Pork producers who suddenly decide to become niche marketers should think twice before making the move. Many have gone before them and not survived the ordeal.
Iowa pork producer Tom Franzen tried it twice and failed. Minnesota pork producer Dan Tollefson, with 15 years of alternative marketing experience, sold a pork product in Minneapolis and St. Paul, MN, stores and still went bankrupt. Fanatically loyal customers resurrected his meat business.
Franzen, who operates Fresh Air Pork Circle, Alta Vista, IA, found out how dicey it can be trying to sell pork chops and sausage through a local food system in northern Iowa. He had to give it up because he couldn't meet their fickle tastes.
For those pork producers with marketing ideas, Franzen offers this dose of reality: Don't try it by yourself. Enlist the aid of professionals to see if it's a worthy business venture.
For now, he is satisfied working for another niche marketer. Franzen raised hogs in confinement for 17 years before turning to outdoor production. That led to coordination of a small circle of producers who raise alternatively grown hogs for Niman Ranch Pork Co., Thornton, IA. White tablecloth restaurants in San Francisco and Berkeley, CA, feature the pork.
The Niman pork operation is managed by Paul Willis, who himself struggled for years to capture a niche market. A combination of luck andcontacts sold California rancher and entrepreneur Bill Niman on the free-range pork Willis produces. Hogs are humanely raised on pasture or in converted, deep-bedded barns. The Willis operation is the first in the nation to be sanctioned by the Animal Welfare Institute. The protocol also includes no use of antibiotics or electric prods. Use of dewormers and preventive vaccines is encouraged.
It took Willis six years before demand for his pork increased to the point that Niman now buys most all Willis' annual production of 700 head.
In fact, demand in the Bay Area for the free-range pork has grown so fast in the past few years that Willis has enlisted about 40 area producers to help produce similar products. That includes the handful of producers in Franzen's group.
That led to development of the Niman Ranch Pork Co., the hog buying arm of the operation. Development was funded by 1 cents/lb. from hog sales of suppliers, matched by Niman Ranch (the California operation) and a grant from the Iowa Department of Economic Development. Those funds were used to start hog purchases. Suppliers are partners in the firm.
Producers don't sign production contracts. But they do have to follow several procedures set out by Willis:
* Read and follow the Animal Welfare Institute Husbandry Standards for Pigs; * Complete and return the quality standards affidavit to Willis once the criteria are met;
* Send a copy of feed ingredient labels and feed formulas;
* Send two samples of pork produced to Niman Pork Ranch in Iowa and two samples to the Niman Ranch headquarters in Oakland, CA. Willis points out that the product not only must be raised conscientiously, it also must possess great taste to be considered as a supplier.
Some humane production practices producers must follow include weaning at 5 to 6 weeks of age, no tail docking and animal access to both outdoors and shelters with bedded pens in which pigs can play, explore or build nests.
Willis credits this free access to exercise and interaction plus humane handling from birth to market as integral to production of tender, great-tasting pork.
Niman suppliers have been rewarded for their involvement. "We've paid out about $800,000 to pork producers in premiums since we started," says Willis.
Niman pork suppliers are making money. Minimum live hog return is 43.5 cents/lb. with an average 6 cents/lb. premium.
Three pork direct marketing firms studied by the National Pork Producers Council have six common factors that drive their success.
The three case studies involve Nahunta Pork Center of North Carolina, The Egg & I Pork Farm in Connecticut and Gordito's Meats in Utah. Their key points are:
1. Production system flexibility. Both Nahunta and The Egg & I retail stores can adjust production almost immediately to market conditions. Nahunta controls supply through the use of a large holding pen and can change orders quickly because the slaughter plant is across the road.
Gordito's uses a vacant farm to control slaughter flows.
The Egg & I farm freezes and vacuum-packs all of their products. This enhances their mail-order and catalog-sales focus and allows for seasonal control of supplies to meet demand.
2. Marketing flexibility. All three use multiple consumer outlets for their products but focus on direct marketing at retail.
3. Customer service. All three markets were built on radically superior customer service, while also continually evaluating and responding to customer demands.
4. Cost structures. Slaughter costs of the three firms ($20-35/head) are above the levels reported for commercial slaughter. But the difference is made up in capturing retail product value.
5. Merchandising and seasonality. The three firms use seasonal sales attributes, developing appropriate pricing and production strategies, production and financial management.
6. Regulatory factors. The firms consistently depend on consultants and government resources to manage regulatory issues.