Adding value to organic cereals
Present situation
This farming group consists of three families producing beef, lamb, cereals and potatoes. Over the last two years they have begun to convert to organic status and have formed themselves into an organic group with the aim of formulating a strategy to help ensure the survival of their family farms.
The problems
At the time of this report the promoters noted that organic prices are high but realised that some supermarkets are lowering the price of their organic products in line with conventional products. This, in turn, would cause a lowering of the price paid to farmers. However, due to the extensive farming system, strict rules and regulations governing organic production, and the prohibitive price of land, the group felt that to lower the prices they were receiving for their products would make it difficult to sustain their businesses.
As such they felt that there was an opportunity to maintain their incomes by processing and marketing their own grain to give greater control over pricing. Cereals were chosen over the other commodities produced, as the group is experienced in cereal production and cereals are easily handled, have a long storage life and are very versatile.
Information required
In order to ascertain the viability of processing grain into wheat flour and oatflakes (so as to add value and sell to the public), the group felt that the following information was required:
Advantages and disadvantages of the different types of processing equipment (maintenance levels, product quality and adaptability to different products).
Marketing information – who are the target markets and what are the best ways of marketing to the different outlets.
Market Research
The group visited two milling operations in the Republic of Ireland:
Mill in Co. Kilkenny
The group discovered that whilst the owner had over 20 years experience in the milling industry, the milling process is a very complex one and requires a lot of fine tuning in order to produce a consistent end product. The owner also informed the group that he had tried selling flour in small bags through grocery and health food shops but the volumes were too small to warrant continuation. As such the owner now only sells to bakeries which require larger volumes.
Mill in Co. Waterford
The second mill was a family run business producing a number of oat-based products. The company, which produces porridge oatflakes, oat bran and superfine oatflour, have recently introduced a breakfast cereal and are also trialing flapjacks in the south east of Ireland.
Conclusions
The group noted a number of points:
- A high level of capital expenditure would be required to set up a milling plant for wheat and oats.
- The milling of wheat and oats would require different equipment.
- Both the milling of wheat and oats would require a lot of milling experience, wheat more so than the oats.
- Both processes would require a full time commitment to run the mill.
- Milling alone would not give a big enough market for the group’s produce.
- The group’s potential market would have to be with small bakeries that would be interested in niche market products.
- Further investigation will be made into biscuit making and breakfast cereals.
Lessons learned
The main points offered by the group would be:
Direct contact with those involved in the same/similar business, if possible, is of vital importance in terms of market research.
- Whilst this demonstrated to the group that milling would not be their correct option, the visits gave valuable information on future developments.
- It can be quite difficult to produce a ‘mainstream’ product without encountering competition from established businesses and so niche marketing seems to be the most viable option by producing a product both separate and distinct from the larger competition.
Important note
The information within these case studies is for general information only. It is not necessarily complete and is not intended to address all issues relating to the proposed diversification ideas. Market and circumstances may change substantially and thus this information should not be used directly within the development of other business cases for diversification without checking its validity at the present time and directly to your particular project and circumstances. Further research is recommended before embarking on any new enterprise.