AgDM newsletter article, March 2001
Mary Holz-Clause, Co-Director, Ag
Marketing Resource Center, Associate Vice President for ISU Extension and Outreach, Iowa State University, 515-294-0648
The “trend is your friend,” is an old marketing adage that some Iowa value added agricultural companies are realizing. Adding-value to commodities has encouraged the startup of several Iowa companies that are building solid businesses upon trends in the food and kindred products area.
Americans spend more than $500 billion dollars on food every year -- retail grocery buying, institutional - such as cafeterias in corporate America or school lunches, and restaurants - running the gambit from McDonalds to Chez Pere.
Let’s examine some of the trends in the world of eating, American style.
Ethnic. The fastest growing ethnic population in Iowa and the U.S. is Hispanic. The Hispanic culture brings new tastes, desired food preparation, and opportunities for companies to meet this growing demand. The National Pork Producers Council did an intensive study of the Hispanic markets in the U.S., a valuable resource for groups interested in learning about this market niche. The study reveals that it might be possible to sell cuts of meat in the Hispanic market that would not move very quickly in traditional markets.
A word of caution needs to be offered in the world of ethnic marketing; ensure that someone with similar ethnic background is involved in the marketing and translation. A classic faux pas was General Motors’ experience when they introduced a new car into the South American market called Nova. Nova to an Anglican means a star; No va in Spanish means “won’t go.”
Other quickly growing Iowa ethnic groups are Asian groups such as the Hmong and Chinese, which bring different tastes and opportunities for new market development.
Organic markets. One of the fastest growing markets in the U.S. is the organic market. Statistics vary, but generally speaking, organic markets have been growing between 6 and 10 percent per year since the early 90s. Organic on the label implies that the farmers have been inspected to verify they meet rigorous standards that mandate the use of organic practices and feeds, and prohibit the use of antibiotics and GMO products. Industry analysts say that by 2008, the organic market will make up more than 10 percent of the food market in the U.S.
Natural markets. The term natural does not have the same strict interpretation as organic does. According to the U.S. Food Safety Inspection Service (FSIS) “natural” may be used when products contain no artificial ingredients and are no more than minimally processed, including soy-based products.
Health conscious market. Soy-based products are fast becoming a hit with the aging baby boomer female population who prefer a natural form of estrogen found in soy over Premarin, an estrogen derived from horse urine. Another reason for the growth in the soy market is the increasing number of Americans who are lactose intolerant. Asians and Hispanics are often genetically lactose intolerant and other populations become more lactose intolerant as they age.
Markets for the cocooner. Faith Popcorn has coined a term she calls “cocooning,” which means staying in and hunkering down. What does this mean for the food industry? It means a demand for products that can be picked up at the grocery store and have all ingredients there for the consumer. Better yet, it is food products that can be ordered over the Internet and delivered to the door. Thus, increasingly there is a market for on-line grocery shopping and other ways of making it easy for people to stay in their homes.
Relationship marketing. There seems to be a growing need among consumers to “get back to their roots” with food buying. Although most folks have not been on a farm, many of them are vaguely aware of their food’s origin. They have fuzzy memories of a farm or corner grocery store where everyone knew who produced the food. Deep down they long for that connection and there is value in capitalizing on that longing. Creating a product image that connects the consumer to the producer develops a relationship, which fosters brand loyalty and repeat business. As baby boomers age, the need for this relationship has grown.
Solution marketing. Solution marketing helps to answer the age-old question, “What’s for dinner?” Solution markets provide entrees ready to heat and eat.
Prestige marketing. In certain markets, intangible responses among consumers can be tapped to realize added value in products. As an example, most people find it desirable to buy something different or in some way special. It is the idea of bragging rights or being able to turn their friends on to something new.
Personal chefs. One growing segment of the food service sector is a phenomenon called “personal chefs.” The service caters (literally) to the people who are busy and don’t want the hassle of meal preparation. Increasingly there is not a member of a household that likes to cook or feels competent to do it well.
Eating makes people feel good. Feeling good is not just about meeting nutritional needs. Food is an emotional experience. By mixing metaphors, products are chosen that meet many of the market trends listed above. For instance, a person may choose a food that is convenient, ethnic, and natural.
The successful Iowa companies listed below often combine several of the marketing trends to deliver products that are successful and meet consumer needs.
Let’s examine some of the Iowa companies who have started in the last 10 years to capture these trends.
Ethnic. LamPost Meats takes meat products considered to be of low-sales value among large packinghouses. These meats, which include tripe, chitlins, and other offal meats, are further processed into small quantity packages of frozen, ready-to-cook specialty items for the ethnic market place. Stan Lammers says he helped make a market expand, but had to scramble to find the right markets. The initial product, chitlins, was not a major consumer product in some areas, so that meant working directly with storeowners to sell the idea, instead of working through chain-store headquarters. A large chain in Iowa, for example, might have 300 stores, but only 10 move a large quantity of chitlins, maybe 25 move some quantity. Lammers said doing business successfully in ethnic markets means asking questions of everyone. What would make the product better? What do they like and not like about the product?
Organic markets. Heartland Organics, located in Harlan, began in 1993 as a group of organic farmers looking for ways to collectively market their area-grown feed grains, oilseeds, and livestock products. Today more than 120 farmers have joined forces in the organic arena to sell their products across the U.S.
Mycal Corporation is a Japanese company that is located in Jefferson to process soybeans into soyflakes. These soyflakes are shipped more economically than whole soybeans to Japan where they are processed into soy foods such as tofu.
Several years ago their Japanese customers began requesting non-GMO, organic soyflakes. To meet this market need the first several years, Mycal had to purchase products from outside the U.S. The past two years the company has been able to source the product locally from suppliers such as Heartland Organics. Prices paid for food grade, organic soybeans have been as high as $15 per bushel.
Natural and healthy markets. Several Iowa companies have started firms that are ingredient suppliers for the natural food market. Paul Lang started a successful soyflour milling operation in Grinnell in the mid-1990s. Iowa Soy Specialties is a group of farmers in Benton County who are providing soy-textured proteins to the natural market. Carroll farmer Elmer Schettler has started a company that ships natural soymilk by the tankerful under the label of Devansoy Farms across the U.S. Tom Lacina, a soybean farmer from Grinnell, has found a market niche selling his Midwest Harvest labeled tofu products, accompanied with recipes developed by his wife and sister-in-law, the Soy Sisters.
Markets for the cocooner. Several pork and beef producers across the state have begun to sell their product on the Internet and with door-to-door delivery sales. Companies such as Carousel Farms can be found on the Internet selling their high quality meat products across the U.S.
Relationship marketing. Many people are connecting back to a farmer through community supported agriculture (CSA). Several types of CSAs are becoming more prevalent around the state. There are farmer’s markets where people can have a one-on-one relationship with a farmer in most major cities across the state. Another form of CSA becoming more popular is where people subscribe to a produce or meat delivery system at the beginning of a crop year, and farmers supply products to their subscribers throughout the season. Penny Brown, Des Moines, actually calls her business “My Farmer.” Larry Cleverly, Mingo, and Jan Libbey, Kanawha, and many others across the state have added significant bottom lines to their farming business through their CSAs.
Solution marketing. A meal, ready in 20 minutes or less, is a solution to that age-old question, “What’s for dinner?” Several companies have been very successful in providing meal solutions. Red Oak Farms in Red Oak has created several very good products that meet the heat-and-eat criteria and have figured out how to make the product taste good. This group of cattle producers has been slowly increasing their retail and hotel, restaurant, and institutional (HRI) market share the past few years.
Prestige marketing. Niman Ranch, Thorton, combines several of the above market trends. What’s so special about the Niman Ranch pork? Just about everything, says one of its producers, Paul Willis. Willis is part of the San Francisco Bay Area Niman Ranch Food Company, a firm that offers free-range meat products - pork in Willis’s case. Among the biggest claims of Niman Ranch is that the meat offered by the company to West Coast outlets and high caliber restaurants simply tastes better. It tastes better, they say, because of the natural way it is raised--lots of space, humane conditions, and no growth hormones or sub-therapeutic antibiotics.
Personal chefs. Mom’s Meals in Nevada was started two years ago and already has grown to be a multi-employee company. Mom’s menu includes entrees that are homemade to order and delivered to your door. Entrees come ready for the oven, or they will deliver it hot.
These are only a few examples of how enterprising Iowans are capturing these food trends. With imagination, some creative brainstorming, and realistic business planning, a market niche in value-added ag can be found. Assistance with business development in any of these areas is available at 515-294-0588, or at the website www.iowaagopportunity.org.