Investigating Local And International Market Opportunities

Investigating Local Market Opportunities

If you have decided to focus on the local market, talk to your extension officer, visit the local shops (gourmet and otherwise) and supermarkets to see what is selling, and why one product appears more appealing than another. Talk to customers, local stores, food clubs, speciality distributors, restaurants, and other prospective outlets in your region. What do they want? Is there an unfilled niche? With your production, labour, and marketing resources, will you be able to fill this niche?

Find out what your prospective competitors are doing. Look for ways to improve upon what they are offering.

Information from market research helps to formulate a market strategy and project profitability. Two levels of information may be obtained:

You can either start small and grow bit by bit or you can start in a big way from the very beginning. Either way, you must be prepared to do your homework and get to know your markets to be successful.

Conventional marketing wisdom has it that 80% of sales come from 20% of the customer base. The grower must build a core customer base and let them know how important they are. Word-of-mouth advertising is the most effective and inexpensive way to attract new customers. Stay on top of consumer trends. The best-made product in the world will not sell if it isn't something people want.

Education of the consumer plays a big part in salesmanship. Most people, for instance, are oblivious to the environmental and health benefits of livestock raised on forage. Conveying information about the farm, how the product is raised and why it is raised the way it is, the effect of recent weather on the crops, and another farm-centred conversation is important. Not only is this good for business, but it also is a small step toward the development of consumer awareness of the farm and of social and health issues. Once customers know that you are providing healthy food, they gladly take on the responsibility to support local farmers. Help them help you run your business successfully and profitably.

Investigating International Market Opportunities

The export market is particularly important for South African agriculture. In theory, it should be quite easy to determine demand. After all, there are numerous companies around the globe that conduct research and gather consumer data. This data would, for example, show that the consumption of oranges per person in EU countries has remained constant for the past 20 years, whereas in Japan it increased. Add to this data about population growth and it should be quite easy to determine the market potential for a product in each period. The complexity of determining future demand arises when one considers constantly changing consumer preferences for specific cultivars and types, the impact of competitive products, changes in disposable income, and other external factors.

The key to success lies in knowing the competition, understanding the impact of emerging trends on consumer behaviour, and being aware of consumer preferences in specific markets. This enables the most appropriate product to be supplied at the most appropriate time to differentiate your business from that of the competition.

With annual crops such as vegetables or grain, it is possible to change areas planted and crop type from year to year in response to predictions based on current and expected supply/demand balances. Other crops do not have the same flexibility. For example, citrus is a long-term crop. The productive lifespan of an orchard exceeds the speed at which shifts in consumer trends, competitive actions and other factors impact demand. This means that sound decisions on what areas to plant, with what cultivars and in what ratios, should only be taken after analysing available market trends and extrapolating, interpreting, and integrating such relevant information from several reliable sources.

However, short-term adjustments to supply patterns also must be made based on prevailing and anticipated market forces within any season. This means that the producer must contend with two sets of circumstances:

• He must decide what volumes of fruit to send into the various export market segments within a specific season. In this context, the term ‘market segment’ is used broadly to cover differences between retail and wholesale markets within a single country as well as markets in different countries.
• He must consider the development of long-term planting (production) and demand (market) trends of local and competing global citrus industries, or at least sectors of these industries.

In the first case, the production manager, through close liaison with his export agent, tracks weekly, if not daily, fruit supplies from other local producers and from competing countries and monitor the movement of this product into the markets in which he has an interest. He attempts to assess the quality and volumes of their product against his own supplies in the knowledge that oversupply weakens a market and influences perceptions about the quality of the product in that market. For example, when a market is fully supplied, yet has confidence in the shelf-life and quality of the available fruit, demand is likely to remain firm. If, on the other hand, the market suspects that the condition of the product is deteriorating, demand will weaken as the market becomes increasingly pessimistic about the value of the product by the expected consumption date. This can lead to a downward spiral in market confidence in own and competitive products resulting in slow sales, the accumulation of increasingly poor-quality products and plummeting prices.

All such factors need to be considered by management to inform short-term decisions when switches of product supply into different market segments within a single production season are being considered.

Long-term supply/demand trends and extrapolations are used to inform long-term decisions, such as whether to channel resources into expansion or land acquisition actions given present and expected future changes to the operating environment. To arrive at such decisions strategic planning exercises are carried out.

Strategic planning is traditionally focused on setting the action plans to attain long-term objectives, considering current realities, and expected future influencing factors. Successful strategic planning however requires information relating to both short-term influencing factors and long-term trends.

At the two extremes lie long-range strategic decision-making on the one hand, and ultra-short-term weekly adjustments to harvesting, delivery and distribution patterns aimed at optimising intra-seasonal returns, on the other. Somewhere in between lies the responsibility of the producer to certain opportunities that may arise and can be exploited. Such opportunities can come in the form of the opening of a new export market or a growing demand in certain market segments for organic or Fairtrade products.