|
 |
|
subscribe
to the Organic Broadcaster: Grain Place
Foods: niche grains not just for the birds At the ACRES USA conference in Minneapolis this December, organic grain farmer David Vetter gave one of the most interesting presentations I attended. Since 1975, his family farm in Marquette, Nebraska has grown to include a grain processing plant, which cleans, processes, markets and ships products for a number of organic farmers. Currently, sales are about $1.8 million annually, and Grain Place Foods processes about 5 million pounds of products each year. Grain Place Foods is now a successful business, but starting out wasn't easy. In 1975, David Vetter moved back to the 280-acre farm he grew up on, in Marquette, Nebraska, and went into business with his father, Don. During this period, the Vetters worked with Blooming Prairie, an organic food company which set up buying clubs in the Midwest. Many families requested organic grains and beans, but organic supplies of these products were limited. Interested in filling this evident demand, Dave and Don decided to make grains an essential part of their operation, and called their farm "The Grain Place." 1977 was their first year as certified organic growers. Initially, they grew their own grains but had them processed off the farm. At the time, facilities that would do organic processing were few and far between. They had continual problems with quality, which was extremely variable, and had to drive long distances to find a processor. Like more than one farmer, they decided to solve the problem by doing it themselves. In 1980, Dave and his father invested $140,000 to build a small grain-cleaning plant, and named the business Grain Place Foods. During an expansion in 1987, they purchased and installed more equipment, including grain storage with forced air-drying capability, a state of the art gas-fired infrared processing, bagging, packaging and labeling equipment, and a refrigerated warehouse. In the beginning, they contracted their services to other companies in order to meet their expenses. Even so, their farming operation subsidized the grain cleaning plant for eight or nine years. Vetter credits his early success to a good export market for organic products. By the mid-80s, Grain Place Foods carried around 90 different certified organic crops in their inventory, "everything from amaranth to lima beans." Although the business was initially conceived as a way to add value to their products, they also began buying from other farmers. They managed their inventory by selling others' products first, and holding their own in reserve. Now only 3-5% of the grains they handle are grown at their farm, with the remainder purchased from as far away as Canada. More recently, they've trimmed down their inventory, dropping some high-cost exotic grains and edible beans, and focusing on small grains, peas and lentils. "My employees tell me I'm trying to do too much," admitted Vetter. Versatility is one of the criteria he uses to decide which products to keep and which ones to weed out. If he can use the product for several purposes, it's worth keeping in his inventory. He still includes some products that don't make as much money, as long as they fit into the big picture. For example, his inventory still includes some exotic grains because they open up possibilities for new products. Even with his product line trimmed down, there's still plenty of diversity. Grain Place Foods handles a number of different marketing venues, from livestock feed ingredients (their least profitable enterprise) to ready-for-retail bulk flaked cereals and mixes, microwave and regular popcorn, and organic birdfeed. Their fastest growing segment is their line of organic popcorn. Although earlier they carried specialty popcorn mixes (red, white, and blue) for sale as fundraisers and gifts, they now focus on yellow and white popcorn, since it allows them to work with larger volumes and more farmers. A specialty niche: organic bird food The company's founder, Greg Harrison, is a veterinarian with a specialty in avian medicine. As a veterinarian, he treated many birds with moderate to serious health problems, which he believed were related to their diets. These included all sorts of ailments, like dry and flaky skin, respiratory problems like sinusitis, digestive problems such as enteritis and diarrhea, as well as infertility and weak chicks. Harrison argues that seed based diets are not nutritious enough for birds, even when supplemented by vegetables and seedy treats. He also became convinced that organic food is very important to birds, since they are quite sensitive to pesticide residues. Most Harrison's products are manufactured for companion birds, although they also produce a line of food for wild birds. Vetter expects less growth in this segment, since a relatively small percentage of the population has enough money for organic wild bird food. Harrison's Bird Foods has several different products-a formula for adults, for juveniles, a high potency formula, and "power treats." All the formulations contain similar ingredients, but in varying amounts. The main ingredients are corn, barley, brown rice, toasted soybeans, oat groats, green lentils, peas, peanuts, sunflower kernels, and alfalfa pellets. They also add supplements such as psyllium, kelp and spirulina. Although a small percentage of the ingredients are not organic, they still meet the 95/5 rule to be labeled as organic. The ingredients are formulated, blended together and put through an extruder. During the last dozen years, the bird food has caught on like wildfire; it now makes up about 40% of Grain Place Food's business. Initially, they essentially handled all the production and distribution for Harrison's. This included weighing all the ingredients by hand, blending, as well as packaging and mailing orders. "A typical order used to be around 4,000 to 8,000 pounds," said Vetter. "Today we sent out an order of 230,000 pounds. That shows you how things have changed around here." The business finally got to be too large for The Grain Place to handle all of the aspects of processing, handling and shipping. "We used to have about a hundred packages a day going out of here by UPS," Vetter mentioned. In addition, the packaged products took quite a bit of storage space. Currently, Grain Place Foods sources the ingredients and does the formulation and ingredient preparation. Then a separate company does the extruding, and the finished product is sent to a warehouse in Tennessee for packaging and shipment. Harrison's prefers to sell their products either directly to the
consumer via the internet, or through veterinarians. They decided
not to sell their product through pet stores, because too many people
were not using the products as directed. According to Vetter, birds
need to become gradually acclimated to the diet. A quick switch
from their "junk food diet" of seeds to the more nutritious
one can cause problems. For this reason, they prefer to work in
cooperation with a veterinarian who will examine the bird and make
a recommendation based on the bird's condition. According to Vetter, conducting informal market research is an essential first step that will help you figure out what to grow and how to market your products. "Talk to people. Know who's doing the growing and the buying. Let others know that you're out there, so they'll think of you when a need arises," Vetter recommends. Again, he emphasizes that it's best to select crops that are versatile in the marketplace. As an example, he mentioned that corn varieties used for specialty dry milling may pay a premium immediately, and have more marketing options and versatility. On the other hand, corn raised for feed will always offer a low return. Although there used to be yield differences between the types, newer varieties of specialty dry milling corn perform as well as feed corn varieties--at least in Nebraska, Vetter said. Specialty products like birdfeed have a high return, but the startup costs may be prohibitive for small growers. And it takes a huge amount of time and resources to bring a new product to market for national distribution. Start-up costs add up when you figure the expense of advertising and promotions, as well as setting up broker networks. "You might use up a semi-load of product on samples alone," commented Vetter. Instead, he feels that farmers would do better to concentrate on local and regional distribution. One of the best ways to add value to your product, Vetter says, is to become organic. After that, on-farm storage is the next easiest way to increase revenues, since it gives farmers more control over when they can sell their product. Storing raw product is usually not difficult, after you meet the basic requirements. "Seed is the best storage unit you can find," Vetter said. Currently there are good opportunities for niche marketing of grains-but there are a number of challenges as well. For example, there are fewer small specialty processors, due to the tendency in recent years for smaller companies to become part of larger conglomerates. That means it's now harder to break into the market. Also, the organic industry is no longer as new as it used to be, and the niche markets are becoming well defined, which makes it harder to come up with new specialty products. However, Vetter feels that there may be good possibilities in the whole grains area. Recently, the USDA reformulated their food pyramid to include more servings of whole grains, and this may result in an increased consumer demand. Since whole grains require less processing, this could also be a boon to small-scale processors. Over all, with an investment of time and energy, it's possible to find a niche market and capture a price premium for your products. Erika Jensen farms and writes in Waupun, Wisconsin.
|
|
Copyright Midwest Organic and Sustainable Education Service 2000-2007 |