Running a farm isn’t all that different from running any other type of business. The tools used and the products created vary from farm to farm as they do from industry to industry, but the basics remain the same; to succeed you need a good product that you can sell at a competitive price. One of the first things we realized when we started farming was that our size was never going to allow us to survive on vegetable production alone. Farming on less than 5 acres we could not reap the benefits of “economy of scale” economics. We would have to come up with something that would add value to crops without forcing us to raise our prices above market so that our farm could survive.
While for most of the year we could easily sell all of the produce we were growing, during the one or two months at the height of field production, we found ourselves returning home from market with left over produce. We had several options at that point. We could sell the produce at a lower price to just get rid of it. This wouldn’t really help our bottom line at all. We could take it home with us and feed it to our chickens, ducks and turkeys. This option had the fowl/poultry vote and would save us a little money, as we wouldn’t have to feed them so much purchased food. But again, it didn’t really support our bottom line. When we figured our finances at the start of the growing season, we included selling all of our produce at market price, taking a loss in that area wasn’t something we felt we could weather. And so, out of necessity, was born our value added side of the farm.
It seems such a simple concept, take something that you are having trouble selling and turn it into something that you can sell, thus adding value to that product. We could never have imagined where those first few tubs of salsa were going to take us! Since we started making and selling our salsa, hummus, dips and jams we have learned so much. Some from our own research and trial and error, and some from watching others attempt to bring a value added product to market.
The most important thing to remember when bringing a “value added” product to market is that the final product must actually be worth more than the sum of its individual parts. For example, when we started making salsa we were having trouble selling our tomatoes for the $2.00/lb we normally got. If I can chop up those tomatoes, put them in 1 lb containers and sell them for $5.00 each, then I have created a viable value added product. But, I’m not just selling a pound of tomatoes. I have added peppers, carrots and spices, along with the cost of the container and label. Also included in the cost of this new product is the labor required to turn those veggies into salsa. And that doesn’t even take into account the expense we incurred building the VDACS approved facility. If all of the costs are not taken into account then no matter how popular the product is and how much of it you sell, you will still lose money.
Taking soft, bruised fruit from an orchard that is virtually unsellable and turning it into a product that extends its shelf life and capitalizes on taste rather than the physical attributes of the fruit is what a value added product should do. I’ve read some product blurbs that proudly boast that they cook down over 100 lbs of tomatoes to make 12 bottles of sauce. To me, this is not a good value added product. Even at a discounted rate of $1/lb for the tomatoes each bottle of sauce would contain $8 worth of tomatoes alone, not to mention the cost of spices, the bottle, label and labor. Remember you can only charge so much for your product or it will not sell.
Aside from making and marketing your own product, some farms and small businesses choose to have their product co-packed. Basically this means that they have come up with a recipe for a product they want to sell, but don’t have the time or facility to make it themselves. Most small vendors would use co-packing for shelf stable products since that type of production requires the use of an approved canning/bottling facility, something much more expensive and with more extensive rules and regulations than our fresh product producing facility.
While there is nothing wrong with having your value added product co-packed, you need to keep in mind that each layer added to the production, and marketing of your product takes more money away from your bottom line. You do get to keep control over the recipe used, and have final say over the taste of the end product, but you don’t always get to choose which raw ingredients the co-packer uses, or how much is made at one time, or when your product will actually hit the production line. Many companies have offered to co-pack our products for us, but we enjoy actually making everything we sell.
A third option that small producers have if they want to add a value added product to their product line is going to a private label provider. These companies have their own lines of products ranging from hot sauce to barbecue sauce to cooked salsas. All you need to do is look at the ingredients, pick out a product that sounds tasty to you and they will sell it to you in an unlabeled bottle. When it arrives you just put your own label on it and you are ready to sell it from your stand. The farmer has no input into the recipe. The farmer expends no labor other than applying the label. There is very little financial exposure for the farmer as he only needs to purchase small lots at a time and any markup from the purchase price is pure profit. This is an avenue we long ago decided wasn’t for us, although from the number of private label manufacturers you can find online it seems we may be in the minority.
We continue to learn more each day about the value added side of the farming business. Just having a great recipe isn’t enough. We’ve watched as other small producers have made mistakes (hint, don’t claim your salsa is made with 100% fresh tomatoes and then post a video showing how you make it using cans and cans of tomatoes) as well as when another small producer copied our exact recipe for their product (but they did tell us they loved the product and were honest about the fact that they totally copied us!).
For most small farms to succeed these days, and I mean actually turn a profit not simply avoid foreclosure, they must diversify. Whether the diversification comes in the form of agritourism with a corn maze and hay rides, or a line of value added products, which can be anything from salsa to sausage, if the farmer wants to be able to support their family they have to look beyond the next harvest.
Wendy and her husband, Richard Harrison own the Farm At Red Hill, where they grow and sell seasonal produce, eggs, herbs, cut flowers, and Asian greens, as well as 15 varieties of tomatoes. Thefarmatredhill@aol.com
