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Evaluating Alternative & Niche Markets

Evaluating Alternative & Niche Markets. What Is Niche Marketing?. Involves developing and marketing products or services for a targeted group of consumers Typically target consumer looking for alternative to conventional product. Why Niche Marketing?. Capitalize on untapped market

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Evaluating Alternative & Niche Markets

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  1. Evaluating Alternative & Niche Markets

  2. What Is Niche Marketing? • Involves developing and marketing products or services for a targeted group of consumers • Typically target consumer looking for alternative to conventional product

  3. Why Niche Marketing? • Capitalize on untapped market • Add value to animals that have been produced in a specific manner or with certain attributes • Take advantage of marketing and customer service skills

  4. Pricing Considerations • Involves more work than typical commodity production pricing: • More management intensive • Requires more labor and resources • More risky, prices not directly comparable to local retail prices • Supply and demand dynamics different than mainstream commodity

  5. Niche Classification Types • Safety of the product (organic, product origin, antibiotic/hormone-free) • Animal welfare (free-range) • Environmentally safe • Help other people (locally-raised) • Religious beliefs (Kosher, Halal)

  6. Risks Of Producing For A Niche Market • Production risk • Managerial risk • Financial risk • Marketing and price risk • Legal risk

  7. Production Risks • May involve new production practices or require skills to produce unique goods • Small producers have difficulty producing steady quantities • Maintaining uniformity and consistent quality • Seasonality • Accountability, process documentation, coordination

  8. Managerial Risks • Direct involvement with consumer • More time intensive, greater labor investment • Must be prepared to change product to fit consumer demand • Guarantees and liability

  9. Financial Risks • Capital investment is generally higher to start up a niche business (organic certification, labeling) • Reaching consumers in certain niche markets may require considerable capital investment • Costs may be higher (labor, processing, promotion, transportation) • May need to deal with bad checks or timely payment from consumers

  10. Marketing & Price Risks • New supply participants increase competition • Prices fluctuate due to changing demand • Must supply volume to meet demand • Need to produce consistent product & maintain uniform pricing • Must determine how to price different cuts (and sell it all) • Market access

  11. Legal Risks • Food safety regulations • Product liability • Regulatory compliance (USDA, HAACP, labeling claims) • Contractual risks

  12. Considerations Is there a market? Are labor, capital, expertise, etc. available? Has market analysis and feasibility study been conducted? Is marketing plan in place? How will venture fit with current operation?

  13. National Organic Standards

  14. Livestock Production • Origin of livestock • Organic management from last third of gestation (poultry 2d day of life) • 100% organic feed • Synthetic vitamins and trace minerals allowed • Prohibited substances • No synthetic hormones or growth promoters • No antibiotics • Animal health and safety • Accommodate the health and natural behavior of the animal

  15. Three Organic Labeling Categories • “100% Organic” *(may use USDA seal) • Just that, including all processing aids • May use USDA seal • “Organic” *(may use USDA seal) • At least 95% organic agricultural ingredients • Remaining 5% on the National List • May use USDA seal • “Made with Organic (Ingredients)” • From 95% to 70% organic agricultural ingredients

  16. Meat Labeling Terms (FSIS) • Chemical free: term not allowed on label • Certified: implies USDA FSIS and AMS have evaluated. Associated with name (ie. Certified Angus Beef) • Natural: product containing no artificial ingredient or added color and only minimally processed. Label must explain natural claim.

  17. Meat Labeling Terms • No Hormones (pork and poultry): cannot be used • No Hormones (beef): “no hormones administered” may be approved for label if sufficient documentation provided • No Antibiotics: “no antibiotics added” may be used on label with approved documentation

  18. Implanted vs. Non-Implanted Steers Sawyer et al., 2003

  19. Effects of Feed Additives in Steers Sawyer et al., 2003

  20. Implanted vs. Non-Implanted Steers Sawyer et al., 2003

  21. Conclusions • “Cattle targeted for niche markets requiring abandonment of antimicrobials and/or growth promotants may have similar or lower production costs when fed for a common number of days, but must garner premiums above those associated with improved carcass quality to be economically competitive with conventionally finished steers.” Sawyer et al., 2003

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