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Five Factors contributing to the rise of the Farmpreneur

Working as international business consultants we are increasingly exposed to Farmpreneur businesses who are taking modern approaches to selling and marketing their valued added branded food and beverages, creating value from farm to table through direct marketing their produce from paddock to plate. So, what, this is not new I hear you say?  Been happening for some time, has it not? Ever heard of a farmers’ market? How does it affect me anyway, as a consumer or a customer (retailer or foodservice operator)?

The transformation of agricultural and food and beverage supply chains has been brought about by a multitude of factors colliding to create the perfect conditions for farmers to become Entrepreneurs or Farmpreneurs as we like to call them at Creatovate.  Value creators in the supply chain from inputs to outputs predominantly by direct selling and marketing their own “branded” products directly to customers (retail and foodservice) and in some cases direct to consumers as well.

Before we go dive deep into some of the factors contributing to the rise of the “farmpreneur” let us look at some live working examples of these new economy farm to table business models and how you might be able to apply this learning to your own farm, business, brand, customers and consumers.

Gladfield Malt

http://www.gladfieldmalt.co.nz/about-us/#our-history  

Doug & Gabi Gladfield Malt

Doug & Gabi Michael are fifth generation malting barley growers and first-generation maltsters situated on prime agricultural land on the Canterbury Plains of New Zealand.  After many seasons growing and harvesting the best malting barley possible, they grew tired of working harder year after year to increase their barley yield only to have their farm gate price per Tonne of malting barley produced drop due to only having one real option to sell their malting barley – one very large multinational malting company. The Michael Family decided to take the challenge/opportunity head on and plunge into the malting industry on their own adding value to their premium quality barley by malting it on their farm and selling it directly to the rising tide of Kiwi craft brewers.  Over the next decade, and after a lot of blood, sweat and tears and significant capital investment in plant, equipment, laboratory and people and processes they are now very proud owners of one of Australasia’s leading malting companies with customers from New Zealand to Australia and China and a strong growing demand for their high quality premium craft malts from brewers and distillers worldwide.

Crosby Hops

https://crosbyhops.com/the-farm/about-us/ 

Crosby Hop Farm

Transplant yourself 7,000 miles across the great Pacific Ocean to Oregon in the Willamette valley at the foot of the Cascade mountains in the Pacific Northwest of the United States and you will find 5th generation hop growers and first-generation hop merchants, dealers and processors of quality craft Hops – Crosby Hops.  Traditionally growing hops for large third-party merchants or grower co-operatives Crosby Hops and the Crosby Families took the brave decision 100 years on from first starting their hop farm to break away from the traditional grower only business model and started selling their hops directly to local craft brewers like Deschutes in Bend, Oregon. Starting initially with freshly dried whole hops Crosby Hops then moved quickly to design and install their own pellet mill with different processing dynamics suited specifically for the unique needs of the rising tide of craft brewers in the USA and the rest is history.  Again, after many years of significant investment in processing technology, capital, people, processes, laboratory and direct to brewer customer service Crosby Hops has not only retained their premium status as a grower of quality hops but is now also seen as a trusted merchant for sourcing from other farms and processing their hops and securing supply of unique hops to keep craft brewers abreast of the modern craft beer drinkers needs.

The Chia Co

https://thechiaco.com/au/our-story/ 

FF060516-John_Foss_140516_chia_john_inspecting_031_final_CMYK_1_Main

John Foss Founder and Chairman of the Chia Co set out in 2003 to sustainably grow process and market Chia Seeds and Chia based consumer products to the world to achieve the company mission to make a positive contribution to the health and wellness of the global community.  A fourth-generation wheat farmer in the Kimberly, John was not happy with two things from growing wheat – 1st – the returns and 2nd – seeing where his high-quality wheat was going and how it turned up on the kitchen table in overly processed sugar added breakfast cereals, baked goods and the like.

With a passion, for the land and the health and wellbeing of his community John saw a unique opportunity to grow and value add to an ancient Chia seed traditionally associated with Mayans and Incas and at the time only available in a sporadic supply from South America.  The unique microclimate of the Northern Kimberley region combined with the farming know how of John and his fellow farmers in the region enabled them to perfect growing a consistent quality clean and nutritious Chia seed that is now supplied to major food processors, retail customers, and foodservice operators globally.

The Chia Co in addition has launched their own range of premium plant nutrition products featuring Chia from whole cleaned Chia Seeds to Chia Pods® to Oats + Chia and Chia Breakfast and Salad Boosters and Chia Oil and Flour.  The Chia Co now boasts customers across the globe and has offices on three continents in Melbourne, New York and London. The Chia Co is a truly global enterprise exporting to over 35 countries with a vertically integrated and value adding business model every step of the way from the farm to the supermarket shelf and back again.

Heartland Potato Chips

http://www.heartlandchips.co.nz/

Heartland Chips Bowan Family

Raymond Bowan is not your average potato farmer – far from it he is the epitome of a farmpreneur from the young age of 18 growing his own potatoes and selling them direct to a local fish and chip shop!  Furious at a large multinational that purchased to scrap the local potato chip factory which Raymond was a key supplier, Raymond took it upon himself with the support of his family to purchase the remaining shell of a deserted factory, fly to the other side of the world and invest in the latest European frying technology and install a state of the art modern potato chip factory literally in the shell and remains of a multinational snack company’s throw away.

The Bowan family ability to grow their own quality potatoes and supply them to their own factory and have them processed in under 12 hours from picking using state of the art technology has given Heartland Potato chips a quality difference from day 1 and customers (retailers and foodservice) and consumers love them! The rest is history as they say, and the business continues to grow from strength to strength on the back of an authentic story, a proud and passionate family and workforce that looks after everything from farm to supermarket shelf and back again.  Heartland Potato Chips has an adoring tribe of customers and consumers on social media who cannot get enough of the chips from the Heart of the South Island, New Zealand.

Five Factors contributing to the rise of the Farmpreneur

1. Farmers’ Markets

growth-in-farmers-markets

Admit it! Who doesn’t love a trip to the market? Its in our DNA!  What do we do when we travel to far flung places or dare I say it the third world tourist destinations? Head to the market of course! Why? We love the dynamics of the marketplace, the hustle, bustle, banter, haggling and freshness of the produce and the direct interaction with growers and stall owners.  Well the good news for growers is the farmers market is on the rise again!

2. Family Matters!

One Degree Organics Family Photo

No doubt you too can see in the shops or in your pantry some fantastic family owned farmpreneur brands that not only taste great but feel great to support.  After all what family doesn’t want to help another family in need.  It feels good to buy from a family you can empathize and connect with as a consumer and customer.  We all love brands, but it is a little harder to say we love corporations unless of course you are a shareholder in them!

3. Co-ops are Crumbling!

MG Sale Fail

Farmer Co-operative business models are crumbling due to their relentless focus on highest volume lowest cost production vs. value adding branded differentiation business models which results in a price race to the bottom.  Many Co-ops grow over time and are committed to taking every litre of milk or grain or seed from their grower owners and will clear them at any cost and aim to process them at the lowest possible cost at all costs!  We need look no closer to home than a local dairy co-op now in family hands after a strategy that focused on scale and cost of production cutting at the expense of branded differentiation and value adding. Net result = fail = sale!

4. Consumer Trust Drops

Consumer Trust

Consumer trust with leading large food multinationals is at an all time low as they read about tax minimisation, restructuring or harsh treatment of growers on the land.  Consumers are reading labels more than before, they are finding things out on social media they never knew about that happen behind the scenes in the relentless drive to meet margins, or retailers demands.  Put simply the behaviour of the world’s largest companies on the supply and retail side doesn’t sit right with a lot of consumers today.  How can they react? Can they change the system? Probably not, but they can vote with their wallets and buy family or locally grown or owned where they can afford to and in many cases that starts in their grocery basket!

5. Going Direct to Customers and Consumers

middleman

Growers, producers and food manufacturers can go direct to customers and consumers like never.  Retailers are ready and actively sourcing local brands for local customers.  Farmers markets appear in abundance as a great way for growers and consumers to interact directly. Social media and internet marketplaces and platforms from Facebook to eBay to Amazon or Alibaba or TMall afford the opportunity for growers to grow, process, brand and ship directly to consumers from farm to table.  While distributors will also add value in terms of aggregation of many small customers or many small volume products dropped and delivered on a single truck to a seller or buyer there is more and more pressure than ever before to cut out the middleman and modern technology and tools of the trade like e-Commerce and hyper fast logistics are facilitating this transition faster than ever before.

In conclusion, simply put it feels good as consumers to support a farmer and family owned business no matter how small they are today or tall they become tomorrow.  If their values and the values of their branded products align with our own as consumers, we actively seek them out in preference to the brands of faceless corporations.  We take pride in sharing our latest pantry treasures at dinner parties, BBQs or with our friends on Facebook and Instagram.  We take it upon ourselves as consumers and upholders of social justice to help the farmers, other families fight against the behemoth corporations.  Five factors are strongly aiding those farmers and families to take ‘entrepreneurial risk’ and create new value adding business models.  Look out in years to come as we see many more cases in our own backyard or country rise from the soil and land on our supermarket shelves.

Dermott Dowling is Managing Director of Creatovate International and Innovation Consultancy.  Creatovate specialise in helping clients create value through the twin pillars of International Business Development and Innovation.  We believe in the power of sustainable organic growth and using choice-based strategy to clearly articulate where your business is going, how you will get there and when and what resources you will need to deploy to make it happen!  If you are interested in a no obligation face to face or telephone chat, please do not hesitate to reach out to us anytime.For more information on our learning and methodologies head over to our website at www.creatovate.com.au and sign-up for our blog at CreatoBlog

Bibliography & References:

ESTHER ASHBY-COVENTRY (2017) Heartland may employ more staff to cope with growing range of chips February 21, https://www.stuff.co.nz/timaru-herald/news/89630153/heartland-may-employ-more-staff-to-cope-with-growing-range-of-chips viewed on 9/02/2018.

Blake Crosby (2013) A Hop Farmer’s Diary: 30 days in the life of Oregon’s Crosby Hop Farm, Aug 19 https://www.craftbrewingbusiness.com/ingredients-supplies/a-hop-farmers-diary-30-days-in-the-life-of-oregons-crosby-hop-farm/ viewed on 09/02/2018.

Clare Dunn (2015) Is chia the next quinoa? Local growers are positioning themselves to be at the head of the next superfoods trend. The Sydney Morning Herald, May 25, http://www.smh.com.au/small-business/growing/is-chia-the-next-quinoa-20150514-gh1mb2.html viewed on 9/02/2017.

Keith Gribbins (2017) Hop insights: We discuss the rise of Oregon Comet, the slowing of Cascade, Crosby Hop Farm and rock bands with Blake Crosby  https://www.craftbrewingbusiness.com/featured/hops-insights-discuss-rise-oregon-comet-slowing-cascade-crosby-farm-rock-bands-blake-crosby/  April 24, viewed on 22/01/2018.

Abbie Napier (2014) Turning Risky Start-Up into Success The Press, Sep 7, http://www.stuff.co.nz/the-press/business/10467259/Turning-risky-start-up-into-success viewed on 09/02/2018.

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Can BIG FoodCo Think! Act & Adapt like a Startup?

Fast business

Concept of small business running fast!

Is it just us or does it seem today that the small food companies are moving faster than ever before and the big companies are moving more slowly when it comes to innovation in our local food industry?  Perhaps you and I are not alone in our thinking? The literature and newswires in the US have been awash with stories of “the war on big food” (Kowitt, 2015) with big bold claims like “big food is under attack from the rise of startup granola!”

Changes are not only taking place abroad in the US supermarket aisles where shoppers are cruising the periphery of the store seeking out new and trendy, authentic and unique chilled, fresh, natural and healthier food options.  The same trends are evident in Australia and plain as daylight for all to see on the high street where the Fast Food Evolution has seen global super brands like McDonalds, KFC, Subway, Pizza Hut and Burger King scrambling to reinvent themselves against the rising tide of ‘fast, casual dining chains’ like Grill’d, Nando’s and Mad Mex (Brown & Han, 2015).  Let’s not even start a conversation about the global food truck trend that could be today’s incumbent fast food operators tomorrow’s ‘disruptor’.

VIDEO: Can big food and beverage think like a startup?

Big food companies will need to rethink their business models if they want to innovate like startups, according to Dermott Dowling, managing director of innovation and international business consultancy Creatovate.

Speaking recently at the Food & Drink Business Disruptive Innovation LIVE forum, he explained why this is growing in importance, and how some of the world’s largest food and beverage companies are responding.

According to Dowling, the top 25 food businesses in the US lost at least $4bn in market share last year as consumers skipped the core food aisles in favour of the fresh segments, and increasingly sought out innovative products from smaller companies.

In this video clip, Dowling describes how some of the world’s largest companies, including Nestle and Coca-Cola, are responding to the movement, and he shares some examples of local companies that are having a go at digital disruption in the food space. See the full clip here.

Why is this happening all of a sudden?  Is it another off-shoot of the start-up tech trend finally finding its way into the food industry? Like most complex issues of business today it is a symptom of a number of factors and key influences colliding to create the perfect storm for “disruptive innovators” in the food industry.  Let us start with the trends underlying today’s shopping decisions consumers are making today with their wallets – after all is it not the shopper who ultimately controls the marketplace nowadays?

Campbells Soup

  1. Shoppers and consumers are looking for ‘authenticity’ and ‘realness’ more than ever before. Their trust in global multinationals is at an all-time low and most major food companies operating in Australia are global multinationals http://www.slideshare.net/dowlmott/going-global-in-food-grocery-retailing-business . With a smart phone in every shoppers pocket the truth is out there on Facebook, Instagram and Twitter and consumers trust their friends and followers and influencers’ more than super brands blasting the old mass media airwaves. Hirschberg (2015), founder of Stoneyfield Organic Farms sums it up when he says “There’s enormous doubt and scepticism about whether large companies can deliver naturality and authenticity.”  As a result consumers are more connected with small and medium size family owned or startup food businesses and brands.  They feel a closer affinity with the founders than the boardrooms and polished CEO communicators of “Big FoodCo”.  They connect through their social media accounts, love the storytelling of startup founders and the authenticity of the founder(s) stories up all night packing boxes in their garage or cooking new prototypes on their stovetop before racing to the local farmer’s market or grocery shop on their way to fame and fortune.

Back to Natural

2. Mintel (2015) Trends report highlights front, bold and centre Trend #3 Less processed foods, more natural as consumers continue to be concerned with eating natural and ‘less processed’ food products.

aldi-vs-big-brands

3. Consumers and shoppers are more affluent than ever before and yet more sporadic in their shopping and buying behaviour. They fill their trolleys with private label staples and shop at Aldi and CostCo to save on essentials and then simultaneously splash out on their indulgent luxury food treats. They love sharing their discoveries at their local high end speciality independent grocery store or Asian specialty shops with friends and taking something a little unique and special over to their neighbours or friends place for dinner to start a ‘foodie’ conversation.  Again here the shopper leans towards the ‘smaller, more real, and authentic’ food brands.

There are also a few key influences in the background from broader business theory on innovation that are impacting the ability of the smaller and medium size companies to grow faster than ever before and hindering the larger elephants from dancing the same jig when it comes to innovation.

Customer Development Models

Customer Development Model (Blank & Dorf, 2012)

  1. Small and medium size companies by their very nature are ‘searching for growth’ ‘new business models’ and ‘repeatable and scalable business models’ and most importantly they are actively seeking out ‘new customers’. As they seek out new growth pathways for their businesses they discover unmet customer needs and wants, gaps in the market and they scurry back to the lab or pilot plant or co-manufacturer and whip something up quickly in the ever desperate search for sales and a repeatable scalable business model. With those real sales comes learned experience what’s working, what’s not, what needs fixing and so the cycle continues at pace – Build, Measure, Learn or as we like to say @creatovate “earn & learn”.  Less time in research more time spent doing, making, talking to customers and consumers with real prototypes, failing, learning, earning, and eventually success! $:-)
Business Model Iteration

Business Model Iteration (Blank & Dorf, 2012)

2. Being smaller by nature you are in fact at a strategic advantage when it comes to innovation. Less $/people/time makes you smarter in your choices, you look for fast hacks forward, cut corners and try to make more from less without the bureaucracy of Stages and Gates and internal meeting after internal meeting and research after research spending valuable $/people/time but earning nothing, spending a lot and often learning very little about real customer and consumer problems in the marketplace.

innovation police

3. Small and medium size companies lack middle management aka ‘ the innovation police’ who are stringently guided and controlled by budgets, plans, processes, performance reviews and the need for ‘incremental’ over ‘transformational’ growth and innovation. The middle manager’s role is to shepherd the workforce on the annually set KPIs, Manage Budgets and stop people seeking out opportunities off the strategic plan no matter how promising those opportunities might look or feel to the front line.

Resource Dependence

Resource Dependency Model

 

4. Stakeholder dependency theory (Hillman, et al 2009) suggests any organisation is interdependent on its ecosystem and the biggest interdependencies on any organisation are its ‘customers’ and its ‘shareholders’. Think about who the dominant customers are of a small or medium size food enterprise in Australia vs. a large one? Think about what investors are seeking in small and medium size business? Fast growth? Exits? Vs. Large stable food businesses? Safe and consistent returns?

think-act-adapt-innovate-like-a-startup-3-638

Technology and capital are influencers in the background and technology enables the small and medium companies to better connect with their consumers, levels the playing field in terms of ability to interact professionally with customers (retailers) and trade partners.  Capital seeks growth opportunities and will look for the opportunity to enter and exit as quickly as possible where the opportunity for disruption exists.  Are we likely to see the small and medium growth food companies grow faster into the future – most definitely Yes! Will the large incumbents sit back and watch the ants eat their cake?  That remains to be seen and we are in for an exciting food future ahead.

Dermott Dowling is Managing Director @Creatovate, Innovation & International Business consultancy. Creatovate help businesses create, innovate and growth through sustainable innovation processes and spreading their wings outside their home base.

References:

Blank, Steve & Dorf, Bob (2012) The Startup Owner’s Manual K&S Ranch Inc, California, US. First Edition.

Dowling, D (2015) Think! Act! Adapt & Innovate $ like a Startup! http://www.linkedin.com/pulse/think-act-adapt-innovate-like-startup-dermott-dowling?trk=prof-post LinkedIn, Aug 19, retrieved on 05-Nov-15.

Dowling, D (2015) Putting “I” first in Insight to Innovation http://www.linkedin.com/pulse/putting-i-first-insight-innovation-dermott-dowling?trk=prof-post LinkedIn, Feb 25, Retrieved on 5-Nov-15.

Dowling, D (2012) Globalisation of Food & Beverages http://www.slideshare.net/dowlmott/going-global-in-food-grocery-retailing-business Slideshare, Retrieved on 5-Nov-15

IRI Worldwide (2012) The Pacesetters Report http://www.iriworldwide.com/iri/media/iri-clients/4-17-13T_T%20April%202013%20NPP%20vFinal.pdf  viewed on 5-Nov-15.

Kowitt, Ben (2015) The War on Big Food http://fortune.com/2015/05/21/the-war-on-big-food/ Fortune Online 21 May, retrieved on 5 Nov. 15

Brown, R & Han, E (2015) Fast Food Evolution – Global Super brands are having to reinvent themselves to keep up The Sydney Morning Herald online 11 January   http://www.smh.com.au/nsw/fast-food-evolution–global-superbrands-are-having-to-reinvent-themselves-to-keep-up-20150106-12j7mc.html  retrieved on 05-Nov-15

Australian Food News (2015) Top Global Food and Drink Trends for 2015 http://ausfoodnews.com.au/2015/10/21/top-global-food-and-drink-trends-for-2016.html October 21, retrieved on 05-Nov-15.

Amy J. Hillman, Michael C. Withers and Brian J. Collins R (2009) Resource Dependency Theory: A Review Journal of Management 2009 35: 1404 originally published online 23 September 2009 https://www.unifr.ch/intman/assets/files/Teaching/Network_2014/Additional%20Readings/Hillman-Withers-Collins%202009%20-%20Resource%20Dependence%20Theory.pdf retrieved on 5-nov-15

Sue Mitchell (2015) Here’s Why Consumers are Choosing Aldi over Woolworths and Coles http://www.smh.com.au/business/heres-why-consumers-are-choosing-aldi-over-woolworths-and-coles-20150714-gicgix.html July 15 retrieved on 04-Jan-16.


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