Friday, 29 February 2008

Consumers, Chickens and Changing the World

Good heavens! Sales of free range chickens increased by 35% last month whereas standard sales dropped by 7%.(TNS data reported in yesterday's Independent). Free range sales could have been higher except the shelves were empty because supermarkets could not keep up with demand. The catalyst was programmes by celebrity chefs Jamie Oliver and Hugh Fearnley Whittingstall drawing attention to the conditions in which standard chickens are kept.

Some are linking this news with the growth in Fair Trade, which doubled last year to £500m, and M&S's decision to charge for plastic bags, and concluding that consumers can change the world. The conclusion is indeed right, but commentators are missing one big point. The growth of Fair Trade has resulted from supermarkets stocking more products, and, as in the case of bananas, selling only Fair Trade, so consumers don't have the option of buying any other type. Similarly the decision to charge for plastic bags is led by the supermarket.

What is different about the chickens is that supermarkets had nothing to do with the change in what consumers bought. Indeed, they were taken completely by surprise as the empty shelves show. The change in buying was wholly due to consumers seeing something they did not like and acting.

The power of the consumer should never be underestimated. The supermarkets are not totally in charge. What is needed to change consumers minds and buying habits is clear communication, from a trusted source.

Farmers might do well to ask themselves if the media rolled up at their farms would they be proud to let the cameras in. And the farming industry should be asking itself whether it policies and practices always merit the same level of trust that the likes of Jamie and Hugh.

Thursday, 28 February 2008

From the Farmers Mouth - Farmers Views on Diversification

In light of the startling statistic that 19% of farm profits come from diversification compared with under 5% from farming excluding subsidies, it seems a good idea to take a regular look at what farmers themselves are saying about their diversification activities. The farming press is a good source of news and views. The last twelve weeks alone have seen farmer diversification stories covering beef, lamb, free range geese and turkeys, cheese, milk (including green top unpasteurised and flavoured), cheese, spelt flour, vegetables, Xmas trees, real ales, farm shops, milk rounds, a conference and venue centre, and a four star hotel and restaurant. Most farmers focus on one or at most two related products, like beef and lamb, or turkey and duck. Those trying to manage alot of ventures speak of hard work and long hours.

Ways of selling vary almost as much as what is sold. Farmers markets are used by almost all produce sellers, followed by local and farm shops. Three farmers have flourishing milk rounds, bucking what is usually seen as a shrinking sector. One farmer is selling to schools, one to a supermarket, two use mail order, and one has an online shop.

The range of activities may be wide, but the thoughts about what makes a diversification successful are common to many.
Top of the list is knowing what the customer wants and giving it to them. William Craig of Gote Farm Sussex, with a milk round selling green top milk says "People are concerned about food miles, where their food comes from, and health". Lynne Lindley, farming free range turkeys and geese with husband Tim, says "People want to buy a quality bird which they know has been reared to the highest possible welfare standards". Duncan Jeary of Hawthorn Farm near Holt, selling Angus Beef direct says much the same: " The customers want to know where their meat comes from. Price is less of an issue.Most are happy to pay a little more for local produce". Another farmer with a milk round, Rhys Lougher, says " We are producing what local people want - fresh natural milk that is fresher, tastes better, and has not travelled long distances.In return they are pleased to support their local farm, and regularly comment on how much better the milk tastes." Robert Garner of Godwick Hall Farm says "We are not just a turkey producer we are a service provider.The more I help customers, the more I will sell."
Iain Roberts, from Solfach Farm near Aberdaron who has opened a four star hotel says "We are aiming to attract visitor types right across the board, but in order to do that you have to offer high class facilities".

Another common thread is that most farmers have gone for the premium end of the market, and at minimum sell above supermarket prices.

Having a brand name and good design is seen as important. Richard Tomlinson from Gracemire Farm near Preston, selling lamb at farmers markets, says "Branding is a key factor in success. A brand name is needed right away." Robert Garner talks about "Promoting the Godwick brand".

When it comes to publicising the products and finding customers, one of the most popular ways is through farmers markets because there are high numbers of people passing by, and leaflets can be given out explaining the benefits of the products or any special offers. Some of the farmers have used leaflets left in local shops to publicise their venture. Word of mouth is also very important. The power of the celebrity chef is mentioned by Ben Rigby of Maldon in Essex who says "Celebrity chefs picked up on game, and began promoting it. We've seen a dramatic rise in trade".

As for "watch outs" when diversifying, the best advice probably comes from Laurence and Eira Harris from Ffosyficer Farm near Abercych. They bought a milk round, but there was alot of local competition who just dropped their prices and drove them out. The lesson is that whatever the diversification, it has to be different and better than existing competition.

Sunday, 17 February 2008

Bottled Water Backlash

All of a sudden, rumblings against bottled water are turning into a global outcry. Environmentalists condemn the product for the high levels of CO2 emitted while producing it, and the food miles clocked up in its distribution. Other critics just think its madness to spend money on something available from the tap at a fraction of the price. The backlash seems to have started in earnest in the US where at least one state has banned spending of public funds on the product, Mayor Bloomberg of New York has condemned it, and Chicago has enforced a 5 cents bottled water tax. Anti bottled water articles and comment are now flooding the British media, fuelled by environment minister Phil Woolas calling drinking bottled water "daft", and "verging on the immoral". The shadow environment minister has endorsed Mr.Woolas's comments. BBC's Panorama is doing a programme tomorrow (Monday), examining the bottled water industry, and its unlikely to be favourable.

The backlash has reached New Zealand, and the issues surrounding bottled water have been covered in the United Arab Emirates and India. The Catholic Patriarch of Venice has suggested giving up bottled water for Lent, and donating the cash saved to a water pipeline project in Thailand. He is supported by his mayor who calls bottled water an unnecessary luxury.

What could have brought on this groundswell of negative opinions? Certainly environmental campaigners around the world have played a big part. Recent coverage in the UK will have been heightened by the Woolas article, and its worth noting that Thames Water, in conjunction with a government funded body called the Council for Water are encouraging caterers to supply tap water for diners without being asked for it, so presumably some of the publicity comes from them. There may well be a touch of anti big business playing a part as the bulk of the bottled water market profits go to Nestle, Coca Cola and Pepsi. Whatever the reasons, the companies selling bottled water in the UK are sufficiently concerned to have set up a body to counteract the bad publicity (the Bottled Water Information Office). They are reported to be preparing a campaign later in the year to promote the health benefits of bottled waters, and the steps being taken to reduce the environmental impact of the product.

Why should farming be so concerned with bottled water? Well, there seem to be parallels with the issue of livestock farming and its impact on the environment. At the moment the calls for a reduction in eating meat or dairy to protect the environment are rumblings. What is desperately needed is for the farming industry to communicate its environmental strategy before the rumblings become louder.

Tuesday, 12 February 2008

Diversification - A Key Part of Farm Income

Heaven knows what planet Jeff Rooker is on when he calls the latest TIFF (Total Income from Farming) figures an encouraging sign for the industry.The farming press and NFU have rightly called for numbers and commentary to be viewed by enterprise so that the precarious position of livestock farming is disentangled from the dazzle of arable and better returns from dairy.

Simultaneously with the TIFF, an analysis of numbers from the Farm Business Survey England were published by DEFRA. These figures highlight the patchy returns from farming, especially if subsidies are excluded, but they also point up the amount of farm income which depends on diversification. Latest actual figures are for the year to April 2007, and these show income for the 60,000 farms who support at least one worker half-time, as follows:

TIFF Total - 2250
Agri income excluding subsidies - 80
Subsidies - 1740
Diversification income - 430

So income from diversification is over 5 times the size of income from regular farming, and about 19% of total income. Not a small amount. Diversification is defined (deep breath here) as "non agricultural work of an entrepreneurial nature, on or off farm, which utilises farm resources".

About half of the total sample of 60,000 farms have diversified, and the biggest activity by far is renting out farm buildings, followed by sport and recreation, processing and retailing farm food produce, tourist related activity, and "other" which is not broken down further but would include activities such as spinning wool, or woodwork from farm trees.

The numbers of farms involved in diversification are:
Diversified total - 30,000
Letting buildings - 21,400
Sport/recreation - 6,700
Processing/retailing - 4,500
Tourist related - 2,600
Other - 4,800
About 30% of farms have more than one diversified enterprise.

The average income per farm from the various enterprises differs alot, with processing and retailing leading the field, followed by tourism.

Income £ per farm
Letting buildings - 12,200
Sport/recreation - 5,100
Processing/retailing - 14,200
Tourist related - 13,800
Other - 10,500
Only 1.5% of farms failed to make a profit from their diversification.

Diversification shows no sign of slowing down. An additional 2,400 farms came into sports/recreation in the year ending April 2007, and 1,100 into processing and retailing.

Against this rosy picture should be set the fact that most diversified enterprises are small. 57% have an output, ie sales, not income, of less than £10,000, and 12% have an output of less than £1000. Also, about 2,800 farms stopped diversifying activities, and what the numbers don't tell us is whether profits fell unacceptably in the core business when the diversification took place because the eye was taken off the core farm ball.

Overall though, the DEFRA numbers are encouraging for existing or would-be diversifiers. Particularly the one about only 1.5% of enterprises failing to make a profit. Many diversifications may be smallish in size, but the majority seem to help make ends meet, and some turn in a substantial profit. All in all, its probably worth taking a regular look at what else the farm's assets could be used for other than core farming, particularly as subsidies shrink. And of course any venture needs thorough market research and detailed costings before going ahead.

Thursday, 7 February 2008

Milk Coops - Time for Shareholder Activism?

The news about talks between First Milk and Milk Link breaking down is close to tragic. So disappears one of the few opportunities to make UK farmer owned dairy businesses an effective competitor, returning decent profits to shareholders.

Gwyn Jones from the NFU has asked for straight answers to be given to farmers as to why talks failed. The place NOT to start questions is over the nitty gritty of business valuations, or structure, or who is to blame for what. Farmers should instead be probing the competence of their boards to develop and implement a plan which gives farmer shareholders a better future. If they don't like the answers then farmers can withdraw their support and move on.

Farmers might want to start the ball rolling by asking how much money would be saved by streamlining the two coops into one business, how much sales would grow by reinvesting the cost savings, and how much extra profit would come back to farmers. The answers might make a squabble over valuation seem like something worth sorting out.

Friday, 1 February 2008

Cloned Food

I'm surprised there's been so little fuss in the UK about cloned food.

On 11th January the European Food Standards Authority (Efsa) announced its conclusion that products from cloned pigs and cattle are unlikely to be a threat to food safety or the environment but that products should be labelled as cloned. It admitted that cloning has significant animal health and welfare issues. It was silent on the ethics of cloning. Comments from the public are requested by 25th February.

The next day the European Group on Ethics in Science and New Technology, reporting to the European Commission said "considering the level of suffering and health problems (to animals) EGE has doubts as to whether cloning animals is ethically justified". It went on to say that it does not see convincing arguments to justify the production of food from clones and their offspring.

But where is the outcry to get cloning stopped? Yes, the Soil Association, RSPCA, Compassion in World Farming and Friends of the Earth have spoken out against the practice, the media have reported the factual news, and supermarkets has said that they will not sell cloned products.To date though, there have been no questions raised in Parliament, no newspaper editorials providing a view, no surveys done among the public to see what they feel about the issue. The NFU say they will be guided by the science, which sidesteps the ethics, and see no need for labelling. Major food processors do not appear to have commented.

Contrast this with what has happened in America where the FDA announcement on 14th January that food from cloned cattle, pigs and goats is safe to sell into the food chain has caused outrage. The ruling was made in the teeth of four years of furious opposition from consumers, around 60% of whom have consistently said in research polls that they oppose cloned food on ethical and safety grounds, and from Congress for reasons of ethics and lack of robust data. Fury has been heightened by the decision not to require specific labelling, leaving the public with no idea whether they are eating cloned food or not. Big food processors and retailers have declared that they will not sell cloned foods. Even the NFU has said that if cloned food is to be sold then it needs to be labelled saying "consumers have a right to know if their food comes from cloned animals". The continued outcry has had an effect. The US Department of Agriculture has asked for the moratorium on cloned food sales to be continued to "allow sufficient time to prepare so that a smooth and seamless transition can occur". Which has been translated as buying time so that consumers can be educated.

It all raises the question of how on earth cloning animals for food has got as far as it has in the US. Clearly there are issues of ethics, unease, and compassion, meaning that consumers don't want to buy the products, food companies don't want to process them, and retailers don't want to sell them.

Getting back to the UK, why is it all so quiet here? Perhaps an announcement from Europe does not have the same impact as one from here at home. Perhaps people think it will never happen. Perhaps a short news report in the brain dead days just after Xmas isn't sufficient to raise awareness.Hopefully its just that it's early days in the process, and when the penny drops the UK public will spring into action with widespread and spirited campaigning. It worked on GM foods.