Marketing Strategies for Sheep and Goat Producers

Marketing Strategies for Sheep and Goat Producers Hannah Lewis and Nick McCann, NCAT

Outline of presentation • 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 • 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. • 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.

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 employee

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 under-standing 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 • Local Sale Barn • Takes less effort than direct marketing • Can sell lower quantities • No guaranteed price • Must pay commission, yardage, and other fees • 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

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/attra-pub/summaries/summary.php?pub=266 • Direct Marketing • https://attra.ncat.org/attra-pub/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/attra-pub/livestock/livestock.html#sheep_goat • Meat Goats: Sustainable Production • https://attra.ncat.org/attra-pub/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.shtml

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Marketing Strategies for Sheep and Goat Producers