Reunited… and it Tastes So Good: Consumer trends in the direct-to-consumer economy and promising new markets for small farmers.

by admin on January 25, 2016

kissing pigsBy Tracy Sweely

As Joni Mitchell reminded us so long ago, "You don't know what you've got till it's gone…" But, at what has seemed like the 11th hour of the demise of the small family farm, consumers are finding their way back to wholesome, great tasting produce grown by their local farmers. Farmers, for their part, are reaching beyond direct-to-consumer marketing into the “experience economy” and discovering new areas of lucrative offerings at their fingertips. This happy coincidence demonstrates that the recently rekindled romance between small farmers and consumers may be on its way to a lasting love... the second time around.

According to agricultural censuses conducted by the USDA, direct to consumer sales of produce increased 60% between 2002 and 2012. (NSCA, 2014). Between 2007 and 2012 such growth had slowed to 5% (ibid.). It has been suggested that such a slowing may have been due to a plateau in consumer interest or to non-direct sales growth (USDA, 2015:1). But other indications demonstrate continued growth in direct-to-consumer food demand. For example, between 2006 and 2014 farmers markets grew 180%, food hubs grew 288% and farm to school programs grew 430% (USDA 2015:1).

Rather than a waning interest in local food by consumers, the slowdown may have been in part due to the economic downturn that began in 2008 (Runyon, 2015), as well as erratic climate conditions that have touched virtually every region of the country. Goodwin and Goldthorpe (2013) found that instability in the economy and climate were the primary self-reported challenges by small farmers in Florida. Since these factors have affected the nation as a whole, they may have inhibited a majority of small farms, those with annual income less than $350,000, from expanding their direct-to-consumer operations. An unstable economy and climate may have prevented farmers from risking their operations and loyal customer bases until the economy improved and they could incorporate methods to better buffer climate. Consumer demand does not appear to have declined at all. But how are small farms managing risks while meeting continued growth in demand?

Farms that rely on direct marketing to consumers have higher survival rates than those accessing intermediated markets, regardless of whether they are new or established farms (USDA, 2015:13). Within the classification system of local food business models, direct marketing of produce to individuals via a Community Supported Agriculture (CSA) program provides the most advantages to the farmer. The CSA model allows farmers to capture the greatest amount of value and marketing margin for their products (Bauman et. al., 2015:3-4). In addition, the personal relationship inherent in the CSA model can generate a level of customer loyalty that increases the pricing-power leverage these farmers have (Bauman et. al., 2015:3).

Disadvantages consist of the relatively low share of consumer dollars spent in agriculture markets versus other types of markets, low sales volumes and potential size-, location- and seasonality-based limitations on the ability to scale up efficiently, not to mention the need for implementing new Federal food safety rules. New food safety regulations under the Food Safety Modernization Act (FSMA) will likely result in increased costs to small farmers. Associated costs are primarily for implementing new product labeling requirements and for increased labor spent on documentation requirements for manure-based fertilization processing and application.

One response to mitigating risks has been the development of multi-farm CSAs, where risks for small and new farmers are spread among several farms. In early 2010, the North Central Sustainable Agriculture Research & Education organization funded a multi-farm CSA handbook (Perry and Franzblau 2010) and a model for multi-farm CSAs has been developed at the University of Florida (Nistler n.d). While this model overcomes some disadvantages to small farmers, FMSA rules could possibly inhibit the multi-farm CSA opportunity because of specific “facility” determinations and rules.

Other strategic directions that local farms are taking advantage of include branching into "agri-tourism," "agri-tainment" and "agri-cational" activities. Such activities include u-pick, corn mazes, farm dinners, tours, classes and workshops, and farm camps for kids. Farmers markets are also beginning to go beyond simply providing a venue for farmers to sell their produce by also providing live musical performances and food courts where customers can get a quick meal while they shop for local produce.

Agri-tourist, agri-tainment and agri-cational activities comprise additional income streams that allow farmers to meet their bottom lines by meeting consumer interest in farms and farming and consumer desires for social, entertainment and educational opportunities. Such activities can have a wider profit margin than does vegetable production alone because they provide opportunities to move products up a progression of economic value (White 2012). Beyond this, even though society has become more information- and technology- (and thus "virtually-") oriented, a surprising effect has been for people to desire more hands-on experiences (ibid; Ghosh 2015). Fabian Rigell of Secret Cinemas, as quoted by Ghosh (2015), states:

"People are absolutely desperate to connect, and to feel experiences in this age where we’re constantly bombarded with information on what’s cool and what’s happening. They want an adventure, so the things that remind people of their childhood.... People want to have experiences with integrity, in which they feel connected."

In fact, a recent study by the Journal of Consumer Science found that "nostalgia marketing" makes consumers spend more (Billig, 2014). Researches of the study pointed out that advertising campaigns were especially successful for products such as food (ibid). Farmers are ideally positioned to take advantage of this "experience economy" by tapping into nostalgic desires, especially of Baby-Boomers, for a bygone, pre-technological way of life (White 2012).

Wondering how to get started working consumer "experiences" into your farming operation? Just Google “agri-tainment,” “agri-tourism” or “agri-cation” and let the fun begin!

References

Bauman, Allie, David Shideler, Dawn Thilmany, Merrit Taylor and Blake Angelo. January 3, 2015. “An Evoloving Classification Scheme of Local Food Business Models.” Extension: Issues, Innovation, Impact. http://articles.extension.org/pages/70544/an-evolving-classification-scheme-of-local-food-business-models

Billig, Aubrielle. "Nostalgia Makes people Spend More, Study Finds. Small Business Trends." August 19, 2014. http://smallbiztrends.com/2014/08/nostalgia-marketing.html

Goodwin, Joy N. and Jessica L. Gouldthorpe. “Small Farmers, Big Challenges: A Needs Assessment Of Florida Small-Scale Farmers’ Production Challenges And Training Needs.” 2013. Journal of Rural Social Sciences, 28(1), 2013, pp. 54–79. http://www.ag.auburn.edu/auxiliary/srsa/pages/Articles/JRSS%202013%2028/1/JRSS%202013%2028%201%2054-79.pdf

Ghosh, Shona. "The New Nostalgia Trend: it's all in the reference." Marketing. February 9, 2015. http://www.marketingmagazine.co.uk/article/1332972/new-nostalgia-trend-its-reference

National Sustainable Agricultural Coalition, “2012 Census Drilldown: Organic and Local Food,” May 16, 2014, http://sustainableagriculture.net/blog/2012-census-organic-local/

Nistler, D. B. “Expanding Your Market: The Multi-Farm Community Supported Agriculture Model,” n.c. University of Florida, IFAS, Extension, Clay County, Green Cove Springs, Fl, USA. http://conference.ifas.ufl.edu/smallfarms11/poster_abs/PDF%20of%20Actual%20Posters/Expanding%20Your%20Market_The%20Multi-Farm%20Community%20Supported%20Agriculture%20Model.pdf

Perry, Jill and Scott, Franzblau, Local Harvest: A Multi-Farm CSA Handbook. 2010, North Central Sustainable Agriculture Research & Education. http://www.caes.uga.edu/topics/sustainag/documents/LocalHarvest-CSA.pdf

Runyon, Luke. “Are Farmers Markets Peaking? That Might be Good for Farmers. February 5, 2015. NPR. The Salt: What’s on your plate. http://www.npr.org/sections/thesalt/2015/02/05/384058943/are-farmer-market-sales-peaking-that-might-be-good-for-farmers

USDA, “Trends in US local and regional food Systems: A report to Congress.” January 2015, http://www.ers.usda.gov/media/1763057/ap068.pdf

White, Randy, “Defining Agritainment as the 4th Level of Economic Value.” August 4, 2012. White Hutchinson: Leisure and Learning Group. https://www.whitehutchinson.com/leisure/articles/agritainment.shtml

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