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| Processing Echinacea into Products Instead of Selling Bulk Roots |
Answered by: Richard Alan Miller
Question from: Colette Wilson
Posted on: February 3, 2001
Dear Richard, Many months back I spoke to you on the telephone about EA. I have thought back to that conversation many times. You mentioned that processing my own herbs is a viable alternative to shipping it aways to be processed. At present, I have one acres seeded.
I am seriously considering exploring alternate processing arrangements. I would appreciate a reply to this email. I would like to get some definite business plans established before the end of March. I look forward to your response.
I remember speaking to you regard the current and future markets on Echinacea angustifolia. Of course, I presume you are aware of my new book on this crop (www.herbfarminfo.com). I am also available to help in a cottage industry business plan. Here are my current thoughts on your questions.
Lack of new products and low consumer confidence in product quality this last year has impacted the growth of herb and spice industry. Future success will be driven by the creation of innovative, effective products with proven clinical support and patent protection. This is not a raw material industry as much as it is best suited for the development of cottage industries.
Those wanting to live in rural communities are left with opportunities other than as raw material suppliers. That would be OK except for the fact that the markets for herbs and spices are limited. The marketing and sales, however, is driven by the (consistent) quality of the raw materials used in the cottage industry.
Niche marketing is created by availability. This means a "new idea," not a new product (or raw material). The "niche" is the idea, not the product itself. The market is not about the raw material itself, but the quality of raw materials used to make "something."
For herbs and spices, the first rule is: Always begin a market program around a specific "idea" (like an Indian Herbal Coffee, or herbal steroid). This is your "cottage industry" idea. Then, to guarantee the continued purchase and growth of that cottage industry, grow your own fields needed to supply its needs (focusing on quality).
This is called "vertical integration," where you might also have a small processing plant to put your various raw materials into a form for their final use. This might mean further cleaning of contaminates, or processing it into better forms for use in your final product. The operant word is "when you want it done right, do it yourself."
Your "in house" ability can also be used for outside customers, also seeking your processing. I’ve found that processing is as important as the raw material itself. A good processor can clean up problems, and often make things work (when they might not have otherwise). It allows the farmer some latitudes with overall farm costs and procedures.
Niches also imply diversification of ingredients and a balance of options (when markets wane or rise). Peppermint is primarily grown for the oil, but some have found that when world oil prices drop, they can often process their product as leaf (for the tea industry) for a better return. However, the grower that makes the real money in this industry is the one who also sells his peppermint as part of a blend of herbal teas (like Country Spice Tea) from his farm.
Economic forces, federal farm policies, and consumer choices are causing small farmers to look at the business of farming in new ways. Today’s successful farmers are, of necessity, increasingly becoming small business entrepreneurs.
Many small farm experts and policy makers across the nation believe that local value-added agricultural food production where farmers assume more processing steps and sell through direct marketing techniques - is a critical strategy to sustain many small farmers and their communities.
The world’s agricultural trade is rapidly shifting from commodities to products. Consumers are demanding products with traits to meet their specific needs. Global competition is intense.
To survive in today’s dynamic market, small farmers must interpret market signals accurately. They must carefully consider what mix of crops and other agricultural products will maintain crop diversity and flexibility, and provide more value-added farm income.
Value-added means adding features - desirable to customers - to a raw agricultural, marine, aquacultural, or forestry material used to make a product. Drying, canning, juicing, combining ingredients, handcrafting, and unique packaging and marketing techniques can add value.
Everyone who adds value to a product as it goes from farm to consumer gets paid. Vertical integration - the farmer doing production, processing, and distributing - can be good for those farmers who are willing and able.
Many farmers have not gone into value-added food products because they are concentrating on what they have traditionally done best - producing a commodity. Doing more of the processing and marketing activities involved in the marketing chain takes time, skill, and extra labor.
My new book on this subject, "A Processing Facility for Botanical Alternatives" should be up on www.herbfarminfo.com shortly. Beyond that, I am available as an outside consultant, to help you make it in this marketplace. This is a good time to start, as I see the markets changing positively this time next year.