PROJECT HIGHLIGHTS | PRODUCTS ON THE MARKET

Value-Added Projects — Project Highlights — 12

	Transitioning a Historic Business to Today's Market
	Treating Forest Products
	Using the Internet to Sell Handcrafted Wooden Toys
	Value Added Beef Enterprise, A Preliminary Investigation of Regulations
	Value- Added Dairy Products
	Value-Added Woodworking
	Working-Farm Vacation Business
	Winery

Decreased revenue and increased theft may be signs that a historic business needs to update its practices to survive in today's market. Writing a business and marketing plan in addition to keeping adequate records of finances and prices are critical steps in improving the management and direction of the business. Using promotional tactics and advertising may help encourage current customers to purchase more products and/or generate new customers. Managing traffic flow and parking areas may increase convenience for, and flow of, customers. Store layout, posted signs or cameras, locks on doors and educating employees may help deter shoplifting and decrease the amount of thefts that may occur.

The start-up investment and regulatory requirements for treating wood are substantial. Start-up costs may approach $1 million and annual operating expenses could run half of that amount. For some wooden products, per unit variable costs may account for approximately 75% of the expected wholesale price. Therefore, a high volume of regional sales is necessary. The market for some treated wood products has substantially diminished in recent years with the increase in the use of fabricated materials. The most significant market for value-added forest products must exist within an efficient distribution area in order to enhance success.

The demand for sturdy handcrafted toys, reminiscent of yesteryear, seems to be increasing with the aging of the baby boomer segment of the population. Products such as wooden rocking horses that are functional toys as well as heirlooms for future generations are very popular. However, gone are the days of strictly selling these items to the local retail outlet or consumer. Distance is not always a limiting factor to today’s producers. Via the Internet, products can be sold down the street or across the globe with virtually the same amount of effort. An assessment of a website currently in use by a value-added wood products business was performed in order to determine ways to increase the site’s ease-of-use and number of times visited. Internet surfers look for websites that provide detailed descriptions and photographs of items for sale. In addition, they want to be able to order using their selected method of payment, usually a credit card, quickly and with few delays over secure channels. Issues addressed during the assessment included 1) keywords used by search engines to find and rank websites, 2) submission to various search engines, 3) the importance of website links and 4) the usefulness of visitor counters.

Regulations and inspection of the US commercial food supply dates back to the early 1900's. In fact, many of the rules and regulation of the current food industry are derived from the principals embodied in the country's first meat inspection laws of 1906. Assurance of a safe food supply involves a coordinated effort from federal, state and local agencies and includes input and oversight from possibly 12 different agencies/departments. It is not uncommon for a review of laws, codes and statutes for the food industry to involve thousands of pages. Despite such an overwhelming amount of text, it is extremely important for value-added entrepreneurs considering a food business to completely understand the regulations and inspections for their industry.

Complete food safety plans and inventory systems should be developed for value-added processing and distribution firms. The CPA developed financial and inventory record keeping systems that allow monitoring of production and marketing activities as well as financial performance. A comprehensive production safety plan was also developed that will allow access into new markets and greatly reduce the risk associated with a food production business.

The CPA has completed an analysis for the potential of adding value to local timber through the manufacturing of wooden cabinet doors. Per unit cost of production was found to be significantly influenced by labor and the wood species utilized. Survey results indicate that there is little market potential for wooden cabinet door panels but a slightly better potential market for cabinet doors. Cost estimates for manufacturing the cabinet doors at full capacity appear to be competitive with market conditions. According to secondary industry research, the largest market potential for wooden cabinet doors lies in the remodeling market. The remodeling market accounts for three-quarters (77%) of the total use of new kitchen cabinets, with the remaining 23% going toward new home construction. However, cabinet makers appear to be losing market share to other businesses when it comes to remodeling jobs. For example, cabinet makers are predicted to do 3.7% of the total kitchen remodeling jobs in 1998 - a significant decline in market share of 61.9% since 1994.

Recreation-related farm enterprises are becoming more popular due to increased leisure time, greater mobility and interests in relaxation. Entertainment farming activities can offer opportunities for hands-on farm experiences, the chance to talk with farm personnel and the opportunity for an overnight stay in a working-farm environment. A unique experience is essential to the success of such a business. The product (farm experience + special service + atmosphere) should be uniquely positioned to appeal to the targeted customers. Entertainment farming activities may offer the potential of additional income for the farm operation and a method to use under or non-utilized farm resources. However, these activities may result in extra responsibilities, more labor and increase the farm’s exposure to risk and liability. The "fun" aspect rather than the income potential is often a primary objective. Outdoor recreation enterprises are not always good profit makers for farm operations. Sidelines of this type usually do not generate enough dollars to be attractive profit makers. When costs are applied to family labor inputs, depreciation, facilities & equipment, taxes and others, the net income is often in the red.

One way to add value to Tennessee agriculture includes the processing, packaging and marketing of grapes through a winery. Proper legal regulations should be pursued early-on in the business planning stages. Product analysis is also essential to a marketable product and should be included in the early phases of business development. Other business planning tactics should include market research, target market identification and financial planning.