Improving Farm Profits by Developing a Niche Market for Green-Certified Senior Calf Beef

Final Report for LNE00-139

Project Type: Research and Education
Funds awarded in 2000: $112,621.00
Projected End Date: 12/31/2002
Matching Non-Federal Funds: $40,000.00
Region: Northeast
State: West Virginia
Project Leader:
W. Neil Gillies
Cacapon Institute
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Project Information

Summary:

Unprofitable family farms in West Virginia’s Potomac Headwaters region are being sold for development. The pastoral community and rural lifestyle they create are at risk. Area farmers are confronted with concerns over the environmental impacts of farming, but many have little disposable income to apply or little inclination toward improving their environmental management.

In this context, this report describes the experience of the Headwater Farms LLC and its partners as we worked, with support from Northeast SARE, to establish an economically viable business based on direct marketing a new beef product-–750 pound “senior calf”–raised hormone and antibiotic free using environmentally sensitive farm management practices.

The primary marketing attributes of the beef, which also define the attributes of the Headwater Farms program, include enhanced:

-customer health and safety from consumption of primarily grass-fed, lean meat with no hormones, antibiotics or additives coming from an identifiable supply chain

-conservation achieved through protecting streams and progressive grassland management

-farm economics that would in turn help to preserve family farms and open space

The partnership relied on progressive consumers, accessed with the support of Cacapon Institute, a conservation non-profit, to demonstrate the feasibility of the concept through purchases of the product—-Petite Beef–sold in packages ranging in size from 15 lb. to whole beefs. On the production end, the eight Headwaters Farms farmers, in collaboration with the other partners, were called on to develop land management and animal husbandry protocols and a time line for protocol implementation. The partnership also had to work closely to develop the standard underpinnings of any business including auxiliary business relationships, marketing materials, and the means to package, store and distribute Petite Beef.

Introduction:

Looking to fend off development pressure and enhance watershed conservation, the WVU Extension Service, Cacapon Institute (a science-based non-profit organization), Gourmet Central (a specialty food producer), West Virginia University’s Animal Sciences department, the Hampshire County Development Authority, and the USDA-NRCS partnered with eight farmers in Hampshire and Mineral counties to produce and direct-market a niche beef product. Northeast SARE acknowledged the potential of this team and their approach by providing the partnership with a two-year $112,600 grant, administered by the Cacapon Institute.

Early on, the partnership recognized the need to establish a business entity able to market under an approved label. Over the course of a number of meetings and seminars, the participating farmers formed Headwater Farms LLC, and attained approval of a USDA–approved label trademarked as Petite Beef. The remainder of the grant term was spent working on issues of farm management such as producing, packaging, and delivering beef, and marketing to customers.

This experience includes notable successes, formidable challenges, and ultimately, what appears to be the creation of a smaller group of farmers committed to pursuing many if not all of the original goals of the project. Notable successes include early establishment of the LLC with USDA-approved label, creation of a business infrastructure capable of producing, packaging, delivering, and selling beef, cooperatively developing riparian protocols that provided both environmental and agronomic benefits, gaining a larger customer base than projected in the SARE proposal, and, less tangibly, the evolution of a group with a realistic sense of the demands inherent in producing and marketing their product. Challenges have included differing levels of buy-in to the original project concept, maintaining farmer enthusiasm in the face of greater-than-expected commitment of time and resources, a perhaps-unreasonable sales projection for the second year, and stresses within the partnership and LLC as everyone worked to make the effort a success based on their own expectations and measures. These success and challenges are discussed comprehensively below.

Project Objectives:

The performance targets for this project focused on the two groups of beneficiaries identified in the original concept proposal–the participating farmers and the nonfarming watershed community.

Our first goal was for six of the eight farmers initially involved in the project to achieve higher incomes within two years, and to agree to adopt the management requirements of the certified product within three years of the start of this project if results indicated it made financial sense to do so.

Nonfarming residents of the Potomac watershed have a close attachment to both the ideal of the family farm and the rural landscape; they fear this way of life will disappear and feel powerless to stop the process. At the same time, many harbor concerns over negative environmental impacts from farming. Our second goal was for at least 150 (50 the first year and 100 the second year) watershed residents and property owners exposed to the product and concept to support change in farm management practices by purchasing our beef for a premium price.

Cooperators

Click linked name(s) to expand
  • Bob Cheves
  • Harvey Christie
  • Peter and Robin Maille
  • David Pancake
  • Steve Ritz

Research

Materials and methods:

The grant’s performance targets and milestones below tell us what the grant was for. We were trying to determine:

1. if the Petite Beef product is acceptable (or better than acceptable) to customers;

2. if the product can be successfully marketed to the environmental community, and what kind of a response rate from various marketing techniques would be obtained;

3. how the costs and profits of raising this product compares to feeder calves.

Why Petit Beef? Most cattle farmers in West Vorginia produce cattle for the feeder calf market and lack the resources to raise many animals to maturity, which was the primary reason for focusing this project on large (750-pound) feeder calves instead of a larger, more traditional animal. Another reason the 750-pound animal was chosen was that it didn’t compete directly with fed beef; it was a new product on which, hopefully, a profit could be made. In addition, harvesting calves before they begin to put on significant amounts of fat produces a naturally lean product. The decision to grow animals for this program without using added hormones and antibiotics was market-driven, as it was clear that many consumers are concerned with chemical residues.

The resulting product is somewhat different than the beef most people are used to buying, and requires special instructions for preparation, primarily because it is leaner and has a milder flavor than traditional beef. In order to ensure that customers could prepare the product to its best advantage, one of the project partners (Gourmet Central) developed recipes specifically for this product. Those recipes, and the story of Petite Beef, were bound into a recipe book that was sent out with orders. Customer satisfaction with the product was assessed using questionnaires (see Outcomes, below).

Community marketing. This product was marketed to the community using a variety of techniques. The primary method was direct mail that targeted certain groups: Cacapon Institute’s membership, the membership of a West Virginia river advocacy organization and, during the second campaign in the fall of 2001, the regional memberships of a national river advocacy organization, a land conservation organization, and a farmland protection organization.

A test mailing to members of the community who were not identified as members of the above groups was also conducted. Direct mail packets included a letter, similar in tone to a membership appeal letter, asking the recipient to become “an agent of change” and promote sustainable farm management by purchasing the product, explanatory information in the form of a full color brochure for the second year’s mailings, an order form, and a return address envelope. All letters were sent out first class rather than using a bulk permit so the letter would look less like a mass-mailing–which of course it was. During the first year, taste-testing events were held in support of these mailings.

Other sales efforts included advertisements in local West Virginia papers, a Virginia regional paper, and in Washington DC, supported where possible by news articles about the initiative. The newspaper ads were focused differently than the letters, with customer quotes extolling the quality of the product and sales bullets that focused first on food safety and family farms (“locally produced on West Virginia family farms and sold directly to you”), second on grocery store concerns (“naturally lean. . . free of added antibiotics and hormones”), third on environment (“raised in a way that protects streams”), and, finally, on convenience.

The participating farmers held an invitation-only dinner event in 2002, to which leading members of the community were invited. They were provided a gourmet Petite Beef meal (prepared by Gourmet Central), a presentation about the Headwater Farms program, and a pitch–given by a farm member–to buy the product (a significant step for this group).

There were numerous other events at which Petite Beef was on the menu and the Headwater Farms program was explained in varying depth, done primarily by West Virginia University Extension and Gourmet Central, and by Cacapon Institute to a lesser extent.

The farm-management components of this project (as opposed to cattle-management issues such as use of grain and raising cattle free of antibiotics and hormones) focus on a rotational grazing program and protection of the river corridor. The partners agreed up front that streamside land-management practices would be based on USDA-NRCS managed grazing Best Management Practices (BMPs). We decided on a stepwise process for development and implementation of a stream protection protocol that would take several years. We worked as a group with the USDA-NRCS, West Virginia University Extension Service, and the West Virginia Department of Agriculture to develop a demonstration riparian grazing protocol that was farmer “vetted” – producing a more flexible and practical protocol than the usual NRCS BMPs.

Research results and discussion:

This section will provide the original milestones from the project proposal, followed by a discussion of actual results.

Milestone A :Appoximately 1,000 supporters of Capacon Institute and 4,000 additional area residents are informed about the project, invited to participate in a market survey, and invited to taste the product at events. Of these, 50 will place advance orders for beef the first year and 100 during the second year of the project.

(Note: The grant was written around number of customers obtained rather than number of cattle processed because the startup marketing costs for obtaining customers could be reasonably estimated up front, but not the size of packages the customers would buy. Every customer costs money to obtain.)

Initially, 2700 potential customers were targeted and invited to support the farmers by prepurchasing the product and to taste the new product at two events. We quickly exceeded our first-year goal of 50 customers, receiving 60 orders in the first five months and 113 orders by the end of June of 2001, with eleven repeat customers. Sales in the first year were almost evenly divided between people with West Virginia mailing addresses and people with Virginia, Maryland, and Washington, D.C. addresses. The second sales year (July 2001 through June 2002) generated 141 orders, and 115 new customers. Twenty-seven of the customers who purchased during the first sales year purchased again at least once. Forty-four of the 215 customers generated during the grant period placed at least one repeat order. More specific details on these results will be provided in the economic analysis section below.

Milestone B: Of the eight farmers in the HCFC group, six will place cattle in this program in the first year.

Seven of the eight participating farmers provided cattle to the Petite Beef program in the first year

Milestone C: A recipe book will be developed with the assistance of Master Chef Warren and Chef Harvey Christie of Gormet Central.

A one-of-a-kind recipe book was created for this product and included with first-time orders.

Milestone D: All farmers participating in the project during the first year will receive additional income per calf sold in this product pool than animals sold through traitional sales.

All received some additional income despite the high commodity cattle prices at the time. More specific details on these results will be provided in the economic analysis section below.

Milestone E: Of the more than 1,000 producers in the Potomac headwaters, 500 will attend informational meetings during the project’s second year where this project is described and its early results discussed.

This did not happen as intended. However, extension partner Bob Cheves gave many presentations on the project to regional agricultural audiences, USDA-NRCS partner Steve Ritz presented to employees of local, state, and federal agricultural agencies and conducted pasture walks, and Cacapon Institute was invited to talk to approximately 200 progressive farmers in Missouri about green marketing (see Outreach below).

Milestone F: In the first year, a diverse goup, including producers, agricultural professionals, environmentalists, and community members, will develop certification standards and a timeline leading to full implementation of those standards.

Our group worked with the USDA-NRCS, WVU Extension Service and WV Department of Agriculture to develop a demonstration riparian grazing protocol in which limited and controlled access in a rotational grazing system are used to exclude or limit access to streams, with grazing in riparian pasture strictly limited in duration (3 days/28 days), season (dry), and ground condition (must be well vegetated and also not too wet) to minimize impacts. The protocol was designed by the farmers and cooperators to be flexible and common-sense adaptable for the unique conditions on each farm (see http://www.cacaponinstitute.org/hpb.htm for specifics). The NRCS agreed to use the protocols we developed as a demonstration project for riparian managed grazing protocols. Cost-share funding was obtained and demonstration BMPs were to be installed on the three Headwater Farms most in need of riparian changes to reduce agricultural impacts. Two of the three farms installed riparian grazing systems designed for their unique settings; the third, however, decided not to implement the scheduled practices on his farm due to concerns over losing fence (two-strand electric) to floods. In the end, seven of the eight participating farmers managed their farms in a manner that minimized impacts of or eliminated cattle in the riparian area. No time line was ever officially set for implementing certification standards. However, the various components of the USDA label, which was approved within the first five months of operation, provided legal meaning for the “no hormone and antibiotics” and “environmentally friendly” claims.

Milestone G: Agreement on certification standards leads to a name for the products. Note that actual development of the label is beyond the scope of this project.

This all happened much more quickly than originally intended. Prior to developing certification standards, we developed a name for the product, “Petite Beef by Headwater Farms.” It was simply not reasonable to begin sales without a name. Trademark applications were made and approved for “Headwater Farms,” for “Petite Beef” (allowed for burger only), and a logo. The farmers participating in the program formed the Headwater Farms L.L.C., rented office and freezer space, negotiated an agreement with a USDA inspected butcher, developed a website, and purchased equipment. The Potomac Headwater RC&D helped fund equipment purchases. We applied for and received a USDA label for the Headwater Farms protocol prior to the start of sales the first year. The details on the label’s product claims can be read at http://www.cacaponinstitute.org/hpb.htm. Environmental claims on the label recognized that the farmers were committing to a process that would play out over time.

Milestone H: The cooperators will determine the viability of the product based on market results in the two performance targets.

This became more of an issue than was originally anticipated. The performance targets were achieved, but expectations based on the first year’s sales led the group to anticipate a much greater response than was actually obtained during the second year. In addition, the full time, energy, and resource commitments required became apparent over the course of the project. A number of the farmers are opting out at this time; those left are developing a strategy to give it one more shot with limited funds. It’s a long shot at best but those left are willing. This subject will be dealt with in considerable detail in the Economic Analysis and Farmer Adoption sections below.

Participation Summary

Education

Educational approach:

This section is divided into outreach efforts by Extension, Cacapon Institute and the USDA-NRCS.

Extension outreach–Significant presentations made by Bob Cheves on Headwater Farms and Petite Beef during 2002:

2/20 Virginia Beef Marketing Conference, Marshall, Virginia – Presented Petite Beef on program to 60 Virginia farmers.

3/5 NASULGIC Conference, Washington, D.C. Working with WVU and VT, a display was done on both grass-fed and Petite Beef. Petite Beef was served to 200 congressmen/senators or their representatives and other state agriculture presenters.

3/8 N.C. State visited Gourmet Central and were presented both the Headwater Farms and Highland Harvest programs. They shared their niche vegetable initiative.

3/22 Headwater Farms served 70 local target residents Petite Beef at a promotional dinner to increase awareness and sales locally. I worked with Headwater Farms members who did the presentation.

4/9 Loudon Co., VA Economic Development Authority and eight farmers visited Gourmet Central and were presented both Headwater Farms and Highland Harvest programs. Their interest was to develop similar programs.

4/18 State RC&D Meeting. Presented to 25 the Educational Dinner Meeting concept and Headwater Farms as a result of that effort.

4/18 Wayne Co. Cattlemen Association. Twenty were presented the Petite Beef program. They were interested in piggybacking on our efforts.

5/3 Mon Valley Farms. Visited with and presented the Petite Beef story to a group of 20 organized by local county agents interested in pursuing value added beef initiative.

5/18 West Virginia Public Broadcasting. Worked with Gourmet Central and a Headwater Farms family to do a half-hour Petite Beef segment on West Virginia Cooks, a PBS fundraiser program. The program was shown twice initially and at later date as well. Estimate 10,000 viewers total.

6/26 CSREES/CS, Community-Based Entrepreneurial Development Program and Awards Banquet. Headwater Farm partners were recognized at the above banquet and were able to speak briefly to a group of 100 USDA and private foundations focused on Rural Development. Petite Beef was served.

7/16 15 Elementary teachers visited Gourmet Central as part of the Farm Bureau sponsored Ag in the Classroom program. Highland Harvest and Headwater Farms were presented to this group.

7/26 Virginia Department of Agriculture Marketing Personnel, led by the assistant commissioner, visited Gourmet Central to learn of the opportunities presented by the project. They are supporting our effort.

9/9 Mon Valley farmers organized into an LLC and will follow Petite Beef protocols. Met with this group from nine farms to work out details.

10/15 Governor Wise and group spent two hours at Gourmet Central focused on tourism, value-added marketing, Gourmet Central, Headwater Farms, Highland Harvest, and how they are interconnected. He was served Petite Beef as part of a steak and eggs breakfast.

Throughout the year, there have been numerous one-on-one presentations to interested farmers and potential customers such as Wholefoods, and the Strasburg Inn, for example. A guess at the numbers would be 30.

Note: Does not include all efforts of farmers or Gourmet Central.

Capacon Institute publications and outreach

“Petite Beef by Headwater Farms: Marketing Beef Using a Land Stewardship and Clean Water Label.” A paper presented by Neil Gillies (Cacapon Institute) at the Missouri Forage and Grassland Council 2001 Annual Conference in November 2001, published in the conference proceedings. Approximately 200 farmers in attendance. Available as a pdf file on the web at http://www.cacaponinstitute.org/hpb.htm.

Powerpoint presentation at River Network’s national conference of river advocacy groups (River Rally) using the Headwater Farms experience as a case study on “Partnering with Farmers,” presented in May 2002.

Powerpoint presentation on the Headwater Farms story at the second annual West Virginia Sustainability Fair in 2000; this slide show is now on the instiute website.

Meeting with the Board of the West Virginia Highlands Conservancy seeking project support. While we were not successful in gaining access to their member list for a mailing, we did get three centerfold feature articles in their widely distributed newspaper–one on Headwater Farms, one an interview with a Headwater Farms farmer, and one an overview about Capacon Institute.

www.cacaponinstitute.org/hpb.htm provides an overview of the Headwater Farms concept, details on the program and USDA label claims, relevant literature on sustainable agriculture, a slide show of the Headwater Farms story and a link to the Headwater Farms website for ordering.

Headwater Farms Partner Newsletter Vols 1 and 2, November 2, 2000 and December 26, 2001. Available as a pdf file on the web at www.cacaponinstitute.org/hpb.htm

Cacapon, the biannual newsletter, ran a number of articles on the program.

“The Petite Beef Recipe Book” is available from Cacapon Institute for $10, including shipping and handling. Cacapon Institute, Route 1 Box 326, High View, WV 26808.

www.headwaterfarms.com provides an order form for Petite Beef.

NRCS conservationist Steve Rist presented a poster paper on this project in August 2001 to the Soil and Water Conservation Society International Meeting held in Myrtle Beach, South Carolina, and has explained and discussed the project with his peers in NRCS throughout West Virginia.

The project was also covered in the Summer/Fall 2001 issue of the “Potomac Valley Forager, The Grassland Management Newsletter For Farmers in the Potomac Valley of West Virginia.”

Project Outcomes

Impacts of Results/Outcomes

An early customer questionnaire (February 2001) polled the first 68 customers, and the results indicated a strong synergy between the various elements of the Petite Beef by Headwater Farms story with the following values listed as “most important”:

1. Promote sustainable farming practices (26%);

2. Help support local, family farms (26%);

3. River friendly (22%);

4. No hormones or antibiotics (17%);

5. Preserve open space (4%);

6. Low fat (4%);

7. Grass fed (0%).

Ninety-one % of the 33 responders felt the price reflected the quality and environmental benefits of the product and planned to reorder.

A second questionnaire was mailed in June 2002. More explicit than the first, this questionnaire was designed to quantify the acceptability of the Petite Beef product and the relative importance of elements of the Headwater Farms story in their initial decision to purchase the product, and in their decision to reorder. A summary of the results from that questionnaire follows (complete report is available at www.cacaponinstitute.org/hpb.htm):

More than 70% of customers found the Petite Beef product to be “more than” satisfactory. Taste tended to be rated “excellent” more often than either tenderness or juiciness.

Fewer than 10% of responders rated any aspect of these products, other than the tenderness of steaks, as less than satisfactory.

Overall, responders were somewhat happier with roasts and ground beef than with steaks. A solid majority of responders thought Petite Beef offered a good value where price appropriately reflected the quality, social and environmental benefits of the product. However, comments on the cost issue highlighted some of the issues that challenge niche products with prices that exceed regular commodity products.

A sampling: “For me the price is okay, but of course, it keeps others from buying. Many prefer to pay the lower price of conventional beef while all of us subsidize it because it doesn’t reflect the internal costs,” and, “Yes but this doesn’t mean that I can necessarily afford it as part of my food budget.” One answer related to the eating quality of the product: “A good value in the terms stated above, but less so in terms of family budget and outstanding flavor.”

Customers first decided to purchase Petite Beef primarily because of the Headwater Farms story. In order, from most to least important on a scale from 5 to 1, customers first bought:

To protect family farms (score = 4.76);

To promote sustainable agriculture (4.67);

To protect the environment (4.62);

To eat beef raised without using hormones and antibiotics (4.54);

To preserve open space (4.40);

To promote humane treatment of livestock (4.31);

Because they knew where their food was coming from (4.29);

Because it was primarily grass-fed (4.19);

Because the beef was packaged without additives (such as salt-water – an increasingly common practice) (4.15);

For the taste (3.65);

Because the beef is leaner (3.35);

For convenience (2.82).

Taste became a more important consideration for repeat buyers, with many deciding the taste was a reason to buy again. Those who decided not to reorder cited reasons related to qualities (cut size, cut selection, ”too much beef”, taste, etc), cost or inconvenience.

There was no customer consensus on the need for formal product certification. However, 50% and 40% of the customers were more than “somewhat” interested in certification for, respectively, river protection and humane treatment, perhaps reflecting the particular interests of the product’s target audience. “Heart safe” certification was of relatively little interest.

Buyers tended to fall into one of two groups-– the majority with progressive concerns (protecting family farms, protecting rivers and environment, humane treatment of animals, promoting sustainable agriculture, and preserving open space), and the minority with supermarket concerns (taste, convenience, and fat content). There were no significant correlations between the supermarket concerns group and the progressive concerns group, but a third group bridged these two with safety concerns (knowing the meat’s origin, grass-fed, absence of additives, and no antibiotics/hormones).

Buyers overwhelmingly liked the brochure.

Niche agriculture marketing specialist Carole Palmer of Good Taste Marketing Services met with the group in May 2002 to discuss options for marketing the product. At the time of this meeting, we were interested in exploring ways to increase sales after disappointing results in the Fall 2001 campaign (see Economic Analysis below). She recommended using a direct mail campaign that targets the affluent, professional, urban consumer. She concurred that getting the product into upscale grocery stores could be a good way to move product–an option being explored at the time–but only if the stores would agree to terms that were financially viable for the group.

Ms. Palmer also provided a review of the material and methods used in marketing the product thus far. She thought the advertising material we had put together was good but could use some refinement. She thought the brochure was quite good but would rework the cover letter to shorten and retarget the letter’s message towards best tasting and convenient; she felt the reader had to think too much to get the message, and she felt the river message was too strong a component of the letter. She would also have the letter come directly from the farmers and be more “folksy.”

She said any advertising campaign depends on repeated exposure to the product, not a one-time shot. She also stressed that building name recognition, whether through a series of direct mailings or meetings with the press or other activities with targeted groups, such as fundraising auctions, takes time; there is no quick way to build a brand, especially with limited financial resources.

Niche agriculture marketing specialist Peter Reese met with the group for a second time in the spring of 2002, after providing a two-day workshop on “Branding Your Beliefs” early in the process in August 2000. The gist of the second meeting was that the sales needed to start locally, within the farmer’s circle of friends and neighbors, and gradually expand beyond that into increasingly larger circles of influence. He stated that the farmers should substitute their time and effort for capital. He also suggested getting press exposure in the major metropolitan markets by gaining access to the food editors of major newspapers and persuading them to write a story. Overall, he focused on farmer marketing and farmer efforts as the way to build the business. He liked our brochure, saying most brochures are, to closely paraphrase, “c___p, but this is one I can work with.”

Environmental goals

As stated above, we decided on a stepwise process for developing and implementing a stream protection protocol that would take several years to complete, and this process was integrated into the marketing efforts. Actual implementation of stream protection practices was designed to hinge on marketplace results. Customers were engaged as partners in this program because their purchase would provide a financial incentive for farmers to implement environmental practices. This linkage between their purchases and promoting sustainable agriculture was one of the reasons people purchased Petite Beef in the beginning and the concept seemed to work well close to home.

That said, it appeared difficult for many of the customers to understand that the farmers were going to wait to see how well the sales went before they actually began implementing some of the practices that the customers wanted to support. This element of the program may have been too complex to adequately explain in necessarily brief marketing material; of course, this concept may also have been off-putting for some potential customers who would have been interested in supporting farmers who had actually implemented those practices.

In addition, uncertainty over what the farm management protocols would actually be, and uncertainty concerning the farmers willingness to implement them, were two of the reasons cited for difficulty we had in obtaining access to mailing lists from other environmental organizations; it is difficult enough for an organization to decide to endorse a product (which many simply will not do), but it is made more difficult when they don’t know exactly what they are endorsing. In the end, our hope of obtaining actual endorsements from other environmental organizations, and the resulting credibility with their membership, failed to materialize.

One of the environmental goals of this program was to reduce pressure for regulation by voluntarily implementing river friendly land-use practices that were developed with farmer input– protocols that could achieve broad acceptance by the agricultural and environmental communities and environmental regulatory agencies by providing, simultaneously, significant environmental and agronomic benefits. Several events indicated that environmental agencies and organizations saw this program in a very positive way. The Headwater Farms partnership received the special 2001 Environmental Award from the West Virginia Environmental Institute, a consortium of environmental agencies, industry, and citizen’s groups, for marrying West Virginia’s economic and environmental futures. Also, Cacapon Institute received the West Virginia 2001 Watershed Network’s Agricultural Award. Hampshire County is recognized statewide for its multiple approaches to improved water quality through better beef cattle management, scientific verification, and extension educational programming.

USDA-NRCS outcomes comments from Steve Ritz: “The Headwater Farms Petite Beef project has received much interest from NRCS and West Virginia State Conservation Agency (WVSCA) employees throughout West Virginia. Many of those employees are working with producers on improved grassland management and marketing seems to be a weak part of many operations.

“I have answered many questions from these employees about the grazing aspects of this project. The eight producers in this project discussed different grazing protocols and made final decisions based on NRCS specifications and their own desires to improve riparian areas on their own farms.

“Only one of the eight Headwater Farms producers has yet to fence riparian areas on his farm from grazing livestock as a result of this project [note: some did it before the project]. Most of the participants have improved their grazing management by implementing rotational grazing systems. These producers report increased grazing efficiency and pasture carrying capacity.”

Recognition

The Headwater Farms initiative has received widespread recognition. It was profiled in two prominent national publications: the SARE 2002 annual report on practical new ideas in agriculture (“Cattle Producers Convert Environmental Commitment to Price Premium”), and the December/January 2001 issue of the Conservation Technology Information Center’s Partners newsletter (“Beef producers clean water: West Virginia partnership markets healthy cows and rivers”) which has a national distibution of 70,000. Major partners were personally provided certificates of appreciation “for innovative collaboration and good stewardship” by Colien Hefferan (Administrator, USDA-CSREES) in June 2002. The efforts has also received the special 2001 Environmental Award from the West Virginia Environmental Institute metioned above. Extension Agent Bob Cheves received the WVU “2001 Extension Agent of the Year” award in part for his work on the Headwater Farms program; the Capacon Insitiute received the West Virginia 2001 Watershed Network’s Agricultural Award. Articles about the project have appeared in the Charleston Gazette, various organizational newsletters, a number of local newspapers, and on West Virginia Public Radio.

Economic Analysis

The paper version of this report has quite a few tables providing results of marketing efforts. As this reporting format precludes use of tables, information from tables is summarized in the text below. To request copies of the original data tables, contact Northeast SARE at 802/656-0471.

The performance targets for this project focused on the two groups of beneficiaries–the participating farmers and the nonfarming regional community. The economic analyses will be partitioned into these two categories as well as a third–developing an acceptable price structure for Petite Beef 750 lb feeder calves in the premium beef market. The discussion begins with the second group, the community.

Regional community

One of the key issues to be explored in this project was to determine if the Potomac watershed community could be sufficiently engaged in the intentionally broad Headwater Farms concept (lean meat, no hormones, no antibiotics, protecting streams, preserving rural landscapes, preserving family farms and rural community) to spend more than they were accustomed to spending and buy Petite Beef. This was done in a number of ways, including newspaper ads and dinners, but mostly relied on mailings that were targeted at individuals interested in either environmental or farmland conservation issues–a group predominantly college-educated with above-average means. The mailings were sent to the regional membership of a number of organizations. In all cases except the membership of Cacapon Institute, the mailing they received was their first directed contact about either the concept or the product, although anyone receiving local newspapers would have had opportunities to read about the initiative.

Interpreting the response from the Capacon Institute mailing list is more complicated, as members and others had been receiving occasional information on the concept for at least three years before they received their first solicitation letter, and received at least some mention of the project in every following communication. For example, less than one month before receiving their first Petite Beef solicitation letter, they were told that Capacon Institute was “working with local farmers, the West Virginia Agricultural Extension Service, and a local food marketing business to produce and market premium grade, range-fed, ‘stream-friendly’ beef that is very lean and hormone and antibiotic free. In a few days, you will receive a letter in the mail describing this program in more detail and asking for your participation. This is a chance for you to support environmentally friendly farm practices and the continuation of family farms.”

The first mailing campaign, summer 2000

The first mailing was sent to people on the Capacon Institute’s mailing list and to members of a West Virginia environmental activist river organization. The institute list consisted of current members (liberally defined as anyone who had donated to the organization within three years), lapsed members, people flagged to receive literature regardless of membership status (agency personnel, political leaders, etc), and a test mailing to landowners in the Cacapon River watershed community who were not associated with either group. In many ways, we made it difficult for this first group to buy: they had to pay well in advance of receiving their product; they had to pick up their order because we couldn’t yet ship the product (many had to drive several hours); it was a new product that many had not tasted; and we wanted a premium price for it.

The mailing to 450 Capacon Institute current members yielded 48 responses for a response rate of 10.7 % and a cost per customer of $8.66. The mailing to 756 Lapsed members and flagged addresses yielded six responses for a response rate of 0.79% and a cost per customer of $116.37. The mailing to 468 Cacapon watershed landowners and non-members yielded no responses. The mailing to the 900 West Virginia River Activist Organization members yielded 23 customers for a response rate of 2.56% at a unit cost of $36.14. Overall, the response rate from 2,574 letters was 2.99% with 77 customers at a cost of $30.87 per customer. Adding the costs for a taste-testing picnic, held about one month after the letters went out, increased the overall cost per customer to $57.80.

The results of this first sales effort indicated a very strong response from Cacapon Institute’s current membership, a strong response from the river group, a modest response from the Capacon Institute lapsed-and-flagged category, and no response from the community at large. It was difficult to determine how effective the taste-test picnic was in generating sales, as many of the participants had already purchased before attending. However, it was clearly effective at generating a sense of community around the initiative among the farm families and their target audience.

Newpaper advertising

Following the initial direct-mail marketing effort, we decided, in early 2001, to test advertisements in local West Virginia papers and regional papers in Virginia and Washington D.C., supported where possible by news articles about the initiative. The newspaper ads were focused differently than the letters, with customer quotes extolling the quality of the product and sales bullets that focused first on food safety and family farms (“locally produced on West Virginia family farms and sold directly to you”), second on grocery store concerns (“naturally lean…free of added antibiotics and hormones”), third on environment (“raised in a way that protects streams”) and, finally, on convenience. In addition, local advertisements enhanced the community link by listing the names of the participating farmers and the names of their farms (“brought to you by . . .”). Most of the newspaper ads were placed well before the September 11, 2001 attacks; the two ads ran in the City Paper of Washington, D.C. and bracketed the terrorist strike, with one running ten days prior and one running three days after.

The results of newspaper advertising are as follows: Advertising four times in a local West Virginia paper at a total cost, including ad space and design labor, of $641, yielded five customers for a $128.20 cost per customer. Advertising twice in a regional Virginia paper at a total cost of $994 yielded two customers for a $497.00 cost per customer. Advertising twice in the Washington, D.C. City Paper for a toal cost of $1030 yielded one response for a $1030 cost per customer. The cost per customer gained through newspaper advertising increased with the distance from our home base in Hampshire County, West Virginia.

The second mailing campaign–fall 2001

The next direct-mail campaign was scheduled for late summer/fall 2001, and the entire campaign was colored by the events of September 11. A note sent by CI to the group in mid-October 2001 said:

”We will learn a lot from the fall mailings this year, particularly about how well this product can sell in the worst conditions–difficult economy with people suddenly feeling poor and a nation under threat and in a war. So far we had 700 letters go to Cacapon Institute folks (current or lapsed members) who didn’t buy the first time around; these went out the week before and actually the day of the 9/11. The second mailing went out to about 400 regional members of River Network on October 1, five days before we started bombing Afghanistan. People were likely to be very distracted. The next mailing will go out to 5000 people on a targeted list in the DC area on November 2, at a time when people are looking at their mail like it will kill them. Just like many other things in this country right now, we are on uncharted territory and last year’s results may well not be predictive of what might happen this year.”

To make matters worse, the audience receiving the November mailing in the Washington D.C. area concurrently received a postcard warning from the Postmaster General about the anthrax issue, saying they should “suspect a piece of mail” that was “unexpected or from someone you don’t know.”

Overall, the results were disappointing when compared to the first year’s results. A total of 10,370 pieces were mailed (370 to River Network regional membership, 5000 to members of a land conservation organization, 5000 to members of a farmland protection organization), at a total cost of $10,145; this yielded 73 customers at a response rate of 0.70% and a$138.97 cost per customer. Although the 0.70% response would not be considered a failure for a first-contact mailing, we had hoped for at least a one percent response rate. At a cost per mail unit of about a dollar, the cost per customer gained was very high. Unfortunately, we have no way to determine how much of this result was due to the generally negative national environment and how much was due to targeting a new audience without specific connections to West Virginia, river issues or Cacapon Institute.

The unit costs for these mailings break out as follows: color brochure at $0.23, first-class postage at $0.34, purchase mailing lists at $0.09, miscellaneous printing and handling costs at $0.24, and material preparation and labeling by Capacon Institute at $0.08. There would be two ways to reduce the unit cost of these mailings: first, increase the number of pieces and gain economies of scale on printing costs (for example, the cost of the color brochure would be cut in half by ordering 50,000 instead of 15,000); and, second, to reduce the cost of components, specifically by changing to a two-color brochure, which would probably cost less than $0.10/piece, and using bulk permit stamps (appx. $0.17) instead of first-class postage. Taking the latter approach would have dropped the unit cost from $0.98 to $0.68, and the cost per customer from $139 to $97.

Farmer sales dinner

In response to the disappointing results from the fall 2001 mailing campaign, the farmers elected to try a local dinner event in March 2002. They personally invited 160 families from the community, targeted as professional people of means, to attend a free Petite Beef dinner. Thirty-two couples and twenty-one individuals attended, and were provided a gourmet Petite Beef meal (prepared by Gourmet Central), a presentation about the Headwater Farms program, and a pitch to buy the product.

This event cost $3,047 to put on, including material and labor, postage, rental, catering and beef. Fifteen customers were obtained, at a cost of $203.14 per customer. Food was prepared in anticipation of a larger turnout than actually came, adding to the costs. Of the 53 attending, fifteen purchased the product either that night or in the following weeks. The cost per customer obtained was substantially higher than recorded for the fall 2001 mailings; however, this was a rather expensive event that might be worth repeating in a less expensive manner or with an audience targeted for beliefs rather than solely means.

The above result reinforced our overall impression that meal events have been generally ineffective at selling Petite Beef. Petite Beef has been served at a large number of events in the region, primarily by the extension service (see Extension 2002 Outreach for a sampling) and Gourmet Central.

The presumed sources of Petite Beef customers are listed below. Asterisks indicate customers with a high degree of confidence in knowing the source

Mailings to members of Cacapon Institute, multiple times–69*

Mailing to members of a West Virginia river group, June 2000–14

Fall 2001 mailings to regional members of River Network, a conservative land conservation organization and a farm preservation organization–70

Newspaper advertisements–8*

Newspaper and newsletter articles–4*

Meal events–15*

Personal contacts and referrals–11*

Miscellaneous–6*

Unknown–18

Direct mail generated the largest number of customers for this product, with 153 of the 215 customers through October 3, 2002. Newspaper and newsletter articles, personal contacts, and referrals are probably the lowest-cost way to gain new customers, but we have been disappointed that more customers have not been accumulated in this way. However, this may be an overly simplistic interpretation. The participating farmers, with one exception, never really went out to sell it. This lack of effort was in part due to the well-known introverted nature of most farmers and was also due to a discomfort with and varying levels of buy-in to the Headwater Farms storyline–see Farmer Adoption and Farmer Testimonial sections below.

Customers were broadly distributed throughout the Potomac watershed region. The orders were geographically distributed as follows: West Virginia, 99, Virginia, 56, Maryland, 67, District of Columbia, 27, miscellaneous, 27. We
actually expected more of an imbalance towards the northern Virginia/Washington D.C. area and it has been a pleasant surprise that so many orders came from the less affluent West Virginia region. The “miscellaneous” category finds orders from California, Colorado, Florida, Illinois, Louisiana, Michigan, New Jersey, New Hampshire, New York, Pennsylvania, South Carolina, Tennessee, Texas, and Washington. Total orders was 276.

Since customers are clearly expensive to find, the need to keep existing customers becomes paramount. Most of the customer base has been sent at least one follow-up mailing asking them to purchase again, which costs only the price of a stamp, some paper, and a small amount of labor to develop the material. The earliest customers have received three follow-up sales letters, plus additional informational mailings (newsletters, etc) that included a sales component. The number of repeat orders should be viewed with concern: 36 repeat orders came once, three came twice, four came three times, none came four times, and one came five times.

Particularly disappointing have been the first-time customers gained through the fall 2001 mailings. Although the rate of repeats for customers gained during the first year’s sales effort was acceptably high, at about 37%, relatively few of these customers have repeated more than once, despite a number of opportunities to do so. Some customers have said that they are waiting to clear their freezers and planned to buy more at a later date, which reinforces concerns over the convenience issue. Customers having to plan to find space for a disposable commodity is probably not a good thing.

The distribution of orders by source, and the distribution of repeat customers by source, indicates that people with a connection to the Potomac headwaters region and an interest in the Headwater Farm values are more likely to buy the product and also more likely to buy it a second time. It is also likely that many supporters saw their purchase of the product as something of a charitable donation.

A detailed table of sources and repeat orders can be requested from Northeast SARE.

Cost of Petit Beef

A comparison of long-term, on-the-hoof stock market prices–750-to-800-pound feeder steers sell for at least 12-17% more than 1,100-to-1,300 lb slaughter steers–indicates that the price of Petite Beef must be inherently higher than for commodity beef. In addition, in order for the Headwater Farms’ initiative to make economic sense, the participating farmers must receive more money for their product than they would receive through the traditional feeder calf stock sales market or through their cattle pool sales (see below). The consumer must be engaged to pay these additional costs.

Petite beef is sold in quantities ranging from 15-pound boxes (family and gourmet packs) to quarters and halves. A small amount of product has been sold by the cut. The price of the product was initially developed as follows: using a “great price” for 750-pound feeder calves in the traditional stock sales market ($0.95/pound on the hoof), then adding on a producer incentive ($100) and estimated processing (slaughter, cut, wrap) costs ($190.10) for a total cost of $1,002.60/animal. At a projected yield of 243 pounds of boxed beef from a 750 lb animal, the estimated cost per pound came to $4.13. After adding estimated storage and handling costs, and providing a small margin of profit for the LLC, the average price per pound to the customer was set at $5.00.

Actual costs were close to estimated costs, with animal size and carcass yields for the first 14 animals being marginally higher (763 vs. 750 pounds and 285 vs. 243 pounds, respectively) and processing costs somewhat lower ($166.80 vs. $190.10), the actual cost per pound was slightly under $4.00. These numbers yielded an average total sale price of $1446.00 per head, $246.00 higher than our $1200.00 budget estimate ($5.00 x 250 lbs). This difference related to product sales, animal sizes, cut out, and percentages of burger, steak, and roast–all of which fortunately happened to be in a favorable direction. Actual costs on a per-animal basis available in table form from Northeast SARE, although those costs reflect a low-volume experimental project.

The current $1446.00 gross sales per animal nets the Headwater Farms LLC about $117.00 in return for our effort. These costs do not include sales efforts and expenses analyzed elsewhere. Keep in mind, however, that this was recognized from the first and was a major reason for asking SARE for help; known companies with known products introducing a new line spend millions of dollars to present their products.

A certain amount of the product has been sold to wholesale accounts, primarily restaurants. The price and products are as follows: T-bone/Porterhouse and rib steaks, $8.00/pound; ground beef patties 1# & 4#, $2.50/pound; ribs, $3/00/pound; liver (not included in sales-per-animal estimate), $2.50/pound. Delivery cost at $.30 a mile would be $18.00. Deliveries are weekly with 90 to 200 pounds of meat.

Extenstion agents and project partner Bob Chaves provided an economic analysis of Petit Beef production costs. Petite Beef production protocols were born out of the cattle pool marketing initiative. That initiative’s protocols were customer-driven and governed by market date, health concerns, quality and uniformity. Thus the Petite Beef followed each of those protocols as follows:

1. Market date: Traditionally, west Virginia is a feeder-calf producing state. Calves are born in the spring and raised on their mothers until fall. Many times they are weaned the day of the sale and shipped to state graded sales where uniform lots are weighed, graded, and auctioned. This maximizes the uses of the cow’s milk and is usually the cheapest per-calf cost program. In the cattle pool concept, a sale date is selected (in our case early October) and the calves are grown to achieve maximum profit per calf. Lot size is maintained at 50,000 pounds (one truckload) and the calves are sorted to achieve the least weight variability. For example, 110 500-pound steers may be weighed, with the top four being eliminated as too heavy and the bottom six as too light to get to the 500-pound most uniform load.

2. Health concerns: Shipping and receiving healthy calves is addressed through several methodologies in the cattle pool. To begin with, a vaccination program, with booster to follow, is implemented 40 to 50 days prior to shipping, which allows for maximum immunity to stress-associated health problems at shipping. Calves are wormed to eliminate internal parasites. They are also weaned and bunk broken (i.e., they eat feed provided in a feeder). This process eliminates the stress associated with weaning and trains the animal to look for feed and water in similar circumstances to those where they will be shipped. To accomplish this, calves are removed from their mothers in the middle of August and exposed to a concentrated feed amount equal to 1 1/2% of their body weight, as well as to pasture. This does several things. First, it compensates for the reduced flow of milk from the cow at a normally dry time of the year when grass, and thus milk, are waning. This allows the calves to continue growth at the two-pounds-per-day rate through a time when no growth may occur under normal conditions. Second, it allows the cow to recover and flesh out, thus going into the winter in better condition and requiring less feed. Feed costs through this period, assuming a 420-pound weaned calf, would average $.49/day x 50 days or approximately $25.00 for 100 pounds of gain. This cost is offset by lower cow winter costs of $15.00 per-head; i.e., one round bale of hay.

3 and 4. Quality and uniformity: Quality and uniformity in the cattle pool are addressed in two ways. First, calves are bred and thus are born in a limited time frame, primarily late February to the end of April. Second, Angus bulls of known genetics are used to insure mostly black animals of the required confirmation and growth characteristics. Angus are recognized for their beef eating quality. Implementing these strategies and building a reputation for results produces a premium price of $10 to $60 per head, obtained through cattle pool sales over the stock-sale norm.

Calves for the Petite Beef program were pulled from the cattle pool herd and were therefore raised according to the same protocols. As mentioned earlier, all calves don’t make the truckload; some may have been red or brown, others too big or too small, and some too high-strung or physically not acceptable, such as being blind in one eye. These animals were then designated Petite Beef and were continued on the 1-1/2% per day supplement plus grass pasture and hay. The goal was to maintain normal growth and not accelerated growth, which produces excess fat. It was agreed that those designated Petite Beef cattle would be bought from the farmers as the heavy pool weight price with the goal of $75 to $100 extra per head for following the protocols. Several examples are shown below:

Example 1: 600-pound black steer x $.95/lb pool price = $570. Growth to 750 pounds x $.95/lb pool price = $712.50 for a gross increased sale income of $142.50. Accounting for the additional costs ($0.70 per day average supplemental feed costs and $0.20 per day labor, grass, and hay cost), and assuming 150 pounds of gain over 75 days gives $67.50 in supplemental cost or net increased income of $75.

Example 2: 600-pound red steer x $.85/lb pool price = $510.If sold grown to 750 pounds x $.95/lb pool price = $712.50 for a gross positive income of $202.50 for the red steer. Assuming as example 1 the net is $135.

Example 3: 600-pound heifer x $.80/lb pool price = $480.Grown to 750 pounds x $.80/lb pool price = $600, for a gross positive income of $120. Assuming as example one the net is $52.50.

Example 4: 400-pound steer x $1.05/lb pool price = $404.Growth to 750 pounds x $.95/lb pool price = $712.50 for a gross positive income of $308.50 less $.90 day x 175 days – $156.50 for a net of $152.50.

As seen above, each scenario produces additional net income to the farm for the calf sold to Headwater Farms. This would represent the premiums paid to participating farms as the project expands. Using the premium cattle pool prices for 600-pound steers pays the farmer the top price for his cattle plus the additional Petite Beef premium.

Capacon Institute note: the decision to use calves to fill Petite Beef demands that did not fit the cattle pool requirements for uniformity (due to size, color, temperament, or disability) maximized the variability of the animals being used to produce Petite Beef from these herds. While the logic behind the decision was quite supportable, the potential impacts on product variability and customer satisfaction are, at present, not measurable.

Farmer Adoption

Reflecting the diverse perspectives of the support partners in this project, this section will be separated into three sections: NRCS perspective, extension agent perspective, and Cacapon Institute perspective. While always complicated, farmer adoption in the framework of this project may have been exceptionally complex, as there was the issue of development and adoption of various farm management protocols, adoption of a wide variety of business practices, adoption of the overall concept of direct marketing a green niche product by participating farmers, as well as adoption of the concept by other farm groups that were not original participants in the initiative. The farmer testimonials available from Northeast SARE provide producer perspectives, and considerable insight, on the overall initiative.

NRCS prespective, Steve Ritz: There has been some interest in the marketing aspects of this project from farmers other than the original eight. Many have been skeptical because they feel the price of the product is too high. I have heard very limited interest in joining the project; many producers are taking a wait-and-see approach.

I have seen a surprising amount of change in grazing practices in Hampshire County in the last several years. I have been a part of an educational outreach program of evening agricultural dinner meetings with the USDA Farm Service Agency and West Virginia University Cooperative Extension Service personnel for over 10 years in Hampshire County. It seems the improvements in grassland management can be traced to this effort as well as the Headwater Farms Petite Beef project.

Riparian area management is a highly emotional subject with farmers who feel the state or other regulatory entity is working to weaken their personal property rights by requiring they fence all streams. This project has shown farmers in Hampshire County that through good management the riparian area can be an asset to both their forage production and water quality in a non-regulatory manner. During a pasture walk, one of the farmers stated that as a result of his management changes of rotational grazing and riparian spot grazing he had two months more pasture available in the fall of 2001 than he had in the previous year. That resulted in a substantial savings in feeding stored forages and in improved vegetative cover in the areas along the streambank.

Extension agent perspective, Bob Cheves: When reflecting on this project I would suggest that we had some wins and losses, we did some right things and some wrong things. Each of the farm partners were basically happy with the success of the cattle pool and the grazing methodology that each had employed. They were comfortable with their situation but were willing to give direct marketing a chance if they could do it with minimal financial risk. (Peter Reese suggested on his first visit that 20-25 thousand dollars would insure commitment). From my point of view as extension agent, I could not ask farmers to go into an entirely new arena, one requiring skills way beyond those utilized on the traditional farm, and risk their financial resources. Thus my job was to guide them into the ownership and commitment to this project without the fear of lost personal resources. This proved to be the most difficult.

On the positive side the farmers did take ownership of the making-this-a-business concept from the first. They attended Reese’s “Branding Your Beliefs” school and left there to distribute responsibilities amongst the various members, i.e., accounting, butchering, sales, etc. They contacted a lawyer and worked to establish an L.L.C. They committed time to promotional events, meetings, USDA protocol development, trademark development, and evaluation necessary to keep the project on track. They worked with the USDA-NRCS and other project partners to develop a Riparian Grazing Management supplement which seve of the eight farmers completely implemented. It has been indicated to me by the farmers that these experiences have made the effort worthwhile.

On the other side, it is my opinion that the farmers never could distinguish Petite Beef from their farm-raised corn fed beef [in a positive way]. This is to say that they felt that Petite Beef was inferior, and that they were being asked to sell a product that they didn’t believe in. I personally believe this to be incorrect. Statistically, the purchasers of the product indicated that they were incorrect but this and the increased profit potential could not overcome their belief.

Secondly, the farmers, personality-wise, were introverts–statistically, 95% of farmers are introverts. This, combined with their lack of enthusiasm for their product, made their sales efforts marginal. Many did their time packing meat, shipping meat, doing paperwork, etc. but not selling.

Thirdly, the original target market was the environmental arena. This niche, because of partner Cacapon Institute, was the easiest to access and looked to be the most promising and in fact gave us our best results. The problem was that even these results were not substantial enough and did not represent to the farmers an obvious commitment by that community. The expanded effort to other like groups proved unsatisfactory. Farmer conclusion: These people [meaning environmentalists] just want–they are not willing to support the project if it costs them a few extra dollars.

One more opinion: in retrospect, the farmers should have been involved in the physical process of getting out the mailing. It strikes me that the mailings advocated by the Cacapon Institute were selected by the farmers because they were required to do nothing–Capacon Institute handled everything. Alternatives were rejected because of that.

Outside interest has been stimulated to the point of action in at least two cases. In Maryland a group of cattle farmers were motivated to direct market grain-fed beef using similar protocols as Petite Beef with regard to antibiotics, hormones, and environment. They direct market at farmers’ markets. In Morgantown, West Virginia, a group of farmers is following the H.F.P.B. protocols and marketing the same product. They are targeting the health market first and differ in composition to the Hampshire County group in that many of the members are businessmen who would like to be full-time farmers, but recognize the financial implications.

In summary: the project in Hampshire and Mineral counties continues. A number of the farmers are opting out at this very time. Those left are developing a strategy to give it one more shot with limited funds. It’s a long shot at best but those left are willing.

Capacon Institute perspective: As noted by Mr. Cheves above, “the farm partners were basically happy with the success of the cattle pool and the grazing methodology that they had employed. They were comfortable with their situation but were willing to give direct marketing a chance if they could do it with minimal financial risk.” Also, “they felt that Petite Beef was inferior and that they were being asked to sell a product that they didn’t believe in.”

To expand somewhat, as a group (admittedly a simplification as opinions varied widely), they did not connect strongly to the values that drove the marketing of this product–preserving open space, saving family farms, protecting the environment, and the humane treatment of animals. The title of the Peter Reese workshop,”Branding Your Beliefs,” really highlights this issue; the farmers did not particularly believe in the overall initiative, some were perhaps a bit embarrassed by it, and many were uncomfortable promoting the product and the program in their community. Complicating the matter further were views, by some, on protecting the environment, humane animal treatment, and nutrition that more closely reflected industry positions on these issues than the positions of the targeted consumers. Although many farmers are introverts, a number of the members would have been capable of effective promotion if they had been more comfortable with the concept and the product. One did in fact individually attend a number of events to promote the product.

As noted above, actual implementation of stream protection practices was designed to hinge on marketplace results. In the end, this issue proved to be a point of strongly diverging opinions. The number-of-customers performance goals agreed to by the group were met, but expectations based on the first year’s results led, in our opinion, to unrealistic expectations for the second year, especially considering the state of the nation during the second sales campaign. In addition, the farmers felt that even the results of marketing to Cacapon Institute’s membership, which generated an overall 15% response rate, “were not substantial enough and did not represent to the farmers an obvious commitment by that community” (as noted above by Mr. Cheves). Some felt that the environmental community should buy this product or, more pointedly, “should put their money where their mouth is.”

A complicating factor here was that the initial number-of-customers goal was based on customers buying halves and quarters; however, it quickly became clear that we needed to offer smaller quantities–thus the 15-pound gourmet and family packages. The majority of potential customers who do not have chest-type freezers. This decision, while obviously necessary, translated into fewer total pounds of beef sold and revenue generated than had been planned for at the start. However, niche-marketing specialist Carole Palmer thought our early direct-mail sales results were good, and was somewhat surprised we did as well as we did during the post-September 11, 2001 direct-mail campaign. It all comes down to differing expectations and shifting realities.

Differences aside, Cacapon Institute was very pleased with the adoption of diverse elements of this initiative by participating farmers. Given that they were all happy with their existing farm management practices and the calf pool at the outset of this initiative, they elected to take a risk on a new marketing program. They took all the steps necessary to start a business. They expended substantial sweat equity in managing the product. They added to their risk by eliminating the beef prepurchase requirement we originally planned. They participated in the development of streamside management protocols and adopted those protocols on most of their farms. They experienced firsthand the excitement of a rush of orders, the excitement of the customers at being involved in the initiative at the customer taste-testing and pick-up meals in 2000, and the down side when orders failed to materialize as wished.

This project was a bit like a marriage, where each partner goes in expecting the other to change in some significant ways. As with any collaboration, all parties in the Headwater Farms initiative were engaged in a common enterprise but were involved for reasons that related directly to the different missions of their respective organizations. The USDA-NRCS wanted to promote progressive farm management. The Hampshire County Development Authority was interested in helping foster innovative local enterprises that would add to the county’s economic base. Gourmet Central was interested in the possibility of adding to its line of gourmet food products and continuing its support of local agriculture through value-added food processing. Cacapon Institute wanted to promote sustainable farming practices that would both protect the environment and make agriculture more economically viable and perhaps slow the trend towards residential development. The farmers, when considered as a group, were primarily and rightly interested in improving their bottom line; when considered as individuals, their interests ranged much more broadly. The extension agent sought to promote more profitable farming practices to the farming community through demonstration of the value-added business approach.

A recent editorial in the New York Times regarding the U.N. Security Council vote on the Iraq resolution provides an interesting perspective on the Headwater Farms partnership process:

—- “…will it last? That depends entirely on the U.N.’s ability to see this resolution through. Countries could vote in favor of the Iraq resolution for all kinds of reasons: some … seeking balance; [some] buying life insurance. But to stand together to actually implement … the parties actually have to believe in it. The Americans have to be prepared to actually stand down if Saddam really complies, and the Europeans and the Arabs actually have to be prepared to stand up … if he doesn’t (Friedman, “Light in the Tunnel”, New York Times, 11/13/02).”

Areas needing additional study

1. Gain a better understanding of the reasons behind the poor rate of repeat and referral orders, including explorations of convenience issues regarding 15-pound boxes of beef, variability of the Petite Beef product as a result of using outliers from the cattle pool to fill demand, the impact of that decision on customer satisfaction, and determining to what extent the purchase of this product is seen as a charitable donation.

2. Research as to the fat composition of Petite Beef is still in the works. Samples were collected per the University of Utah, are in their lab and we are waiting for the results. West Virginia University has now made arrangements to do these tests in the future.

3. Value-added food products will be developed, the first of which will be beefstock. This product will be sold to high-end restaurants. Prepared roast beef will be next, with the target being local residents who buy complete meals i.e. pizza, chicken, etc. and will be offered as “Beef Night Out”.

4. A food chain has agreed to trial market Petite Beef on a limited basis if we change packaging. New packaging is being researched now.

5. An independent beef retailer and grocer would like to sell Petite Beef, but wants hanging halves. Pricing of that product is underway.

6. An individual cut wholesale/retail price list is being developed as well as additional 15-pound offerings, i.e. a 15-pound grill pack of eight steaks, seven burgers etc. This will enhance sales but will continue the product balance problem.

7. Developing a distribution system that allows the product to be sold profitability at various locations is the goal. Doing this, increasing sales volume and distribution to a profitable level quickly enough to at least break even is the goal.

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.