Nitche Marketing
for the
Herb & Spice Trade

by Richard Alan Miller ©2002

Those wanting to live in rural communities are left with becoming a raw material supplier. That would be OK except for the fact that the markets for these various and diverse crops is limited. This means only 300 ton St. John's Wort herb will be sold in North America this next year to raw material buyers. All other inventories will have to seek alternative marketing opportunities.

Many of the larger companies in Europe, like Indena and Martin Bauer, try to farm their own ingredient needs (whenever possible). Why? Because the raw material ingredient is the key to successful sales in various cottage industries. Obviously, if something delivered chemistry (i.e. "worked"), then that customer is probably going back for a rebuy. The marketing and sales is driven by the (consistent) quality of raw materials used.

Niche marketing is created by availability. I've found that when I produce something "new," like Golden Eagle Herbal Chew, there is already a built-in market demand for something like this. This means a "new idea," not a new product (raw material). The "niche" is the idea, not the product itself. The market is not about the raw material itself, but the quality of raw material used to make "something."

Too many farmers, seeking to save their farms, tried to change over to these crops. In doing so, most missed the whole idea of this form of marketing. Those who made something (like Frozen Pesto), made their way through the financial demands of this industry. Those who sought to grow raw materials found a more difficult road to hoe.

The St. John's Wort herb bonanza of 1996 and 1997 was a misleading indicator of "what to grow." Many farmers, seeking alternative crop options, began to grow hybrid versions, hoping to corner the market. But the market was not the raw material (per se), it was in the tablet, capsule, tincture, or other form it was finally sold to the public. And, it was in the quality of that product that then set their position in the marketplace.

From this metaphor, it can be deduced that the following concept is probably "Rule #1:" Always begin a market program around a specific "idea" (like Indian Herbal Coffee). This is your "cottage industry" idea. Then, to guarantee the continued purchase and growth of that cottage industry, grow your own fields needed to supply it's needs.

This is called "vertical integration," where you might also have a small processing plant to put your various raw materials into a form for their final use. This might mean further cleaning of contaminates, or processing it into better forms for use in your final product. The operant word is "when you want it done right, do it yourself."

Your "in house" ability can also be used for outside customers, also seeking your processing. I've found that processing is as important as the raw material itself. A good processor can clean up problems, and often make things work (when they might not have otherwise). It allows the farmer some latitudes with overall farm costs and procedures.

Niches also imply diversification of ingredients, and a balance of options (when markets wane or rise). Peppermint is primarily grown for the oil, but some have found that when world oil prices drop, they can often process their product as leaf (for the tea industry) for a better return. However, the grower that makes the real money in this industry is the one who also sells his peppermint as part of a blend of herbal teas (like Country Spice Tea) from his farm.

Specialty crops are often not accommodated by normal State channels. In many situations, it is desirable to have an advance contract with price determined prior to planting. To contract profitably, growers will have to carefully estimate their anticipated production costs. This is why I always council on smaller feasibility studies for any new crop.

Even with a contract there are risks of non-performance or misinterpretation. These risks can be minimized by carefully reviewing the terms of the contract and the credibility of the buyer. Both the buyer and seller need to understand all terms of the contract before signing the agreement. If you still have questions, it may be advisable to have an attorney familiar with contract law review the agreement.

I have found over the years that a company or buyer is only as good as their word. Contract are only as good as those who sign them, and only keep “honest people honest.” A Letter-Of-Understanding, in your own words, is probably the very best form of contract one can have. It is in plain English, one that anyone can understand and relate.

Finding honest buyers is like any other kind of marriage. There are good ones, and there are bad ones. Unfortunately, you never really know until you marry them. Older, more established firms, have a reputation to uphold and maintain. Newer companies are often “in a hurry.” And, as said before, contracts are only as good as those who sign them.


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