For a marketer like Ted Soudant, the income problem in production agriculture isn’t exactly a mystery.
Soudant once asked a group of 55 prairie farmers to estimate the collective value of their production assets: land, equipment, everything. “At least $35 million” was the answer that came back.
“So my next question was, ‘how much do you have invested in marketing to sell your product?’ ” recalls Soudant.
“And the answer was, ‘nothing.’ I say that’s a pretty scary thought.”
Soudant is a sought after speaker these days because of his success with Field Gate Organics, a private company owned by two dozen southern Ontario farm families.
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Field Gate has two retail markets, a network of retail customers, its own delivery system and the country’s first 100 percent kill and processing plant. That sure beats what the dozen organic farmers who first approached Soudant had: little control over the quality of the retail product, no established brand and a limited distribution system and retail network.
“Coming from the conventional side of food marketing, my view was there really was no marketing infrastructure in the organic world,” says Soudant, a farm kid with a 25-year history in food wholesaling and distribution.
“The producer basically had no way to get to the market.”
Not that they hadn’t tried.
“The original group of 12 beef producers formed a marketing committee of three people and one of them did the marketing,” says Soudant. “But it just didn’t work out well. It had limited success and absorbed a lot more time than they expected.”
Credit Field Gate’s founders for realizing they needed a pro. Credit luck that one of them, an old schoolmate of Soudant’s, knew he was living down the road in tiny Zurich, Ont., and that he had just sold his food distribution company.
By that point, they were ready to put the whole thing in his lap.
“They wanted to go back to being farmers, not marketers,” Soudant recalls. “They even asked if I wanted to form a company and they would sell to me.”
Now think back to those 55 farmers with $35 million in production assets and no marketing assets.
So Soudant gave a facts-of-life talk: if he owned the company, then sooner or later he would just pay the going rate for their beef. And if a big corporation bought him out, it would likely be even more hard-hearted.
“That could have left them in worse shape than they were because they might have ramped up their numbers and still not have a way to profitably market them.”
Getting started wasn’t easy. Field Gate was in business only a few days when the BSE crisis struck.
“So we had to go to Phase 2 of the business plan right away and come up with half a million dollars to open our retail outlets,” Soudant says.
The processing plant was another problem. The first four plants either had quality or capacity problems and a fifth couldn’t afford to upgrade to meet new provincial standards. So they raised several million dollars to buy a plant, hiking their risk profile up a few more notches in the process.
“Doing it is a lot harder than talking about it,” Soudant says of marketing. “But I think of those farmers and their $35 million in assets and I say you’re better off spending 10 percent of that to secure your market. After all, at the end of the day, your revenue determines what your farm is worth.”
Ultimately all revenue comes from the consumer and those with access to consumers tend to want to share as little of that money as possible with farmers. Unless, of course, the farmers are the ones with the marketing access.
Glenn Cheater is editor of Canadian Farm Manager, the newsletter of the
Canadian Farm Business Management Council. The newsletter as well as archived columns can be found in the news desk
section at www.farmcentre.com.
