Growing Value Chains

The goal of a value chain is increased profits for all value chain partners, as they capitalize on market opportunities and deliver a quality product that consumers demand. Moving from a price-sensitive commodity production business model to a value-driven one is a big shift. We can help!

What is a value chain? It’s a business model based on collaboration. An agri-food value chain is a partnership between producers, processors and marketers created to improve quality, increase efficiencies or develop and market differentiated products to make all partners more profitable.

Value chains allow members to be more competitive by seeking market opportunities and linking production and processing requirements to meet consumer demand.

What People have to Say...

...on the benefits of value chains

“We have established and continue to spur demand among North American consumers for our branded, premium greenhouse-grown produce. Leveraging our established value chain allows us to further generate market opportunities prior to committing to the necessary infrastructure costs required to fulfill on those opportunities.”

John Newell COO, Windset Farms

“Farmers need a tool that will empower them in the market place. It is critical that all of the parties in the market place benefit from the process of producing, processing, selling, distributing and consuming. Properly constructed value chains can be the tool that will facilitate the accomplishment of these goals.”

Garnet EtsellChair, BC Agriculture Council

...on the services offered through the BC Value Chain Initiative

“We made a lot of progress in one day. We just needed to have the right people in the room and the right facilitation. Thanks to IAF, we took a huge step to creating our value chain business.”

David ZirnheltCariboo Rancher and

Chair, BC Grass-fed Beef Value Chain

A value chain can help your business by:

• increasing efficiencies

• reducing costs

• delivering consistent supply

• providing market differentiation

• increasing food traceability

• improving knowledge and information sharing

• reducing and spreading risk

The Investment Agriculture Foundation is a

not-for-profit organization that strategically

invests federal and provincial funds in support

of innovative projects to benefit the

agriculture and agri-food industries

in British Columbia.

Comparison

between a

product value chain

and traditional

business

relationships:

VALUE CHAIN BUSINESS FOCUS TRADITIONAL

Extensive COMMUNICATION Little or None

Value/Quality VALUE FOCUS Cost/Price

Differentiated PRODUCT Commodity

Consumer Pull SYSTEM DRIVER Production Path

Interdependent ORGANIZATIONAL STRUCTURE Independent

Collaborative BUSINESS RELATIONSHIPS Adversarial

Known & Traceable SOURCE OF SUPPLY Anonymous

Relationships SOURCES OF RISK Market & Price

Program funding provided by:

Do you know what your customers are looking for? How will you make your product stand out from the rest?

Seven Tips for

Creating a Successful Value Chain

1. IDENTIFY THE OPPORTUNITY: By mapping major companies who are your suppliers and customers, you will better understand how the product moves through the market channel and identify who you need to involve in your value chain. This process can be helpful in determining

the greatest opportunities.

2. EVALUATE YOUR MARKET: Developing new products and markets requires considerable work. What are the trends and future scenarios? Find out what retail, food service and institutional markets exist? Where will the processor have the most success selling the product?

3. ASSESS RESOURCES, RISKS AND CAPABILITIES: Take the time to prepare a summary of your potential chain’s resources and capabilities. You’ll want to evaluate the factors that could interfere with the success of your chain. This evaluation will be a useful tool when choosing and talking to potential partners and developing a pilot

project plan.

4. BUILD RELATIONSHIPS: Relationships are the most important element of a successful value chain. Often little time is spent developing the required business relationships when groups embark on projects. In fact, most businesses want a trusting relationship with customers, but think it is acceptable to be tough on suppliers.

5. GET SUPPORT OF ONE TO TWO CHAIN MEMBERS: Experienced alliance developers tell us that carefully selecting the right partners is the most important factor in establishing a successful value chain. The best alliance strategy or market opportunity may still not be successful without the right partners.

6. ENSURE GROUP COMMITMENT & RESOURCES: Start by setting goals, objectives, measures and action plans. Involving chain partners in developing these plans is necessary to building commitment and trust, as well as preventing misunderstandings down the road.

7. DEFINE A CLEAR PROJECT FOCUS: Your first value chain venture should be a pilot project; a small, trial-size version of the full potential value chain. It allows you and your partners to commit yourselves in stages by minimizing risk and allowing you to work out the bugs while proceeding on a small scale.

Creating a strong brand identify

for your productis very important.

Headquartered in the fertile Fraser Valley of British Columbia, Windset Farms grows and markets a variety of fresh tomatoes, as well as peppers, cucumbers, baby eggplants and Belgian endives. With 80 acres of their own greenhouses in Delta and Abbotsford, the company also markets produce grown by local contract growers who operate an additional 160 acres.

The goal for Windset was to transform their produce from a common commodity to a line-up of quality branded products that consumers demand.

In addition to producing a new line of higher- margin products to be sold through retailers such as Thrifty Foods, Overwaitea Food Group, Loblaws and Costco, Windset vegetables had to exhibit flavour, conve-

nience and safety. Research also uncovered a need for innovative new packaging with unforgettable brand names to build buyer confidence and loyalty. So, Windset creatively gave names to each product. Grape tomatoes became Concerto™ Tomatoes and bell peppers became Maestro™ Bell Peppers. The concept was to position the product (not the grower) to be the hero at the point of purchase. Consumers would come to know and trust these products by their distinctive brand names.

Cucumbers can be bought anywhere from anyone, but Fresco™ Cucumbers, with their signature snap, are only available from Windset Farms.

The value chain business model proved to the market that Windset was committed to their customers and suppliers over

the long term. By working with their chain partners, they developed the systems to effectively coordinate a guaranteed, year-round supply of branded greenhouse vegetables. At the same time, they exceeded their customers’ expectations by converting a commodity into the value-added products that consumers prefer.

Windset’s commitment to their retail customers is evident as they continually survey to determine what new features are desired in their products. To become unique in their customers’ minds, Windset created a network of relationships based on superb communication. Feedback flows from the retail buyer back through the value chain to growers, processors and partners providing inputs such as packaging materials, seed and liquid fertilizer. Together, the chain partners implemented changes in systems such as planting specifications and sizing to meet the higher standards of the marketplace.

Some of the results from the dynamic Windset value chain include:

• The partners are able to respond to rapid change in technology and market needs.

• Information on problems and opportunities come from the consumer and are tackled by the entire chain.

• Trusted relationships are improving customer and consumer loyalty.

• Product quality is kept at the highest level possible.

• Value chain partners can quickly adjust technical and production systems.

• Market share is rising and margins are above commodity levels.

• Financial stability for Windset and its value chain partners.

feedback from buyers

flows back through

the value chain

A RETAIL VALUE CHAIN CASE STUDY: Windset Farms

ABOUT THE BC VALUE CHAIN INITIATIVE The BC Value Chain Initiative was launched by the Investment Agriculture Foundation of BC with the aim of encouraging and assisting BC’s agri-food industry to become more competitive through value chain development. We offer facilitated group sessions and coaching services at no charge for agri-food groups and individuals wishing to move from a price-sensitive commodity business model to a value-driven one. As a partner in the Canadian Value Chain Network, we are also working to raise awareness of the benefits of value chains and offer training.

FUNDING FOR THIS INITIATIVE IS PROVIDED THROUGH THE FORMER FEDERAL-

PROVINCIAL SAFETY NETS FRAMEWORK.

MORE INFORMATION For more information on the BC Value Chain Initiative, visit our website (www.iafbc.ca/valuechains.htm) or contact:

Bill Henderson Value Chain Coordinator Investment Agriculture Foundation of BC T: 250.356.1675 E: bhenderson@iafbc.ca