Raising, processing and selling your own pork to supermarkets and restaurants can be a recipe for success in the pork industry.
Large, vertically integrated producers like Smithfield Foods and Tyson Foods prove it every day.
With a bit of innovation and a lot of hard work, direct marketing can be a successful strategy for small and mid-sized producers, too.
With production from their 4,000-head finishing operation in Perth County, Ontario, Fred and Ingrid de Martines have proven direct marketing can be successful.
Every week, the de Martines ship 70-80 market hogs to Quality Meats' processing plant in Toronto. But, unlike the 25,000 other hogs received at the plant, the de Martines' hogs are segregated every step of the way from the time they are unloaded.
With a country-of-origin labeling (COOL) system already in place for the Japanese market, Quality Meats is able to hold de Martines' pigs separately and then track them through processing.
The de Martines buy back the primal cuts and deliver them to local butcher shops for further processing into specific cuts, which Fred de Martines needs to fill his weekly orders. “For instance, if you take a whole loin and take the backbone off before you sell it to a restaurant, it's a simple way to move a fresh loin and get a much better price,” de Martines explains.
Some of his pork is sold to small supermarkets, but restaurants and hotels in cities across southern Ontario purchase most of it.
His customers like to know where their food is coming from, so being able to offer pork raised on his farm is a big selling feature.
Most orders are received on Mondays and Tuesdays, then delivered on Thursdays, he explains. “Once you get to know your customers, the orders don't change that much. Menus don't change often, but when they do, I talk it over with the chefs to make sure we know what changes are coming.”
All About Control
For de Martines, the advantage to direct marketing boils down to just one word — control.
“Having control over pricing makes all the difference; it's what makes this fun,” he says. “I'm not just hoping to get a price from the market. I set my own margins. My chefs expect me to be making a profit. From time to time they ask me, ‘Are you getting your margins?’ They want to make sure that we are, because they don't want to worry about finding a new supplier. We're not used to that in farming.
“If you can't get the right price for all the different cuts, you're better off to just sell them to the packing plant,” he continues.
Direct marketing is often touted as a way for very small producers, those with a couple hundred hogs or less, to make a few extra dollars. In Canada, those hogs are slaughtered at smaller, provincially-inspected slaughter facilities, with the pork sold through farmers' markets or farm stores.
De Martines tried that, too, but quickly ran into bottlenecks.
“We started off with whole hogs at small abattoirs,” he explains. “But, it is virtually impossible to get any volume doing whole hogs, because you end up with a lot of cuts that don't move at certain times of the year. Being able to buy back primal cuts alleviates that completely, because I don't have the problem of a high inventory of hocks and jowls, or having too many hams that end up being ground into sausage. There is just no money in inventory. It's too expensive.”
It seems that de Martines has found a way to have the best of both worlds. He has enough volume to sell into the commercial pork market, but he's adding value to a big chunk of his pork by selling into the wholesale and industrial market.
Not Rocket Science
“Developing markets is not rocket science,” says Bert Dening, a business development officer with the Alberta government. “Some producers who are direct marketing their animals have their own customers and deliver. Others sell through farmers' markets. Only one's imagination limits what a person can do.”
Fred de Martines finds his customers by asking to talk to a restaurant's executive chef. After introducing himself and describing his products, he finds most are quite interested.
“I am selling them the same product they can get from their current supplier, at a competitive price, but with better service,” he says.
As an example, de Martines says he can outshine any large company with his tight turnaround. “We've had calls on a Saturday night saying, ‘Could you please bring out some more product?’ because they didn't have anything for Sunday brunch. That's where we can make a difference and create some markets.”
De Martines' also offers perks to his customers. Not only has he turned his identity preserved (IP) product into a great selling feature, he has also turned his farm into a tourist destination. Brochures describing his farm and operation are available at the hotels he supplies. The brochures invite guests to take part in a farm tour, free of charge, in return for loyal patronage.
“It's a niche market, and you've got to play on the things that the competition can't do,” he adds.
Social Skills Required
Thinking of direct marketing for your operation? Better brush up on your social skills. To make an extra $34-$42/animal requires dealing with the public, which in itself is a separate skill set, says Dening.
“You're not just producing pigs anymore,” he says. “Now you're on the phone and have to deal with the abattoir, the customers and money. It's a different world than just shipping pigs to a big plant and getting a check every week. If you don't like people and just want to work in the barn, then you better forget direct marketing.”
And, de Martines adds, “If you don't like to be busy, don't do this, because it can sometimes cut into your social life. You've got to be available almost seven days a week. It's quiet in January and February. We enjoy that time of year and like to go on holidays. But we don't go on holidays in the summertime, because that's our busy time.”
Direct-marketed meat in the province of Alberta alone was a $30-million industry in 2004. The lion's share was in beef sales, but direct-marketed pork sales accounted for $4.2 million. While small compared to the dollar value of the commodity industry, Dening believes it will easily double to $60 million as smaller hog farms struggle to find viable options.
De Martines loves the contact he gets with his customers through direct selling. “By talking with people who are using our products, we find out what their needs are,” he says.
“I've told so many producers that if they would just do that, they would gain a much better understanding of their own industry. The vast majority say they'd much rather milk an extra cow or feed an extra sow than have to do what we're doing. They like to load their hogs and watch the back end of the truck as it drives down the lane. That's fine, and not everybody can do what we're doing, but I would certainly love to see more people try.”
Editor's note: all values expressed in U.S. dollars.
By Lorne McClinton
The Newfoundland hog producers association could hold its convention in a phone booth. Roosevelt Thompson, a pork producer from Point Leamington, operates the only remaining hog farm on the island of Newfoundland, Canada's most eastern province.
Until 1992, when the provincial government decided to close the island's last remaining hog slaughtering plant, there were dozens of farms. With no slaughter facilities, everyone took a government buyout and left the business. Everyone, that is, except Thompson.
Thompson expanded. Today he runs a thriving hog operation, and credits his success to his daughter's Cabbage Patch doll.
“When all the hog producers in Newfoundland went out of business, I was caught wondering what I was going to do,” he says. “My daughter had a cabbage patch doll that (as part of its marketing campaign) had adoption papers with it. This gave me the idea that perhaps we could start an adopt-a-pig (program).”
Thompson's adopt-a-pig concept was simple. Customers paid a C$50 ($42.50 US) down payment on a month-old pig, and Thompson raised it. When the pig reached market weight four months later, the customer paid an additional C$200 ($170 US) and received their live pig.
Customers could pay an additional fee to have the animal processed into pork chops, bacon, ham and sausage. Most paid it.
By the time all the extra fees are in, a pig can sell for as much as C$300 ($255 US), but the average is C$265 ($225.25 US).
Thompson made up adoption papers like flyers, then posted them in a town two hours away.
“After I put out that flyer, I really couldn't keep up with the business,” he says. “I had to stop putting the flyer out because I was getting swamped with orders. It's now almost 15 years later, and we're still getting orders coming in to adopt-a-pig.”
In 1992, he had about 75 sows. Today he has 150. “We're still expanding slightly, but mainly concentrating on processing,” he says.
A big advantage to Thompson's adopt-a-pig program is it lets him know in advance how many pigs he will need to market four months later. Of course, there's also the added cash flow advantage of having the pigs paid for in advance.
“If you multiply a thousand pigs by $50, it gives you a cash flow,” Thompson says. “Some will pay the $50 down payment and then make monthly $25 payments. By the time the pig is 5 months old, it is almost completely paid for. I've got money in the bank before the pig has left the barn.”
It's also a big advantage to know in advance how much each pig will return. On average, Thompson estimates he gets $1.75/lb. ($1.49/lb. US) for his hogs.
Since he is dealing directly with the consumer, not with a processor, he can set his own prices, which he's raised gradually over the years.
“Usually, the customer pays $2/lb. for pork chops in the store,” Thompson says. “If the price of pork the producer gets goes down to 35¢, pork chops are still going to be $2/lb. in the store. The store makes the money. Consumers don't really see the benefit of those low prices when the price goes down for the producers.”
Any excess pork is featured in truckload sales. Thompson sends out flyers noting when his refrigerated truck will be in an area. Fresh pork is available by the side, and cut, packaged and ready for the freezer, he says. The flyer features a diagram of a side of pork broken down into its various cuts. Smoked and cured bacon and ham costs extra.