Value Adding

Closer to the Consumer

“The shop window of farm

products directly available to the

consumer”

Free State Agri Congress

10 – 11 August 2017

“The ultimate goal of farming is not

the growing of crops, but the

cultivation and perfection of

human beings.”

― Masanobu Fukuoka, The

One-Straw Revolution

• To Clarify

• Product Development

• Value Chain

• Trends

• Retail

• Opportunities

• Case Studies

• Conclusion

AGENDA

PRODUCT DEVELOPMENT &

VALUE CHAIN

?WHAT IS PRODUCT

DEVELOPMENT

TO CLARIFY:

Product Development

This process is how someone takes a

new concept, such as a new

type of food, or a new flavor of

existing food, and brings it to

the consumer.

• Consumer

– End consumer of the product

• E.g.. Baby consuming baby cereal

• Customer

– Purchaser of products

• E.g. mother, purchasing baby cereal

• LSM – Groups

TO CLARIFY:

Nutrition Variety Quality Convenience Transparency Sustainability

High LSM

Med LSM

Low LSM

TO CLARIFY

• Product Development Basics– Who:

• For Consumer & Customer

• By the Producer, processor, retailer

– What:• Finished product / Raw Material

– When:• Before trending / Demand from the customer

– Why:• Innovation / Trends / Sales

– Where: • Retail space vs Food services vs Market

– How: • Product Development

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PRODUCT DEVELOPMENT

Value Chain

Farmer/ Producer

Tertiary Processor

Secondary Processor

Primary Processor

Retailer Consumer

PRODUCT DEVELOPMENT

• Product development executed by:1. Producer

• Final/Finished Product– Tertiary/Secondary Supplier– E.g. Fruit/Veg for retail

• Ingredient/Component for products– Supply to secondary supplier– E.g. flour, butternut

2. Processor• Secondary/Primary supplier

• “Final” product

3. Retailer

VALUE CHAIN

• Optimization

– Common practice in food industry

• Spend on packaging than ingredients

• E.g. bottled water and cereal

– Capture farm-to-fork market

• Emphasis needs to change

• Not just new product development

• Shift attention to the value chain

– ID promising, natural ingredients

– Finding new ways& occasions

VALUE CHAIN

Value Chain Optimisation:

1. Reducing Links in chain

2. Financial Benefit

• Producer &/or consumer

3. Reducing food waste

4. Focus on Local production

5. Linking farmer to the fork user

• Easy of implementing/translating trends

6. Understanding additional use of product

• Off cuts

• Waste usage

TRENDS

• Health

– High LSM - No longer a trend behaviour

– Lower LSM – Becoming more and more aware

• Healthy Fast Food

– Meal solutions

• Slow Food

– High involvement (scratch cook)

– Low Involvement (ready to eat)

– Juicing & Soup

– Food Waste in Food

TRENDS

– Quality

– Farm to Fork:

• Values quality over ease and accessibility.

• Idea that food is best when fresh,

• Encourages consumer to swop over-processed foods

• More: local, natural and unaltered Foods

– Product Trends

• Seeds Oils

• Nuts Butters

• Dairy Fermentation

• Fruits & Vegetables Health Behaviour

• Venison Health Behaviour

TRENDS

• Ingredient Lists

– Clean

– Clear

• Consumers Demand

– Raw/unprocessed

– Organic

– Non-GMO

– Consumers not always sure what the difference is

TRENDS

Sustainability

“The soil is the great connector of

lives, the source and destination of all…

… Without proper care for it we can have no

community, because without proper care for

it we can have no life.”

― Wendell Berry, The Unsettling of America:

Culture and Agriculture

TRENDS

Consumer Perception of LOCAL farms:

– Maintain food's natural health benefits

– Nutritional quality

– economic vitality of small/local farms

– Safety of our food supply

– Avoid the use of genetically modified foods

– Diversity in the types of foods available

– Environmental impact

– Carbon footprint

– $ point

PERCEPTIONS

• Reduce Links in Chain

• Coordinate across growing regions.

• Pursue propriety varietals.

• Offer innovative products.

• Build the brand.

• Partner for Scale.

VALUE OPTIMISATION

RETAIL & FARMER

• Farm-to-fork principles

– x fit naturally within major food companies,

– Focus attention: downstream operations & end-products.

• Farmer determines where he wants to retail

– Own Brand / Bulk

– Supplier to a brand / Processor

– Retailer

• Farmer and the retailer

– Farmer (new varieties, markets)

– Processor (ingredients as part of end product)

RETAIL AND THE FARMER

• Consumer you have in mind

– High LSM – retail

• More cost added

– Secondary: Margin

– Primary: Margin

– Retailer: Margin

– Packaging $

• Often benefit for producer

– Low LSM – market

• Directly to consumer

• Fewer margins

• Often no packaging

RETAIL VS MARKET

OPPORTUNITIES

OPPORTUNITIES

• “Own Brand”– Farmer: Primary Supplier

– Farmer does own processing

– Sells products without processing

– Eg. vegetables

• Processors– Farmer: Supplies to processor

– Vegetables, grains, meats

– Produced goods used as ingredients in NPD

• Retailer– Supplies to a retailer directly (vegetables & fruit)

– Suplies to a retailer via a processor / own processing

• Producer own Brand

– Processing Facilities

– Food Safety Certification

– Audit: FSA/HACCP/ISO 22000

– Selling: Deli’s, small markets, local food markets, Spar

• Woolworths:

– Local Food Heroes

• Farmers / producers with own brands in store

• E.g. Prince Albert Olive Oil, Visuvio, Wines, Clemengold

– Minimum Criteria for supply

OPPORTUNITIES

OPPORTUNITIES

• Entering retail

– Question:

• Who do I want to sell my product to?

• Do I want to innovate?

• Am I willing to produce according to specifications?

• Am I willing to get audited?

• Above is NB, as they all have a cost.

– Entering retail with lowest risk:

• Via processor

– Selling volumes

– Fixed price / certainty in income

– Facility/Infrastructure

CASE

STUDIES

Case Studies

• Pet Food

• Butternut

• Fit Chef

• Wellness Warehouse

• Restaurants: Waste

• Vegetable Crisps & Juices

CONCLUSION

FARM TO FORK?

• Get to know the consumer

– Wants & needs

– Trends

• Farm to Fork = Supporting Local Producers

• NPD = window of opportunity

– Retail / processor

– Get involved with a retailer/Processor that has a growth plan

• Do full risk analysis

• Product must be grown/produced with end use in mind