Reasons for value adding Use crops not prime for sale still high quality – visual blemishes, too ripe to get to market, etc. 20 -45% of crop lost from fresh sales in research plots Love to cook and create Personal dream Create cash flow for a longer period of time Potential to make more money on crops when processed Local business development
Challenges of value adding Can you make it worthwhile – financially and lifestyle Finding successful products Selling those products Find the financing to get started Must figure out and then abide by regulations
Areas to gain knowledge Product selection and testing Who is your market and what do they want? Where will you make the product? Food safety Rules and regulations Business planning Pricing, competitive analysis Marketing Ingredients Customer service Insurance
What is your product? Unique products aim for a product consumers cannot get – something unavailable or superior Salsas are being done by many –must be exceptional and pay for extra marketing or make something else Something you love- a long venture Determine what products you can produce Different products require differing levels of food safety and regulation which can mean differing equipment and registration costs.
Recipe development Develop recipes Once you have a product Ensure the recipe follows that the consumers love food safety requirements and want to buy, then run small scale trials at adapt the recipe to full home to create the scale production desired product Test the scale up Produce the recipe in a products on the commercial kitchen and consumers again test on consumers Calculate the needs for the larger scale and out into a business plan
Product testingTest products on friends & then on the target market Survey consumers views on Blind test your product product against similar products on Taste the market and/or against Sweetness other versions of your Sourness product Salty, etc. Conduct tests directly with Texture target consumers- ie. farmers Appearance market, events note local health regulations -at Overall appeal a minimum the product would Likeliness to purchase have to be made in commercial kitchen Frequency of purchase Or conduct tests in Price range they are willing to pay professional testing panels Enter contests
Ensure consistency and high quality Today’s consumers expect Use high quality the exact same product ingredients to get a high every time quality product The quality of the product Have a consistent supply of must be exceptional to the main ingredients –if justify premium price - using local crops, pick ones that Small scale production is more can be produced consistently expensive than large commercial and in high quality production Find processes to achieve and keep excellent quality Develop and always follow a protocol for production
Who is your market? Who are the consumers that will buy your products? Income or passion to pay the premium price Ethnicity if product targets Local demand How do you get your product available for purchase? Farmers markets, online, gift basket companies, etc. Adapt product taste, volume, size and type of packaging to fit the identified market
Where will you make your product? At this time, there is not a cottage food law in Nevada allowing commercial processing in private kitchens In Nevada, commercial products must be processed in an inspected kitchen certified by the local health inspector. Kitchen rentals – incubators, community kitchens providing fee for service Any currently inspected kitchen can be used – some Senior centers, school facilities and restaurants are willing to rent out space or take your protocol and manufacture it for you.
Renting a commercial kitchen Before building your own kitchen it is recommended to rent a facility to gain experience Create a clear business arrangement on paper Research and obtain any insurance and licensing required At least one person in the kitchen must have servsafe certification
Rules and Regulations Business licenses County/city State - http://nvsos.gov/index.aspx?page=267 Approval by your health inspector Start a positive relationship with your local health inspector early Due to the uncertain rules for small scale processing federally and in Nevada the expectations and requirements vary between health inspectors Their goal is to help insure that you produce a safe product Follow the required federal rules Difficult to determine for small scale processing Key - food safety
Ensuring your product is safe To create a good, safe product follow the federal guidelines, the best food practices, and what the state health inspector tells you. There needs to be a paper trail for each finished product back through the processor and all sources of ingredients. At least one person in the processing kitchen needs to take the food safe course. Establish a Good Manufacturing Processes (GMP) for each product and the kitchen These processes how, where and when of the safety practices required for each product. Research the requirements for each product
Good Manufacturing Practices Establish a detailed paper trail for all ingredients in the processing item. If an ingredient is tainted, the origin needs to be found. Outline an in-house description of how an item is handled from its entry into the kitchen (date), its care (refrigerate), the way in which it was processed (temperature), the way in which it is packaged, how to care for it post processing, and proper labeling. Also, the distribution of the product to purchaser needs to be paper trailed.
Different rules for different products Vegetable and fruit products: For safe, simple products fresh or fresh cut vegetables, fruits or herbs, dried products or fermented products that are fermented to pH less than pH 4.6 best practices need to be outlined the paper trail of ingredients Labeling-5 points approval by the inspector.
Different rules for different products Vegetable and fruit products - Shelf stable high acid or acidified foods for pH below 4.6 i.e. jams, pickles, sauces require approval from the FDA on forms 2541 and 2541a. Need details on ratios of ingredients, processing times (adjusted to altitude), and various pH measurements. Follow the recipes approved by the USDA -most recent Ball canning books , National Center for Home Preserving at the University of Georgia. Need recorded data for each batch.
Different rules for different products Other products considered safe processing Most baked goods 9except some custards Some refrigerated products may have potential Low acid foods – too difficult for most small kitchens Meat products require one or more USDA inspections
Product labeling Keep the label as simple as possible Avoid any health claims on the label or anywhere because it requires extensive paperwork with an additional agency Small scale production allows an exemption from full labeling – need to file for exemption Labels can be made in house on specialty printers or ordered from printer companies – the choice will depend on volume, cost and convenience
Simplest label requires1. Name of product2. Weight/volume3. List of ingredients4. Care of product (e.g. refrigerate after opening)5. Contact information leading back to processor (e.g. web site, physical address)Mimic labels on approved products as there are specifics in format and design
Business Planning Processing is a business and one that can quickly lose money without proper management and planning Create a realistic business plan – initial time investment very fruitful later – help is available from Nevada Small Business Development Center, SBA, RNDC, College of Southern Nevada - Business and classes such as Next Level are available Consider: Mission, vision, goals Expenses, supply sources, labor needs, financing, insurance, projecting sales. marketing, time frames, etc
Competitive analysis Competitive analysis is when you study the market for products similar to what you want to produce The analysis should determine: Whether there are similar products in the market - how many and what is their quality? If there is room in the market for your product (demand not being filled) If your product is better or worse then the competition Pricing of the competition
Pricing Pricing can be determined by combination of: Exceeding the production cost Finding what the market will bear Researching the competitors pricing and deciding on pricing above or below
Is the Product Profitable? Estimate the size of market you can acquire Is it large, stable and long-lived enough to warrant starting the venture? Estimate price of the product Identify the cost of production Consider all costs: Product development costs, registration fees, costs of production, cost of materials, cost of labeling, shipping, cost of marketing, staff, equipment, land, building, your labor, etc. Determine the break even point – add risk and profit
Marketing Identify how to reach your target market what are their habits & hobbies Use the profile features to reach them economically Social media is a small business marketing dream free and can be viral. Learn how or hire someone knowledgeable. A website is essential. Keep it up to date Match your marketing drive to the volume of sales you need -maybe the farm stand is all you need Ensure that your product promotion, packaging and label match the image that you want your product to reflect
Consider creativity to succeed Think out of the box – only unique products and approaches stand out from the others Kitchens alone often lose money. It may pay to outsource or find other uses for the facility to split costs Materials – most supplies are available or only at reasonable prices in huge volumes - ie. jars need to buy by the pallet- budget for these larger volumes up front and have storage area Evaluate how many raw materials go into the product – using bulky whole cucumbers uses less cucumbers than a thinly sliced pickle but looks the same -cooked down sauces/ dehydrated products can be amazing but takes much more raw produce to make
Common beliefs to avoid“If you build it, then they will come” If you build it, the way the specific consumer group wants it, make them aware of it and deliver it to them, then they will come.
Managers of thriving businesses: Know their break even point for every product Can estimate quickly the cost/return impact of a change in market availability, labor, etc. Sell to several strong markets Have markets/sales planned for products months in advance Have someone skilled in marketing Have a consistent labor source Ensure that the market knows about their product and where to buy it Have a product that the consumers want and are willing to pay for
Common beliefs to avoidMy product is amazing. My friends and family love it so it will sell. The opinion of the majority of your specific market segment is what counts Urban tastes and values are often very different than rural
Common beliefs to avoidIf I make and sell my product the way that I would want it then that will work for the consumers Your logic, desires and needs DO NOT necessarily equal that of the specific consumer group Only the opinion, desires and needs of the specific consumer group counts
Common beliefs to avoidEveryone will trust our farm’s products because we are honest In the market trust has to be gained with proof Every step must be taken for quality control and certification when required. Personal relationship building is essential