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Pondering Product Prices

Bacon

When we first started selling pork at Six Sigma Ranch, I really struggled with pricing. Pork at the grocery store was just so cheap. I ran the numbers and there was no way that we could cover the expenses of pasture raised organic pork at grocery store prices. It took a real leap of faith to set a price reflecting what the meat is actually worth.

It’s tempting when starting a farm business to price the same as what people can get at the local supermarket. Here’s the problem. The brands that sell to your local supermarket are often (but not always) large companies that sell huge amounts of product all over the country and, sometimes, the world. They compete with low-priced high-volume goods. When you set your price the same as theirs in an effort to get customers, you could be on the right track to go out of business. You may never make enough to break even as a small farmer.

But here is the awesome news: I found out that there are plenty of customers out there who are looking for high quality, amazing food and willing to pay for it!

Rachel

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How to save the Family Farm: “Put Your Name on Your Work!”

That phrase, commonly associated with frustrated elementary school teachers, is also priceless wisdom for any entrepreneur.

On the contrary, ignoring that idea results in the death of the small farm.

Allow me to illustrate with two stories:

In the first story, Farmer Sharp has three cows. He feeds them well and milks them efficiently. A truck from a generic milk brand (let’s call them Dairy Inc.) picks up his milk daily.

In the second story, Farmer Donaldson also has three cows. He also feeds them well and milks them efficiently. But, instead of selling his milk to Dairy Inc., Farmer Donaldson has it processed according to local regulations and sells it in grocery stores and at farmer’s markets using his own label, Donaldson’s Dairy. Farmer Donaldson puts his name on his work.

I oversimplify the dairy industry here to make a point: One business model has the capacity to be profitable, while the other doesn’t. Why?

When customers buy milk from Dairy, Inc., it doesn’t matter much to them who produced it. To them, the brand they know and trust is Dairy Inc., not Farmer Sharp. For that reason, Farmer Sharp is in perfect competition with the other farmers supplying Dairy Inc. (Perfect competition, according to my dear economics-trained wife, means that he is selling a good that is identical in quality to everyone else.) Subsequently, Dairy Inc. has the luxury of selecting suppliers by price, which means the price goes as low as it possibly can without driving every supplier out of business. The least efficient do go out of business. The most efficient (think big guys) may make some money. But everybody else (that is, every dairy supplying Dairy Inc. that isn’t the most efficient) is working on slim or zero profit margins.

Meanwhile, Farmer Donaldson has his own customers that know his brand. He is in especially good shape if his brand is distinctive in quality, story and appearance. That distinction may be as simple as being the only small, family-run dairy in town.

In summary, Farmer Sharp is forced to grow big (efficient) or go broke, while Farmer Donaldson gets to create value for his customers with a friendly brand.

That may make the difference between the beginning or the end of the family farm.

Christian

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The Farm in Alsted Mark

My great grandfather founded his family farm in the 1920’s in Alsted Mark, just outside Vonge, Denmark. There, 20 miles from Billund (later the birthplace of Lego Group in 1932), he and my great grandmother raised 7 of their children and an adopted son on 23 acres.

A few things strike me as interesting about this family-based case study:

First of all, the farm fed and financed the rearing of 8 children, meanwhile employing the two proprietors plus 2 male and 2 female apprentices, all on 23 acres. That’s 14 total people, or 1.6 acres per person.

Secondly, it was farmed according to organic principles, by default. (Nobody had considered chemical fertilizer until it became a by-product of bomb manufacturing during the Second World War.) Thus, fertility and bug control must have been supplied by the resident pigs, chickens and milk cows. In the same fashion, the operation never included a tractor; horsepower came from two Belgian beasts, obviously powered by grass. It’s fair to assume that the operation was also “carbon neutral.”

And lastly, little money was spent on education. That’s not to say that education wasn’t happening, only that it had a positive impact on cash flow instead of a negative one. Through a formal system of apprenticeship, young men and women could learn the trade under the guidance of a “master,” while performing valuable work.

The farm in Alsted Mark operated profitably this way at least until 1955, when my father remembers visiting as a youth. After that, my great grandfather sold it at a nice profit and retired to a job in town, brokering hogs at the Vejle Export Market.

While these observations obviously don’t translate directly to American culture in 2014, I find them interesting to dwell upon.

Christian

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The Magical Tune of Winegrapes

This week, we’d like to share with you a piece that Christian wrote for the October Newsletter at Six Sigma Ranch and Winery:

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We finished harvest this year  on October 2, beating by a week last year’s record-early harvest. We were blessed with an awesome crop, slightly lighter in weight than last year. With that, we put Six Sigma’s 11th harvest on the books, starting with 2004 and now including 2014. (The 2004 vintage was a mere 37 cases of Cabernet Sauvignon, but let’s count it anyway!)

Wrapping up harvest always reminds me of why I love growing wine grapes. As a farmer-at-heart, I enjoy anything that grows, from hot peppers to bitter hops, but there’s something special about wine.

Consider for example the 2005 Tempranillo, the first one we ever made. The vines captured every detail of the growing season in the vineyard. As the United States  swore in  the second George Bush for his second term on January 20th, the vines responded to freezing temperatures by forming tiny clusters inside closed buds. During the growing season, they recorded humidity, breezes, and aromas in the air from the nearby Pines and California Bay Laurel. On July 24, as Lance Armstrong crossed the finish line for his 7th Tour de France victory, the grapes were entering their final stretch of ripening, building sugars before their harvest on September 28.

When you open that wine, it tells a story of a season and a place, like a time capsule summarizing that year’s growing season. That’s one of the many things I love about wine!

Christian

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Starting Can Stink

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Starting something new is hard. I’ve noticed that in my life, every time I start a new job, I’m terrible. It takes me a good year before I feel like I’m making any progress. The truth is that success in one field does not transfer directly to another. The same was true when I started farming.  I may have been a gymnastics coach, a finance assistant and an after school director, but had I ever been a farmer?  No.  If you are new to an industry and it feels like you’re just not that awesome, take heart; soon you will be. The discipline that brought you success in one career will eventually bring you success in another. Here is the key: Plan. Michael Hyatt, author of the book Platform, always tells people not to quit before the point of inflection. Plan for the time when learning needs to happen so you don’t have to quit due to lack of funds or energy.  And don’t quit just because you think you stink. Keep going and soon you won’t!

-Rachel

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