Building Diverse Markets and Strong Businesses with Limited-Means Farmers

Ohio University Sales
Sales to Ohio University (OU) were very successful for a first effort. The Cowdreys, family farmers from Meigs County, were very pleased with the outcome. The same amount of produce they'd previously sold generated significantly more income with no broker or distributor involved.
The Cowdreys say they will continue working with Ohio University and plan to increase sales to them. They are also planting new crops specifically for the OU market. Randy Shelton, director of food service at Ohio University, also says he is happy with the process. He is currently buying from eight local producers and says that the quality and freshness is outstanding.

Business Workshops
The business workshops were generally successful. A total of 51 people attended, not including those at workshops that were held as part of the landowners conference. Producers said that the content was useful and returned positive evaluations.
We are concerned that the farmers most in need of business assistance may not participate in workshops because they aren't aware of the difference that good business practices can make to their profitability, and they may not even know that there are gaps in their knowledge. Word-of-mouth advertising from satisfied growers may help overcome this obstacle.

Specialty Crops
A total of 185 producers attended specialty crops sessions at the annual "Income Opportunities" conference. Topics included agroforestry products (such as ginseng and goldenseal), orchard and vineyard crops, beekeeping, rotational grazing, and production of field-grown Chinese and Western medicinal herbs. Field crop sessions at the conference were attended by 74 producers, and 111 attended the forest-oriented crop sessions. We also sponsored a number of stand-alone workshops on forest cultivation of ginseng, goldenseal and other medicinal herbs, as well as mushroom production and Paw Paws.
In addition, the interest of Ohio University in Chinese medicinal herbs spurred us to identify local resources for production of these herbs. Ohio University's College of Osteopathic Medicine is one of a few medical schools in the United States that has begun teaching Traditional Chinese Medicine (TCM), which relies on a number of medicinal plants, many of which are not readily available in the United States. Currently there is not high demand for these plants in the United States but the market is growing. The TCM program at OU College of Osteopathic Medicine will potentially develop a significant pool of doctors and practitioners with emotional and social connections to Southern Ohio. If we can introduce these TCM practitioners to local farmers growing quality products while they are students here, we may have a pool of "salespeople" across the country committed to Southern Ohio herbs.
We participated in several exploratory meetings with OU personell and farmers, and offered sessions on Chinese herbs at the annual "Income Opportunities" conference. About 20 people attended the two sessions on Chinese medicinals.
We have continued to explore this idea, most recently bringing in Steven Foster, an internationally known researcher and author on medicinal herbs, to consult with Rural Action staff and high-level administrators at Ohio University. We also met with representatives from Chinese universities and a prominent Hong Kong businessman interested in exploring the potential of production of high-quality herbs in Ohio. We are focusing our energy on the developing domestic markets, as large-scale production for export is unlikely to be feasible or profitable for the farmers with whom we work.

Local Food Distribution and Value-Adding
Our subcontract to ACEnet to carry out value-adding and distribution work focused primarily on value-adding. Of particular interest were two efforts at utilizing the abundance of tomatoes and peppers produced in the region. Local grower Rusty Cummings developed a salsa product and produced yellow-tomato salsa with a $9,000 value in his first year from his excess production of tomatoes. Local restaurant Tomatillos purchased local peppers for production of an additional $4,400 worth of salsa.

Good Food Direct!
While the Good Food Direct! project's total sales approached goal levels, it faced considerable problems resulting in major changes during the grant period. In late 2001, we were informed that a State of Ohio grant that subsidized project operating costs would not be renewed. At the same time, the Corporation for National Service announced major changes in the AmeriCorps VISTA program that would reduce the number of VISTA staff persons assigned to this project from three to one or none by the 2003 fiscal year.
As a result, we were forced to take a hard look at the project's viability, despite its popularity with producers and a committed core of consumers. The structure of the project was labor-intensive: Consumers called in, dropped off or e-mailed their orders to the Rural Action office each week, with most orders involving items from several different producers; project staff and VISTAs then compiled all orders into a list for each of the 22 producers. Each producer received their list of orders by phone, fax or e-mail and brought the products ordered to a central pick-up site each Wednesday morning. The staff and VISTAs pulled together all items ordered by each consumer to have them ready for pick-up on Wednesday afternoon. Consumers made one payment for their entire order by cash, check or credit card, and the staff then broke all the payments out by producer and issued checks to the producers every two weeks. The program operated in both Athens and Columbus, so someone had to make the trip to Columbus each week to deliver orders to the pick-up site there and receive payments. In addition, some Athens consumers paid an extra fee to have their orders delivered. And then there were all the marketing activities!
All of this required one full-time staff person and three VISTA volunteers to operate. In the absence of substantial grant funding and the VISTA volunteers, the program, using this structure, would be too costly to continue. Through a series of meetings with the GFD! steering committee and all participating producers, we learned that producers were not able to absorb more of the cost or labor of running the program. Further economic analysis demonstrated that a sales volume of nearly $500,000 per year would be required for the program to generate sufficient operating revenue to cover all costs. We reluctantly decided to completely restructure the program.
For the 2002 season, consumers had to both order from and pay farmers directly. A small group of growers continued to offer a convenient weekly pick-up site at a local bakery that had gotten its start through Good Food Direct!. Other growers required that orders be picked up at the local farmers market, and a few offered delivery.
The new structure was more burdensome for both the consumers and the growers, and as we expected, sales were significantly lower: less than $6,000, versus more than $44,000 the previous year. However, this structure did eliminate the 15 percent fee that was paid to Rural Action in previous years to help with operating costs, and it made for a stronger relationship between farmer and consumer. At this point it's not clear whether the producers will continue the project in 2003.
We have had considerable interest in this model from other regions in Ohio and other parts of the country. It is possible that in a setting with better access to a larger customer base the model could work, especially with more use of on-line ordering by customers so that the process could be streamlined. Despite the need to restructure, Good Food Direct's successes were significant and bear examination and discussion.

Incubator for New Producers
Good Food Direct! served as a useful "incubator without walls" for new producers, allowing them to test-market in a supportive environment. The catalog and other marketing materials provided a low-cost, low-risk way to get visibility in the marketplace and secure orders from customers and to receive market feedback about which offerings were appealing to customers.
In contrast, the Athens Farmers Market is extremely successful but can also be a difficult market to access for newer producers. The Market typically has more than 50 vendors, many of whom have been there for more than a decade and have substantial consumer loyalty. It is difficult for new farmers to compete with these established and recognized firms.
Access is also a barrier; there is a waiting list for stalls at this popular market. There are not many other successful markets in the region.
Overall, the Athens Market is a good investment for farmers able to participate and sell hundreds of dollars of product in three hours. On the other hand, a farmer going to the Morgan County farmers market may spend much of the time waiting for customers. Farmers markets have significant fixed costs for producers (most notably labor) which are easily justified in a successful market but which are not immediately justified in a smaller market.
The Athens Farmers Market succeeded through the efforts of a core group of extremely dedicated persons who stuck with it over time. SARE might consider investing in projects that determine ways to enhance marketing of emerging farmers markets and provide support to early "innovator" farmers. Policy work focused on leveraging greater state and county support for farmers markets also seems compelling area.

Incubator for New Producers: Test Marketing
The experience of baker Christine Hughes illuminates the function of Good Food Direct! as an incubator. Christine had been involved with food businesses before, most recently as a worker-owner at Casa Nueva restaurant in Athens, Ohio. The Good Food Direct! catalog and marketing mechanism allowed her to test the waters for a business of her own with relatively limited risk exposure.
Christine offered several different specialty breads through the catalog under the name "The Baker's Trade." While she didn't receive enough orders to "quit the day job," she was able to get a great deal of feedback from customers about product preferences. The Good Food Direct! staff also received both positive and negative feedback that was valuable to Christine.
Christine's participation in Good Food Direct! also gave her a track record for successfully marketing her products that was helpful in securing outside financing for her venture.
After her successful year in the Good Food Direct! catalog, Christine was confident that customers wanted and would pay for her product. She launched the Village Bakery and Café on East State Street in Athens and is now grossing $12,000/month in her first year.
Without the low-risk marketing provided by Good Food Direct!, Christine might not have taken the bigger risk to open a bakery, and the ten local producers from whom she currently buys ingredients would not have the additional market she provides. In addition, through networking with local farmers on the Good Food Direct! steering committee, Christine offered her bakery as a drop-off/pick-up site for GFD! in 2002 to the benefit of all involved.

Incubator for New Producers: Quality Control, Customer Interface
In addition to providing feedback about customer preferences, Good Food Direct! also helped producers understand the importance of providing a quality product that meets consumer expectations. GFD! staff members were able to tactfully communicate any quality concerns.
For example, during periods of drought, some farmers brought in produce that was not of the quality that customers wanted. Several consumers communicated this to GFD! staff who then worked with farmers to improve product quality.
Some farmers expressed some resentment about what they perceived as a customer's desire for perfection even if it required additional resources (irrigation in drought periods, significant amounts of time spent on cleaning of produce, etc.). These conversations, though sometimes challenging, helped producers supply products that would not only sell but would lead to positive referrals.
Many farmers put their heart and soul into their products and believe that will automatically result in a market. Long-term success requires that growers see the product from the customer's perspective--the essence of marketing. A mediating system like Good Food Direct! can help farmers understand quality concerns and can give consumers a better understanding of the hard work, sacrifice and risk factors, including weather, in farming.

Other Outcomes and Benefits
The GFD! Holiday Catalog was one of the program's most successful ventures, and offers a promising mechanism for future farmer cooperation. While the 2002 holiday season was relatively short, sales in this period accounted for 23 percent of overall sales and required far less effort than sales efforts in Columbus and Athens for regular season. Some items offered moved beyond the low-price strategy that farmers often adopt; these had higher profit margins and were put together as gift items that added value to the individual farm products.
With further market research it might be possible to develop higher-value products that are competitive in the marketplace, particularly in the corporate gift category. If a Web site were combined with the word-of-mouth marketing that has helped GFD! grow, it could generate significant business for farmers outside of the limited local market.
Ohio University graduates--4,000 each year--are a particularly interesting potential market, because many still feel connected to the region. Follow-up on this strategy would require producer interest and the availability of capital to "upsize" this effort to a self-sustaining scale.
The marketing of Good Food Direct! in Columbus allowed us to assess interest in local products and the feasibility of breaking into that market. We determined that there was significant interest but that we did not have the capital to capture enough market share to justify transportation costs. Selling larger quantities using a larger truck could have made the economics different but we did not capture enough customers to justify using a larger truck. The connections we made there are still serving local producers as two producers have maintained contacts and continued to sell there after Good Food Direct! ceased operations in Columbus.
While the final fate of GFD! may not have been as inspiring to farmers as we had hoped, it did involve grower cooperation and was viewed as a positive project. We've helped to establish relationships between numerous producers, strengthening the groundwork for future cooperation. Indeed, in 2002 there were two producers who, independent of GFD!, cooperated on supplying local produce and meat to customers in Columbus, following up on market interest generated by GFD!.
In addition, many producers are still active participants on Rural Action's Sustainable Agriculture Advisory Board and have expressed interest in forming one or more Grower's Associations for cooperative marketing and distribution. The disappointment that comes with the termination of Good Food Direct! has had a negative impact on Rural Action's ability to work with a few farmers, but the ability of local growers to work together has been strengthened, and that was, after all, the ultimate goal.