14 May2001

Overstory #83 - Niche Markets

Written by U.S. Department of Agriculture Cooperative State Research, Education, and Extension Service.

Niche Markets

Growing fruits, vegetables, and other farm products—particularly specialty items preferred by ethnic populations, unusual minor crops grown on a limited scale, or certified organic produce—offers profitable niche markets for small farmers.

Many unique crops do not easily adapt to large-scale production—so corporate farm enterprises, which control so much of the world's food business, do not produce them. Small farmers can capitalize on growing this specialty produce.

Today's customers want high-quality, interesting, attractive, tasty, nutritious, and convenient foods. Many want to know who grows their food and under what cultivation practices.

Increasingly, successful small fruit and vegetable growers need to know as much about business and marketing as horticulture.

To maximize profit, small growers need to sell a diversity of farm-raised products directly to consumers through various marketing methods. Small farmers are better suited to do relationship marketing than are larger firms, whose sheer size requires selling food in an impersonal marketing system.

As agriculture increasingly moves to a global market, what crops can you specialize in and market better than anyone in the world? What regional or environmental quality or cultivation practices can you capitalize on to promote your produce?

Crop Selection

Choose a crop mix compatible with your climate and soils for which there is unmet market demand. Some issues to consider in selecting your niche market crops:

Cultivation techniques.

Each crop has special requirements in planting, pruning, fertilizing, etc. University libraries offer local or international publications that may help with information that would be costly and time consuming to learn through experience.

Regulations.

Certain crops or value-added products may be regulated by law, such as processed foods, medicinal herbs, or on-farm activities for the public. Check with government agricultural and health agencies to see if your product line may be subject to regulations, permit approval, etc.

Risk management.

As with all new crops, there is added risk involved for crop or market failure. Limit risk by starting with a small investment, and expanding on success; by spreading risk over 2-3 crops; and by selecting crops with multiple products and benefits. Consider selling to several markets in case one does not perform as expected.

Value-added.

Food processing and packaging can add greatly to the value of a crop. Also, increasing the perceived value of products by offering an enhanced user experience (freshness, desirable varieties, etc.) add value to products.

Food safety.

Clean, fresh, and pesticide free, products can bring higher prices.

Resources.

Check your industry or local fruit and vegetable associations for workshops, conferences, technical assistance, and other information.

Some ways to direct-market fruits and vegetables

Farmer cooperatives.

Small growers can spread risks by forming a cooperative to gain market power through joint supply purchasing, bargaining, processing, and marketing.

Farmers markets.

These are usually no more than an hour's drive from large populations, and draw many customers to one selling location.

The Internet.

Web site advertising exposes a business to a markets in a wider local community and worldwide.

Roadside stands. Location on a high-traffic road is essential.

Clear directional signs, adequate parking, and attractive displays of fresh, clean, and quality products draw repeat customers. Stand setups can be simple or elaborate. Understand your customer base to know what produce they seek and what times your stand should be staffed.

Community-supported agriculture (CSA).

At the beginning of the growing season, a CSA farmer forms a direct relationship with a customer base before planting. CSA members invest in a harvest share by giving the farmer money up front for farm operations. Members receive weekly in-season produce deliveries. Customers sign a CSA agreement stating that they assume risks and bounty of farming.

Subscription farming.

Customers do not pay for a year's harvest share at one time but weekly, monthly, or quarterly. Customers expect a weekly share, which usually must be made up if the crop fails.

U-pick farms.

Customers come on farms to pick fruits and vegetables, eliminating the farmer's harvest and delivery costs to buyers. Some pre-picked produce may be offered. Local advertising, clear road signs, parking, a clean bathroom, shady rest area, refreshments, picking containers, weigh site with cash register, and friendly sales people are key. Let customers know clearly what produce is available and hours of operation (and when the operation will unexpectedly be closed).

Food circles.

A food circle is an informal network of small farmers who sell food to a targeted group like neighbors. Farmers pay a small membership fee to be able to be listed in a directory describing their farm-raised products. A coordinator handles customer inquiries and event publicity like festivals. Food circles offer farmers a steady customer base. Customers know who grows their food and by what agricultural practices. Farmer-to customer relationships help each other better understand rural-suburban-urban cultures.

Agri-tourism.

Agri-tourism includes entertaining attractions or educational on-farm events to draw customers. School and tourist tours, farm specialty gift shops, on-farm restaurants, bed and breakfast accommodations, nature photography, or sports events, offer customers opportunities to stay longer and spend more money on produce and value-added products. Festivals and other attractions can benefit whole communities.

Other marketing outlets.

Investigate local eatery establishments to target local shops and finer restaurants willing to invest in superior quality produce. Offer crop varieties unavailable through regular suppliers. You may also sell a portion of your crop through a contract to small cooperative stores specializing in quality organic produce, food chains that buy direct from farmers or farmer cooperatives, schools, nursing homes, the military, prisons, hospitals, caterers, produce company suppliers or airlines.

Tips for success

Identify your customer base and target your market early in the season.
Know your customers, including ethnic groups wanting specialty produce and marketing methods that fit their culture.
Visit nearby shops and study what fruits and vegetables are carried, product display techniques, and people traffic flows. Do stores buy produce locally or import? Consider producing fruits and vegetables not carried there.
Know customers' buying habits and regional growing seasons' windows of opportunity.
Every region has its own mix of crops that can be successful—find your niche.
Market your region's and farm's identity in a unique way through a logo and quality products.
Choose marketing plans that are adaptable to your family, operation, lifestyle, and personality.
Diversify crops and have complementary marketing outlets to keep income flow steady.
Plan years ahead for your operation's growth.
Successful growers know how much cost they have in their operation and where they are losing money. Focus labor and expenditures on high-profit crops.
Farms should look tidy and produce should be clean.
Be dependable with produce availability and hours of operation.
Market fruits and vegetables by telling what sets your produce apart—such as growing practices, varieties, etc.
Consider turning your fruits and vegetables into a value-added retail consumer item through processing and packaging.
Take time to talk with customers.
If you don't like dealing directly with the public, assign that job to another family member or hire someone with strong people skills.
Cultivate community presence by forming a connection to your local community.

Original Source

This article is adapted from "Fruits and Vegetables: A Niche Market for Small Farmers," which originally appeared in Small Farm Digest 4(2), Winter 2001, 1-4, published by the Cooperative State Research, Education, and Extension Service, U.S. Department of Agriculture, Mail Stop 2220, 1400 Independence Ave., S.W., Washington, DC 20250-2220.

For more information about the newsletter of the Small Farm Program, Small Farm Digest, contact the editor Stephanie Olson at CSREES, USDA, Mail Stop 2220, Washington, DC 20250-2220; Tel: 202-401-6544; Fax: 202-401-1602.

About the Author

The U.S. Department of Agriculture's Cooperative State Research, Education, and Extension Service (CSREES) Small Farm Program is designed to improve small farm operations throughout the United States and its territories via partnership and collaboration with the land-grant university system and other public and private sectors, including farmers, community-based organizations, foundations, and others. For additional information about the Small Farm Program, contact Denis Ebodaghe at CSREES, USDA, Mail Stop 2220, Washington, DC 20250-2220; Tel: 202-401-4385; Fax: 202-401-5179.