Farm Diversification

Quality Meat Scotland (www.qmscotland.co.uk) analysis of the market for beef and lamb indicates the following figures:

Production Volume and Value (2007-08):

There has been significant growth in recent years in direct sales of farm produce through farm shops, Farmers’ Markets, box schemes and internet/mail order.  Consumers are looking for features such as quality, freshness and traceability.  From the producer’s perspective, opportunities to add value to produce should be taken wherever possible.  For instance, lower value mince can be made into pies or burgers that can be sold at higher prices.

As with all new ventures a full business plan incorporating a marketing plan should be prepared to assess the viability of the enterprise in advance of making any investment in equipment and facilities etc.  The marketing plan should establish the target market for the product, how big this market might be, who your competitors are and what your product will offer to set it apart from the competition. Beef sales in Scotland increased by 7% between 2006/07 and 2007/08.

Many producers begin on a small scale by testing the market by attending Farmers’ Markets or developing sales through word of mouth.

Branding is important, to give the produce an identity that the consumer can readily identify.

The amount and quantity of facilities and equipment required will depend on the proposed scale of the enterprise and how much of the process will be carried out by the business as opposed to sub-contracting out (e.g. having the meat butchered and packed by another, specialist company).  The following list is not exhaustive but highlights the main issues to consider:

• Butchery Premises - could be new-build or conversion of existing building.
• Qualified Butcher
• Chiller room for hanging meat
• Freezers and fridges
• Vacuum packing equipment
• Labellling equipment
• Packaging materials
• Refrigerated transport
• All appropriate licences and certification (for facilities and staff)

• Adaption of existing buildings or building new premises and associated fittings and equipment: Costs will vary depending on the type of produce and preparation required.  For example, installation of a full butchery facility will include chill rooms and working areas.
• Vehicle: Second hand refrigerated small van - £4500 upwards
• Chiller/fridge cabinets - £500 upwards depending on size
• Freezers - £500 upwards depending on size (higher costs if blast freezing).
• Butchery knives and other equipment – £200 upwards
• Vacuum-Packing machine - £750-£1200 for commercial scale equipment.
• Labelling Equipment – around £500
• Banners/Advertising materials etc - £100 upwards
• Website creation: around £500 upwards, plus ongoing maintenance costs

• Staff costs – variable depending on scale of enterprise.  Qualified butcher might seek £7-£10 per hour (plus employer’s National Insurance contributions etc)
• Electricity – freezers, chillers etc
• Packaging – Plastic for vacuum packing -£10/6m by 20cm roll
  - Polystyrene Boxes for transport -£1.20 each (reusable)
• Vehicle Running Costs (fuel, tax, insurance, maintenance etc)
• Slaughter costs – cattle c.£50 per head, lamb c. £9 per head
• Sub-contracted butchery cost – Cattle: c.£250 per head, Lamb: c.£20 per head
• Disposal of Bone Waste- - Cattle: c.£32 per head, Lamb: c.£6 per head
• Sub-contracted sausage/burger manufacture costs – c.£1.70 per kg
• Licences, Inspection Costs etc, if appropriate (see Further Information Section below)
• Training costs –e.g. food hygiene courses, other relevant training
• Advertising: Production of leaflets/recipe cards etc - £100 upwards; website around £100 per year for updating website
• Rates: New premises may be liable for rates.

Prices charged should reflect the required profit margin (to ensure the enterprise generates the desired level of return), the added value attached to the brand (e.g. a premium price for organic meat), and the prices being charged by competitors. 

Other factors to consider include the need to develop a good customer base, with the aim of encouraging repeat business and costs of transport, shipping etc.  Careful consideration of customer requirements is also important in order to maximise returns.  For instance, the sale of half lamb boxes, with a combination of meat cuts, sausages and mince.  In this way value can also be added to the lower value, fore end cuts such as mince.

Retail prices will fluctuate seasonally and also between years, depending on demand and other economic factors.

• Capital costs: Sound business planning including a thorough feasibility study should help reduce risk.  Grants may be available (see section below)
• Labour/Time: This activity can be very time consuming, depending on how much of the work is carried out “in-house.”  Sourcing a qualified butcher, particularly if only part time work is required, may be difficult.  Other staff will require appropriate training.
• Seasonality, particularly with lamb, can lead to peaks and troughs in demand.
• Legislation: All necessary legislation and regulations must be complied with.  It is likely there will be both time and cost implications in order to comply.  The Local Authority Environmental Health Department should be consulted at an early stage.  The Food Standards Agency (www.food.gov.uk) also produces essential information on Food Hygiene issues, particularly with regard to the requirements imposed by the food Hygiene (Scotland) regulations 2006.  See the Food Standards Agency's Cutting of meat for direct sale by farmers Scotland which details the responsibilities of local authorities with regards to meat cutting and details many of the do's and don'ts for farmers.  Competition: Competitors can be both a good thing and a bad thing.  Competition can help keep businesses on their toes by creating the impetus to develop new products or find ways of staying ahead of the opposition.  On the other hand, competitors may already have a big share of the market, putting pressure on your business.  A full competitor analysis and a well-planned strategy are essential parts of the business plan.

Food businesses have a responsibility to ensure that food is kept safe and free from contamination and this involves compliance with all relevant legislation and regulations.  The Food Hygiene regulations require food business operators to ensure that food handlers are supervised and instructed and/or trained in food hygiene matters appropriate to their work activities.  In addition, those responsible for the development and maintenance of procedures based on HACCP (Hazard Analysis and Critical Control Point) principles will require to have training in the application of HACCP. 

Advice on appropriate training requirements can be obtained from your Local Authority Environmental Health Department.  Training providers include SAC (www.sac.ac.uk), local colleges and the Royal Environmental Health Institute of Scotland (www.rehis.org).

Training in customer service, marketing and website design/maintenance may also be appropriate.