Farm Diversification

Background
John Sinclair is tenant of the 105ha West Craigie Farm, South Queensferry, Edinburgh. The farm was originally a dairy and converted to cereal production in the 1970s. The farm also began to grow a small area of soft fruit for the pick-your-own market. A small farm shop was established in 1988. The area of soft fruit expanded and now covers 4ha, mostly under polytunnels. Around 35% of fruit sales are now generated through direct public sales. A new, enlarged shop and café was built in 2007. This was very successful and was further extended in 2009.

Why Diversify?
Low margins from cereals combined with the relatively small size of the farm led to a need to increase returns. The soft fruit enterprise was expanded to help meet this objective. The location, close to Edinburgh, was important in deciding to develop the soft fruit business and, subsequently, the farm shop and café.

Researching the Idea
A database of existing customers is kept. This was very useful in allowing a survey to be undertaken to assess the likely demand for an enlarged shop and café. Visits were made to other farm shops/coffee shops etc and advice was also sought from trade organisations (e.g. Farm Retail Association) and other sources. The same process was adopted for the more recent extension to the shop and café.

Funding
Funding for the building of the new shop and café in 2007 was obtained by means of a successful application to the Farm Business Development Scheme with the balance made up from cash reserves and a bank loan. A succinct, but thorough business plan was important in securing funding. This was particularly the case for obtaining bank funding for the extension in 2009, when the credit crunch put pressure on obtaining finance, especially for diversified enterprises. A 50% grant from the Scottish Rural Development Programme Rural Priorities Scheme was received for the extension in 2009.

Business Establishment
The presence of an existing farm shop and direct sales business was helpful when it came to expand and develop the shop and add a café. A customer base had already been established and it was possible to survey these customers regarding the new shop and café and hence make an assessment of the likely level of demand. A detailed business plan was prepared; this was used to support applications for grants and loans as well as set internal business targets. The business already had a website and an email list of some customers, who received regular newsletters. John took the opportunity of the new development to rebrand the business to “Craigies”. This rebranding involved professional support, and a PR campaign included roadside advertising, email newsletters and use of the website along with press editorials and advertising. The business now uses the website, blogs, Twitter and Facebook to connect with customers.

Challenges Encountered
There were several challenges to overcome to successfully establish the business. As a tenant, John was required to agree the development with his landlord. This complex process took two years to reach agreement. Obtaining funding, particularly for the 2009 extension, was a challenge. In 2009 it was necessary to change banks in order to secure the required funding – this process delayed the project by a few months. Time was also spent preparing detailed applications for grant funding. Thorough planning helped to ensure that all planning permission requirements and other regulatory requirements were met. Sourcing, training and managing the staff (currently 25 employed) has also taken up a lot of time.

Where the Business is Now
The business has developed over time. The new farm shop and café was very successful, running well ahead of sales and profit projections. For this reason, the extension development was initiated, both to increase capacity and offer further new features, such as a dedicated butchery counter complete with on-site butcher. As the business has become established, staff turnover, which was quite high initially, has reduced, and overall productivity has increased. Further enhancements are being planned for the future.

Critical Success Factors
The location of the farm and the existence of the pick-your-own and original farm shop were essential in securing the success of the new shop and café development. Well planned marketing and inviting customer feed back have also made a significant contribution to the success of the venture. The experience of managing a large team of staff during the fruit season was helpful, but John’s staff management skills were further enhanced by obtaining management training and coaching.