Virginia Urbanization: "Lemons to Lemonade"
Farm Business Management Update, April/May 2003
By Megan Green and Dr. David M. Kohl
Urbanization. It is the talk of Virginia agriculture today. To many, it is a horrendous evil, vowing to destroy the family farm and all that it entails. It is a threat that could result in a loss of jobs and lifestyles that have lasted for generations, throughout wars, floods, and many family disputes. However, several agribusinesses in Virginia have decided to overcome these perils. They have decided to change. They have decided to diversify.
On February 14 and 15, Dr. Dave Kohl's Agricultural Management and Problem Solving class visited different agricultural businesses in the western Virginia area. Every business visited in those two days took advantage of one thing - urbanization. From growing a trendy crop, to appealing to those who desired a "farmette," to adding glass and glee to your old fashioned milk products, these farmers knew how and who to farm. They were entrepreneurs that took a general commodity and did not simply add value to it - they earned that value and retained it.
The first business visited was a dairy and trout farm in Buchanan. The owners took advantage of profits made from the dairy and turned a natural amenity, an abundant spring, into a home for some 35,000 trout. The family was able to keep fixed costs for the hatchery and lanes for the trout low and pulled profits from the dairy when needed. Both entities contribute to the business and help make the cash flow work. They keep labor costs low and capitalize on the natural resources of water and woods around them. They use their own timber to construct buildings and sheds needed for the farm. The business is so economically sound that the total farm profit has averaged in the six figures in recent years. Not bad for fish and milk.
The next operation that was marketing urbanization was Rockbridge winery in Raphine. What's better than a lovely weekend in the sun, live music, good food, and a nice inexpensive bottle of wine? The people who pay generously for such a commodity are better. The winery pulls in the urbanite looking for the culture of the city they miss, yet, searching for the rustic taste of agriculture and the farm. Again, the owner makes use of his land wisely. Not only does he use the correct slope of his land to cultivate his grapes, he turns his storage shed into a homey shop and an eclectic venue to hold wine tastings and dinner parties. The owner made a long-term investment in his land. He decided to diversify. Now he brings in profits and awards annually. How do they measure their success? In 1995 and in 2000, the winery was awarded with the top state award for two different types of wine. If that does not prove success, how about listening to a man so proud of what he does that he could spend hours talking to you?
Another agribusiness that was changing the agricultural paradigm was none other than a John Deere dealer in Rocky Mount. How did Anderson Tractor deal with urbanization? How could he market to the new owners of the mini-farms? He got mini, too. He built a whole separate store devoted to what he called the consumer and commercial market. He changed his hours in this smaller operation to fit the customer's lifestyle. He opened the store on weekends. Not only did he improve his business by appealing to the urbanite, he constantly improves his core business. He employs an incredibly competent sales staff, absorbs approximately 86 percent of his bills through parts and service alone, and knows the margins his business can withstand. He even knows his customers so well that he can categorize them three ways and better serve them because of this characterization. The three tiers include the small tractor owner, or the mini-farmer; the farmer who is also dependent on off-farm income, or the 70-90 horsepower tractor owner; and the farmer whose life and paycheck depend on the farm. He has products and services available to completely satisfy all three. He does not complain about urbanization and change, he capitalizes on it.
What is better after a long day on your tractor after mowing your recently purchased 10 acres than a huge bowl of ice cream? What about a tall glass of milk and a couple of cookies? The Homestead Creamery in Burnt Chimney can satisfy that hunger and much more. They can catch your eye and send you back to times when you were a kid and waited for the glass containers of milk to be set outside your door. This creamery not only markets their incredibly creamy and delicious dairy products, they also market a look and feel. Not only does this business possess a spot on Kroger's shelves, they also possess a humble country store in the front of the creamery where the products are created. They also sell other homemade pie fillers, salsas and dips, along with scrumptious scoops of ice cream. What makes them different? Why should you buy their product? The idea of it all is the key. The marketing technique that takes you back in time, to simple, happy days. So what if the American dream of 40 acres and a mule has changed to 10 acres and a Corvette? You still have your milk in a shiny glass container.
The final business that we visited that is taking advantage of urban sprawl is a horse cutting/dairy farm/hunting reserve in Union Hall. The three completely different enterprises are all intertwined. How does the Shelton family manage it all? They don't. They lease out their land and liabilities to others. They are simply owners. The family leases out the horse farm to a very competitive and successful man in the cutting horse business. They stable more horses on their farm worth more than five figures than you can count on your hand. They enjoy the success of the leasee who has clients that vary from a New York stock exchange extraordinaire to an NFL football player. Yet, they have no liabilities and will not risk losing a business or career if the leasee falls off one of those horses and breaks a leg. They take this same concept and apply it to the dairy business. The only thing they manage is the hunting reserve. No longer do they have to wake up to milk at 5:00 in the morning in the heavy snow. Someone else does it. What responsibilities do they have? They cater to the successful businessman or famous athlete and guide them on a backwoods turkey hunt.
All the Virginia agribusiness managers mentioned are shifting paradigms and profiting during times of change. They capture the appeal of the new consumer - the urbanite. But these business managers are not successful simply because of this change. They do other things extremely well. These business managers use the resources they have very wisely. They are continuously educating themselves and developing new ideas to improve. They know their market. They know their limits yet are constantly searching for ways to set new ones. They know the business cycle and do not fear it. They expand when times are good and save when times are bad. They trust their employees. They are not perfect. They have made bad decisions and faced adversity but persevered. They are excellent communicators. All of these Virginia agribusinesses we visited possessed these qualities. However, the one thing that really sets them apart from all the others is that they know their focus, do it well, and love their jobs.
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