct marketing
endeavor can be satisfying." (Salatin, 1994)
"You may as
well do nothing for nothing as something for nothing."
—Joel Salatin |
Direct marketing has unique characteristics that depend on building
relationships with the customers. In fact, the term "relationship
marketing" has been used to describe the best methods of direct
marketing for family farmers. In an article in The Stockman
Grass Farmer, Salatin describes the five advantages of relationship
marketing.
- Consumer Education
Producers have to tell the consumers why their sustainable pork
products are different from the pork that can be bought in the
grocery stores. This will involve explaining that the pork comes
from hogs raised more humanely on a sustainable family farm, not
by giant corporations, and that the pork is raised in a more environmentally
friendly manner. This is not only good for business, it is also
a small step toward the development of consumers' awareness about
farm, social, and health issues that affect their lives.
- Product Quality
When the producer maintains control of the hogs and raises them
in a sustainable fashion, it is easier to avoid compromising the
quality of the pork.
- Customer Loyalty
When the consumer knows the producer personally, the relationships
built between them—personal and commercial—are not
easily broken. Good sellers know and use their customers' names.
Loyalty helps bring in repeat customers. The greater the loyalty
and satisfaction, the higher the likelihood of repeat business,
even though a similar product may be available at the grocery
store at a cheaper price.
- Lifestyle
As Salatin explains, "I think one of the biggest differences
between the pressures I encounter as a small potato and the pressures
encountered by the big potatoes is the amount of control we have
over the situations that cause pressure. No one can escape from
the pressures of life, whether they are financial, emotional,
physical, or spiritual. But the chances of our affecting those
pressures, of dealing with them, of solving those problems, make
the difference between an enjoyable lifestyle and a terrible lifestyle."
- Balance
This helps to equalize the relationship between producer and consumer.
The producer has to remember that the first rule of business is
that the consumer is always right, but in some cases a sale might
actually cause a negative gross margin. If the consumer is not
a good patron, the producer does not need to continue marketing
to him or her. Salatin says about taking someone off of his customer
list, "This helps to balance the producer-consumer relationship,
so that we concentrate on profitable sales, appreciative customers,
people who 'get with the program.'" (Salatin,
1992)
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Where Are the Niche Markets?
An important part of direct marketing is identifying and targeting
a market niche. A marketing niche occurs when the producer finds
customers who have needs or wants that the producer can satisfy
better than anyone else. A niche may sometimes be found by following
a simple and effective method of market research: asking questions
and being observant. Look for special or unique needs of the consumers.
Identify the special needs that you can meet, and decide whether
the volume is large enough to be profitable. The niche market you
identify must have clientele who are reachable through clearly identified
information and distribution channels. But remember, the very nature
of a niche market means that it tends to disappear after a while.
"Almost any
niche market in North America, with its 300 million consumers,
can support you handsomely. One third of one percent of that
market is still a million people. If you get 10 percent to
buy something worth ten dollars from you a year, you have
a million dollars."
—Dr. Marti Skye |
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Niche Marketing Opportunities
Niche market opportunities exist because many consumers are looking
for safe, healthy food products raised in systems characterized
as humane, organic, earth-friendly, free-range, antibiotic-free,
etc. Niche marketing can either be done by working though others—a
cooperative, say, or a private label brand—or directly to
individuals. It can involve freezer meat sales, home delivery, farm
meat stores, farmers' markets, Internet sales, sales to restaurants,
groceries and/or specialty food stores, even by catering events
and preparing hog roasts.
These approaches have been verified by several studies during the
past few years. A 1999 research project funded by the Leopold Center
in Ames, Iowa, suggests that producers can add value to pork production
by marketing meat produced in ways that benefit the environment.
Iowa State University economics professor James Kliebenstein and
graduate student Sean Hurley say that "consumers may be willing
to pay nearly $1 more for a package of pork chops produced under
a system that improves air, groundwater and surface water quality."
(Larson, 1999)
In 2002, six Midwestern focus groups were held to develop key marketing
messages for producers of pasture-raised products. The result was
the report FoodRoutes/Midwest
Collaborators Pasture Raised Products Message and Strategy Consumer
Focus Group Study (PDF / 137KB). The groups revealed a
range of consumer attitudes about meat purchases, and found that,
in general, "pasture raised" is the term the groups favored.
Some of the other key findings were:
- Consumers shop for food in a variety of places, but convenience
is key to regular visits.
- Coupons and other incentives lead consumers to try new products.
- Consumers buy meat and poultry according to how it looks.
- Healthy is important, but not at the expense of taste.
In 2003, the Iowa Pork Industry Center compared nine niche pork
markets available in Iowa and summarized the findings in a chart,
Comparing
Swine Niche Market Opportunities. The five markets surveyed
were Niman Ranch Pork Company, Organic Valley Pork Pool, Confederated
Swine Producers LLC, Truline Premium Pork, 100% Pure Berkshire Pork,
and Five Star Premium Pork Company.
In 2001, Paula Schafer completed her thesis, "A Key to
Successful Marketing: Understanding What a Consumer Wants When Purchasing
Animal Food Products Directly from the Farms." She surveyed
consumers and tried to identify what attracted them to buy directly
from the farm in rural upstate New York. Her thesis discusses the
findings of the survey and provides 11 action steps that producers
need to consider when developing a successful direct marketing program.
(Schafer, 2001)
- Use a variety of outlets, such as farm direct, farmers' market,
and restaurants.
- Publicize the farm and animal food products through word of
mouth, newsletters, state agriculture and marketing promotions,
on the Internet, and at a farm open house.
- Be knowledgeable and able to communicate to the consumer.
- Target the products to appeal to the female consumer.
- Offer times convenient to the consumer, with set days and hours.
- Know the consumer's household size.
- Offer a variety of products, which may encourage larger purchases
more frequently.
- Produce animal food products that are as healthy and natural
as possible.
- Always sell fresh products that look, smell, feel, and taste
fresh.
- Never undersell the animal food product; prices should equal
or be higher than those in grocery stores.
- Ask consumers questions and listen to their recommendations
on how to improve products.
Information about Schafer's thesis is available on-line.
Organic Labeling
One of the largest and most widely recognized niche markets is
for organically grown products. Despite the fact that "organic"
is a process claim, not a product or health claim, the growing demand
for organic foods is driven primarily by consumers' belief in the
higher quality and safety of these foods, and their awareness of
the positive environmental, animal welfare, and social impacts of
organic agriculture practices. This growth in demand is expected
to continue in the foreseeable future. (Anon.,
2000)
Organic pork, like all other organic products, has to perform commercially
alongside conventional products. Organic pork should not be considered
a threat to conventional production, but as a complementary alternative
for those who demand choice. Organic pork can be differentiated
without damaging conventional pork's credibility. (Aitchison,
1999)
A study from the University of Minnesota Swine Center found that
modest producer premiums are likely to continue over the long run
for organic and natural pork production. The reason according to
economist W. Parker Wheatley: "Increases in supplies [of organic
pork] are unlikely to keep pace with expected increases in demand
that cause higher prices." He says that "the demand is
driven by the perceived safety of organic and natural products."
Demand is also driven by the perception that organic products improve
environmental quality. "Consumers view the premiums paid to
organic producers as implicit rewards for reducing the pollution
associated with production. An additional source of increased demand
is the consumer perception that natural and organic production provides
for improved animal welfare." (Anon., 2001)
While the study did not look into actual premiums received by producers,
Wheatley says that "in the fall of 2000, one processor/marketing
firm paid $6 per hundred over the mean market price for Iowa/Southern
Minnesota with a minimum price of $40 per hundred. The same firm
will pay $65 per hundred live weight for organic pork. Another national
cooperative was paying an average of about $50 per hundred live
weight for organic pork." He also states, "These premiums
don't seem substantial—given that market prices per hundred
pounds live weight ranged between $40 and $50 in 2000. However,
the premiums existed even when prices were lower in 1998 and 1999,
and provided some stability to these producers' income." The
publication is available online or by requesting a copy from:
Wayne Martin, Coordinator
Alternative Swine Production Systems Program
385 Animal Science Building
1988 Fitch Avenue
St. Paul, MN 55108
612-625-6224
612-625-1210 FAX
marti067@tc.umn.edu
Ethnic Marketing
Ethnic markets are a growing and often under-exploited niche market.
Many ethnic groups form close-knit communities and can offer concentrated
and potentially lucrative markets for farmers. But bridging the
cultural gaps between the ethnic consumers and the producer can
present a challenging opportunity.
The Hispanic market consumes a lot of pork, and sees pork as its
meat of choice. This ethnic group is the one of the fastest growing
groups in the United States, but that growth varies among different
states. A project report from the Agricultural Utilization Research
Institute (AURI) in Minnesota evaluated the Hispanic market for
chorizo, a traditional type of sausage.
Any marketing directed at the Hispanic population
must be conducted with the understanding that Hispanics differ
from non-Hispanics; these differences include lifestyle choices,
eating habits and shopping patterns. Various subgroups within
the Hispanic population also exhibit specific characteristics.
Hispanics generally shop more often than non-Hispanics;
the places they patronize also differ. The population as a whole
spends more on food, and will buy different types of food than
the general population. Fresh foods and meals made from scratch
are extremely important to this population. The tendency to buy
packaged or convenience foods increases as an individual or family
becomes acculturated to the "American" society.
Meat purchasing habits differ from the average
consumer. Hispanics purchase more meat and poultry on average
and prefer fresh products, which they can see prepared in front
of them (Dahlhoff, 2002).
The Agricultural
Utilization Research Institute report is available online or
by contacting:
Dennis Timmerman
Project Development Director for Value-added Animal Products
Agricultural Utilization Research Institute
1501 State Street
Marshall, MN 56258
507-537-7440
The National Pork Board has produced three publications specifically
dealing with ethnic marketing of pork.
The Front End Guidance for Value-Added Networks (#04322) and the
Guide to Latino Pork Cuts (#04409), as well as the video Latino
Meat Cutting Video (#08072), are available for $10.00 each for producers
or $15.00 each for non-producers from:
National Pork Board
Attn: Order Department
P.O. Box 9114
Des Moines, IA 50306
515-223-2600, ext. 621
515-223-2646 FAX
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Niche Marketing with
Others
Niche marketing with others in an established market can take several
forms. Producers can become members of an established marketing
cooperative, or they may form a new cooperative to develop a processing
facility and/or a distribution system with other producers who raise
pork in a similar, consistent manner. Producers can also market
to a company that already has a private label brand and an established
customer base for fresh pork produced in a particular manner.
Cooperatives
The cooperative marketing concept has long proven useful. Hog farmers
with a specialty product have organized together, identified markets,
put together business plans, and built solid cooperatives. However,
some cooperatives have also failed—because they lacked good
marketing or business plans, or because they needed good management
and clearly defined missions.
For hog producers wanting to form a marketing cooperative, the
best source of information is the USDA Rural Business and Cooperative
Development Service (RBCDS). The RBCDS helps farmers and rural residents
form cooperative businesses and improve the operations of existing
cooperatives. It provides technical assistance, conducts cooperative-related
research, and provides informational products to promote public
understanding of cooperatives. For additional information contact:
USDA/RBCDS
Cooperative Services
AG Box 3255
Washington, DC 20250-3255
202-720-7558
coopinfo@rurdev.usda.gov
USDA/RBS Publications
Available from ATTRA
(Call 1-800-346-9140 for a free copy)
- Cooperative Services: What We Do, How We Work
- How to Start a Cooperative
- Small Fresh Fruit & Vegetable Cooperative Operations
- Understanding Cooperatives: Ag Marketing Cooperatives
- Cooperative Feasibility Study Guide
- Cooperative Farm Bargaining & Price Negotiations
- Cooperative Marketing Agencies-in-Common
|
Founded in 1985, Cooperative Development Services (CDS), a nonprofit
organization, provides a range of innovative, results-oriented, and
cost-effective services to cooperatives and related organizations.
CDS has participated in the development, restructuring, and expansion
of more than 500 cooperative organizations of all kinds. CDS provides
consulting on a fee-for-service basis and is often successful in helping
clients secure grant funding. For additional information contact:
Cooperative Development Services
30 West Mifflin Street, Suite 401
Madison, WI 53703
608-258-4396
608-258-4394 FAX
CDS@co-opdevelopmentservices.com
Organic Valley Family of Farms is an organic marketing cooperative
in Wisconsin. Starting in the spring of 1999, they began marketing
certified organic pork to various retail outlets for about 12 organic
hog producers. Their pork production standards are available online.
For information on organic hog production and marketing with Organic
Valley contact:
Organic Valley Family of
Farms
CROPP Cooperative
507 West Main Street
La Farge, WI 54639
608-625-2602
Patchwork Family Farms, composed of 15 independent Missouri family
hog farmers, is organized as a marketing cooperative supported by
the Missouri Rural Crisis Center. They market pork raised using
sustainable and humane growing practices that prohibit growth hormones
or synthetic growth promoters and provide sources of water and feed
that are antibiotic-free. They also stress that animals must receive
adequate amounts of sunshine, fresh air, and quality feed to maintain
good health. For additional information contact:
Patchwork Family
Farms
1108 Rangeline Street
Columbia, MO 65201
573-449-1336
573-442-5716 FAX
Rhonda@morural.org or
bryce@morural.org
Another example of cooperative marketing is the Ozark Mountain
Pork Cooperative, organized by the Missouri Farmers Union. The Ozark
Mountain Pork Cooperative is comprised of 34 farm families that
market their own fresh and smoked cuts, sausages, brats, and pulled
pork under the label Heritage Acres. The hogs are processed in their
small, locally operated plant. For additional information, contact:
Ozark Mountain Pork Cooperative
Russ Kremer
P.O. Box 190
Mountain View, MO 65548
417-934-5753
417-934-5784 FAX
Private Label Brands
An example of a private label product is Niman Ranch Pork Company
formed in January 1999, as a partnership between Niman Ranch in
California, Paul Willis, and some other Midwestern hog producers.
Operating a pasture-farrowing operation near Thornton, Iowa, Paul
Willis has marketed hogs for several years through Niman Ranch—a
20-year-old company, founded by Bill Niman, that sells natural meat
products on the East and West Coast. Niman Ranch Pork Company slaughters
hogs every week. Paul Willis explained that Niman Ranch Pork Company
is looking for pork producers willing to raise hogs following the
criteria set by Niman Ranch and the Animal Welfare Institute (AWI).
If you would like more information about the Niman Ranch Pork Company,
contact:
Niman Ranch Pork Company
2551 Eagle Avenue
Thornton, IA 50479
641-998-2683
641-998-2774 FAX
pwillis@frontiernet.net
Some highlights of the AWI Pig Husbandry Standards followed by
Niman producers are:
- Not using any growth promotants or subtherapeutic antibiotics
- Not using any meat or bone meal products
- Not using farrowing crates, but allowing sows to build nests
and pigs to root, explore, and play
- Weaning pigs at a minimum of four weeks of age
- Using low-stress environments, such as those on pasture or in
deep-bedded systems with suitable bedding materials
- Being family farms, with at least one member actively caring
for the animals and managing the farm
For additional information on the AWI standards, contact:
Animal
Welfare Institute
P.O. Box 3650
Washington, DC 20027
703-836-4300
703-836-0400 FAX
awi@awionline.org
Another private label brand that markets natural and organic pork
in the United States is du Breton Farms out of Quebec, Canada. Du
Breton Farms works with more than 45 small family farms in Quebec
and the Maritimes to produce pork under the new Certified Humane
Raised & Handled certification program administered by
Humane Farm Animal Care (HFAC). For additional information on du
Breton Farms, contact:
Du Breton Farms
150 Chemin des Raymond
Riviere-du-Loup, Quebec G5R 5X8
418-863-6711
418-863-6767 FAX
mmailet@dubreton.com
Humane Farm Animal Care is a nonprofit organization that offers
a certification and labeling program for meat, dairy, eggs, and
poultry raised under the HFAC animal care standards, which are also
verified by the USDA Agricultural Marketing Services. For additional
information on HFAC certification, contact:
Humane Farm Animal
Care
P.O. Box 727
Herndon, VA 20172
703-591-0350
info@certifiedhumane.com
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Individual Direct
Marketing Opportunities
Mirabel Fernandez, Wright County Educator for the University of
Minnesota Extension Service, says that producers looking into direct
marketing need to do careful analysis and planning before they start.
This includes assessing your skills, time, money resources, personality,
and determination. Fernandez suggests that the producer write out
the goal for direct marketing of the planned product. Then the producer
should write down all possible steps between the raw product on
the farm and the final product on the consumer's table—including
transportation, processing, labeling, storing, advertising, selling,
and customer services. As Fernandez says:
Direct marketing involves a promise to deliver
something of value to the customer without excuses. Direct marketing
customers expect extra value not only in what they buy, but also
in how and when. As a direct marketer you are promising your customers
satisfaction in all areas. Blaming other people whom you contracted
with for part of the processing is not an acceptable excuse for
problems. You have to be on top of the whole process to make sure
each step is done according to your quality standards (Anon.,
2001).
Kelly Klober, author, farmer and value-added marketer, makes the
following suggestions for anyone interested in direct marketing
of value-added pork. He notes that producers usually start marketing
to people they know: "Your mechanic, your barber, your insurance
agent, the guy that runs the coffee shop and even the manager of
your local supermarket are fair game in your pursuit of sales."
He also recommends that direct marketers begin with simple, inexpensive
advertising, using postcards, flyers, or simple mailings containing
words such as "fresh," "locally grown," or "homegrown,"
and emphasizing the control this gives the buyer over everything
from the animal's diet to the thickness of the pork chops.
Kelly Klober explains that word-of-mouth is one of the best methods
of advertising and is a result of consistently good products.
Word-of-mouth can reach a very long way with today's
phone service and e-mail, but you must be prepared to move on
the inquiries it brings, perhaps with another simple flyer or
brochure. A catchy name, a few lines describing how the pork will
be produced, a brief outline of processing options, and most of
the customer's potential questions are answered.
Today's computer and printer pairings make a newsletter
a feasible option, as well. A small publication such as this can
be sent to new contacts and keeps past buyers aware that you're
still there and producing.
It also gives satisfied customers something to
share with others in their circle, thus widening your circle of
contacts.
A short ad under the "Good Things to Eat"
column in the Sunday classified of your nearest major newspaper
will also put your message before a great many readers for a few
pennies each, and a simple press release announcing your new business
should get some free play on the local paper.
Business cards can often be had for under $20
a thousand, and they will give your farm venture a professional
look. They can also be pinned on every likely-looking bulletin
board that crosses your path.
Free or low-cost promotion is where you find it;
here are a few other possibilities:
- Most big cities have health and/or environmentally
oriented publications where ads for "humanely reared,"
"additive-free," or "free-range" meat are
sure to draw a response.
- Help to get you on the Internet is now available
at local Extension offices in many areas.
- Paint an attractive sign and put it by the
road.
- Give a few free samples. In our culture a free
sample almost demands at least a token purchase.
- Donate some pork to good causes.
- Take your pork to every potluck, church supper
and family reunion to which you are invited.
Most farmers don't think of themselves as sales-people.
But sales and promotion are only going to grow in importance for
all family farmers. Try out the above tips, and you may find that
successful promotion of your value-added meat is easier than you
think (Klober, 2001).
Develop a Business Plan
Producers should develop a detailed business plan. A business plan
is usually required when applying for loans or grants. A business
plan should be a working document that is reviewed and updated at
least a couple of times a year.
The Minnesota Institute for Sustainable Agriculture publishes the
280-page "Building
a Sustainable Business—A Guide to Developing a Business Plan
for Farms and Rural Businesses. This guide will help develop
a detailed business plan and looks at ways to take advantage of
new marketing opportunities. It can be purchased from:
Minnesota Institute for Sustainable Agriculture
411 Borlaug Hall, 1991 Upper Buford Circle
St. Paul, MN 55108
800-909-MISA (6472)
misamail@umn.edu
$14.00 + $3.95 shipping and handling
Iowa State University's Center for Industrial Research and Service
has developed the online publication Adding
Value to Pork Production: A Business Start-up Manual to Move You
Up the Chain.
Legal Considerations
All meat products offered for sale to the general public must
be processed in a USDA or approved state-licensed equivalent facility.
If the meat is going to be marketed across state lines, including
by Internet marketing, the processing has to be done in a USDA-licensed
processing facility. Marketing activities for meat products are
governed by a wide variety of laws and regulations at federal, state,
county, and city levels. While marketing regulations vary by type
of enterprise and location, there are some general rules that apply
to all areas of direct marketing. Some of these legal considerations
include the type of business organization (sole proprietorship,
partnership, etc.), zoning ordinances, small business licenses,
building codes and permits, weights and measures, federal and state
business tax issues, sanitation permits and inspections, food processors'
permits, and many more. If you plan to employ workers, there will
be more requirements to meet, such as getting an employer tax identification
from the IRS and getting state worker's compensation insurance.
Environmental laws are also becoming increasingly important to farmers.
Farmers' Legal Action Group, Inc., a nonprofit law center, provides
legal services to family farmers and their rural communities, in
order to help keep family farmers on the land. FLAG provides an
extensive array of legal services nationwide. In 2001, FLAG published
a series of booklets entitled Farm to Market: Legal Issues for
Minnesota Farmers Starting a Processing or Marketing Business.
The booklets include:
- Introductory Issues
- Choice of Business Entity
- Cooperatives
- Corporations
- Partnerships
- Limited Liability Companies
- Owner Agreements
- Employment
- Minnesota Financial and Technical Resources
While these booklets are specific to Minnesota, they offer useful
information to any new entrepreneur. Call for prices or visit their
Web site.
Farmers' Legal Action Group,
Inc.
46 East 4th Street, Suite 1301
St. Paul, MN 55101
651-223-5400
651-223-5335
Always check with local, state, and federal authorities before
trying to market any food product. A retail food establishment license
may be needed in your state. In most cases, the state Department
of Agriculture is a good starting point to learn about regulations.
Certified scales are probably required for weighing your products,
and a freezer may be required for storing your products separately
from your personal meats. Processed meat products are heavily regulated
to protect public health. Stay informed, since rules and regulations
change often, and keep good records to prove that you're in compliance.
(See Additional Resources for several books
on rules and regulations, such as The Legal Guide for Direct
Farm Marketing and In the Eyes of the Law.)
Adequate insurance coverage is essential. Every operator should
have liability insurance for the product and the premises—for
breach of implied warranty, negligence, violation of federal, state,
or local statutes, and for foreign substances in product. Other
types of insurance needed are employer's liability insurance to
protect you if employees are injured, and damage insurance to protect
against loss of buildings, merchandise, and other property. General
comprehensive farm liability insurance often does not cover on-farm
marketing or direct marketing operations. Many farm liability policies
exclude business activities that are not a natural part of the farm.
It is best to contact your insurance agent and explain your marketing
plans in detail. Product liability insurance may be the most difficult
to purchase. Many retailers want up to a million dollar liability
insurance for the products that they market.
Starting a Business
Starting a new marketing business can be rewarding, but it may
also be frustrating and confusing. Start-up help can sometimes be
found by contacting your local Chamber of Commerce, doing a search
on the Internet, or by contacting either state or federal agencies.
The Small Business Administration
(SBA) is a good federal agency to contact. SBA Answer Desk phone
number is 800-U-ASK-SBA or 800-827-5722. The SBA has offices in
all states, and these offices can be contacted for information on
free or low-cost training available in your state. The SBA also
offers online training
at their Small Business Training Network, a virtual campus offering
free training courses, workshops, and knowledge resources designed
to assist entrepreneurs.
Processing Regulations
Producers considering construction of their own slaughtering and/or
processing facility should remember that it is very important to
comply with federal, state, and local regulations for processing—the
axiom "ignorance is not an excuse" applies here.
Producers need to understand that meat processing is a very tough
business with very small margins involved. It is critical that differentiated,
value-added products be added to the processing mix, because there
is usually not enough profit margin in unprocessed meat alone. The
producer will also have to figure out some way of making money from
the hides, offal, and other waste products of the processed hogs.
Farmers who intend to process on-farm should be aware of all federal,
state, and local regulations. It is possible that the USDA, state
Department of Agriculture, and local Health Department may all have
different regulations to follow. Your state Department of Agriculture
will have information about regulations, as will your health department.
Your county Extension office should be able to direct you to the
county agencies that regulate zoning, health, waste disposal, and
other local ordinances.
For federal processing regulations, the producer should contact
the Food Safety and Inspection Service (FSIS). The FSIS works with
small and very small processing plants to make sure they comply
with the Hazard Analysis Critical Control Point System (HACCP).
For more information about FSIS and HACCP, or for generic HACCP
models and guides, contact their Small
and Very Small Plant Outreach Web site, or call the FSIS Technical
Service Center at 800-233-3935, extension 2, or contact Mary Cutshall
at the Small/Very Small Plant Coordination Office at FSIS, USDA,
SIPO, 14th and Independence SW, Washington, DC 20250, 202-690-6520.
Producers need to be aware that the USDA now has generic processing
plant models to follow, but no longer has exact specifications for
plants. This gives some freedom to producers in designing their
processing plants, but it may also lead to a situation where one
inspector can approve the construction of a plant, while another
inspector may deny approval of the same plant.
Labeling Pork Products
The USDA/Food Safety and Inspection Service (FSIS) is also responsible
for ensuring that meat, poultry, and egg products are safe, wholesome,
and accurately labeled. The Labeling and Consumer Protection Staff
ensure that all labels are truthful and not misleading. Labeling
includes all forms of product identification, claims, net weight,
species identification, and nutritional information related to meat,
poultry, and egg products. The
FSIS Web site states:
FSIS strives to ensure that small and very small
meat and poultry processors are not at a disadvantage in accessing
labeling requirements and gaining label approvals. The website
has all of the information needed to help small food processors
with technical and procedural labeling concerns, including the
name of the Agency staff liaison charged with facilitating resolution
of small business issues on a one-on-one basis.
Additional information is also available by contacting:
U.S. Department of Agriculture
Food Safety and Inspection Service
Labeling and Consumer Protection Staff
1400 Independence Avenue
Room 602 - Annex Building
Washington, DC 20250
202-205-0279
202-205-3625 FAX
FSIS.Labeling@fsis.usda.gov
Producers will need to work with the federal- or state-inspected
processing facility that processes their hogs. This is because the
labeling process begins with the federal inspector and the processing
facility. A generic label may be allowed for a single-ingredient
product (such as pork chops or pork steak) that does not contain
any special claims (quality, nutrient content, geographical origin,
production system, etc.), guarantees, foreign language, or nutritional
facts. The processing facility will be able to help the producer
with generic labeling without further authorization from FSIS. Information
on generic labeling requirements is available online.
The label has to at minimum include the product name, USDA inspection
legend, net weight, handling statement, address (signature) line—which
may require "Distributed by" or "Packed for"—ingredient
statement, and safe handling instructions. If any special claims,
guarantees, etc. are wanted by the producer, the processing facility
has to submit a printer's proof label showing all required label
fields, including any graphics, to FSIS for approval.
After approval of the label, the FSIS inspector monitors use of
the label and the product formulation. The labels are kept at the
processing plant where they have been approved. If you want to use
another processing plant, there are additional procedures and requirement
to transfer labels from one plant to another.
Trademarks
Almost all businesses use some kind of logo or design as a means
of identification on their labels; these are called trademarks or
brand names. The law that protects trademarks was designed to prevent
customer confusion and unfair competition by someone marketing on
the reputation of another. Trademarks will help prevent others from
copying the look or name of your product. There is both state and
federal registration in the U.S. Each state has a system to register
trademarks used within that state. The U.S. Patent and Trademark
Office (PTO) administers the federal system. The symbol ® indicates
a trademark has been registered with the PTO. The symbol ™
designates a trademark established through common law use but that
has not been registered with the PTO. The state registration and
federal registration both take time and money but are probably worth
it to make sure your trademarks belong to you. Even if you decide
not to register your products, using the ™ symbol will provide
some common-law protection. (Evans, 1997)
Obstacles
One obstacle to direct marketing of pork is that many consumers
want fresh pork rather than frozen. In a commentary in the Land
Stewardship News, Ray Kirsch discusses the differences between
the previous and current meanings of fresh meat and frozen meat.
At one time—during my parents' lives and
even during my early childhood—"fresh meat" meant
"local meat." Freshness was proof that the animals slaughtered
had to have been locally raised and butchered. A frozen product
would have been looked upon with suspicion, as indeed, it could
have come from anywhere.
Times, however, have changed. Distances have
arisen between rural and urban communities. Additionally, industrialization
has moved rural communities that produce meats to selected portions
of the nation. Thus we as consumers and producers have suffered
a double removal. For many shoppers, fresh meat now means animals
that have been raised and processed at a great distance from their
communities. These animals are not part of a local, sustainable
food system. They do not contribute to the ecological well-being
of local farms. They do not contribute to the economic infrastructure
of local communities….
An alternative, and possible antidote, to these
long-distance meat systems is frozen meat….For local farmers
who raise animals, collaboratively market, and are successful
at negotiating a fair price for their product, frozen meat is
key to their commerce. There are several reasons why. Frozen allows
them to work on a small scale, where individual farms can contribute
individual animals to a cooperative marketing effort. There is
less waste and spoilage. Their meats are available to several
markets for a longer period of time than fresh meats. In all,
it allows them to compete on favorable terms; it balances the
playing field dominated by the large fresh meat companies.
And as frozen allows local farmers to flourish,
it also allows local communities to flourish. It allows consumers
to choose and purchase locally raised and processed meats. It
makes a local economic infrastructure possible (Kirsch,
2000).
Another obstacle to direct marketing of pork is that many people
want only the best cuts; marketing of the poorer cuts can be challenging.
Hog producers can offer sausage—bulk, link, and/or patties—to
help market the slower selling cuts. But what do producers do with
the bones and organs that larger slaughtering plants market? Well,
there is an option available: the controversial natural diet for
dogs and cats called BARF (Bones And Raw Food) diet. Many pet owners
believe their pets are healthier on a raw diet. Hog producers' Web
sites can feature items on their lists such as stock bones, ham
or leg bones, neck bones, and organs for the BARF market. To learn
more about BARF and for lists of pet owners in your area who feed
their pets BARF, use a search engine such as Yahoo. There is also
a book entitled Natural Nutrition for Dogs and Cats, The Ultimate
Diet that discusses the all natural, raw diet of meat and bones
(see Additional Resources: Books).
Back to top
Developing a Clientele Base
Joel Salatin, in another article from The Stockman Grass Farmer,
explains how he and his wife developed their customer base using
a three-pronged approach. Salatin stresses that this worked for
them, but that your situation may be different. He wants his approach
to stimulate your creative thinking; you will have to make your
own adaptation. (Salatin, 1995)
Salatin's first course was to give samples to anyone he thought
might be interested. He commented, "Over the years, we've never
given anything away that didn't come back fourfold."
The second approach was education. They put together a slide show
and began presenting it to local organizations. These groups were
glad to get a different, interesting program. The Salatins' slide
show illustrated their alternative production methods for pastured
beef and poultry. People are always interested in knowing about
alternatives available to them. He didn't really make a sales pitch,
but at the end of his presentation, he'd say, "Now if any of
you would like to participate in this type of agriculture, I happen
to have some order blanks with me and you are welcome to sign up."
Their third strategy was to turn their patrons into evangelists.
They let their customers know that they appreciated their spreading
the word about them. Whenever a new customer was added, Salatin
asked where they had heard about their products. If the new customer
gave a name from the established customer list, the next time that
established customer picked up something, Salatin would say how
much he appreciated their referral and give them a small package
of beef or chicken in return. (Salatin, 1995)
Salatin concedes that this three-pronged approach was unconventional,
but it was consistent with their unconventional product.
"Our experience,
as well as that of others, shows that advertising an unconventional
product conventionally never pays off."
-Joel Salatin |
Back to top
Marketing Channels
Starting small is probably the best approach for the beginning
direct marketer. Producers need first to determine their target
markets. These could involve selling frozen pork to friends and
neighbors, to home delivery customers, farm meat stores, farmers'
markets, and/or restaurants. The article "The
ABCs of Marketing to Restaurants" provides some good information
on what is important to restaurants and some tips on marketing to
them.
Sales to groceries and/or specialty food stores may be more difficult
for beginning marketers, because the stores usually want guaranteed
amounts of frozen meat and are sometimes locked into exclusive contracts
with large suppliers. (Klober, 1998) Some
store managers may refuse to handle and display alternative meat
products because, as one explained, if his store "made a big
deal out of humane meat," customers might start to wonder whether
something was wrong with the regular meat. (Anon.,
1993) Producers also need to consider that many grocery stores
have "slotting allowances" for space in their freezers
or meat coolers. This may make them too expensive for small producers
who do not generate enough turnover. (Looker,
2003)
Live Freezer Meat Sales
For many producers, selling live hogs to customers for their freezers
has been an easy way to get started in alternative marketing. Typically,
the producer might sell the hog by live weight to a customer, then
take the hog to a government-approved slaughtering and processing
plant. The customer then picks up the pork from the plant and pays
for the processing and packaging. But before beginning live freezer
sales, the producer needs to form a good working relationship with
the processing and packaging facility. An article in Small Farm
Today suggests several points to consider.
- The facility needs to be close to both your location and the
market area.
- It should be a clean, regularly inspected facility.
- The facility operator will need to be willing to work with buyers
who have little knowledge of processing, and who will probably
do most of their business on a weekend. (There are people who
think a hog is all chops.)
- The facility needs to be willing to handle special orders.
- Cut, size, selections, packaging, package weight, and other
processing steps (slicing, smoking, curing, etc.) should be written
down and fully understood by all parties. (Klober,
1998)
Some additional points to consider:
- In pricing the hogs, be sure to include the cost of handling
and delivery to the facility.
- Make sure the buyer understands that there will be loss of weight
during slaughtering, processing, and curing.
- Require a deposit before taking the hog to slaughter. (Klober,
1998)
Catering Events or Hog Roasts
Kalton Bauman in east central Wisconsin has a 400-acre farm with
pheasants, hogs, chickens, and cattle. Formerly a farrow-to-finish
operation with 75 sows, the farm now has only 15 sows. Bauman is
striving to produce only the number of hogs needed for his direct
marketing. The Baumans do catering of livestock produced on the
farm and direct market chicken, pork, and beef. As the article in
Acres U.S.A. explained, "Caterers are many in today's convenience-driven
society, but few can attest to being as farm-direct as the Baumans.
The Baumans built, at a total cost of $7000, four cooker-roaster
trailer units, constructed out of former 275-gallon fuel containers."
The Baumans cater many different events during the summer. "Pork
is not the only meat offered by this catering service; they also
offer homegrown chicken. The usual offering is three-quarters pork
and one-quarter chicken."
Bauman notes that a considerable number of people—for dietary
or religious reasons—do not eat pork, while most do eat chicken.
There are licensing and insurance requirements for caterers, but
Bauman hasn't had any problems following the regulations. As he
explains, "Most state inspectors are good people and are only
trying to do their jobs in order to protect the public." (Slattery,
1999)
Frozen Meat Marketing
Frozen pork can be marketed by several direct methods, such as
delivering meat directly to consumers' doors, marketing at on-farm
or in-town stores, marketing at farmers' markets, or over the Internet.
As Wayne Martin, coordinator of the Alternative Swine Production
Systems Program at the University of Minnesota, says:
While direct marketing can indeed offer extra
profits, the real value of direct marketing to the whole farm
enterprise depends largely on what other revenue streams exist,
and the personal goals of producers and their families. As with
any other entrepreneurial activity, marketing your production
requires a great expenditure of time and energy. Producers place
value on an activity depending on its economic return and how
well it fits with whatever else they are doing. Due to these inherent
differences, what one producer may view as time well spent may
not seem so worthwhile to the next producer (Martin,
2001).
One small-scale, direct-marketing hog operation is Madewell Meats,
LLC, in southwest Missouri. Steve Madewell and Sons operate a 90-acre
farm where 90 to 100 sows farrow outdoors all year. About one-third
of the market hogs are processed and sold directly to consumers
as all-natural pork. The Madewells use a federally inspected processing
plant close to their operation. The family attempts to set their
prices to sell all the cuts. They feel their prices compare favorably
to those in grocery stores.
The Madewells started marketing frozen pork to family, friends,
and teachers. They still deliver most of the frozen products because
they want to hear comments directly from the consumers, and they
feel this gives them control over how their product is marketed.
They opened a store in town to diversify their customer base and
allow consumers to come directly to them. They also help other farmers
market their products in the store. As Michelle Callahan wrote in
American Small Farm:
Best-selling meat products vary with the seasons.
Hams are popular during the Christmas holidays, chops move quickly
during the outdoor grilling season. Nitrite-free bacon sells well
all year, according to Steve.
Madewell Meats does have a signature product.
"Pig wings" are made from the upper shoulder by cutting
away the bone and marinating the meat. Two flavors are available—hot
and apple-cinnamon. "If buffaloes can have wings, why not
pigs," Steve comments.
"People come back because of quality,"
Michael [Madewell] states. "Our customers like the way our
meat tastes and are constantly telling us how different it is
from what they used to buy in the store" (Callahan,
2000).
Farmers' Markets
In an article in Growing for Market, Aaron Silverman,
a pastured-poultry and -lamb producer, discusses direct marketing
of meat at farmers' markets. He says that meat marketing at farmers'
markets has been slow to develop and that the burden of regulations
for processing meat is part of the problem. Regulations vary by
state—even between in-state localities—but most are
consistent in one area: all meat sold has to be processed in a licensed
facility. Silverman makes several suggestions for marketing meat
in farmers' markets.
Marketing meat at farmers' markets is similar
to marketing any value-added product, and very different than
marketing vegetables or cut flowers….Purchasing meat requires
a heightened level of trust by the customer, since neither fondling
nor smelling is possible. Your ability to gain, and more important,
retain your customers' trust will determine your success marketing
meats at farmers' markets.
We use three elements to gain our customers'
trust. The first is the creation of a marketing brand—the
customer's way of identifying our product outside of the farmers'
market. Brand identity is even more critical when processing and
marketing is done on a collaborative basis. Your brand is more
than just your name, it encompasses the "who" and "what"
of your product, and in case of most meats, the "how."
Central to building this brand identity is your
story. Your product's story is crucial for distinguishing yourself
to customers who are used to purchasing meat and poultry from
a supermarket case. Pictures speak much louder than words….
Consistency is the most crucial element to ensuring
lasting success at your farmers' market. When marketing meats
at the farmers' market, you are starting with many disadvantages.
The greatest is the novelty of the product. People aren't used
to purchasing their meats at a farmers' market, even those that
purchase the majority of their produce there. Purchasing meats
doesn't fit as well in some customers' schedule, due to its highly
perishable nature. If your product is high quality, every time,
these inconveniences will be overlooked by your customers. You
are not only competing against the products and pricing of supermarkets;
you are competing against their convenience (Silverman,
2003).
Internet or Mail Order Marketing
There are advantages and disadvantages to Internet marketing. More
consumers are shopping on the Internet, so Web sites can help buyers
locate producers in their area, and Web sites are accessible 24
hours a day. A big disadvantage is that packaging and shipping costs
can about double the final price of products for the consumers.
Many people may browse the Web sites without making any purchases.
Internet marketing of pork requires a well-designed, user-friendly
Web site that provides information about the producer's products
and services. A more complex Web site may include a secure system
to take orders and payments, and a method to address customer questions
and problems. A simple Web site may contain only a phone number
and contact address.
One company selling beef and pork directly over the Internet is
Carousel Farms, LLC.
The company is made up of three northwest Iowa farmers who market
their products collectively. The perishable products are usually
shipped by UPS in an insulated shipping box packed with dry ice
to insure their safe delivery.
There are many excellent sources of information on establishing
and designing Web sites. A good place to start for information on
Internet marketing is the online, 50-page publication How
to Direct-Market Farm Products on the Internet (PDF / 6.13MB).
It provides information on developing a marketing plan, researching
the market, and setting up the Web site.
Another good place to start is the Access
Minnesota Main Street Web site. This program is designed to
help small businesses use the Internet as a business tool. The Web
site has a copyrighted Electronic Commerce Curriculum that provides
training on electronic commerce basics, finding business information
and services online, exploring e-commerce Web sites, planning your
Web site, promoting your Web site, developing your Internet business
plan, and much more. You can e-mail the coordinator, Rae Montgomery
(mainstreet@extension.umn.edu) for more information.
The Federal Trade Commission (FTC)
has primary responsibility for all food advertising; the Food and
Drug Administration has responsibility for food labeling. This means
that your brochures, mail order catalogs, and Web site must meet
FTC standards for any claims that you make, and must meet their
shipping guidelines. Some examples: claims must be substantiated;
disclaimers must be clear and conspicuous; refunds must be made
to unsatisfied customers; orders must be shipped within 30 days;
and other advertising practices cannot deceive or mislead consumers.
Back to top
Carcass Cutout and Pricing
According to the National Pork Board's publication Pork Facts
2002/2003, a typical 250-pound market hog will yield about
a 184-pound carcass. The five major parts of the carcass are ham
(45 lbs), loin (34 lbs), side (35 lbs), Boston butt (15 lbs), picnic
(16 lbs), and miscellaneous—jowls, feet, tail, neck bones,
etc.—(39 lbs). These figures are averages from actual carcass
tests. The actual yields vary depending on cutting methods, weights
of the pigs, and the types of pigs.
Further breakdown into retail parts from these major portions of
the carcass will result in about 140 pounds of semi-boneless products—including
18 pounds of trimmings for such things as sausage, brats, and pork
wieners; and 15 pounds of jowls, feet, tails, neck bones, etc. —plus
44 pounds of fat, skin, bones, and an allowance for shrinkage or
loss. Additional processing and deboning will further lower the
weight of the retail pork products that can be sold to the consumer.
(National Pork Board, 2003) While the chart
below is a good reference, it is advisable to test cuts from your
own hogs to determine your own product yield, so that more accurate
pricing can be calculated.
Breakdown of Cuts from
a 184 lb. Pork Carcass |
|
Retail Pork* (pounds) |
Other Products |
Carcass Total |
Ham (45.0 lbs) |
|
|
|
Cured ham |
25.5 |
|
|
Fresh ham |
2.3 |
|
|
Trimmings |
5.8 |
|
|
Skin, fat, bone |
|
11.4 |
|
Total |
33.6 |
11.4 |
45.0 |
|
Loin (33.8 lbs) |
|
|
|
Backribs |
3.2 |
|
|
Boneless loin |
10.7 |
|
|
Country style ribs |
7.6 |
|
|
Sirloin roast |
5.7 |
|
|
Tenderloin |
1.6 |
|
|
Trimmings |
1.6 |
|
|
Fat & bone |
|
3.4 |
|
Total |
30.4 |
3.4 |
33.8 |
|
Side (34.9 lbs) |
|
|
|
Cured bacon |
19.0 |
|
|
Spareribs |
5.8 |
|
|
Trimmings |
9.1 |
|
|
Fat |
|
1.0 |
|
Total |
33.9 |
1.0 |
34.9 |
|
Boston Butt (14.7 lbs) |
|
|
|
Blade steaks |
4.4 |
|
|
Blade roast |
7.8 |
|
|
Trimmings |
1.7 |
|
|
Fat |
|
.8 |
|
Total |
13.9 |
.8 |
14.7 |
|
Picnic (16.6 lbs) |
|
|
|
Boneless picnic meat |
12.6 |
|
|
Skin, fat, bone |
|
4.0 |
|
Total |
12.6 |
4.0 |
16.6 |
|
Miscellaneous (39.2
lbs) |
|
|
|
Jowls, feet, tail, neckbones,
etc. |
15.4 |
|
|
Fat, skin, bone |
|
22.0 |
|
Shrink and loss |
|
1.8 |
|
Total |
15.4 |
23.8 |
39.2 |
|
Total |
139.8 |
44.4 |
184.2 |
*Retail cuts
on semi-boneless basis. Fully boneless would show lower retail
weights.
Source: NPPC, Purdue University and Texas A & M University,
1994. (National Pork Board, 2003) |
In his article "Did the Locker Plant Steal Some of My Meat?,"
Duane Wulf provides some examples of pork yields from different
cutting requests. He says that an average 250-pound hog weighed
full (not removed from water and feed) would yield about 133 lbs.
of closely trimmed bone-in chops and roasts and regular ground sausage.
The same 250-pound hog would yield only about 118 lbs. of closely
trimmed boneless chops and roasts and lean ground sausage. Wulf
also says that a lean, heavily-muscled hog might yield 133 lbs.
of closely trimmed boneless chops and roasts and lean ground pork,
and a very fat, light-muscled hog might only yield 93 lbs. of the
same boneless products and lean ground pork. (Wulf,
1999)
Whole or Half Carcass Sales
Probably the easiest method of pricing carcasses or halves is to
ask a set price per pound, either by live weight or by hanging carcass
weight, without the head, offal, hooves, etc. Carcass weight will
also be affected if the skin is left on the carcass or the carcass
is skinned by the processor: a skinned carcass will yield a lower
hanging carcass weight; however, neither method will affect the
amount of meat the consumer will get from the hog. (Wulf,
1999) Pricing by carcass weight requires customers to inform
the processor about their specific cutting, wrapping, and curing
preferences. Customers need to understand that—depending on
the type of hog, whether the cuts are boneless or not, and how closely
the meat is trimmed—the amount of freezer-ready meat per pig
could range from 40% to 55% of the live-weight. Another way of explaining
it to customers is that going from live hog to the hanging carcass,
the carcass weight will be only about 70% to 75% of live weight,
and going from hanging carcass to cut and wrapped products ready
for the freezer will reduce the hanging weight by 25% to 30%.
Customers must also understand that the costs for processing, cutting,
wrapping, and curing are added to the price paid for the hog itself.
Hog-processing costs vary depending on the cutting, wrapping, and
curing, but can be between $75 and $150 per hog. The producer might
want to add a separate hauling or handling charge for delivering
the hog to the processor. This hauling charge could be a way of
proving that the hog was the customer's property before it was processed.
Producers need to be sure to check their state's regulations to
be certain it is legal to sell live animal carcasses and halves
to the consumer.
Retail Pork Sales
Setting the price per pound for the many varied individual pork
products can be challenging. The pricing structure needs to reflect
the live hog's value, as well as the processing, wrapping, curing,
storage, transportation, labor, advertising, and all the other costs
involved in getting your product to the consumer. Producers need
to be very concerned about carrying a large inventory of unsold
products, because the inventory will add greatly to the overhead
a producer has to cover. To give an oversimplified example of how
costs mount, let's say the producer sees the value of a hog—calculated
as the cost of production plus a reasonable profit—as $150.
Processing, cutting, and wrapping add another $100, curing another
$50, with another $50 to cover other costs. So the producer needs
at least $350 for the 100 to 135 pounds of pork to cover all the
costs and return a profit, making the average per-pound price for
all cuts about $2.60 to $3.50.
The Web publication Marketing Meat Animals Directly to Consumers
provides an excellent table for estimating the retail value of a
pork carcass. The worksheet below provides a sample listing of possible
retail cuts and weights for a pork carcass to estimate the total
retail value of the hanging carcass. (Henning,
2003) Producers will need to determine the weight of retail
cuts and other products from their hogs, then calculate the value
of these individual products. They must also determine how the carcass
portions will be fabricated into the various pork products that
their customers want.
Worksheet for estimating
the retail value of a pork carcass (165 lb). |
Retail cut |
Pounds
|
Price/lb |
Total $ |
Ham |
|
|
|
Cured hams (2) |
29.7 |
X |
$__________ |
$__________ |
Loin |
|
|
|
|
Blade roast |
8.0 |
X |
$__________ |
$__________ |
Center chops |
17.3 |
X |
$__________ |
$__________ |
Sirloin roast |
5.6 |
X |
$__________ |
$__________ |
Side |
|
|
|
|
Cured bacon (2) |
18.6 |
X |
$__________ |
$__________ |
Spareribs |
6.4 |
X |
$__________ |
$__________ |
Shoulder |
|
|
|
|
Blade roast |
7.3 |
X |
$__________ |
$__________ |
Blade steaks |
4.2 |
X |
$__________ |
$__________ |
Arm roast |
7.7 |
X |
$__________ |
$__________ |
Various |
|
|
|
|
Trimming for sausage |
20.8 |
X |
$__________ |
$__________ |
Misc. (Neck bones, feet) |
3.5 |
x |
$__________ |
$__________ |
Fat, skin, bone |
32.7 |
|
|
|
Shrink |
3.5 |
|
|
|
Retail Wt (excl fat
& bone) |
128.8 |
|
|
|
Total Retail Value |
$__________ |
Retail Value/lb of Hanging Carcass
(Total $/165) |
$__________ |
|
Summary of cuts |
Pounds |
Cured pork |
48.3 |
Roasts |
28.3 |
Chops and steaks |
21.3 |
Misc. |
9.9 |
Sausage |
20.9 |
|
Some producers have created alternative pork products to help market
the parts of the hog that are in less demand. These products include
cottage bacon from the Boston butt or pork shoulder and "Pig
wings made from the upper shoulder by cutting away the bone and
marinating the meat" (see Madewell Meats LLC quote in Frozen
Meat Marketing). By creating these products, producers add significant
value to those parts of the carcass in less demand, and hope thereby
to increase their customer base and profits.
Producers may want to keep track of how their prices compare to
commodity wholesale and retail pork prices. Commodity prices are
reported by the USDA Agricultural Marketing Service (AMS) and the
Economic Research Service (ERS). Their online reports are:
Back to top
Failure
Be prepared for failure. No matter how well you plan and execute
your direct marketing efforts, some will not succeed. On the Practical
Farmers of Iowa's Web site, Tom Frantzen, organic farmer and direct
marketer, discusses the closing of the small marketing cooperative
called Fresh Air Pork (from the acronym for Family Raised Environmentally
Sound Hogs). Fresh Air Pork was developed to assist a small group
of Iowa farmers in the production, marketing, and sale of alternatively
produced hogs. The initial activity of the cooperative was to coordinate
the production and shipping of market hogs to the Niman Ranch program.
However, in 1999 Fresh Air Pork decided to enter the direct marketing
business, targeting local sales to the public, to health food stores,
and to institutions. All Fresh Air Pork continued to meet the Niman
Ranch program criteria, and the hogs were butchered and processed
at several local state-inspected lockers. The marketing to health
food stores was successful, even though Fresh Air Pork could not
afford to sell pork to the stores at wholesale prices. Despite the
fact that they had to add their store margin on to the retail price,
the health food stores sold the pork on a regular basis. The local
grain elevator provided freezer space to promote direct sales to
consumers. As Tom Frantzen says:
Local consumers liked our quality and selection.
We promoted the pork through advertising and word of mouth. We
had bus tours stop to check the operation and make purchases.
Several local businesses used our pork in their customer dinners.
In spite of these promotions and the significant
success of local sales, the Fresh Air direct pork marketing will
end on April 1, 2002. The sales volume never reached a profitable
level in three years. What went wrong? With so much done right,
was there something out of place?
I led the initiative to try to sell our pork
to two targeted institutions. We made "professional"
approaches to the food service managers. We donated and cooked
meals for the advisory councils that advise the food service.
We were well received, and when the required product specifications
were detailed we met them. For example, these services need a
select product cut into a precise portion and offered in volume.
In spite of repeated attempts, we never sold one ounce of pork
to a single institution. This significantly hurt the potential
sales volume and in time was a key factor in our decision to stop
direct marketing.
All meat programs are complicated, and ours was
no exception. Our local sales were strong on ground and packaged
products like pork sausage and hot dogs. We had excellent bacon
sales. However we could not sell enough pork loin items and ham
sales were so poor that we often had ham ground with the trim
meat. Here we could not sell the high value pork and lost the
margins that those cuts produce. You can only sell so many $3.50-a-pound
pork chops in Iowa. The supermarkets are about a $1 a pound cheaper,
and that is where most people go.
Getting the best value from a hog carcass is a
difficult task. Loins amount to 20% of the hog carcass. Selling
the loin is critical as there is little processing in this item.
However the cost of making bacon and sausage is considerable.
The expense of processing cuts into the profits quickly. When
hams are ground into processed products, they hurt profits from
two directions. The ham is not sold as a high value item, and
the amount of ham (a large portion of the carcass) that incurs
processing expense adds to the bills. Fresh Air put most of the
hams into their "All Pork Weiners." These pork hot dogs
were a real treat, but we made very little money selling them
for $2.75 a pound. Pork marketing is complicated, and the ham
market is especially competitive. I really wonder how other direct
marketers sell this item.
What lessons can be learned from this experience?
Is there a place for direct marketing? I think so. But both the
location and the right kind of individual must be found. A large
population area is a major consideration. The marketers must accept
the fact that it will take years to build the business volume
that will return profits. This means that their effort will have
to be subsidized in the beginning (Frantzen,
2002).
Back to top
Summary
The failure of Fresh Air Pork is a lesson: Marketing alternative
pork at prices higher than those of commodity priced pork will be
a challenge and will require exceptional marketing talent and perseverance.
In addition, selling pork successfully in a niche market may require
access to large population centers with enough potential customers
to fill the niche.
Nonetheless, a sustainable hog production and marketing system
should be the goal of many small-scale hog producers. Many consumers
are interested in buying pork that is produced by alternative, sustainable
methods on small family farms. As Mark Honeyman, associate professor
of animal science and coordinator of the Research and Demonstration
Farms at Iowa State University, says, "Alternative systems
are pig friendly, people friendly, community friendly, and environment
friendly." (Bauer, 1998) Sustainable
farming involves the whole farming environment, both production
and marketing, and can be an important part of the local community.
Direct marketing and niche markets are just two alternative marketing
options that can be considered by all sustainable hog producers.
If you care enough about the way you raise your hogs, if you do
it in a humane system, you can be rewarded both financially and
emotionally. Even if you don't want to market through farmers' markets,
farm meat stores, or other direct marketing means, there are now
some alternative marketing groups, such as Niman Ranch Pork Company
and Organic Valley Family of Farms. More of these marketing groups
have formed recently, and one may be near you.
Back to top
References
Aitchison, Angela. 1999. The
organic meat myth revealed. 1998 Meat New Zealand—Link Foundation
Fellow. June. 22 p.www.dpi.qld.gov.au/extra/pdf/organicmeatmyth.pdf
(PDF / 58KB)
Anon. 1993. Real meat...From real
farmers. Wisconsin Rural Development Center. May-June. p. 4.
Anon. 2000. Food safety and quality
as affected by organic farming. Twenty-Second FAO Regional Conferences
for Europe proceedings. Porto, Portugal, July 24–28. 14 p.
www.fao.org/docrep/meeting/x4983e.htm
Anon. 2001. Direct marketing food
requires analysis, planning. Sustainable Agricultue. March. p. 3-4.
Bauer, Lisa. 1998. Sustainable
swine production: Low-cost options. Small Farm Today. June. p. 38.
Callahan, Michelle. 2000. All natural
pork production: Old methods produce new products. American Small
Farm. January. p. 44–45.
Dahlhoff, Amanda. 2002. Assessment
of Market Alternatives for Minnesota Meat Export. Southwest State
University, Marshall, Minnesota. Project funded by Agricultural
Utilization Research Institute. December 2. 28 p. www.auri.org/research/meatexport/pdfs/meatexport.pdf
(PDF / 186KB)
Daykin, Tom. 2001. Beefing up sales.
Milwaukee Journal Sentinel. October 13. www.jsonline.com/bym/news/oct01/graze14101301a.asp
Evans, Lawrence E., Jr. 1997. Have
you neglected corporate™ trademarks®? Small Farm Today.
February. pp. 40-41.
Frantzen, Tom. 2002. Direct marketing
pork—A report from the field. 3 p. www.pfi.iastate.edu/Local_Food_Syst/Fresh_Air_Pork_Frantzen.htm
(link no longer active).
Henning, William R. 2003. Marketing
Meat Animals Directly to Consumers. Cooperative Extension in Bedford
County, PA. 12 p. http://bedford.extension.psu.edu/Agriculture/Lessons/market%20meat%20animals.htm
Kirsch, Ray. 2000. It's fresh,
but is it sustainable? The Land Stewardship Letter. April/May/June.
www.landstewardshipproject.org/lsl/lspv18n2.html#COMMENTARY
Klober, Kelly. 1998. Approaches
to marketing—Notes from a direct sales survivor. Small Farms
Today. October-November. p. 48-51.
Klober, Kelly. 2000. Hogs in the
new millennium. Small Farm Today. May. p. 21-22.
Klober, Kelly. 2001. Promoting
value-added pork. Acres U.S.A. October. p. 14.
Larson, E. Anne. 1999. Earth-friendly
pork: A niche market waiting to happen. Leopold Letter. Spring.
p. 10.
Looker, Dan. 2003. Expert pins
blame for concentration on retailers. Successful Farming. February
5. 3 p. www.agriculture.com/default.sph/AgNews.class?FNC=DetailNews__Asearch_listAgNews_html___49330
Martin, Wayne. 2001. Goals influence
direct marketing. 4 p. http://www.misa.umn.edu/Goals_Influence_Direct_Marketing.html
Nation, Allan. 1999. Allan's observations.
The Stockman Grass Farmer. May. p. 13.
National Pork Board. 2003. Pork
Facts 2002/2003. 34 p. www.pork.org/producers/2002-3%20pork%20facts%20bk.pdf
(PDF / 555KB)
Salatin, Joel. 1992. Relationship
marketing: Five advantages—consumer education and loyalty,
product quality, lifestyle, sales balance. The Stockman Grass Farmer.
September. p. 19, 22-23.
Salatin, Joel. 1994. Sales can fail.
The Stockman Grass Farmer. June. p. 31.
Salatin, Joel. 1995. Developing a
clientele. The Stockman Grass Farmer. November. p. 7-8, 11.
Schafer, Paula J. 2001. Successful
direct marketing of livestock. 4 p. www.cce.cornell.edu/washington/aedp/articles/marklivestock.html
Silverman, Aaron. 2003. Selling
meat at market. Growing for Market. April. p. 1, 4-6.
Slattery, Patrick. 1999. Farm-direct
catering & direct-marketed packaged meat...Making natural meat
pay. Acres U.S.A. April. p. 20.
Wulf, Duane M. 1999. Did the Locker
Plant Steal Some of My Meat? Current Research Articles, South Dakota
State University, Meat Science Extension and Research. 4 p. http://ars.sdstate.edu/MeatSci/May99-1.htm
Back to top
Additional Resources
Web Sites
Agricultural Marketing
Resource Center
Marketing Web site links to hundreds of resources on direct
marketing, natural, niche/ethnic, organic, processing, etc. for
pork.
Practical Farmers of Iowa Pork
Niche Market Working Group
Supports the development of niche markets for pork. Has online
newsletters, news releases, contact information, and project descriptions.
Can also contact:
Gary Huber, PNMWG Coordinator
Box 349
Ames, IA 50010
515-232-5661, ext. 103
gary@practicalfarmers.org
USDA's Farmer
Direct Marketing
Provides online National Farmers' Market Directory, online
listing of Direct Marketing Resources by state, and many links
to general direct marketing publications and other USDA programs
related to direct marketing.
Books
Farm Fresh Direct Marketing Meat & Milk. 2002.
By Allan Nation. 251 p.
$30 plus shipping and handing. Contains information on preparing
business and marketing plans, naming products, setting prices,
and finding and keeping customers.
Order from:
Stockman Grass Farmer
P.O. Box 2300
Ridgeland, MS 39158-2300
800-748-9808
601-853-8087 FAX
The Legal Guide for Direct Farm Marketing. 1999.
By Neil D. Hamilton. 240 p.
$20 plus $3 shipping. Contains some information specifically
on farm marketing meat.
Order from:
Drake University Law School
Agricultural Law Center
2507 University Avenue
Des Moines, IA 50311-4505
515-271-2947
In the Eyes of the Law: Legal Issues Associated with Direct
Farm Marketing. 2002. By Richard F. Prim and Daarin K.
Foede. 27 p.
$10. Deals mainly with Minnesota laws, but should be helpful
for other states as well.
Order from:
University
of Minnesota Extension Service Distribution Center
405 Coffey Hall
1420 Eckles Avenue
Saint Paul, MN 55108-6068
800-876-8636, 612-624-4900
Collaborative Marketing, A Roadmap & Resource Guide
for Farmers. 2000. By R. King.
$4.75 plus $2 shipping. Presents alternative ways to market
and form marketing networks.
Order from:
Extension
Distribution Center
405 Coffey Hall
1420 Eckles Avenue
University of Minnesota
St. Paul, MN 55108-6068
800-876-8636, 612-624-4900
Front End Guidance for Value-Added Networks—Marketing
Pork to the Mexican Consumer in the United States. 1997.
National Pork Board. #04322. 82 p.
Explains how value-added market development and implementation
might be investigated, and can guide the development of a business
and marketing plan to assess the viability of an investment. Can
be ordered from National Pork Board and is available online. www.mnpork.com/producer/research/guide.pdf
(PDF / 1.85MB)
Guide to Latino Pork Cuts. 1998. National Pork
Board. #04409. 56 p.
Shows pork carcass fabrication, Latino style, including retail
cut pictures, cutting procedures, cooking methods, yields, and
relative pricing. Can be ordered from National Pork Board and
is available online.
www.mnpork.com/producer/research/latino%20meat%20guide.pdf
(PDF / 2.54MB)
Order from:
National Pork Board
Attn: Order Department
P.O. Box 9114
Des Moines, IA 50306
515-223-2600, ext. 621
515-223-2646 FAX
Cost: $10.00 each for producers or $15.00 each for nonproducers
Building a Sustainable Business—A Guide to Developing
a Business Plan for Farms and Rural Businesses. Minnesota
Institute for Sustainable Agriculture. 280 p.
Will help develop a detailed business plan and ways to take
advantages of any new marketing opportunities. It is available
online.
www.misa.umn.edu/publications/bizplan.html
Order from:
Minnesota Institute for Sustainable Agriculture
411 Borlaug Hall, 1991 Upper Buford Circle
St. Paul, MN 55108
800-909-MISA (6472)
misamail@umn.edu
Cost is $14.00 + $3.95 shipping and handling
Making It on the Farm: Increasing Sustainability through
Value-added Processing and Marketing. 1996. Southern Sustainable
Agriculture Working Group (SSAWG).
$10.00, includes shipping and handling. Tells the stories
of 12 farmers involved in value-added marketing. One of these
is Clarence Durham, a hog farmer in Pittsboro, North Carolina,
who barbecues three or four hogs a month for sale by the pound
to individuals, and sells sausage in 5-pound bulk packages. Durham
says, "We could probably sell a lot more sausage and barbecue—probably
two hogs a week of each," but it is a lot of work and he
and his wife are supposedly retired. The book has information
about Durham's operation, information about the 10 keys to success
that emerged from these interviews, and a listing of resources
for adding value to farm products.
Order from:
Julia Sampson
SSAWG Publications
210 W. South Street, #6
Fayetteville, AR 72701
479-582-2858
The following book is available from bookstores and online booksellers.
If a book is listed as out-of-print, you may be able to obtain it
through Interlibrary Loan; check with your local librarian. You
may also be able to buy a copy through an online used-book search
site, such as www.bookfinder.com/.
Natural Nutrition for Dogs and Cats, The Ultimate Pet Diet.
1999. By Kymythy R. Schultze. 135 p.
$8.95. Discusses the BARF (Bones And Raw Food) diet for dogs
and cats.
Online Publications and Articles
Adding Value to Pork Production: A Business Start-up Manual
to Move You Up the Chain.
Iowa State University Center for Industrial Research and Service
www.ciras.iastate.edu/porkmanual/
online manual
Farmers' Markets Rules, Regulations and Opportunities.
Drake University Law School
www.law.drake.edu/centers/aglawcenter/farmersmarkets.pdf
(PDF /130KB)
49-page publication
Goals Influence Direct Marketing.
University of Minnesota Alternative Swine Production Systems Program
www.misa.umn.edu/Goals_Influence_Direct_Marketing.html
Publication or contact:
Wayne Martin, Coordinator
Alternative Swine Production Systems Program
385 Animal Science Building, 1988 Fitch Avenue
St. Paul, MN 55108
612-625-6224
612-625-1210 FAX
marti067@tc.umn.edu
How to Direct-Market Farm Products on the Internet.
USDA Agricultural Marketing Service
www.ams.usda.gov/tmd/MSB/PDFpubList/InternetMarketing.pdf
(PDF / 6.13MB)
50-page publication
Small Farm Cooperative: Quality and Innovation.
North Central Initiative for Small Farm Profitability
www.farmprofitability.org/research/smallfarm/smallfarm.pdf
(PDF / 87.3KB)
Case study
Attracting Consumers with Locally Grown Products, a study
of consumer attributes and purchasing patterns in four Midwestern
states.
North Central Initiative for Small Farm Profitability
www.farmprofitability.org/local.pdf
(PDF / .9MB)
Publication
Family Farms and Ranches Can Benefit from Niche Markets
Center for Rural Affairs
www.cfra.org/newsletter/2003_03.htm#Feature
Article
Direct Marketing Pork—A Report from the Field
Practical Farmers of Iowa
www.pfi.iastate.edu/Local_Food_Syst/Fresh_Air_Pork_Frantzen.htm
Article (link no longer active).
Pennsylvania Farmers Consider New System for Happy Hogs
The New Farm from Rodale Institute
www.newfarm.org/depts/pig_page/pig_alliance/index.shtml
Article
Patchwork Takes Pork to the People and Gives Firm Market
to the Farmers
The New Farm from Rodale Institute
www.newfarm.org/depts/pig_page/patchwork_farms/index.shtml
Article
Direct Marketing Well-raised Hogs Takes Special Finesse:
Fair Partnering with Marketers Would Allow Farmers to Farm
The New Farm from Rodale Institute
www.newfarm.org/features/0902/iowa_letter/index.shtml
Article
A Pig's Tale: Marketing Stories for New Value Chains from
"Niche and Value Added Marketing: What's in it for you?"
2001 Conference
Leopold Center for Sustainable Agriculture
www.leopold.iastate.edu/pubs/speech/files/091801_p.pdf
(PDF / 144MB)
Keynote address
Pasture Raised Products Messages and Strategy
FoodRoutes and Midwest Collaborators
www.foodroutes.org/doclib/167/Pasture+Raised+FRN+project+Final+report.doc
Consumer focus group study
Comparing Swine Niche Market Opportunities
Iowa State University Iowa Pork Industry Center
www.extension.iastate.edu/ipic/information/IowaPorkNiche.pdf
(PDF / 447KB)
2001 online publication
Case Studies of Value Added Production & Marketing
National Pork Board
www.mnpork.com/producer/research/valueadd.pdf
(PDF / 3.76MB)
1999 online publication
Ethnic Marketing of Pork
National Pork Board
www.meatscience.org/Pubs/factsheets/q-ethnicmktng.pdf
(PDF / 174KB)
2000 online publication
Videos
Pork, The Other Producers: A Better Way to Raise Hogs
is a 41-minute video examining the changes in hog production and
what they mean for family farmers and rural communities. Production
systems requiring lower amounts of capital—especially important
for beginning farmers—are presented as alternatives to the
large-scale, corporate structure of production. 1998. #V3. Cost
$10.00.
Order from:
Center for Rural Affairs
101 S. Tallman Street
P.O. Box 406
Walthill, NE 68067
402-846-5428
402-846-5420 FAX
info@cfra.org
Latino Meat Cutting Video shows meat cutters preparing
retail cuts to Latino market specifications. Both carcass and boxed
fabrication is shown. #08072. Cost is $10.00 for producers or $15.00
for nonproducers.
Order from:
National Pork Board
Attn: Order Department
P.O. Box 9114
Des Moines, IA 50306
515-223-2600, ext. 621
515-223-2646 FAX
Pork: Marketing Alternatives
By Lance Gegner
NCAT Agriculture Specialist
Cole Loeffler, HTML Production
IP 153
Slot 100
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