The following material is excerpted from the publication, "Adding Value for Sustainability: A Guidebook for Cooperative Extension Agents and Other Agricultural Professionals". To order the complete publication, click here and select "Publication Order Form".

Value-Adding Defined

Value-added products

1. offer a higher return than a new product,
2. open new markets,
   
3. create brand recognition, and
   
4. add variety to a farm operation.

There is a wide range of possible ways to add value to a raw product. Typically, any steps between harvesting and sales of a product are considered value-adding if the consumer perceives the product as having a higher value and is willing to pay more for it.

This (guide) is designed to provide a background on small-scale processing enterprise development in order to educate interested producers, processors, and communities.

How Does Value-adding contribute to Sustainability?

Value-adding offers farmers the potential to recapture a larger share of the food dollar. The farmer's share has decreased from 46% in 1913 to 24% in 1997. By processing their own raw, undifferentiated agricultural products into higher-value consumer-ready products, farmers have the opportunity to retain income.

Furthermore, value-adding is a logical extension of many farm businesses. Unlike other alternative farm enterprises which require an enormous effort to create a market, specialty foods have a proven track record in the market place, which is demanding more and more homestead and farmstead products.

Small-scale food processors tend to be embedded i9n their communities - often sourcing ingredients locally, hiring staff from the community, and selling their products locally. The dollars generated from these activities tend to recirculate in the local economy longer than dollars generated from other businesses.

Finally, value-adding captures the essence of communities. Locally produced specialty foods provide a window into the unique qualities of a community. Local value-added products can complement tourism goals by giving visitors a tangible "piece" of the place to take back home and share with others. This is an underrated and underutilized method of showcasing the community.

Typical Value-Adding Start-Up Activities

Quality Products

• Decide to explore a value-added business endeavor, after receiving enthusiastic response from family and friends and from customers when the product was test-marketed at a farmers market.
• Discuss product development with university food science Extension specialists.
• Subscribe to specialty food journals, purchase books on the topic, spend time in the reference and periodicals sections of a public library.

Good Marketing

• Develop a business plan, market research plan, and book-keeping records.
• Determine most appropriate market distribution channels
• Research brokers and distributors
• Attend trade shows, talk with vendors, and research their products and marketing channels.
• Hire a qualified graphic designer to help with labeling, packaging, and sales literature design ideas.
• Use sales literature and sampling demonstrations at local gourmet food shops and farmers markets
• Send out press releases to local newspapers to encourage articles.

Sufficient Capital

• Research co-packers and food processing incubators.
• Research sources of capital
• Keep capital costs down

Food Safety

• Research and comply with federal, state, and local laws and regulations
• Contact appropriate local, state, and federal food safety regulators regarding processing, packaging, and labeling.

Other Legal Issues

• Determine the business legal structure, and if there is more than one business partner, develop a business partnership agreement
• Purchase sufficient product liability and other necessary insurance coverage.
• Research registering trademark

Community-Based Support for Value-Added Enterprises

As noted in the introduction, more and more farmers and other businesspeople are entering into value-added food processing enterprises or are interested in doing so. Responding to this interest, a growing number of communities are providing market development support, business education programming, technical food-processing services, and even developing special facilities to serve fledgling value-added enterprises.

The following are some general community-based strategies for support value-adding activities:

1. Establish Specialty Food Networks and Associations
2. Build Regional Product Identity
3. Encourage Use of Farmer's Markets to Launch Value-Added Products
4. Food Processing Incubators
5. Consider New Generation Cooperatives
6. Educational Programming

Conclusion

Small-scale processing enterprises involve a wide range of considerations, and each situation is unique. There is no one formula for developing a successful business and there are many barriers to success.

This guide has offered insight and information on small -scale processing enterprise development. It is hoped that it will provide a foundation for the reader to build upon by working with interested processors and community groups.

This tool is excerpted from Adding Value For Sustainability: A Guidebook for Cooperative Extension Agents and other Agricultural Professionals. The complete guidebook is available from CFAP, contact information below.

For more information, contact:

Community Food and Agriculture Program (CFAP)
216 Warren Hall
Cornell University
Ithaca, NY 14853
(607) 255-0417
dlh3@cornell.edu