Progress 06/01/12 to 01/31/14
Outputs
Target Audience: Top 10 Produce, LLC has developed a technology and marketing approach that provides the traceability and food safety features of GS1 technology, but expands those benefits in a way that will especially benefit small and mid-size family farmers. A key feature of Top 10's approach is that it provides these benefits to small producers at a much lower cost than other GS1 alternatives. The purpose of this project was to determine whether Top 10's marketing approach combined with mobile pay technology would increase buyer value and thus sales revenue to small and mid-size farmers. Top 10's technology and business model attempted to bridge the gap between consumers' demands for safe, wholesome foods and locally-grown, high quality fresh produce, and the farmers who could meet those demands. Although there is a growing demand for locally-grown produce, smaller farmers face very large expenses in complying with government regulations and the requirements of distributors for food traceability. Farmers who cannot afford the expense of GS1 numbers are restricted to selling in small farmers' markets, limiting opportunities for economical growth and sustainability. The problem, and the reason this research was necessary, is that even at the lower cost, too few farmers have been willing to invest in the technology and its implementation. To substantially increase the number of small and mid-sized farms voluntarily adopting GS1 standards nationwide, Top 10 proposed a two-part technology-based business and marketing plan that has the potential to overcome this problem. • Target small and mid-size producers who are positioned to benefit from the technology, and who already recognize a need to enhance their marketing strategies. • Ally with strategically-positioned marketing and technology firms to expand the network of buyers that have direct contact with farms participating with Top 10, giving those buyers the ability to buy products though Top 10 using mobile pay technology. As part of Objective 1 of the project, Top 10 successfully tested this technology in farmers' markets in which one of Top 10's customers sells its products. The technology works as follows: buyers scan a UPC or QR (Quick Response) code of the product, receiving information about the supplier/farm (e.g. the grower's geographical location, the grower's history) and other related details of the product itself. Buyers can place an order, confirm it, and pay the farmer directly through the technology. Buyers receive an email confirmation of the transaction. Farmers receive an email confirmation of the transaction, which indicates exactly what has been purchased and where the product should be delivered and to whom. After purchasing a product using the system, buyers can directly pick up the product from a farmers' market or have it delivered nationwide. The producer then independently adjusts the available inventory based upon the automated invoice for administrative processing. The payment is directly deducted from a buyer's credit card account, which is remitted to a Top 10 account. Top 10 then pays the producer based upon sales. The data is easily summarized and analyzed. Part b of Objective 1 was modified. Part of Top 10's original marketing plan, as proposed in this Phase I project, was to ally with strategically-positioned marketing and technology firms to expand the network of buyers that have direct contact with farms participating with Top 10, giving those buyers the ability to buy products though Top 10 using mobile pay technology. However, while conducting the research for this project Top 10 discovered that it could achieve more immediate returns ("picking low-hanging fruit") by building a local network that we had not originally anticipated. Top 10 found that even though its technology significantly reduced the cost to producers to participate, in most cases the marketing channel for the producers was too "thin" (insufficient volume) and fragmented for them to be able to use the technology adequately. Thus, these producers had little incentive to implement the technology, and not enough of them joined to provide sufficient scale and revenues. Top 10 found a way to overcome this hurdle, buying an existing "craft foods" brand, Beefy Boys, that already had a supply chain. The acquisition of Beefy Boys provided Top 10 an opportunity to exploit the potential benefits of its traceability technology and "know your farmer, know your food" marketing advantage, without having to create a new supply chain. Beef jerky is a product with a long shelf life, and could be tested in a range of small food markets (such asgas stations, convenience stores, and small grocery stores) as well as at farmers' markets and online retailers such as Amazon.com. Additionally, non-Top 10 producers of complementary food products can potentially use the Beefy Boys supply chain with Top 10 technology with all of its advantages. By purchasing a craft food brand (Beefy Boys) and by leveraging the mobile payment platforms offered through existing companies (Volusion and Authorize.net), we have allowed seamless and safe mobile payments by consumers through a simple scan of any consumer packaged good. Now, Top 10 has an opportunity to use this fully traceable supply chain to both increase sales of its flagship product and to sell additional, complementary food products produced by small- and mid-sized farmers. At its current scale of operation, Top 10 is covering variable costs, but must increase profitability to justify continued investment of time and capital. Top 10 wants to investigate two possible solutions. The first is to increase scale of its processing capability. The second is to sell complementary items from local food producers through Top 10's traceable supply chain. This would increase sales and profitability of local food producers while generating margins for Top 10. Top 10 has begun to penetrate several markets that it will use to increase beef jerky sales and sales of other food products through its traceable supply chain. It has had success in retail stores (Ace Hardware, 7-11, local grocery markets, and gas station/convenience stores), and online through Amazon.com and Top 10's own OurLocale.org®. Top 10 will use an intensive personal contact approach to assure input supply from high-quality food suppliers who fit Top 10's "know your farmer, know your food" approach and to further penetrate retail outlets. Because of Top10's pricing structure, increasing sales at physical stores will enhance online sales as satisfied consumers reorder online. Top 10 believes commercialization can be successful if scale of its operations can be increased by increasing sales of its Beefy Boys brand and by adding complementary products. As it moves forward, Top 10 will attempt to answer questions critical to "ramping up" production and sales to achieve scale economies sufficient to become sustainably profitable. At the same time it will investigate the effect on sales and profitability of adding complementary locally-produced foods to its supply chain and marketing plan portfolio to demonstrate that the Top 10 technology will work in a well-functioning supply chain. If Top 10 becomes sustainably profitable, consumers will have greater access to locally-produced foods, and producers of those foods will have greater access to consumers in a way that improves supply chain management, food safety, and regulatory compliance through enhanced traceability. Changes/Problems: We discussed this shift in plans in our midterm report for this project. In that midterm report we outlined plans to achieve the refocused objectives of the project. Quoting from that report: Plans to Achieve Remaining Unfulfilled Objectives Using transactions data generated through the online store (OurLocale.org) we have substantially more data to estimate and graph: - Mobile payment sales by channel (e.g. OurLocale.com vs. farmer's market). - Mobile payment or online versus traditional channel (retail store or farmers' market) - Percent of customers who made a purchase through OurLocale.org who scanned the QR codes on the packaging since July 2013. Expanding on this information, we will conduct a survey of all customers who purchased product through OurLocale.org, comparing the following between the group that scanned the QR code and the group that did not scan the QR code by: -Likelihood of repeat purchases oTotal dollar value of purchases oAverage dollar value of purchases -Percentage who purchased with a mobile phone. We expected that Top 10's online presence will increase not only online sales but also traditional marketing channel sales supplemented through social media activities, including Top 10's "know your farmer, know your food" capabilities. We collected data from July 4 (when the online store was opened) through December 31 on the beef jerky products which now have the QR codes linked to the mobile commerce platform developed using the SBIR grant funding. What opportunities for training and professional development has the project provided? Sales through our online "Social Store," OurLocale.org allowed us to gain feedback from consumers to adapt our production and marketing practices. OurLocale.org website An additional benefit of purchases through OurLocale.org is that Top 10 receives detailed data about each purchase, including the computer IP address as well as date, time, and other relevant information. This helps Top 10 know the location of consumers making those purchases. These data can be used to analyze the success of various marketing strategies. In addition, consumer feedback is received immediately through this website, so that problems or opportunities can be addressed immediately. These data also suggest that there is a high likelihood that customers who purchase through OurLocale.org will be repeat customers. Out of 50 transactions from July through December 2013, 20 were repeat orders. Top 10 began to test the feasibility of selling other products, including organic avocados and Valencia oranges, olive oil, and balsamic vinegar. Sales of olive oil and balsamic vinegar so far are online. These store well and can be shipped. We tested selling avocados to determine whether we could attain sufficient volume to justify the expense of having them delivered to us for redistribution through our normal channels. We quickly achieved a consistent weekly sales volume of 6 cases organic Valencia oranges and 2 cases organic avocados. This was critical because this was the volume required to ensure that Old Creek Ranch Inc. could profitably make the weekly delivery to our facility. Based on these initial successes, we can now look for additional markets to increase the volume of weekly deliveries, as we simultaneously seek out and strategically add other products produced by small and mid-sized farms that will fit nicely with the Top 10/Beefy Boys model, targeting consumers who desire natural, origin- identified food and are willing to pay for it. We will also expand sales of these initially successful complementary products. How have the results been disseminated to communities of interest? Our Social store disseminates information to our customers through the use of surveys. OurLocale.org can be thought of as a "social store" because it is tied into Facebook and Twitter, and permits two-way conversations between Top 10 and our consumers (see Figure 3). To help accomplish the parts of Objective 2 focusing on measuring purchases at each of the different markets and consumer satisfaction from the technology, particularly following up on the sales cited above, Top 10 conducted a small survey to gauge the likelihood of repeat orders, offering a free 3.25oz bag of jerky to survey respondents. Of the 19 respondents, only one had scanned a Locale® Beefy Boys QR code, but 5, or 26%, had used their mobile phone to buy Beefy Boys. Seven, or 37%, said they were more likely to use mobile phones to purchase the product online, meaning that 63% were more likely to use a computer. The fact that only one had used a QR code suggests potential for promoting its use to buy Locale® products. Using a QR code would provide immediate information about the product and production process, and because of its ease would possibly make consumers more likely to reorder with a mobile phone. Online orders of any kind, whether on a computer or a mobile phone, are more profitable for Top 10. What do you plan to do during the next reporting period to accomplish the goals?
Nothing Reported
Impacts
What was accomplished under these goals?
In its SBIR Phase I, Top 10 completed parts a and c of Objective 1 by successfully testing this technology in the farmers' markets in which Old Creek Ranch, one of Top 10's customers, sells its products. The technology works as follows: buyers scan a UPC or QR code of the product, receiving information about the supplier/farm (e.g. the grower's geographical location, the grower's history) and other related details of the product itself. Buyers can place an order, confirm it, and pay the farmer directly through the technology. Buyers receive an email confirmation of the transaction. Farmers receive an email confirmation of the transaction, which indicates exactly what has been purchased and where the product should be delivered and to whom. After purchasing a product using the system, Buyers can directly pick up the product from a farmers' market or have it delivered nationwide. The producer then independently adjusts the available inventory based upon the automated invoice for administrative processing. The payment is directly deducted from a buyers' credit card account, which is remitted to a Top 10 account. Top 10 then pays the producer based upon sales. The data is easily summarized and analyzed, completing part c of Objective 1. Part b of Objective 1 was modified. Part of Top 10's original marketing plan, as proposed in this Phase I project, was to ally with strategically-positioned marketing and technology firms to expand the network of buyers that have direct contact with farms participating with Top 10, giving those buyers the ability to buy products though Top 10 using mobile pay technology. As we moved forward, it became clear that we could achieve more immediate returns ("picking low- hanging fruit") by building a local network that we had not originally anticipated. This made the national alliances with MarketMaker and eFresh less appealing for phase I, and we shifted away from this focus so that we could focus energy on growing sales for the craft beef jerky brand locally, to increase our purchases of local beef to supply the local manufacturing of the Locale Beefy Boys jerky, as further explained below. SBIR Phase I - Purchase of craft food brand, Beefy Boys. While conducting the research for this project, Top 10 concluded that even though its technology significantly reduced the cost to producers to participate, in most cases the marketing channel for the producers was too "thin" (insufficient volume) and fragmented for them to be able to use the technology adequately. Thus, these producers had little incentive to implement the technology, and not enough of them joined to provide sufficient scale and revenues. While Top 10's technology provided significant benefits to producers, those benefits were insufficient to overcome the hurdles of entering new supply chains or modifying existing ones. Early attempts to get consumers to use the smartphone app at farmers' markets showed some gains, but not enough to achieve scale economies. Top 10 found a way to overcome those hurdles by buying an existing "craft foods" brand, Beefy Boys, that already had a supply chain - a supply chain that included 7-11 convenience stores and farmers' markets as retail outlets (see Figure 2). Using the Top 10 technology with the Beefy Boys brand and product allows a consumer to scan a Beefy Boys product's QR code with a smartphone, whether purchasing it at a 7-11 convenience store, at a farmers' market, or online, and find out information about the farm on which the cattle were raised, where the product was processed, and other information about the product. The consumer gains the added assurance that the product is traceable back to each point in the supply chain. The customer also has the ability to provide feedback through the smartphone to Beefy Boys and to ask questions about the product. This feedback helps Beefy Boys improve its products. The acquisition of Beefy Boys provided Top 10 an opportunity to exploit the potential benefits of its traceability technology and "know your farmer, know your food" marketing advantage, without having to create a new supply chain. Beef jerky is a product with a long shelf life, and could be tested in a range of small food markets (such as gas stations, convenience stores, and small grocery stores) as well as at farmers' markets and online retailers such as Amazon.com. Additionally, non-Top 10 producers of complementary food products can potentially use the Beefy Boys supply chain with Top 10 technology with all of its advantages. Consistent with its overall objective of helping small, local farmers expand their opportunities, Top 10 moved the processing and input sourcing for Beefy Boys to an area near Top 10's location. Upon acquisition of the Beefy Boys brand, Top 10 added the Locale® brand to all labels and used its Locale® software to provide consumers the ability to identify the location of the manufacturing facility - a local beef processing plant in which to have the raw beef processed for use in jerky manufacturing. Also, Top 10 changed the source of beef supply from producers in Canada to beef producers within 200 miles of the manufacturing plant in Salinas California. Together with processing locally, purchasing inputs locally allows Beefy Boys to truly claim that it is made of locally-grown food. This is consistent with Top 10's market image and focus on "know your farmer, know your food." To accomplish the remaining objectives, as quoted above, Top 10 conducted market tests of Beefy Boys sales as follows. Market tests of Beefy Boys during Phase I - Top 10 introduced Beefy Boys into Ace Hardware stores. Ace is a cooperative with a vast market potential - approximately 3,200 independently owned member stores nationwide, each with a high degree of autonomy. This has allowed Top 10 Produce LLC to introduce the Locale® Beefy Boys jerky into a store with a decision from a local store manager/owner rather than a corporate officer. Further, Ace customer profiles have some similarities to those who purchase the natural, locally-grown products, including Beefy Boys, sold by Top 10. Top 10 sells Beefy Boys in Ace stores at prominently-displayed shelves in that look like kiosks. The managers at the Ace stores in which Beefy Boys was sold reported that sales of selected other products increased concurrently with the introduction of Beefy Boys. Although it could be coincidental, they believe that those products were complementary products with Beefy Boys. If this is correct, and if the right mix of products can be identified, Beefy Boys has the potential to increase sales of these complementary products, increasing the incentive to Ace managers of selling and promoting Beefy Boys. Likewise, sales of the complementary products may increase Beefy Boys sales.e Hardware, we also sold through Top 10's own website OurLocale.org and through Amazon.com. Top 10's biggest margins are through OurLocale.org, where it sells at full retail and the customer pays shipping. Top 10 sells at wholesale to the retail outlets 7-11 and Ace. In addition to testing the technology in farmers' markets before the purchase of Beefy Boys, Top 10 has tested its technology through its sales of Beefy Boys through OurLocale.org and Amazon.com starting July 2013. Customers who purchase any of Top 10's products through Amazon.com see the grower's name and the Locale® label on those products, along with OurLocale.org's website address. They can easily reorder their favorite products there. In this way, presence of Top 10 products on national accounts may lead to purchases on the OurLocale.org website, increasing profitability.
Publications
- Type:
Websites
Status:
Published
Year Published:
2013
Citation:
http://www.OurLocale.org
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