More on 'Bridging the Gap' workshops for farmers

Steve Williams is a ‘new generation’ farmer who bridges the gap between production, processing and marketing.

Naturally Iowa buys organic milk from three Iowa dairy farmers, and will expand to eight farmers by summer 2006. Housed in a remodeled Pamida store in Clarinda, the plant has been in production since June 2005 and now employs 10 people.

Emerging markets
Considered small by most dairy industry standards, Naturally Iowa is playing a huge role in new niche market opportunities for Iowa producers.

“Naturally Iowa is building the capacity that Iowa needs to open doors for niche dairy farms in Iowa,” said Rich Pirog, who directs the Leopold Center’s Marketing and Food Systems Initiative and the Value Chain Partnerships project. “Iowa needs these small and midsize farmers as well as the locally owned processing facilities that can supply some of these emerging markets.”

Williams was one of seven farmers who shared their experiences at a series of “Bridging the Gap” workshops throughout Iowa in March. Each workshop was designed for farmers and processors who want to increase their sales of locally grown or “place-based” foods to new customers in educational institutions, health care facilities, restaurants and hotels, grocery and convenience stores
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“If you’re going to sell to food service or other companies, you need to understand that it will require an entirely new level of business skills than selling directly,” Williams said. “There are so many other issues to think about, from the insurance needed for product liability, to having a delivery truck that can unload at a dock. It’s a different level of sophistication.”

Making connections
Williams has learned these and other lessons since 2002, when Naturally Iowa was just an idea. Since then, Horner and Williams have taken the company through development of a farmer supply network, products, labels and packaging, and finding investors, to creation and implementation of marketing and business plans.

The most valuable assistance, he said, came from members of the Regional Food Systems Working Group of the Value Chain Partnerships project. The group includes farmers, processors, researchers and staff from various agencies and nongovernmental organizations.

“This group has people involved in other aspects of the value chain who were aware of what we might need to do next,” Williams said. “They also were familiar with the institutions that we wanted to sell to, which was a great help so we might know what to expect.”

The Value Chain Partnerships project, supported by a grant from the W.K. Kellogg Foundation, also has worked closely with Naturally Iowa to document the process so that startup lessons can be shared with other entrepreneurs. The project has helped by tackling some of the obstacles that would have been difficult, if not impossible, for a single entrepreneur to manage.

Testing new concepts
For instance, how to locate environmentally friendly milk and yogurt bottles?

Naturally Iowa wanted to use biodegradable packaging made from a renewable resource. The material, made from corn and marketed by Cargill Dow under the brand name NatureWorks, had never been used for milk. The Bioeconomy Working Group (also part of the Value Chain Partnerships project) provided a small grant to test the safety of the bottles at ISU’s Department of Food Science and Human Nutrition.

“Last September, we became the first company in the world to put milk in this bottle,” Williams said. “Because of our bottle’s unique qualities, we got an audience with Costco, which allowed us to get a contract.”

Williams said a number of other dairies are interested in the bottles. Naturally Iowa has shipped samples to companies throughout the United States, Japan, Korea and Australia.

Naturally Iowa also received a grant from the Regional Food Systems Working Group to partner with Food Alliance Midwest. The grant included funds for testing products for the Des Moines and Omaha markets, as well as development of sales strategies and marketing messages.

“We know there’s a demand for natural and organic dairy products,” said Jim Ennis, who directs Food Alliance Midwest in Minneapolis. “This sector has been growing 15 to 19 percent each year and we’re expecting a double-digit growth rate the next five years.”

It can be a challenge, however, making the switch from direct markets to working with food distributors.

“Some people think that they only need to get a product ready for market and that the distributors will pick it up and sell it for you,” Ennis said. “You need to have a pull-through strategy that guides your products through the distribution system. You also need to have a promotion program that educates distributors and their customers about your new products.”

Ennis said processors can benefit from packaging products under private labels, rather than developing their own label. “Developing your own brand may be rewarding in the long term, but it’s an extremely expensive endeavor and you need to include those costs in your marketing plan,” he explained.

Williams also worked with a team of ISU agriculture and business students who conducted a market survey as a class project.