British farmers are desperately trying to stay afloat against the combined pressures of the strong pound, rising fuel costs and exclusion from a share of the profits reaped by the retailers. In these circumstances, diversification has become the farmer's byword.
A report published by Deloitte and Touche last month notes that farmers have experienced a 90% drop in earnings over the past five years, and should expect heavy losses next year also. The accountancy firm projects the £8,000 average profit made by the British farmer this year will be a £4,000 deficit next year, despite massive cost cutting and redundancies in the sector. As such, the problems facing the 200-acre Manor Farm Granaries, near Huntingdon in Cambridgeshire, are no different to any other.
But lessons can be learned from the way farmer Stuart Loakes and his family has gone about diversifying their business. The Loakeses moved away from growing mixed crops in the 60s, to eventually concentrate on birdseed, which they sell in their own farm shop. They then established a mail order business in 1992 and in April this year took that business online, from which they now sell seed for wild birds and fish, plus merchandise from other farmers in the area.
According to Stuart Loakes, who manages the farm with wife Rosalie and brother Philip, manor-farm-granaries.co.uk was up and running within six months on start-up costs of around £20,000, which covered the website, database, new computers and brochures. This could be considered chickenfeed by some venture capital-backed upstarts, but is an entirely different matter for a cash-hungry farmer.
The start-up costs plus an additional £80,000 spent on new weighing, packing and seed cleaning machinery over the last 12 months, means that with turnover for the site currently at less than £1m, the business is expected to break even within three years. Last month the Ministry of Agriculture, Food and Fishing (MAFF) announced the Processing and Marketing grant, a fund providing support for capital investment in projects aimed at improving the processing and marketing of agricultural products in order to increase their competitiveness in the marketplace. But there is a catch. To be eligible, farmers must have up to £70,000 to invest, for which the government will provide up to 30% of costs towards their project - deemed unrealistic by more than a few, so far.
Loakes employed the consultancy services of Peter Cooke in 1992 to set up the mail order business. When Cooke became principal at Morton Hodson management consultants operating out of Cambridge, he was perfectly placed to help with getting the farm online. Cooke's firm designed and runs the business-to-consumer website, and he recommended both web hosting and the site's online transaction system, which allows secure online credit and debit card transactions, from the NetInvest Group, which provides one-stop internet services to small and large businesses.
"It was a case of rejuvenating the business, along with having a new sales channel," recalls Cooke, who project-manages the site. "I helped with this as part of the pilot phase of the Technology Means Business initiative that was launched around the same time." Formally launched in March by Patricia Hewitt, minister for small businesses and e-commerce, the Technology Means Business (TMB) project is the brainchild of the Institute of Management. It provides a network of accredited advisers with expertise in both business and technology issues to small and medium-sized companies.
Both Loakes and Cooke believe the rejuvenation of Manor Farm Granaries has worked, in as much as up to 95% of its online customers are new prospects. "It's just like another, nationwide shop out there for everyone to see our wares on display." Loakes enthuses. Aside from transforming the business, there have been personal transformations too. Before going online, Loakes's only experience with computers had been to use a word processor for the odd letter, but by his own admission is now "very good with spreadsheets". He contacts Cooke mainly by email as it cuts down on the number of calls he needs to make while tied up on some corner of the farm.
Although manor-farm-granaries.co.uk has a basic front end, it obeys the fundamental laws of e-commerce. It has a robust database at the back end that stores and manipulates final product seed mixes that consist of a multitude of ingredients and combinations, often with fluctuating cost prices. It has an order processing application that links orders from the browser's shopping trolley interface to the farm's sales office system, which integrates with Manor Farm Granaries' mail order business. The system also incorporates a spreadsheet to monitor the costs of hundreds of products, yields, margins, and price/ weight options for each of the farm's three sales channels.
"Having the mail order business made it easier to go online, because we had a distribution system and were used to handling credit card transactions," says Loakes. But the dominant concern for the site is delivery. Order fulfilment was found wanting during the earlier stages of selling online. It is now carried out by Business Express, signed up by the farm after initial "problems" with Parcel Force. However, the fear of losing customers through poor delivery remains prominent in the Loakeses minds.
Delivery is currently only within the UK, although orders as far flung as Finland have been honoured. Loakes explains that because the cost of shipping rises above the value of the seed itself, large-scale exporting is uneconomical. "The seed is cheap, but dispatching 25 kilo sacks of it abroad isn't, so at this point it is not viable." Loakes thinks the onus is on the delivery companies to develop cheaper, more efficient overseas routes. Future plans include a B2B element through which the farm can develop online relations with trading customers such as garden centres and agents, and through which it can render its own supply chain more efficient. As setting up shop on the web is increasingly seen as a realistic option for many a beleaguered farm, perhaps the only ones to survive in the 21st century will be virtual.
• See also www.technologymeansbusiness.org.uk, www.mortonhodson-cambridge.co.uk and www.maff.gov.uk
