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Saturday, August 5, 2006 - Page updated at 12:00 AM

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Small farms aim for "right niche"

The Bellingham Herald

BELLINGHAM — Tim Lukens is fascinated by what people are willing to pay for a product.

Lukens, president and general manager of Grace Harbor Farms near Custer, remembers that it wasn't long ago when it would have been unheard of to pay more than 50 cents for a cup of coffee. That is, until Starbucks came along.

"I think Starbucks really opened the door for many small-scale farms by convincing consumers to pay up to $5 for coffee by adding to a simple product," said Lukens, who operates the farm with his wife, Grace. "They did an amazing job creating value in a product."

Value-added products — taking an apple grown on the farm and shipping it to the market as apple pie, for example — plays a small role in Whatcom County's overall agriculture economy, but it is the lifeblood for the small farms, said Henry Bierlink, administrator of the Whatcom Agriculture Preservation Committee.

"When you look at the costs of operating a small farm, it's important to have something to sell that offers some price stability," Bierlink said. With value-added products, the farmer can charge a price that earns a profit, and then it's up to the consumer to decide if it is worth it.

Bierlink expects the success of selling value-added products may catch on with larger Whatcom farming operations as well. The commodity market is difficult even for the large farm, so the committee has spent the past year studying whether the bigger dairy farms in Whatcom County could benefit from creating value-added products.

Bierlink said they've finished the first phase of the study, where they've discovered it could be profitable if 30 or 40 farms banded together to make enough of a niche product that could be carried either across the country or in markets such as Asia.

For now, smaller Whatcom farms have a firm hold on value-added products. Lukens' farm takes raw milk and makes soap and skin-care products, as well as food such as yogurt.

"For a small-scale farm, it makes sense to go the value-added path because it is just too difficult to compete with the big farms that can make milk more efficiently," Lukens said. "If you can find the right niche, you can create a business that's better protected against price fluctuations and sell directly to a loyal customer base."

Finding that niche was George Train's goal when he started Pleasant Valley Dairy near Ferndale in 1974. He started with bottling raw milk, but as a small, 70-acre farm, he found it difficult to adjust to the oscillating volume numbers and prices.

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"So I started looking for another market and discovered there were very few local specialty cheeses in the local market," Train said.

Train knew he had to stay away from mainstream cheeses, such as cheddar, because he didn't want to compete with the big companies. So he started working on harder-to-find flavors, including Gouda and spiced cheese.

Today, Train is turning the business over to his family members, who produce as much as 130 pounds of cheese a day.

But there are scores of businesses that make a great product yet don't succeed.

Train remembers a cheese maker in Eastern Washington who made a cheese that he thought would be a hit with consumers. But he was too aggressive with production and not aggressive enough with marketing.

"Marketing is one of the biggest challenges to this business. Many farmers put a lot of effort creating a value-added product, but forget that it only adds value if you can sell it," Train said.

Bierlink said it is his experience that farmers enjoy the work that goes into creating a product but don't have much experience when it comes to marketing.

Cheryl Thornton, who owns Cloud Mountain Farm near Everson with her husband, Tom, said one valuable marketing tool is the local farmer's market.

The Thorntons were originally in the apple-commodity business when they first started in 1977, but switched to value-added products such as cider. In recent years Cloud Mountain has gotten out of the value-added product business, focusing on retailing.

With consumers continuing to look for something new and unique, Bierlink expects the value-added market to continue to grow in the coming years.

"At some point there will be some local farmers who will become more aggressive and take a value-added product to a bigger market, such as Asia, and that will be a big step for Whatcom County agriculture," Bierlink said.

Even so, it will still be a challenge for those entering the market, said Lukens.

"The problem is that you can't tell what brand will shoot to the top," Lukens said. "It really comes down to what the consumer thinks is valuable."

Copyright © 2006 The Seattle Times Company

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