Agribusiness Trends & Opportunities for Skagit County. Andrew Miller, EDASC

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1 Agribusiness Trends & Opportunities for Skagit County Andrew Miller, EDASC

2 Overview Food Trends & Analysis Opportunities & Awareness for Skagit County The Value Chain & Ag of the Middle

3 Evolving Consumer Demands Shifting attitudes on: Dietary choices Shopping patterns Trust in conventional institutions and brands Interest in using household purchasing power to support desired social, economic and environmental goals Moralized Market More than an economic exchange relational and ideological Combining economic activities with their social values Deeply held philosophical concerns about corporate influence over US food supply Environmental ramifications of current centralized food system structure Preference for food varieties bred for flavor rather than tolerance for long-distance shipping

4 Consumer Trends = Market Driven Generation Z Enters Market Combined w Millennials + Gen X = 50% of food shoppers Always have had the internet Racially & Culturally Diverse 46% of Gen Z shoppers are non-white % of US population growth is forecast to come from racial and multicultural growth (non-white) Impacting what s being purchased in stores as tastes continue to diversify High awareness of, and desire for healthy food 33% of food purchases are organic Tend to favor smaller, more frequent trips to the store Consumers are getting brand information (making choices) from online influencers, in addition to considering the brand recommendations of their family and friends

5 Moralized Market Will: Reward businesses that share values Sustainable production methods Environmental stewardship Animal welfare Fair wages Demand access to transparent information about ag and food production and business practices Barnyard Blockchain

6 Authenticity Advantage Authenticity 100% of surveyed Millennials purchase food based on brand s reputation for authenticity Clean ingredients (real, all natural, fresh, organic) Top shelf ingredients and great flavor True to mission and product claims Culturally accurate Transparency (packaging says what s in it and why) The most important aspect of attracting today s US food shopper is authenticating the fresh foods story as consumers have increasingly high expectations around freshness, convenience and transparency.

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8 An Old Model is New Again Regional Food System: All steps in the supply chain occur in a specific region Consumer driven Profitable Differentiated from global commodities Values-driven Direct economic benefit to neighbors Ecologically sound decisions grounded by shared values Improved access to healthier food Reduced carbon footprint & food security Productive LOCAL workforce

9 Local Food Market Demand 87% of consumers say availability of local food very/somewhat important to choice of primary supermarket 75% of grocery shoppers purchase local products at least monthly (of those most purchase local 3x a wk) 66% of patrons more likely to visit a restaurant that features locally produced food/beverage items 92% of fine dining establishments add locally sourced

10 Who s Paying More for Local?

11 Regional Food Systems? One of four USDA Pillars of Ag & Rural Development $1B invested in 40K RFS projects from Strategies focus on: Strengthening rural-urban linkages Regional import substitute

12 Ripe Ground for Local Food Systems to Take Root? Growth Haven Urban-adjacent (proximity to input/output markets) Accumulated human and physical geography Natural endowments Commerce hubs Critical Elements: Residents have strong commitment to civic participation Health conscious Environmentally aware and engaged Seattle/Vancouver Portland Spokane

13 Growers Dialing into Consumers Demand Net revenues for local supply vs mainstream supply Salad mix 649% greater (Sacramento) Blueberries 183% greater (Portland) Milk 91% greater (DC) Beef 65% greater (Twin Cities) Apples 50% greater (Syracuse) USDA: Growers who sell through food hubs within local food system retain 60-85% of market price paid by customers

14 Bottom Line: Consumers want memory, romance and trust High quality food Produced with farming practices they want to support Brought to them through a value-chain they can trust Food marketers that do not allow for conversations about food and relationships with the value-chain will be at a disadvantage Food Story

15 Ag of the Middle: Market Share

16 Ag of the Middle: Value-added Chain

17 Ag of the Middle: Differentiated

18 Value-Chain Economics Three-fold value built into product marketed through the chain Quality of the product Food Story Trusting relationship Partner rewards based on agreed upon formula You decide what good, better, best looks like Target or cost-based pricing Price maker, not price taker Contracts for long-term partnerships

19 Value Chain vs. Supply Chain Keep more of the consumer dollar by being involved throughout the process Producer, processor, distributor Partnerships and engagement drive value Combine cooperation with competition Link economies of scale with differentiated products Require shared vision, information and decisionmaking

20 What is Currently Working in AOTM? Value of the product can be increased with a food story environmental stewardship, farm/farm worker relationship, ethical treatment of animals etc. Relationships can be designed to reward partners fairly based on contribution and risk Working groups convened by land-grant universities/business partners addressing technical, production, policy, market challenges are critical

21 Challenges for Mid-Tier AOTM Strategies for product differentiation and pricing Achieving sufficient volume and quality targets Adequate capitalization and competent management Consistent standards and certification mechanisms

22 AOTM: Heavy Lift Organizational Structure Develop clear statement of vision, rationale, and goals Create and organizational/administrative framework to support phase II New Business & Marketing Strategies Public Policy Changes Research & Education Support Develop and engage initiative s research and educational capacity Policy & Research Collaborate with business, gov t, agencies to enact meaningful public policy changes

23 AOTM: Heavy Lift Cont. Business and Marketing Infrastructure Develop standards and certification systems (quality) Develop value-chain partnerships Develop corporate sponsorship of AITM system Processing Marketing Logistics

24 So what? Price no longer dominates as the primary consideration in determining product value but competes with other considerations such as personal health, trust in suppliers and local community benefit. - Debra Tropp, USDA

25 We ve Been Here Before

26 Thank You