Niche marketing: a way to beat the odds for hard-pressed producers

Wednesday, August 10, 2011

Whether it's with antibiotic-free or Omega-3 pork, some operators are finding that developing niche markets is a key to survival. And experts believe that these could eventually account for 20-25 per cent of the Ontario market

by MARY BAXTER

Five years ago, Gord Player's sons bought their uncle's share of the family's farrow-to-finish swine operation near Gads Hill, north of Stratford. The vision was to continue working with their father to produce commodity market pork. Then, in 2007, costs soared and prices plummeted. "We obviously knew what we were doing wasn't working," says Gord. So the family considered another direction.

"At that time, Grand Valley Fortifiers was looking for people to join the 'Free From' products," says Gord. The products – antibiotic-free, grain-fed pork – are produced in a value chain developed by the feed supplement company to supply the Loblaw Companies Limited President's Choice brand. Quality Meat Packers Limited in Toronto is the processor. "We thought it was a great market and we thought it was a great business plan," Gord says.

Until the Players joined, the program sourced its animals from four or five small farmers. The Players' operation was considerably larger. Today, all of the 11,300 pigs they annually produce from their 530-sow operation are sold through the program and earn a premium of $12 to $22 per pig. Without it, "I just don't see in the last three years how we would have survived in the hog industry," says Gord.

In the same year that the Players switched to the Free From program, Paul and Rosie Hill, who farm near Mitchell, also embarked in a different direction. They launched Willowgrove Hill, a direct marketing venture that features antibiotic-free pork enhanced with Omega-3 and Selenium.

Paul says the 2001 death of the couple's two-year-old son, Ryan, from liver cancer inspired their quest to produce a healthful product. "After living and seeing what cancer's capable of, we thought if we could just make the difference to one family's life, all of this would be worthwhile," he says.

Niche markets are known to offer farmers a chance to set prices for their products and the niches that the Hill and Player families entered appeared especially promising. According to a 2005 U.S. National Pork Board survey, nearly 37 per cent of the respondents liked the idea of products raised without animal by-products or growth promotants. Fourteen per cent wanted antibiotic-free products and were willing to pay more. Nearly half wanted locally grown pork.

Niche markets are often small, but that isn't the vision behind the two Ontario ventures. The Free From program processes 4,500 animals a week, drawn from about 40 farms, says Ian Ross, president of Grand Valley Fortifiers. That's more than five per cent of the total number of hogs sold in Ontario in the first week of May 2011.

Paul Hill says he'd like to expand his venture to roughly 10 per cent of Ontario's hog production. Currently, his 450-sow operation is Willowgrove Hill's sole supplier. He hopes to add other producers within the next three to five years – sooner if a major retailing partner is found. "The whole concept behind this was to bring on third party barns, and also to help other pig farmers to become sustainable as well as us," he says.

What also distinguishes these initiatives from other pork niche marketing is the ability to use conventional livestock containment production. For example, both producers still use their commodity production barns (the 90-kilogram, dressed target weight for Free From pigs is actually the size Gord's barn, built in 1994, was designed to accommodate).

Jump in mortality
The shift to niche production, however, posed challenges. When the Players joined the Free From program, "we just basically cold-turkey started," says Gord. They used up the existing feed, removed the medication, cleaned out a medicine cabinet and consulted with their herd health vet.

Six months later, without medication use, mortality rates rose. In the finishing barn, where the mortality rate had been seven to eight per cent, it jumped to 8.5 to nine per cent before their vaccination program kicked in. Today, wean-to-finish mortality rates have fallen to five to six per cent. Pre-wean mortality, once six to seven per cent, is now five to 5.2 per cent.

Gord credits the feeding program, a proactive management approach and rigorous biosecurity for the mortality rate drop. There have been "big investments" into pressure washers. They clean with hot water and use degreasers as well as disinfectants.
Natural products, vitamins and homeopathic treatments are their only resources during an outbreak. Determining which products are effective is "100 per cent trial and error," Gord says.

Maintaining records is crucial for proving they meet the standards outlined in the product's claims. There are annual surprise audits by Grand Valley Fortifiers, President's Choice and a third-party auditor.

The Hills and their partner, Paul's brother-in-law, Jan Holland, encountered many of the challenges and requirements that the Players faced but shouldered the added risks of developing and marketing the product on their own. That has meant organizing transport and processing, as well as branding and promotion. "I swear if I had known that it was going to be this hard three and a half years ago, I would have seriously had second thoughts," says Paul.

Research shows that Omega-3 fatty acids may reduce the risk of heart attacks and may even help lower blood pressure. It's found in plants such as flax and in fish like salmon. There is other Omega-3 pork on the market but it's derived from flax, a source of alpha-linolenic acid (ALA) that the body converts to DHA/EPA (docosahexaenoic and eicosapentaenoic acids), the form found in fish.

But people convert the flax-derived fatty acid inefficiently. What makes the Hills' product unique is that people can obtain DHA/EPA Omega-3 directly, as they do from fish. They can also obtain Selenium, a trace mineral studied by researchers for its potential as an anti-cancer agent.

Introducing Omega-3 enrichment in pigs can affect the taste of the meat, notes Ian Ross, Grand Valley's president and CEO. The company began exploring the possibility of introducing Omega-3 in pigs in the 1990s. By the time the Hills approached the supplier for assistance in 2007, the remaining challenge was how to apply the research to a commercial operation, says Ross.

It took two years and nearly $1 million to establish their feeding program and 72-page protocol, says Paul. Much of the effort was focused on proving the product met federal requirements to make the health claims. "That takes testing – a lot of it," he says.

Convincing people to pay a premium price for a product they normally pay little for has been equally daunting, he adds. The couple sells the pork at their farm store, through several smaller retailers, mostly in southern Ontario, and to restaurants. At Remark Fresh Markets in London, the pork sells for about $1 a pound higher for each cut than regular pork, says Geoff Smith, the store's meat manager.

Paul won't say what his wholesale price is. "If I told you the numbers, people would be able to figure out the retailers' profitability and I don't think that's fair." But he says that, on every piece that's sold, "we actually do make money." They are not selling all of the pig at this point. Paul declines to explain what he does with the unwanted cuts.

He says interest in their product is growing in the domestic market. They have recently shipped product to Mexico and he says there's interest in the United States, too.

Flax diet
The Hills might be the only ones in North America producing pork with high enough levels of DHA/EPA Omega-3 to make a health claim, but producing the ALA Omega-3 version is becoming easier.

In April, Kees de Lange and other researchers at the University of Guelph completed a study for Ontario Pork that looks at feeding flax to create Omega-3 pork. It included consumer research to assess which type of Omega-3 pork – fed flax or fish oil – produced the most appealing product as well as recommendations on when to introduce the flax. The study also establishes "that pigs are able to produce health benefit providing conjugated linolenic acid (CLA) isomers and long chain polyunsaturated fatty acids (EPA; DHA) in their upper gut from dietary precursors, ALA from flax seed."

As Omega-3 pork production expands, protecting their niche may well prove to be the Hills' greatest challenge. "The worst case scenario is that someone tries to do what we do, taints pork and screws our market," Paul explains. "That is definitely a concern."

To protect the venture, Grand Valley applied for patents in Canada and the United States on the feeding program and the process of adding the DHA/EPA Omega-3 and Selenium to the meat without compromising taste.

Change and innovation are how the Free From program can hold its turf, Ross suggests. That's the advantage of being a value chain, he says. Once set up, "you can do whatever you want."

He recalls that, while in Europe, they saw pictures of producers on a Marks & Spencer product. "We said, 'hey, we know the 40 farms that are supplying President's Choice; we can go get pictures and supply them to President's Choice.' It's all there, you just have to do it."

Niche markets might present opportunities, but keep in mind they are limited, advises Jim Gracie, vice-president marketing and business development at Quality Meats. Gracie estimates niche marketing programs' optimum share of Ontario's pork market is 20 to 25 per cent "at best." Currently, "the number we're seeing is in the 10 to 18 per cent range," he says.

So yes, there's room for growth. "But to think that one day we'll all be raising antibiotic-free I don't think is reality." BP