Tuesday, July 29, 2008

A Followup to Yesterday's Post...

Yesterday's post birthed some pretty lengthy comments (which is awesome!) from some readers. The comments were so good and and well thought out that I decided to share some more of my thoughts from the article I referenced, the blog post I referenced, the comments from my post, and of course my own post. I think it is great that there is so much discussion on here from time to time because I often type these posts in a matter of minutes and then just move on, but the discussion really forces me to think about many issues. With that in my here are some of my thoughts in a bulleted list:
  • “Consumers are going from national brands to private labels and from more expensive produce, and that would include organics, to lower-priced produce." That is what Brian Todd of The Food Institute has to say about consumer buying habits. I would say that it is a pretty vague comment, but he did also say that the data isn't in yet. Now, here is one thing I take from that quote ... if people are switching from higher priced organic/natural items to lower priced items that were conventionally grown/raised then they were never really buying products because of any great moral conviction (otherwise they would have found a way to continue). Maybe they were just buying those products because it was trendy and they could afford it at the time? I think this proves that maybe there needs to be more and more education for the consumers (just like Kramer mentioned in one of his comments).
  • "My sister shopped at an urban farmers’ market the other day, one that supposedly caters to the low-income residents who live nearby. 'There was nothing there you could buy for $2, even greens or onions,' she said. 'The shoppers were almost all upscale people from downtown offices, not locals.'" This quote comes from the original blog post that I cited and of course is just anecdotal evidence, but it does sort of coincide with the point that I was trying to make in my post. That point being that there is a possibility to price ourselves out of the "local" market. Especially if education is not involved the sales/transactions.
  • "I believe it is important that farmers are paid an adequate amount for their work and realize that a natural/organic product will involve more labor, but are the prices getting a little too gourmet? I believe one of the benefits of grassfed natural beef is that it shouldn't cost as much to finish (even though it takes a little longer). But, I'm beginning to wonder if that savings is passed on to the consumers in all cases." This quote of course comes from my own post yesterday and I just thought I would clarify a few things, because I don't always communicate things as well as I would like. People can charge whatever they feel that they need to charge ... I think that there is some economic principle that says that. But, we have to make sure that we charge a price that fits. There is no way that I believe we need to compete with the supermarket ... it wouldn't work. But, price is a factor no matter how great your product is. As far as the grassfed beef thing goes I think it is true to a point, but it sure is open to debate.
**After rereading what I had written I decided that if anyone was going to make it through the whole thing I need to shorten it up! So, I decided to break it up into two parts ... Today's part contains my thoughts from the article, the blog post, and my blog post. Tomorrows part has some of my thoughts after reading the awesome comments and a couple closing things ... Thanks for the great discussion and keep it coming! Oh, and I want to be the guy leaning against the fence in the picture :)

3 comments:

sugarcreekfarm said...

Random thoughts after reading these last 2 posts...

1) So far this year our experience has been that we are selling more at farmers market this year than last, but receiving fewer pre-orders for the larger on-the-hoof quantities (beef quarters, half a hog, etc.) Unfortunately higher market sales have not equated to more income because - in the interest of keeping things affordable to our customers - we have not raised prices as quickly as our costs have risen so our profit margin is probably half of what it was.

2) I see a lot of discussion about where to price on the scale of grocery store to gourmet. What about pricing relative to costs and profit? I'm curious how other farms figure out what their direct & indirect costs are, how they price those costs into their product, and what a reasonable profit would be in order to make a living. How much do you have to make per head on your cattle, your hogs, your chickens in order to make a living? Obviously there's no simple formula, but it's something I don't see talked about anywhere.

3) You can't sell what people don't want. In our particular area, I'd say 95% of the people are not interested in organics. Some are downright suspicious of organics. Same for grassfed. And since we don't live in a real populous area, that 5% doesn't amount to much. It took some time talking to a lot of people to find out that what they are interested in is hormone-free and antibiotic-free meat. These are 2 of our top priorities as well, so we're basically raising our animals the way we like to eat and fortunately for us it's what consumers around here are looking for. So we have no incentive to move to organic at this time. I'm curious how other farms go about determining how much of a market they have for their products (sales projections).

4)I told you this was random! Another thing I've been curious about (that has nothing to do with these posts) is how other beginning farmers go about financing their operations. Especially with beef, there's a lot of investment up front until you get a salable product. And with any start-up there's going to be a need for buildings, equipment, etc. Bank loans? Don't start farming until you have the money saved? Wait for your rich uncle to die? (Oh shoot, I don't have a rich uncle ;)

So there you go, random thoughts I thought I'd throw out here since I don't seem to have the time this summer to post on my own blog. Thanks for letting me use your space, Ethan :)

Ethan Book said...

Sugar Creek - Thanks for the well thought out response and the first hand reports. I think #2 is a great way to think about it and really it is how how have to set your prices if a profit is your goal.

As for #4 ... I was actually planning on dealing with that very soon (maybe later this week or next week) in a series of posts. I just thought I would tell our story and how it is working out for us.

Mellifera said...

Quick anecdote.

Ever since I got pregnant, we've been eating more fruits and veggies. We might even be up to 5 a day now like you're supposed to.

Ever since I got pregnant, our grocery bill has doubled.

That's buying mostly conventional produce. (We do it when the price is comparable, say up to a third more.)

We are both in grad school and are about to have a baby. Need we say that doubling the monthly expenditures on groceries is a BIG deal?

Before making it into a moral dilemma, remember that for a lot of consumers it might not be an issue of "organic produce vs nonorganic produce." It might be an issue of "nonorganic produce vs no produce at all."

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