Marketing Strategies for Sheep and Goat Producers

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Marketing Strategies for
Sheep and Goat Producers
Hannah Lewis and Nick McCann,
NCAT
Outline of presentation
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Market segmentation
Processing rules
Segment examples
Win-win scenarios
Selling the whole carcass
Selling co-products
Timing production to marketing
Commodity markets
Two ways to approach marketing
• Niche Market
– Specializes in
satisfying specific
needs of consumers
– Niche products are
attractive for specific
demographics, at
specific price points,
and at differing levels
of quality.
• Commodity Markets
– A standard product
that is undifferentiated
from other products
within the market.
– Commodity prices are
volatile and typically
set through commodity
exchanges like the
Chicago Board of
Trade.
Let’s talk about
niche marketing,
where the market
is differentiated or
segmented
What is market segmentation?
• Two sections of a market are segmented if
price changes in one segment do not
cause a corresponding price change in
another segment
• For example:
– You have two customers. One is price sensitive
and buys in volume (perhaps a regional Halal
slaughter plant). Another (maybe an up-scale
restaurant) wants frequent deliveries, specialty
cuts, and buys in lower volumes. The animal is
the same, but the price is different depending on
value added attributes.
Why do we segment the market?
– If there is more than one type of goat and
sheep consumer, then the market is not
uniform
– A non-uniform market implies that among
consumers of goat and sheep products, there
are different perceptions of value
– If there are different perceptions of value, then
it is possible to charge a different price for the
same product based on value-added traits
– Creates a more resilient business model.
What kinds of segments are there?
• Market Venue Segmentation: Segments based on
different outlets to sell meat.
– Grocery, Farmers’ Markets, CSA, Buying Club, Restaurant
• Service Platform Segmentation: Segments based on the
services provided to a customer.
– Delivery, further processing
• Cultural Traditions Segmentation
– Halal, kosher, cabrito, organ meat
• Values Segmentation: Segments based on customer
perceptions of value
– Organic, natural, local, grass-fed, farmer owned
No market segment type is an island, many overlap.
How do we segment the market?
• Identify different market venue, service, and
individual value segments in your area.
• Requires some sales legwork.
• Are you out talking to:
• Restaurant owners?
• Grocery Co-op managers?
• Individual consumers?
• What do they want?
• How can you fulfill those needs?
• Many will say low price!
– HOWEVER, the key is to identify something besides price that
helps them receive more value or better profitability.
Before we go any further, let’s talk
about processing. . .
• USDA inspection
– Each animal is inspected before
and after slaughter by a USDA
employee of the Food Safety
Inspection Service (FSIS)
• Official state inspection
– Each animal is inspected before
and after slaughter by a state meat
inspection program employee
– Meat can be sold only within the
state where the animal was
slaughtered
– Not every state has a state meat
inspection program
• Custom exemption
– The animals and meat are never
inspected, but the operation as a
whole is inspected by a state
Segment example: Restaurants
Requires:
• Effort and relationship building
with chefs and managers
• Consistent supply and quality
• Delivery to restaurant
• An official inspected processing
plant (state or federal)
Restaurants typically want
specific cuts and may be willing to pay more, but you
might get stuck with less desirable cuts of the animal.
Segment example: Restaurants
(cont.)
• Restaurant suppliers (your competition)
typically already provide consistent supply,
quality, service, and competitive prices to
restaurants.
• Your typical restaurant buyer also likes the
convenience of fulfilling all of his/her needs
with one phone call or on the internet.
• If you are going to compete with other more
established suppliers, you must give the chef
a reason to make an extra phone call to you.
Segment example: Restaurants
(cont.)
• Often, our first instinct is to reduce prices…
However, selling cuts piecemeal means you
must get paid for the service and hassle of
unloading the rest of the carcass
To reap a higher price, you
must prove your value. So,
what is your restaurant
customer’s perception of
value? And, most importantly,
can your competitors copy you?
Segment example: Restaurants
(cont.)
• Your restaurant customer must
provide a unique dining experience to
his patrons at a competitive price.
– How can you help your customer
provide that?
• The local, family farm, or organic attributes
might be important…
• Can you provide unique cuts of meat that help
provide a unique dining experience?
• Food prep time is a costly and difficult part of
restaurant management. Can you help your
customer decrease food prep time?
Segment example: Buying clubs and
CSAs
• Requires consistent
supply and quality
• You can sell a whole or
a half per family
• To sell meat directly to
the consumer, you
need an inspected
processing facility
• Delivery of meat to a
specified site or direct
to customer is often
required.
Know your buying club or CSA
customer
• If you have customers that are cost
conscious, you need to show that you are
competitive on cost.
– Often, buying a whole carcass is actually cheaper
than if you bought equivalent cuts through retail
channels. Do your customers understand this?
• If you have customers that are nervous about
paying up front, you need to alleviate this
problem.
– Can you deliver smaller individual quantities to a
group and charge on a weekly or monthly basis?
Starting a buying club
• It is often hard to organize
people and it takes a lot
of time and effort.
• However, if we can look to
where people are already organized, then
it might be possible to start a buying club
with less outlay of time and effort.
• Churches, mosques, woman’s clubs,
rotary clubs, etc.
Segment example: Ethnic markets
• Immigrants and refugees
may prefer to eat the
food they grew up with
– Goat is purportedly the most
widely consumed red meat in
the world, but it’s not typical in
the U.S., so it’s hard to find
here
• Many 1st-generation
immigrants know how to
slaughter and process
meat at home
– Are therefore able to buy live
animals
Several cultural
traditions involve whole
goats/sheep at parties
and for holidays
Know your ethnic markets
• Selling live animals to your customers
– Customers may prefer to purchase live animals if they
are looking for a lower price and prefer to utilize the
whole carcass
– You can avoid the hassle and expenses involved in
processing and transportation
– However, you lose the added value of selling
processed meat
– The time involved can lead to high transaction costs
• Sell animals one by one, instead of by volume. Do you have
the time for this? Do you mind having people stop by your
farm, sometimes without notice?
– Be aware of local regulations
• Can customers slaughter on your farm?
• If so, what facilities are needed?
• How do you dispose of waste materials?
Know your ethnic markets (cont.)
• What and when are the major
holidays for ethnic markets for
your area?
• Do you have a basic understanding of your ethnic market’s
culture traditions ?
• If the buyer is price sensitive,
can you make your bottom line
while still providing value to the
customer? It is possible.
• Do you understand special cultural needs like Halal?
• Is there a market for organ meat?
Win-win scenarios
• Is dropping the price your first and only
method for increasing sales?
– This is win-lose. Your customer wins with
cheaper meat, you lose with cheaper meat.
– Is there a better way?
• Remember, if you don’t win you won’t be
in business for long. If your customer
doesn’t win … you won’t be in business for
long either.
Win-win scenarios (an example)
• If “my price sensitive customer, who is
nervous about the high upfront meat CSA
costs and would rather go to the grocery to
buy small quantities is resistant to buying
from me.”
• And If “I need to make sales and move the
entire carcass at a decent price.”
• Then “is it possible to deliver smaller
quantities on a weekly or monthly basis”
Win-win scenarios (an example)
• The Result:
– you are selling a whole or half, giving the customer a
better value than they could get at the retail store,
while also maintaining a fair price
– AND you allow them to pay in smaller increments,
helping to alleviate a customer’s resistance to buying
your product.
• You win by making more sales at a fair price,
thus making more money. The customer
wins by getting a great product at a great
price with payment terms he/she can live
with. Win – Win!
Making money on the animal as a
whole
Sell the entire carcass
– One advantage of market
segmentation is that I
have multiple avenues
to move different cuts
of meat
– Selling the whole animal
means that I can be more
cost competitive on certain cuts, while still
making a fair return from the carcass overall
Making money on the animal as a
whole
Sell a combination of products
• Meat
• Organs or offal
• Livestock (show and breeding
stock, or slaughter-ready)
• Fiber or skins
• Dairy
• Vegetation management services
• Manure or compost
Timing production and marketing
• Should I calve (kid), feed, and kill a
whole herd together?
– Have to schedule slaughter at a plant
– Need meat storage (freezer) space
until meat is sold
– Ties up money until meat is sold
– Freezer storage eventually hurts meat quality
(freezer burn)
– Some inventory is hard to sell (shanks, neck bones,
etc.)
– Can you time the slaughter close to holidays?
Timing production and marketing
• Should I calve (kid), feed, and
kill animals on a staggered
schedule?
– This takes more planning.
– Most breeds of sheep and goats
naturally kid from Jan. to May; this may dictate
production schedule.
– Staggering means you would need less freezer
space, as you’re continually selling meat.
– Improves cash flow and lessens risk of freezer
burn.
Commodity markets
• Meat Packers
– Require Volume
– Require uniform
appearance
– Require livestock
hauling capabilities
– Less effort for actual
animal marketing
– Must be willing to
accept price and
volume set by buyer
• Local Sale Barn
– Takes less effort than
direct marketing
– Can sell lower
quantities
– No guaranteed price
– Must pay commission,
yardage, and other
fees
Commodity markets
• Commodity markets can often be a
necessary part of livestock marketing
– Multiple marketing outlets for sheep/goats
allow for flexibility
• Beware that commodity markets might
have different standards than your local
market niche
For further information:
• Niche Meat Processor Assistance Network
(NPAN)
– http://www.nichemeatprocessing.org/
• ATTRA Publications
– Selling to Restaurants ATTRA Publication
• https://attra.ncat.org/attrapub/summaries/summary.php?pub=266
– Direct Marketing
• https://attra.ncat.org/attrapub/summaries/summary.php?pub=263
For further information:
– Tips for Marketing Sheep and Goat Products: Dairy, Fiber,
Live Animals, Meat, and Vegetation Management Services
• https://attra.ncat.org/attrapub/livestock/livestock.html#sheep_goat
– Meat Goats: Sustainable Production
• https://attra.ncat.org/attrapub/summaries/summary.php?pub=214
• Sheep and Goat Marketing Information
– http://sheepgoatmarketing.info
• Purdue University Alternative Livestock Page
– http://www.ansc.purdue.edu/poa/org%20goats%20sheep.sht
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