The Island of Hawaii is by definition, at least the US Department of Agriculture’s definition, entirely “rural,” meaning that we live in an area in which there is no city with a population greater than 50,000. As a rural area, agriculture is of course a big part of our local economy. Much of our local economy is about what we can grow on farms, raise on ranches, or harvest from the sea, and what we can make from that. All of us here are happily familiar with the fantastic abundance our farms and ranches provide and the outstanding quality available from locally grown or raised products. However growing a crop and selling the raw harvest is only one way that local producers can benefit from their labors. It is the most direct way obviously, but it is also probably the merchandising method that is the least lucrative for many crops.
The Island of Hawaii is by definition, at least the US Department of Agriculture’s definition, entirely “rural,” meaning that we live in an area in which there is no city with a population greater than 50,000. As a rural area, agriculture is of course a big part of our local economy. Much of our local economy is about what we can grow on farms, raise on ranches, or harvest from the sea, and what we can make from that. All of us here are happily familiar with the fantastic abundance our farms and ranches provide and the outstanding quality available from locally grown or raised products. However growing a crop and selling the raw harvest is only one way that local producers can benefit from their labors. It is the most direct way obviously, but it is also probably the merchandising method that is the least lucrative for many crops.
This is not to say that producers can’t profit from selling their raw products. For some crops it is the only way to go, or because of volume or resources it is the logical way for a producer to proceed. But there are ways of adding value to what a producer can farm or raise and these are, quite naturally, called “Value Added” practices. Taken together these are ways that producers can use to add to the value of what they raise by doing something to it, by manipulating the product in some way. There are numerous ways this can be done: coffee can be roasted, mangoes can be made into jam, beef can be butchered and sold as various cuts, and macadamia nuts can be processed. In each instance a procedure requiring some skill is applied to the raw crop or product which changes it into something that has more value on the market, and which therefore results in more income for the producer.
This takes not only skill, but also some market and production know-how, and that is just what the SBDC’s upcoming Value Added Agricultural Products workshop on Thursday is about. A lot of the skill comes from the producer, as does knowledge about what his or her product can become. But as with so many things, the devil is in the details. And the details about how to successfully take the raw product from the ground or the sea and turn it into a value added product that is safe, saleable, economically feasible, and that can command a higher price are numerous.
There are issues about food industry requirements and these dovetail with Hawaii State Department of Health requirements. So a newcomer may and should have questions about labeling, lab analyses, commercial kitchen requirements and what it takes to be labeled organic, for example.
Then there are the issues about getting the product to market. What are the channels for marketing to specific outlets, what is the industry vocabulary that a small scale producer needs to know, and what are the expectations from retailers? Depending on your product you may be stepping up to play with the “big boys” (and girls) and they’ve got a wealth of knowledge on how their products should be placed and promoted. While we all know that your products are worlds’ better, you need to know the mechanics of getting that gem of yours into outlets and in front of consumers. It’s to your benefit to level the playing field as much as you can.
What about the scale of production? You may be producing batches and batches of whatever it is you are making and it sure looks like a lot, but is it really if you have to fill a large order for a retailer, and do so over and over (hopefully) again?
Lastly there is cost, and from that naturally stems profit. What does it cost you to make your product; are there economies of scale? How do you price your product competitively so that people are encouraged to buy it, but at the same time in a way that covers your costs and makes you some money, which is after all what this is about?
As you can see, it’s by no means a no-brainer to take your product to market successfully. In fact, while it doesn’t take a rocket scientist (usually) to add value to your home grown products, it does take some significant amount of knowledge if you are going to have a product that flies off the shelves at prices that fill your pockets. Consider gaining that knowledge and gearing up for value added products to optimize your own little portion of Hawaii’s incredible natural and cultivated bounty.
Our workshop, Value Added Agricultural Products, will be held on Thursday in Kona. Register at www.hisbdc.org or call 327-3680 for more information.
Dennis Boyd is the director of the Hawaii SBDC Network, which is funded in part through Cooperative Agreement with the U.S. Small Business Administration and the University of Hawaii at Hilo.