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Ministry of Agriculture, Food and Rural Affairs

Business Planning & Marketing

Know Your Market Potential: The Customer Comes First

Growing and selling specialty crops or developing value-added products can draw new customers and potentially increase revenues to a farm business. Obtaining and retaining customers and learning how to best market niche agricultural products is the key to capturing those extra dollars. Understanding consumer preferences and/or creating a market for a novel product, while profitably satisfying a demographic need, is essential for successfully marketing a specialty crop.

Here are some simple guidelines to developing a marketing strategy and exploring specialty crop and value-added opportunities.

  • Cultivate relationships among individuals from various value chain sectors (i.e. agricultural input suppliers, distributors, end users, and consumers). Networking will provide a better understanding of current trends, issues and future contacts for business.
  • Outline a variety of objectives including what you want to grow or produce and a timeline of expected results.
  • Describe your product in detail so others will clearly understand what is being grown or produced.
  • Create a detailed budget. Include items such as seed and propagation, land use, labour, harvest and storage requirements, delivery, market research, product development, and advertising.
  • Summarize the target demographics and approach to pricing for your target customer. Consider parameters such as age, gender, ethnicity, geographic location, and how you will distribute and display the product.

When considering a specialty crop and developing a marketing strategy it is important to fully educate your industry partners to ensure successful market development. Remember to:

  • Survey potential customers to determine what they would like to purchase or are unable to locate, and the types of products they are currently consuming. Cost share programs may be available in Ontario for assistance in researching potential markets and business planning. For information on available cost share programs please visit the Programs and Resources section of the OMAFRA website at: http://www.omafra.gov.on.ca/english/infores.html.
  • Research the demographics and potential uses for the specialty crop or end product. Consider crops with multiple uses and companion products to sell with the crop. Many specialty crop markets rely heavily on the consumer’s response to factors such as:
    • Crop variety and maturity
    • How the crop is packaged and presented (e.g. What type of packaging is used? Is the product ready to use?)
    • Production method (e.g. organic or conventional)
  • Search out other growers and crop specialists to ask for advice on agronomics and markets of specific specialty crops or value-added products.
  • Confirm processing facilities exist for the crop in your area, if needed. Some industrial and food crops require further processing to create a marketable product (e.g. hemp fibre, saponin removal on quinoa).
  • Locate bulk seed sources or plant propagators, which can be difficult for specialty crops, and confirm shipping or import requirements of the plant material.
  • Experiment by planting a small acreage and expand as needed once the market proves viable.
  • Take samples to potential distributors and retailers. They need to know what the product is and the quality you can produce. Be prepared to provide them with enough product for initial processing, testing, or selling.
  • Keep production, marketing, and contact records to assist with agronomic and economic decisions. Become familiar with accounting procedures and economic terms and how they apply to your crop or product.
  • ‘Spend money to make money’. Consider product development opportunities to add value to a specialty crop. Fee-for-service organizations in Ontario can assist in developing batch recipes, packaging alternatives, and other options.
  • Create good working relationships with clients by being reliable, punctual, providing quality products, and responding to their inquiries as soon as possible.

Performing background research on consumer preferences and locating a market before growing a specialty crop or developing a value-added product can be time consuming and potentially expensive. However, having a solid marketing plan in place and confirming customers before setting foot in the field will increase your opportunities for success with a specialty crop. Always remember to ‘sell before you sow’.

Sell Before You Sow

Selling any crop is always a challenge, so it is critical to develop a well-defined marketing strategy that clearly describes all steps leading to final sales. Marketing is the process of planning and implementing pricing, and promoting and distributing product in a way that satisfies individual organizational and customer needs.

Marketing is more than just selling a product or service. Marketing consists of strategic decisions made “behind the scenes” that affect customer perceptions. Marketing decisions need to include the major “P’s”:

  • product (including labelling and packaging to ensure safety and quality)
  • place/distribution
  • promotion
  • pricing

Key areas to research

  • Features and benefits of the product.
  • Target market – Who is most likely to buy the product?
  • Market demand – How many possible buyers exist?
  • What volume of product is needed?
  • Is the market seasonal or year round?
  • Distribution options –What is the best way to reach the target buyers?
  • Competition – What are the competing products and companies?
  • Trends – How stable is consumer demand for the product?
  • Expected Price – What price range can be expected? Is the lowest price still profitable?
  • Expected Sales – How will potential changes in market conditions impact quantity of product sold?

Marketing Opportunities

The marketing opportunities for crops in Ontario have traditionally been broken down into two broad categories, retailing and foodservice, however, some industrial crops and non-food crops are typically sold directly into processing markets.

Retailing

Ontario is home to over 12,000 retailers including convenience stores, farm markets, roadside stands, grocery stores, warehouse clubs, drugstores, and internet sales. Agri-tourism also presents a market opportunity for some crops. For information on selling specialty crops directly from the farm through a road side stand, farm store or “pick your own”, contact the Ontario Farm Fresh Marketing Association ( www.ontariofarmfresh.com). For information on selling at farmers’ markets, contact local market operators or visit the Farmers’ Markets Ontario website (www.farmersmarketsontario.com).

Foodservice

There are more than 30,000 foodservice outlets in Ontario, including bakeries, caterers, cafés, vending trucks, chip trucks, home delivery services, hospitals, schools, prisons, and establishments run by contract caterers (including employee cafeterias). These outlets may be seasonal or year round. One way to reach some of these outlets is through the Ontario Food Terminal in Toronto.

Choosing a Target

Identify and talk to potential buyers prior to planting as this could lead to sales contracts. If the plan is to target large numbers of Ontario consumers, contact Ontario’s three major chain grocers (who sell more than 75 per cent of Ontario’s groceries). Each chain has a produce buyer who will provide specific information on insurance, labelling, farm practices/audits and packaging requirements. It is prudent to identify these in advance.

It is possible to sell directly to a distributor that specializes in reselling to food retail and foodservice. Organizations such as the Ontario Food Terminal (OFT) and companies specializing in foodservice can reach a significant number of outlets.

An internet search for “foodservice distributors Ontario” will generate a list of suppliers. If a retail or foodservice outlet already sells to the target consumer, it will be helpful to identify the distributor for that outlet. Having the specialty product available to the distributor can help to increase sales.

Targeting multiple markets helps reduce risk when trying to sell the crop. If only a single market exists, consider its stability and develop a contingency plan in the event this market changes over time or disappears altogether.

Labelling Requirements

Be aware of any labelling requirements and the additional expense this may entail. Labels need to follow all applicable acts and regulations (provincial and federal).

Targeting Specific Consumers

Clearly understand how to increase target consumer awareness, as this can help sales. Research shows simple strategies such as advertising in magazines read by the target shoppers, or painting a market stand in colours recognizable to that consumer group (e.g. the colours of their national flag), boosts sales. Ensure the crop variety chosen meets the demands of the desired market. For example, there are numerous varieties of eggplant, each with different characteristics. Many varieties are unique and preferred by specific ethnic groups. For specialty crops, understanding the target market and making certain there is sufficient consumer demand is critical to success. Due to their low production acreage, there is often a fine balance between supply and demand for many specialty crops. It is particularly important to determine the minimum acreage needed to break into the market due to the need to gain experience with the crop prior to investing in substantial acreage. Additional production of any new crop may result in an oversupply that would negatively affect the sale price, particularly if the market is small. Consider how changes in market supply affect the price of the crop, and ensure the business plan reflects a range of crop prices. Competitiveness can be affected by factors such as product freshness, quality and proximity to market.

Organic Market Opportunities

The retail sales of organic foods have grown by 15-20% annually for 20 years across most of the globe. Current estimates are that organic food sales will grow by 10-15% annually over all categories during the next 5 years.

Many markets for organic specialty crops exist in Ontario (e.g. health food market). Conducting background research on consumer preferences for production method (organic or conventional) can help determine your target market.

The Canada Organic Regulations were introduced in 2009. Consumer recognition and development of labels that incorporate the logo will take some time to develop, however the new logo is now gaining more prominence in the marketplace. The Canadian Organic Standards continue to be updated and are equivalent to the USDA and EU standards. For more information on organic production and marketing practices please visit the OMAFRA organic page at www.ontario.ca/organic.

Ontario organic farmers and processors also have the opportunity to benefit from a unique Foodland Ontario Organic logo. In 2011 a marketing survey indicated that more than one-quarter of shoppers surveyed would buy organic more often if they knew it was from Ontario. To appeal to Ontario consumers who shop for organic products and help them to choose Ontario organic foods, Foodland Ontario has developed a logo for producers and processors to identify their food as both certified organic and local. Producers and processors who want to use the logo on their promotional and marketing materials will need to verify that their products are certified to the Canadian Organic Standard as well as meet the Ontario food definitions found on the Foodland Ontario website: www.foodland.gov.on.ca/english/industry/ind-definitions.html

Risk Management

Understand what options are available in the event of crop failure. Crop insurance may not be available for low acreage, specialty crops. Consider diversifying. Growing a number of different crops to serve intended markets can reduce the negative impact of losing one specific crop. The financial risk of crop failure also increases the longer a crop takes to mature. For example, losing one of four plantings of a culinary herb would have less impact than losing a plantation of tree nuts that takes 15 years to reach full production.

Conclusion

Specialty crops are one way Ontario growers can adapt to changing trends in agriculture and markets. However, the cultivation and marketing of these crops can be very different from the conventionally-grown commodities most growers are familiar with. Detailed research into agronomic requirements, production and marketing concerns will help in considering the opportunities and challenges associated with producing a specialty crop, and will greatly increase the chance of success.

Retail marketing Wholesale marketing Roadside marketing