What
is 'value-added'?
North Dakota is rich in
natural resources. Our capacity to produce agricultural commodities
is tremendous. In spite of these strengths, we struggle to create
an economy which can sustain long-term growth. Most of our natural
resources and agricultural commodities are exported to other parts
of the country where they are developed into products which create
economic gain for others.
The concept of adding value
suggests that we use our entrepreneurial capabilities to create products
from our own raw materials. We then reap the benefits and profits
currently being realized by others. For example, a bushel of wheat
an is important link in the global food chain and a vital piece of
the American economy. Yet North Dakota wheat producers can hardly
make a profit on raw wheat. If that bushel of wheat is used to create
a product which has special value in the marketplace, such as ethnic
baked goods, western pancake mixes, or high quality pasta, the profitability
of that bushel of wheat is enhanced. Value, in other words, is added.
Seeing through the customer's
eyes
Adding value and developing
value-added products require us to look at our existing products and
resources through different eyes. It means scanning the marketplace
for unique needs and wants of customers. As we identify what is valuable
in the marketplace, we can develop new and unique products which are
aligned with these needs and create a new market.
Understanding customer
needs, creating and distributing products to meet those needs, has
always been part of the marketing process. With value-added products,
the emphasis is on niche marketing - marketing to special groups with
unique needs. The key to success in niche marketing is to communicate
the special features of the product that the consumer views as valuable.
We tell customers about these special features with labeling, product
information, and promotion. Even where and how the product is sold
will communicate its value to shoppers. A food item sold in a gourmet
food store tells customers that it is more special than an item sold
at an ordinary grocery store.
Where do value-added
products come from?
Value can be added to:
If we pay attention to
the needs and wants of consumers, we will get clues for developing
products which have value to new as well as existing customers. The
key is to make the best possible use of our resources and products
right here in North Dakota.
Added-value in existing
products
Our customers will tell us the value (or potential value) of
our products if we listen to them or observe them using the product.
The owners of the Sanders 1907 restaurant in Grand Forks paid attention
to their customers. They wanted the recipes for sauces used in restaurant
entrées. Instead of giving away the recipes, they bottled
the sauces and now sell them through retail outlets like gourmet
food stores. The sauces and the idea for bottling them came from
the restaurant business, adding value to their current business
and creating a new market for their product. The people who buy
the sauces, especially in other parts of the country, are not the
same people who eat at the restaurant.
Arlene Wells of Carson,
North Dakota, made the same discovery. Arlene took the wheat produced
on the family farm and created Hey Cowboy Flapjacks. The mix is
packaged and sold as a western specialty item. Her market is among
people in urban areas who find "cowboy" mixes more appealing than
standard pancake mixes. Her customers value the idea of western,
wholesome pancakes of superior quality. And they are willing to
pay for it.
The arts and crafts industry
in North Dakota has seen innovations like dolls made from corn husks
or decorative weavings made from wheat. These products have value
to a target market of people looking for handmade, country-style
decorations. They wouldn't appeal to someone who decorates their
home in, say, contemporary style. Wheat weavings must be marketed
to a specific niche in the home decorations market. Finding ways
to locate, distribute and sell to these particular customers is
challenge and thrill of niche marketing.
Products from leftovers
Sometimes usable products can be created from waste products
or byproducts. Livestock feed can be created from the byproducts
of the durum pasta plant in North Dakota. Waste straw can be turned
into cardboard boxes or press board.
The advantage of using
byproducts is obvious. Making use of discarded materials is not
only smart economics, it's a form of entrepreneurial recycling.
Creating products from
byproducts can require a great deal of research and development.
Individual entrepreneurs often team up with other entrepreneurs
and researchers. Ideas for products from leftovers are often developed
at universities which have the capability to research and test products
for quality and safety.
Non-food products
from farm commodities
North Dakota is a strong producer of farm commodities. This
strength can be further enhanced by using farm commodities and other
materials to create non-food products.
Wheat is a food, but
creative entrepreneurs have found that wheat can also be turned
into beautiful, decorative weaving and sold as art. By a more complex
process, corn can be turned into fuel.
A source of help in the
use of farm materials for more commercial ventures is the Alternative
Agricultural Research and Commercialization Center, part of the
United States Department of Agriculture. The AARC is designed to
assist the private sector in closing the gap between research and
the commercial use of industrial (non-food, non-feed) products from
farm materials. The AARC has worked on everything from biodegradable
films and coatings from wheat to insulation material from milkweed
floss.
Food processing
North Dakotans are finding advantages in being involved beyond
just the production of commodities. For example, 80 percent of all
the durum wheat in this country is grown here in North Dakota. A
cooperative group of producers have joined forces to produce and
market pasta rather than just selling the wheat. This type of effort
adds value to wheat and helps to keep jobs and economic activity
in the rural areas.
New uses for natural
resources
Research continues to find new uses for raw materials, from
lignite coal to prairie wildflowers. While there is real potential
for resources which are created naturally here in North Dakota,
the difficulty for most entrepreneurs is the investment in research
to develop products. The universities in North Dakota, however,
are in the business of research. As additional uses are discovered
for North Dakota's natural resources, new opportunities arise for
businesses and entrepreneurs by creating new wealth and stimulating
the economy.
The opportunities for
entrepreneurs
The common ingredient in
the development of value-added products is entrepreneurial ingenuity
and determination. This is as true for smaller, individual efforts,
like pancake mix, as it is for more complex ventures like a pasta
cooperative.
Developing value-added
products and locating customers for these products is a creative process.
The markets for value-added products are driven by new trends. It
is important to be aware of consumer trends in order to learn about
the needs and wants of the niche markets. It is not possible to meet
all of the needs of every consumer trends. The secret is in matching
what we have to offer needs with specific trends.
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