Developing Consumer Driven Markets for Southern Wisconsin Farmers

Final Report for LNC00-176

Project Type: Research and Education
Funds awarded in 2000: $84,951.00
Projected End Date: 12/31/2003
Matching Non-Federal Funds: $32,274.00
Region: North Central
State: Wisconsin
Project Coordinator:
Greg Lawless
University of Wisconsin Center for Cooperatives
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Project Information

Summary:

This project sought to strengthen prospects for small and mid-sized family farms in Wisconsin by connecting “clusters” of farmers with promising consumer markets in the region. Working with eight diverse groups, we learned that (a) the cost of market research and market development should not be underestimated, (b) ambitious ideas should be grounded in realistic business plans, (c) shared leadership is critical to successful collaborative ventures, (d) university extension and non-profit institutions can provide valuable support, and (e) a group of farmers pursuing an opportunity together can be remarkably persistent.

Introduction:

Background and Context for the Project

The rapidly developing food commodity sector makes it increasingly difficult for all but the largest farming enterprises to remain viable. These enterprises focus on producing high-volume, low-margin commodities, and are often linked to vertically integrated food chains. While managers of traditionally independent, mid-sized family farms increasingly find struggling in this sector to be a poor management strategy, they see few alternatives and feel “stuck.”

Also developing is a more locally or regionally based food sector focusing on specialty or niche markets for agricultural products. For example, the nationally known Dane County Farmers’ Market is part of a 63% increase nationally in the number of markets in the second half of the 1990s (Klotz 2001). Southern Wisconsin’s large and growing number of Community Supported Agriculture (CSA) farms is part of a similar national trend (deMeurisse 1999). Further, nationwide farmers are finding that selected stores and supermarkets increasingly will buy from local or regional sources (Pool 1999). Larger specialty marketing systems include the growing organic industry with its regional and national marketing nodes. But there is a large information gulf between farmers seeking production and marketing alternatives and reliable marketing opportunities for them.

Three important needs emerge. First, most farmers lack reliable information about barriers and opportunities related to marketing locally grown and processed foods. Second, there is a need to organize farmers to explore marketing opportunities that they can address collectively. Finally, we expect to encounter limitations imposed by scarce public resources supporting such initiatives in the state. Our objectives’ sequential order reflects these changes.

Project Objectives:

Three of our four project objectives correspond directly to the three needs identified above.

(1) To identify, analyze and selectively respond to the markets in southern Wisconsin for food products from local, sustainably oriented sources. This objective corresponds to farmers’ need for reliable market information.

(2) To share market information gained from meeting Objective 1 with southern WI farmers and to coordinate their response to that information. This objective corresponds to organize together to pursue market opportunities.

(3) To explore and organize the development of legislative and state programs and policies supporting alternative marketing initiatives in Wisconsin. This objective corresponds to the shortage of public resources to support farmers’ effort to develop new markets.

(4) To share lessons of this southern Wisconsin project within the state and region. This objective is intended to ensure that our research results are extended beyond the project’s immediate participants.

Cooperators

Click linked name(s) to expand
  • Laurie Greenberg
  • Margaret Krome
  • E.G. Nadeau
  • Steve Stevenson

Research

Materials and methods:

For each of the four project objectives listed above, we developed separate strategies and approaches.

In order to identify specific market opportunities (Objective 1), we would (a) conduct an in-depth literature review to identify consumer trends, successful marketing strategies and product innovations, (b) conduct individual interviews and one joint meeting with selective farmers, food retailers, and successful marketing innovators, in order to identify and evaluate various marketing and/or product ideas, and (c) submit the most promising ideas to a “feasibility screen” that considers capital investment requirements, required production volumes, and other factors. With the help of a Farmer Advisory Council, the Project Partners would select for further development 2-4 specific market opportunities (innovative marketing strategies, new food products ideas, etc. Project partners UW Center for Cooperatives (UWCC) and Cooperative Development Services (CDS) would share responsibility for carrying out these strategies related to Objective 1).

In order to share market information with southern Wisconsin farmers and coordinate their collective response (Objective 2), we would first (a) widely publicize the selected opportunities to farmers who could potentially supply the raw products, primarily through our Extension-sponsored conferences and county connections. In order to encompass a range of strategies and structures, including cooperatives, limited liability companies, informal arrangements, etc, we used the umbrella phrase “farmer clusters” to describe business initiatives involving multiple farm families. Once we connected clusters of farms to appropriate opportunities, we would (b) provide free technical assistance (TA) to organize multiple farm families to pursue these opportunities collectively. The TA would fall into two categories. “Early stage” TA would include meeting facilitation, leadership training, strategic planning, grant writing, and other services provided primarily by UWCC. “Advanced” TA would include conducting feasibility analysis, market research, and other services provided primarily by CDS.

In order to achieve greater state support for alternative marketing initiatives (Objective 3), we would (a) conduct a literature review of what support other states are providing, (b) facilitate discussions on pressing needs and policy remedies, and (c) inform policy advocates of most needed remedies. Project partner Michael Fields Ag Institute (MFAI) would take the lead in fulfilling this third objective.

Finally, in order to spread the lessons learned from this project (Objective 4), we would use press releases, web pages, radio interviews, organizational newsletters, research briefs, and participation at appropriate meetings and conferences in Wisconsin and at the regional and national level. Project partners UWCC and the UW Center for Integrated Agricultural Systems (CIAS) would share responsibility for fulfilling this fourth objective.

Research results and discussion:

Our project began with a scan of literature and Internet sites related to market opportunities and innovative marketing strategies across the United States. This result was an overwhelming supply of information. In fact, it was more than could be adequately digested by the project team. What’s more, much of the information, such as reports of innovative business start-ups and consumer trends, quickly became dated and of limited value.

Of far greater value, but equally overwhelming, were the interviews that one of our project partners conducted with one local distributor and seven local grocery retailers of various sizes. The resulting draft report, “Working with Retail Buyers,, is included as Appendix A to this report. This report, which was delivered to the farmers in January 2002 as a PowerPoint presentation, explored retailers’ interest in a wide range of food products, as well as the effectiveness of various food labels and other marketing strategies. The retailers’ answers varied widely, and while the report provided many insights, it really didn’t enable us to narrow the universe of potential market opportunities for Wisconsin producers.

Three months into our SARE project, we decided it was simply unrealistic, given our limited funding, to identify specific market opportunities for further development. Our market lit review and our retailer interviews made it clear that literally hundreds of marketing strategies and product ideas were worthy of consideration. Our modest budget simply did not allow us to study specific ideas sufficiently enough to recommend them to southern Wisconsin farmers. Simply put, it was not within our means to “pick winners.”

At about the same time, an opportunity arose to more than double our project funding and to extend the reach of our project statewide. Three of our project’s four partners had joined with six other organizations in four states to secure a $2.5 million grant from the USDA’s Initiative for Future Agriculture and Food Systems (IFAFS) program. One aspect of that IFAFS project included a “farm cluster” initiative quite similar to our SARE project. By adapting our SARE methodology, we were able to dovetail the two projects, effectively injecting $100,000 of additional support for the core component of our second SARE objective: to organize and develop “farmer clusters” around market opportunities.

The adaptation of our SARE methodology involved shifting the project from a “consumer-driven” to a “farmer-driven” initiative. This coincided with our revelation that it was not within our means to identify the most promising markets on farmers behalf. Instead, we let farmers come to us with their own ideas, and we essentially gave them an opportunity to compete for our support.

Combining portions of our SARE and IFAFS funds, we offered a total of $32,000 of direct cash support and approximately 500 hours of free technical assistance. This was to be divided among 6-8 farmer clusters, which were to be chosen through a competitive grant process. At the Midwest Value Added Agriculture Conference in January 2001, we unveiled the “Wisconsin Initiative for Value Added Development” and publicized a formal Request for Proposals (see Appendix B). The Initiative was also promoted through a press release and via 72 county extension offices.

The application process was quite simple. We requested a 2-page “letter of interest” from Wisconsin producers who were exploring or developing a business opportunity involving “multiple farm families.” We gave a range of examples to convey the types of projects we were looking for, including gourmet ice cream, Internet marketing, ethanol production, organic breakfast cereal, and a farmer-owned restaurant chain. We asked applicants to address the following criteria in their letters:

(a) Provide a description of the basic business idea, including the intended market.
(b) Give clear evidence of farmer leadership and multiple farm involvement.
(c) Identify the involvement of local resource people.
(d) Demonstrate their project’s compatibility with environmental sustainability.

We received about 40 letters of interest. Key to our selection process was the establishment of a Farmer Advisory Council. Working through our 72 county extension offices, we sought farmers to serve on this council who were successful, innovative, and respected by their peers. Most of the eight producers who agreed to serve on the council were previously unknown to our project team members. While most of them were traditional commodity producers, they were quite open-minded and fully supported the goals of our project.

Prior to submitting the cluster proposals to our Farmer Advisory Council, three members of our project team screened the 40 letters and determined that only 23 met our basic criteria. Those that were rejected were invited to resubmit their letters to adhere better to the criteria, but none of them did so. The 23 proposals that passed the first screen were invited to contact us to improve their proposal before we submitted it to the selection process. Many of the projects accepted this offer and made significant improvements to their proposals. Our intent with this process was to ensure that promising ideas would have the best chance to compete for our assistance.

We should first concede that we were not unanimously satisfied with the kind or caliber of proposals that we received. Our hope was to select some projects that could potentially impact large numbers of “commodity” producers in Wisconsin. While we did receive and select one proposal involving about 20 traditional soybean producers, even that one involved small-scale technology with limited output, and they weren’t really looking to expand. The bulk of the 40 proposals involved “niche market” products involving companies at a very early stage of development. This meant that it would take many years, if ever, before any of the companies grew to a scale that could benefit significant numbers of growers. Frankly we were hoping that one or two of our selected projects would involve adding value to traditional commodities at a scale that could immediately involve large numbers of producers. Such proposals did not materialize.

Nevertheless, we sent copies of the 23 two-page proposals to our eight farmer advisors. Our seven project partners also read the proposals and participated in decision process. All 15 people rated each and every proposal, and we then tallied up the scores, and the top eight proposals were selected. These eight clusters were informed of their selection in June of 2001, about one year into our two-year SARE project.

Project partners then met face-to-face with each cluster to outline their needs. Each cluster was asked to develop a budget for how they would spend our $4000 cash grants. We also developed technical assistance plans for each cluster, which would consist of approximately 40 hours of early stage TA from UWCC and 25 hours of advanced TA from CDS.

We then ran into a problem. The cash grants and advanced technical assistance were to be funded by the IFAFS grant. However, when that grant was originally submitted to the USDA by the lead institution (the University of Nebraska-Lincoln), our Wisconsin subcontract was mistakenly shorted by $68,000 (two-thirds of our farm cluster award). Subsequently, we spent the next 18 months tangled up in red tape, trying to get the USDA to approve a budget fix that would get us the money we had already promised our cluster recipients.

Needless to say, the project was severely constrained as a result of this budget impasse. During those 18 months, we sporadically provided “early stage” technical assistance to the projects that needed it most, but the cash grants and most “advanced” TA was withheld until the full funding was released. A one-year no-cost extension was requested and granted from SARE.

Fortunately, through the 18-month interim all eight clusters continued to develop, and finally in December 2002 the USDA allocated us the missing $68,000 and we reconnected with each cluster. Each began submitting receipts for reimbursement of the $4000 of expenses approved in their cash grant budgets. A CDS consultant was assigned to each project and developed plans for delivering a minimum of 25 hours of advanced TA over the final six months of the project. A brief overview of each cluster and the support we provided is presented below.

(1) Wisconsin Dairy Grazers. One of three dairy clusters, this group consisted of five family farms, all of which had grass-based dairy herds. They were interested in pooling small quantities of summer milk to produce a branded cheddar cheese that emphasized the higher levels of conjugated linoleic acid (CLA) from their pastured cattle. The producers, who are quite geographically dispersed, chose to use their $4000 cash grant to pay for their time and travel to attend board meetings every six weeks. The group was in need of several forms of technical assistance, including: (a) assistance in the formation of a cooperative; (b) conducting market research; (c) working with cheese manufacturers; and (d) writing a business plan. We were able to help them most substantially with the first two requests.

UWCC staff helped the producers form the co-op and develop by-laws. CDS staff conducted market research examining the potential marketability of CLA for a U.S. market. The study, attached as Appendix C to this Final Report, determined that CLA was not a good characteristic on which to form their brand and made other recommendations to the group for marketing their product. Meanwhile, the co-op struggled financially while working with a distributor that didn’t understand their product. They chose cheddar cheese because it ages well and would allow them to build an inventory while they slowly grew the business. The downside of cheddar is that it’s generally considered a commodity product, and that may also have limited sales of their relatively high priced cheese. They are now working with a successful specialty cheese marketer who has guided them as they found a new broker relationship, explored new cheese products, got research support from the UW Center for Dairy Research to improve the original recipe, and hired a part-time marketing person to promote and sell their cheese to retail and wholesale outlets. Members of our SARE team continue to help them out, field regular calls, and engage the co-op in other artisan cheese activities in the state.

(2) Scenic Valley Protein Producers Co-op. The second of three dairy clusters, this co-op has over time included about a dozen farms that milk exclusively Jersey herds. The co-op has been paying a local plant to produce its cheeses for them, which they then marketed via gift boxes and to some retailers in the Chicago area. The co-op has always been centered around one individual leader. Their long-term goal was to secure funding to build their own cheese factory. They asked us for assistance in developing a marketing plan for the co-op’s cheese and securing additional funds for preparing a business plan. During the course of the project, there was a falling out among co-op members over the strategy for the developing the co-op. Personality differences also played a part in the conflict which resulted in several members quitting. Meanwhile, project staff helped them secure an Early Planning Grant of $3,000 from the Wisconsin Department of Commerce in the spring of 2003 for the preparation of a business plan, and the remaining co-op members reached agreement on changing their business plan to continue outsourcing cheese production rather than building a new plant. They also agreed to pursue a USDA Value Added Development Grant in September 2003, with the support of CDS staff. The co-op is focusing its marketing on natural food co-ops in the Upper Midwest. Their goal is to convert about 30% of their 1.8 million pounds of milk to cheese and cheese spread by the end of 2004. The current level is about 2%. It is also considering certification by the Midwest Food Alliance as a means to strengthen its market with the food co-ops and other stores with natural foods sections.

(3) Green Ribbon Creamery. This group started with 13 dairy farms that were looking to jointly process their milk with small-scale equipment and to market a variety of dairy products into very local markets. A UWCC staff member attended and facilitated some of their initial meetings, and the group indicated that that was very helpful. When that facilitation was discontinued due to distance and the hold-up of IFAFS funds, the group struggled to reach consensus on some basic issues. Meanwhile, they contracted separately with outside consultants for a feasibility study, which came back very positive. However, when a UWCC staff person saw the report, she was very skeptical and ran it past more knowledgeable experts, who confirmed her concerns. When she confronted the co-op with this negative assessment she was not well received. In fact they discontinued their relationship with our SARE project, even refusing the $4000 cash grant. In the months that followed, many producers left the group and thus far they have not pursued joint investment in processing facilities. However the few who remain involved are still optimistic about the market potential and say that they will go forward, whether as part of a group or individually. The IFAFS funding that would have gone to this group was divided amongst the seven other clusters.

(4) Northwoods Marketing Co-op. When this group approached us they included 15 producers from northern Wisconsin who were interested in cooperatively marketing a range of niche farm products, with an initial focus on retail cuts of goat meat. They were aware that there was a diversity of ethnic groups in the Fox River Valley whose diets included goat meat. They also saw a potential opportunity if the federal government restricted imports of goat meat, as had been anticipated. The group sought assistance with market research and development of a business plan. As with other clusters, our limited funds did not allow to provide business plan assistance. On many occasions throughout the project we helped them track down information via the Internet. We connected them with UW staff, notably a meat scientist who ran tests on their goat meat for taste and nutritional content. We reviewed a grant proposal they submitted for federal funding, which they did not receive. We took them to an IFAFS conference in Nebraska that they found very useful. Toward the end of the project, CDS staff conducted market research on demand for goat in Hispanic markets. Prospects for the co-op initially looked good, as they got free national exposure from a TV appearance, and they simultaneously got their product into the Woodmans chain of Wisconsin groceries. With their own limited resources they developed a very optimistic business plan which unfortunately we did not make time to properly review. They claimed to have expanded membership to 161 farms, though only a handful invested significant money and were active in the co-op. Two members of the group quit their off-farm jobs and set up an office for the cooperative. They recognized the need for capital inputs to effectively implement a marketing program, and they sought private investment for the project. That funding did not materialize. Due to high transportation costs, they stopped distributing meat to Woodmans. Potential capital investors advised that a cooperative structure restricted private investments, so the group dissolved the cooperative and planned to form a conventional corporation. Currently, the group is not marketing goat meat, but they intend to resume when they raise the necessary capital. Both people who served as co-op staff have now found other jobs. Leadership in the group remains in the same hands.

(5) Wisconsin Pasturelands. This group of about 10 farms formed an informal association a year or two prior to our involvement with them. Informally, these individual direct marketers jointly promoted their various “natural” meat products under a “Healthy Meats” label. One of our SARE partners had helped them secure several small grants to hire a coordinator and develop a business plan to evolve the group into a formal cooperative business for the purpose of joint marketing. Our SARE grant was requested to supplement their coordinator’s salary and also to pay an industry consultant to review their business plan. The consultant rated the plan very favorably. The coordinator did an excellent job working around the many obstacles to small-scale meat processing and marketing. A very attractive label was developed that incorporated the new name, Wisconsin Pasturelands. Unfortunately, in the end most of the participating farmers decided they did not want to invest the necessary capital nor give up their independence. The coordinator shopped the opportunity around to other producers, and a group of Amish producers were committed to marketing their free-range poultry through the co-op. Eventually the coordinator took a job with a growing organic dairy co-op in the state. Another coordinator stepped in and continues to assist the Amish producers market their poultry through the co-op. However, working with the Amish involves challenges, such as their refusal to get insurance, which some distributors are demanding. By last account the co-op was still operating, but the scale of the business falls far short of the opportunity outlined in the business plan.

(6) Fox Valley Winter Farmers Market. This project was initiated by an individual producer who wanted to work with her fellow vendors at summer farmers market to develop an indoor winter market. They requested and received our SARE funds to advertise the new winter market on local radio stations. They received assistance developing a survey of customers after the first market ended. They attended a SARE-sponsored training on grant-writing (as did several other clusters) and they credited that training with their successful application for a SARE Producer Grant. Their winter market did well enough the first two seasons to expand into a larger facility this winter. They report that the market makes a significant difference for a small group of farmers. Vendors earned between $300 and $2000 last season. Also important, they were able to maintain year-round relationships with their best customers. While the market has always been overly dependent on the woman who first initiated it, it seems that our limited assistance may have reduced her frustration of carrying too much of the load on her own.

(7) Soy-Co LLC. Of our eight projects this was the only one involving traditional commodity farmers, and it also represented the longest established and most capital intensive of the clusters we worked with. It was started in 1997 by some 20 soybean producers in central Wisconsin. Together they had spent $250,000 to purchase used equipment to mechanically press soybeans into meal and soy oil. The demand for their meal by area dairy farms was less than expected, but they found several markets for the oil that paid better than commodity price. The result was they were able to keep the business afloat, but if was never really sufficiently profitable. They requested our help primarily to explore markets for soy-based dog food products. We did some initial research for the group that showed that dog food markets would be very difficult to break into, but nonetheless they continued pursuing it and used the $4,000 cash grant to develop a pilot product for nutritional testing and as samples for market development. Despite continuing input from members of our SARE team advising that the dog food market was probably not a great idea, they forged ahead. Ultimately, however, the continued lack of profitability forced all but one of the partners to want out of the business. They attributed their poor sales to low pork and dairy prices, which restricted their meal sales, and high rent in a business incubator that was not suitable to their operation. One remaining member recently bought the equipment from the LLC, which was then dissolved. His intention is to move the equipment to a new location and possibly focus on organic beans.

(8) Central Agriculture and Food Facility. This project was initiated by an existing farmer co-op, with additional interest coming from a large urban farmers market and a coalition of CSA farms. Their goal was to determine the feasibility of a shared facility that would include some combination of services, including: an indoor winter farmers market, a distribution and storage center for local produce, a commercial kitchen, office space, and retail food space. The main assistance we provided the group initially was to write two successful grants proposals to further support the project, including a state grant for $25,000 and a county grant for $17,000. The project then lingered for a year as the manager of the co-op behind the effort was overwhelmed with his own farm and his co-op responsibilities. The project finally moved forward after he accepted leadership support from CDS and UWCC staff. The feasibility study promised in the two local grants are about half completed. There does appear to be interest in the project from area farmers. This past summer a steering committee was formed that is now guiding the project. A local food co-op has become involved that has the potential to provide access to processing equipment. The project has also become connected with two related efforts to get local food processed for distribution to the UW cafeterias and the Madison public school lunch program, both of which look very promising. The steering committee is also examining the potential for a more ambitious phase of the project involving a comprehensive facility featuring an indoor farmers market along with other components. This next phase may take several years to plan and implement.

Our Other Project Commitments

The selection and provision of assistance to the eight farm clusters represented the bulk of the work that the partners completed in this SARE project. This work corresponded to our Objective 2. We have already discussed that while we undertook the work of Objective 1, we stopped short of “picking winners” because we realized that it wasn’t within our abilities or our budget to confidently identify the most promising market opportunities for Wisconsin producers. We should briefly address what we accomplished concerning the two other project objectives.

Under Objective 3, we promised to explore and organize the development of legislative and state programs and policies supporting alternative marketing initiatives in Wisconsin. As planned, we conducted a literature review of what other states were doing to support value added agriculture. This resulted in a great many downloaded websites and program descriptions, most of which quickly became out of date, particularly given the extreme restrictions in all of the states’ budget situations during the period of this grant. Nevertheless the information helped us envision the right system of support for our producers. We still expect to complete an updated description of most Midwestern states’ value-added and alternative agriculture programs by mid-March, 2004.

Two significant events affected our approach with this objective. First, at one point in the project’s progress, the project partner assigned chief responsibility for this effort became engaged in a state fight to increase funding for our state’s Agricultural Diversification and Development program through use of one-time federal monies available for minor crops. (No SARE funds were used in that advocacy effort.) Because some of the state’s principal commodity and farm groups opposed this effort, we recognized that the timing was inappropriate to then approach them about their interest in state policies and institutions supporting value-added and alternative marketing initiatives. We decided to wait. This proved to be a sound approach as, indeed, several of those groups have since expressed interest in working with us on many of these issues. This change of perspective has come about in part due to work supported by this project in assisting the Wisconsin Potato and Vegetable Growers Association (WPVGA) in searching for state institutional assistance with their marketing campaign for specialty, “green label” potatoes. In the course of many interviews, we identified significant deficiencies in state supported marketing assistance. We have discussed our results with several mainstream agricultural groups beyond the WPVGA, many of which have voiced agreement with our conclusions and are interested in working with us on remedies.

While tensions cooled and agricultural groups’ attitudes became more favorable to this set of issues, the state of Wisconsin found itself in the midst of a major budget crisis that continues to this day. This not only killed any near-term prospects for increasing state resources for value-added and alternative marketing initiatives, but all existing programs’ funding became threatened. As it made no practical sense to explore the potential to develop new programs with impossible budgetary implications, we began exploring opportunities for better coordinating very sparse existing state institutional resources on marketing assistance. We are scheduling a round-table strategy meeting of key institutional and agricultural players for late March, 2004 to identify opportunities for such synergistic work and the best mechanism for coordinating them to make them easily available to the state’s value-added entrepreneurs and others.

For all three years of our project, one of the partners co-organized a Midwest Value Added Agriculture in Eau Claire, Wisconsin. Besides providing a vehicle to promote our Request for Proposals and to deliver training to our selected clusters, the conference also provided a forum for bringing farmers, elected officials, and state agency people together every January to discuss state support for value added agriculture.

At the 2001 conference, we sponsored a discussion forum titled “Supporting Emerging Agricultural Development in Wisconsin.” A state Department of Agriculture official was asked to lead a discussion about developing a better support system for value added agriculture, and 175+ participants were invited to join in. We also asked the WI Dept of Commerce to present their grant and loan programs over the lunch hour. In 2002, the Secretary of the ag department and the dean of Extension’s ag program were asked to present to 200+ participants as to what their respective institutions were doing for them. In 2003, we held a general session titled, “What Are Your State Agencies Doing to Support Your Markets?” Top officials from the departments of agriculture in Wisconsin and Minnesota were asked to answer the question in front of 225+ participants.

It is difficult to quantify or even qualify the effect of these sessions, but we are happy to report that support by state institutions does appear stronger today than three years ago, despite the state budget crisis. The popular Ag Development and Diversification grant program has been maintained at $400,000 level. The Dept of Ag and the UW-Madison have worked together to support the growing specialty cheese and farmstead dairy industry in the state. Extension officials secured a federal grant for over $100,000 via Senator Kohl’s office to support fifteen outreach efforts related to value added agriculture. Most recently, the Dept of Ag and UW Extension jointly unveiled a web-based marketing program for farm and food companies, called SavorWisconsin.com. While our SARE project can’t take direct credit for these developments, the conferences we co-organized kept the right state officials aware that there was a sizeable demand for support among a great many Wisconsin farm families.

Finally, with Objective 4 we promised to share lessons of this southern Wisconsin project within the state and the region. A major obstacle to fulfilling this objective was the timing of events that postponed much of our technical assistance until the final six months of the three-year project. Much of that TA continued until the final months and weeks of the grant. This meant that the “lessons learned” from working closely with the groups did not get communicated to the project team until literally the final week of the project, leaving no time to organize and implement an outreach effort.

However, one of the partners is publishing two reports that resulted from this project. One is CIAS Research Brief #66, which concerns consumer response to CLA in cheese from pasture-fed dairy cows, which was a result of the TA we provided to one of our eight clusters. The second report, which is only available in draft form at this time, describes Madison retailers’ interest in local, sustainable foods. This report was a result of our market scan conducted as part of Objective 1. Finally, this Final Report, which will be available on the SARE website, can be condensed and reproduced in a more attractive format if we find there is a demand for it.

Research conclusions:

Certainly one of the best results of this 3-year SARE project is that all eight of the farm clusters that we worked with continue to exist, in one form or another, albeit with varying degrees of success. However, the confidentiality that we guaranteed each cluster, and the trust and access to information that they shared in return, prohibits us from reporting everything we know. Even more limiting is the fact that they certainly they didn’t tell us everything! To some extent, and in some cases, they also may have exaggerated their impact and their prospects. All of this severely limits our ability to conclude which of the eight are truly successful, or which will likely be around in another five years. Given what we know and what we can share, it is safer to present our Lessons Learned as generalizations from our work with eight very diverse collaborative business development initiatives.

Lessons Learned

(1) The cost of market research and market development should not be underestimated.

Originally we intended to do market research and identify opportunities around which to organize farmers. We quickly discovered that we did not have sufficient resources to narrow down and confirm any single opportunity. Instead we selected clusters of farmers that had already identified markets themselves. None of the eight ideas lacked market potential. On the contrary, potential demand for many of their products appeared substantial enough to build sustainable businesses. Many of our groups were wise enough to avoid new construction and ownership of facilities, choosing instead to rent and to contract with existing companies for needed services. That kept their capitalization needs down. However, many of the clusters were introducing new products and/or tapping into new markets, namely, ethnic markets for goat meat, “natural” angus beef, soy-based dog food, cheddar cheese from pastured cows, and branded Jersey-based dairy products. Given a million dollar budget, many of these new ideas might achieve relatively quick success. Lacking that level of financing, these groups have struggled. We also learned that when a group does contract for marketing services (as it might for custom processing), the key is finding a broker or distributor that understands the value of the new product, and is truly committed to selling it.

(2) Ambitious ideas should be grounded in realistic business plans.

Individual entrepreneurs sometimes brag that they succeeded without ever writing a business plan. But when groups of people are involved, having a plan on paper and getting an outside evaluation is very important. In one of our clusters, potential investors were scared off when an external reviewer questioned the market assumptions behind the plan. They deserved to know what they were getting into. In another case a very ambitious plan was not sufficiently reviewed, and a number of families lost several thousand dollars. The sooner something gets put down on paper the better, as the plan can evolve and improve over time. Ironically, in the one case where a very thorough plan was developed and positively reviewed by a qualified industry expert, the bulk of the farmers withdrew from the project.

(3) Shared leadership is critical to successful cooperative ventures.

Several problems arose related to leadership: over-dependence on one individual, domination by one individual, poor communication, divisions over mission and strategy. Probably all eight clusters suffered from one or more of these conditions at one point or another. When any one of these problems persist, the result can be disastrous. The goal should be to attain a core team of leaders who complement one another’s strengths, communicate well together, trust each other, and generally agree on mission and strategy. Not every cluster participant needs to play a leadership role. But, depending on the scale of the operation, somewhere between three and nine individuals must rise to the occasion.

(4) University extension and non-profit institutions can provide valuable support.

Businesses should never become grant-dependent, but grants can certainly help start companies up. University and nonprofit staff often excel in grant writing, and when they share that talent with farmers they provide a very significant value. Also, a strong county extension system provides an excellent vehicle for communicating information about grant programs and market opportunities to farmers. The UW-Madison provides excellent training in business planning and co-op board of directors training. In hindsight, we should have provided our cluster groups greater access to these educational resources.

(5) A group of farmers pursuing an opportunity together can be remarkably persistent.

The funding that we provided the eight clusters was insufficient. The technical assistance we provided was delayed and not as complete as it could have been. They often grossly underestimated their marketing costs. They suffered every form of leadership ailment. They received negative assessments of their business plans, they created overly ambitious plans without external review, or they neglected business planning altogether. Despite these and other difficulties, all eight of the initiatives were still going when we last checked. That is a testament to their hard work and stubborn resolve. Not necessarily by choice, most have adopted a “slow growth” strategy. If they continue to hang on, it is possible that some of them will slowly gain market exposure, accumulate some capital, confront opportunities, and achieve the profitability to which they aspire.

Economic Analysis

We did not commit to doing economic analyses of the eight clusters that we selected, and we did not collect financial information from them that would allow us to do so. Essentially this project was about discovering how to best identify market opportunities for small and mid-sized farms, and how to best support farms that come together to develop businesses to exploit those opportunities.

Farmer Adoption

We estimate that a minimum of 100 farms were directly involved in the eight clusters we worked with, although their level of involvement varied widely. We mostly worked with individual cluster representatives and to a lesser extent with their governing bodies. We did not survey the 100 farmers to ascertain whether they were adopting new practices, how much they benefited from the cluster activity, or for any other information. Nevertheless we can briefly summarize some of the new skills that various farmers developed via activities funded or supported by our SARE project:

(a) Working with radio stations to place promotional ads
(b) Completing business plans using qualified consultants
(c) Working with a consultant to conduct market research
(d) Developing brand identities and attractive labels
(e) Forming a legal co-op, developing by-laws
(f) Working with the university to develop new recipes
(g) Working with the university and private firms to get products tested
(h) Serving on a board of directors

Participation Summary

Educational & Outreach Activities

Participation Summary

Education/outreach description:

Two publications from the UW-Madison Center for Integrated Agricultural Systems:

(a) Research Briefs #66 “Flavor, Not Health Claims, Key in Marketing Pasture-Based Cheese”
(b) “Working with Retail Buyers” (in production)

Outreach and education activities:

(1) Co-organized three Midwest Value Added Agriculture Conferences in Eau Claire, Wisconsin in 2001, 2002 and 2003. Our project partners gave workshops on (a) grant-writing, (b) preparing yourself for the retail market, (c) steps to starting a co-op, (d) value added strategies, and (e) starting a food business in Wisconsin. In conjunction with our third objective, we also hosted sessions at each conference that brought farmers together with elected officials, state agency representatives, and university leaders to promote greater state support for value added agriculture. In addition, three of our clusters made presentations at the conferences, including the Appleton Indoor Market, Wisconsin Dairy Grazers Co-op, and Northwoods Marketing Co-op.

(2) As part of our involvement in the related IFAFS project, we were able to invite all of our clusters to another educational conference in Lincoln, Nebraska in August 2002. Two of the clusters accepted and both rated the experience very worthwhile.

Project Outcomes

Recommendations:

Areas needing additional study

Based on the “Lessons Learned” presented above, we recommend the following suggestions for future research, demonstration and training.

(1) We still believe that university and nonprofit institutions can do preliminary market research to uncover and flesh out opportunities for farmers. However, that work requires significantly more funding than was available to us in this project. The USDA’s recent funding of Agricultural Innovation Centers across the country provides significantly more funding, largely for this purpose, and hopefully that will prove to be a wise investment of our tax dollars.

(2) Many universities and nonprofit institutions offer business planning courses and board leadership training. These should be directed to leaders of farm groups who are undertaking collaborative business ventures. If possible the training should be partially subsidized.

(3) Good grant writers should be given incentives to put their skills toward supporting collaborative farm ventures. A good grant proposal not only can secure much needed funding, but it also can present a logical framework for a business development effort that will improve its chances for success.

(4) Concerning grant programs that support collaborative farm ventures, we suggest that they insist on seeing significant spending on market research and market development. Producers can come together and develop excellent leadership skills. Working with the right people, they can develop new products that truly reflect consumers’ needs and wants. They can avoid investment in physical infrastructure by partnering with existing businesses. However, if they do not allocate money to researching market conditions, to gaining market exposure (through advertising, branding etc.), and to hiring or contracting for marketing personnel, they will probably be a poor investment for farmers and taxpayers alike.

CITATIONS

DeMeurisse, A. 1999. Talking to Farmers about Sustainable Production and Marketing, Report prepared for Food Choices, Madison, WI.

Klotz, Jennifer-Claire V. 2001. Farmer Direct Marketing Bibliography, United States Department of Agriculture, Agriculture Marketing Service, Number 135.

Pool, W. 1999. “IPM Label Products on Supermarket Shelves.” Presentation to the Adding Value through Environmental Marketing Conference, 12/6-7/1999, Madison, WI.

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.