Side activities as a key to success for agricultural companies?

‘SIDE ACTIVITIES AS A KEY TO SUCCESS FOR AGRICULTURAL COMPANIES?’

This report will investigate the side activities that take place on agricultural businesses. It will outline how an existing agricultural company can develop in a way that strengthens its current activities.

Introduction
As a young boy, I spent a lot of time at the vegetable farm, which my father started in 1987. Back then, a wide range of crops was grown, mostly sold locally. Over time, the acreage expanded, and the bulk of the produce was sold at the former auction in Bemmel. Starting in 1991, Gert Smits began selling directly from the farm. In addition to small-scale sales of a wide variety of vegetables, the company also focused on large-scale leek cultivation. For 20 years, the company cultivated an average of 80 hectares of leeks annually. However, over the years, the Netherlands has slowly lost its market position as other European countries became self-sufficient, causing leek cultivation in the Netherlands to come under pressure.

Throughout its existence, the company has grown more than 30 other (special) crops in hopes of adding value to the business. However, none of these crops have been sustained.

Since 2017, I, Edwin Smits, as the second generation, have joined the business. Around this time, we renewed our search for crops with more potential for regional sales. This is when we began growing strawberries and asparagus. Leek cultivation was scaled down to reduce risks, while regional sales grew annually.

Once again, we sought other crops with more potential, this time to eliminate leeks from Smits' crop plan and achieve better returns in the future. In 2020, Gert and Edwin were inspired by a crop commonly grown in Austria, namely oil pumpkins. This crop is grown to harvest pumpkin seeds that can be processed into pumpkin seed oil or used in the bakery industry. Smits is currently the only company in the Netherlands involved in the cultivation and sale of this niche product. Two years ago, we developed our own snack line under the name “Met PIT,” in which the seeds are coated with various herbs, spices, or chocolate.

With the company's focus now on regional sales and niche markets, new opportunities have emerged. Two years ago, a new shop was established, marking the next step toward the future.

            
Reason for the Study
At the home farm, as described above, many attempts have been made to diversify crops. Unfortunately, these efforts did not succeed in the current market, did not fit the company, or did not improve profitability. First, I embarked on my Nuffield journey, focusing on the potential of new crops for Dutch farmers. This aligns with what the company has been working on for years but has involved considerable learning costs and risks. During my Nuffield period, I became aware of this and questioned whether this was the right method. Could more value be gained from deepening rather than broadening?

 

Research Question
The above reason led to the formulation of the following research question:

"How can agricultural companies develop side activities that strengthen their current activities?"

This research question is aimed at finding opportunities within the current business structure, where side activities enhance the primary operations. The combination and synergy between activities are key. One should not come at the expense of the other.

Research into side activities in the agricultural sector is important because it enables farmers to diversify their sources of income without undermining their primary activities. This can increase profitability, reduce risks associated with market fluctuations, and improve sustainability. Examples of side activities include food processing, compost production, or small-scale tourism, which can be integrated into the existing business structure without disrupting core operations. (F.A.Bahar, 2022)

These activities help make optimal use of resources such as labor and land and reduce waste by utilizing by-products or less productive parts of the business. Agro-tourism or small-scale artisanal products, such as cheese or honey, can be a major source of income without requiring large additional investments. (Yadav, 2020)

Research Method
This research will use a combined approach, consisting of desk research and practical visits.

First, desk research was conducted to analyze existing literature, reports, and case studies on side activities in the agricultural sector. This provided a foundation for understanding successful examples of side activities and how they can strengthen core operations.

In addition, during my Nuffield trip, I visited various agricultural businesses in different countries. During these visits, I spoke with farmers and entrepreneurs to gather practical experiences. These interviews and observations provided valuable insights into how side activities are set up and integrated into the business model.

The combination of desk research and practical visits offers a comprehensive approach to the topic, highlighting both theory and practice.

Results
This research report will discuss the findings that answer three sub-questions. These questions will help answer the main question. To present the results clearly, each sub-question will be addressed separately. The following topics will be discussed:

I. What types of side activities can agricultural companies develop to create synergy within their primary activities?

II. How can agricultural companies add value by tapping into new markets within and outside the traditional food chain?

III. What challenges and opportunities do agricultural companies face when implementing new activities?

Types of Side Activities
Agricultural businesses can develop various types of side activities that create synergy with their primary operations, such as farming and livestock breeding. These side activities can strengthen operations by generating additional income, reducing costs, or improving the sustainability and efficiency of the business. (CBS, 2020)

During the Nuffield journey, I visited dozens of companies. What struck me is that many of these businesses stand out because they have developed a specific business model that always retains a connection to the agricultural sector.

During personal travels and the GFP, several companies involved in the local food network/farm shop were visited. Direct sales of mainly their own products through farm shops, events, or “pick your own.” Jucker Farm, located in Switzerland, is a good example of this. At four locations, they focus on agro-tourism, processing their own products, and direct sales to end users. The synergy in these core activities is mainly due to the direct contact that companies have with the end consumer. This increases brand awareness, appreciation for food production, and boosts the farmer's margins. Middlemen, who normally capture the highest margins, are no longer necessary. Another good example is "Hughes Farming." This open-field vegetable farm in southeast Ireland specializes in growing, among other things, carrots, flower bulbs, onions, and pumpkins. Since 2016, they have expanded their activities with a pumpkin festival that attracts 15,000 people annually.

In addition to these types, education can play a major role in the operation of an agricultural business. A well-known global example is the "Ballymaloe Cookery School." I visited this school during the GFP, which left a strong impression. At this cooking school, both basic techniques and culinary skills are taught. Students learn everything about ingredients and food production, which is put into practice on the farm. The most famous course lasts 12 weeks and costs €14,795. There is a waiting list for this course.

Beyond the aforementioned activities, one can also think of adding sustainable energy production to the business. An example of this is converting biomass into energy, so that waste streams contribute to a sustainable business model. Finally, farmers can also engage in additional activities in the areas of healthcare or nature and landscape management.

New Markets Within and Beyond the Traditional Food Chain
Companies whose core business is food production often operate within the global supply chain. They focus on supplying agricultural products to a wide range of international customers, from wholesalers and processors to retailers and consumers spread across different countries and continents.

Although it makes sense for agricultural businesses to focus on the traditional food chain, it is also possible to explore new markets beyond food production.

 

Another interesting business model outside the food chain is the rental sector. For example, "Revesby Estate," located in eastern England, explores various business models with social value. In addition to growing crops, the estate has several side activities. Renting containers for storage, horse stables, and office spaces is an important part of the business. It makes its space/infrastructure available to consumers.

Agriculture can also contribute to infrastructure in other ways. Consider producing raw materials for biobased materials. In the Netherlands, the first projects in the field of fiber hemp, which is processed into insulation and sheet materials, are underway. (RVO, 2021)

In Australia, the company "Enviro Dust Solutions" took a different approach. They process canola oil into a product that helps control dust on unpaved surfaces. Natural resources, such as plant-based oils, are used to offer environmentally friendly alternatives.

Opportunities and Threats
When devising or implementing a new business model, it's crucial to clarify what this will mean for the company, staff, and environment. The key is to manage any potential problems that may arise and to recognize the opportunities available.

First and foremost, various threats or challenges are lurking. Implementing a new activity often requires financial investments in infrastructure, technology, and/or personnel. Obtaining capital can be particularly challenging, especially for small businesses or projects that are new to lenders. (Nationaal groenfonds, 2024)

Another aspect to consider both before and during the new activity is legislation and regulation, particularly unpredictable changes in these areas. Adjusting business activities correctly demands a lot from entrepreneurs. In the agricultural sector, advisors and specialists are frequently used for this purpose. There is a strong dependence on external factors, from advice to external parties such as suppliers, customers, and service providers. these external experts are often needed because the entrepreneur may not always possess the specific knowledge and/or skills required for the implementation of the new business activity. (Bremmer, 2023)

Of course, the agricultural sector also presents many opportunities. At the start of a new activity, it is advisable to research access to subsidies and other forms of financing. Governments and international organizations often provide subsidies, tax benefits, and other financial incentives for companies that innovate and pursue sustainability. This can make it feasible to acquire specific technological innovations, enabling a new business model to become financially viable (Rijksoverheid, 2024). This can be done individually by each company or organized as a partnership. By collaborating, farmers can share resources, knowledge, and technology, which helps in cost reduction, gaining faster market access, and strengthening negotiations with customers. Such collaborations often evolve into cooperative models in agriculture.

Many ancillary activities implemented in the agricultural sector offer additional opportunities for establishing a circular farming system. This involves reusing or repurposing waste streams within the company for other purposes. For example, using fertilizers from animal by-products, generating energy from waste, or using crop residues as animal feed. This reduces costs, improves environmental performance, and makes the company more efficient and sustainable. (Petra Berkhout, 2019)

A notable example of extensive use of circular implementation is the company 'Agrico,' located in the desert environment of Qatar. During the Nuffield trip, I had the opportunity to observe all the activities taking place at this company. They grow various types of leafy and fruit vegetables, cultivate both on substrates and in water, specialize in mushroom cultivation, and have recently started breeding Tilapia fish. It is impressive to see how they integrate circular agricultural practices. They use hydroponic systems and recycled water, with Tilapia fish facilitating the conversion of nutrients for the plants. This water is reused multiple times to minimize water consumption. Additionally, the company has a complete waste management branch, processing crop residues from their own operations and green waste from the surroundings into compost, which is then used on their own farm and sold in various packages under the name 'Agricompost.'

The agricultural sector faces many challenges, but there are also numerous opportunities for businesses willing to innovate and adapt to trends such as sustainability, technology, and changing consumer preferences. Farmers who are open to change and can adapt to this dynamic environment can not only survive but also achieve above-average profitability.

Conclusion
The research shows that ancillary activities can be a valuable strategy for agricultural businesses to enhance their existing operations and ensure their future viability. By focusing on activities such as regional sales, agritourism, niche products, and sustainable energy production, farmers can diversify their revenue streams without compromising the core of their operations. This not only leads to better utilization of company resources but also helps spread risks and reduce dependency on traditional markets.

Moreover, successful ancillary activities must create synergy with the company's existing operations so that they mutually reinforce each other. Direct interaction with consumers through farm shops and events, for instance, increases profitability and brand recognition, while focusing on circular farming models contributes to a more sustainable business model. Although the implementation of additional activities presents challenges, such as the need for investments, dealing with complex regulations, and requiring specific knowledge and experience from the entrepreneur, this research provides examples of how innovations and collaborations can help seize new opportunities. As a result, agricultural businesses can not only survive but also sustainably evolve in a constantly changing sector.

Implementation
It is clear that ancillary activities can play a significant role in agricultural businesses. Adding a new activity should not disrupt core operations but should instead strengthen them. As mentioned in the introduction, many activities have already been tried on the home farm, with most eventually failing.

What is important now is to maintain focus on regional sales and the oil pumpkin trade, along with the associated snack line 'Met PIT.' These products already have a distinctive market position. However, there is potential to further increase the value of the company. One option is to invest more in consumer interaction, for example, by hosting events. This would not only enhance brand awareness but also contribute to customer loyalty and appreciation for the products. This option will be implemented, as it is an effective way to build long-term customer relationships and enhance the company's visibility. Currently, significant effort is being invested in creating a new website, logo, and brand identity. Additionally, following a visit to Jucker Farm in Switzerland, various artworks made from homegrown pumpkins are being developed to attract more visitors. The Nuffield experience has motivated me to focus more on the current processes on the farm, which could mean adding value through processing, product innovation, and customer focus, without initiating too many new activities that might introduce risks.

The Nuffield trips have provided valuable insights into the global agricultural sector. They highlight the major challenge of feeding the global population amidst changing climate, political, and other global influences. Beyond these insights, the Nuffield experience encourages pushing boundaries and taking steps that were previously unthinkable. Personal development is central to the Nuffield Scholarship.

Recommendation
This research further confirms that adding ancillary activities can help agricultural businesses enhance their core activities and future viability. Each agricultural business needs to clarify what these activities are and where additional value can be derived. These do not always have to be major changes. The key is to mitigate risks inherent in the sector. As inspired during the Nuffield trips, focusing on innovation, customer engagement, and product processing offers opportunities for sustainable growth and market positioning.

This advice is aimed at agricultural entrepreneurs who are seeking innovation but are not yet certain what or how they want to implement it. It is important that this innovation aligns with the needs and capabilities of the entrepreneur. Additionally, this report is relevant for policymakers, as regulations such as permits and subsidy schemes have a significant impact on the implementation of supplementary activities.

Based on my experience and observations, I find it crucial that policymakers empathize with the current agricultural sector, where staying afloat can sometimes be a challenge. Besides food production, farmers also bear important ecological and social responsibilities. It is essential that policymakers contribute to creating an environment where farmers can operate a healthy and sustainable business.

 

Bibliografie

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CBS. (2020, december 11). Boeren vinden steeds vaker aanvullende inkomstenbron. Retrieved from Centraal bureau voor de statistiek: https://www.cbs.nl/nl-nl/nieuws/2020/50/boeren-vinden-steeds-vaker-aanvullende-inkomstenbron

F.A.Bahar, M. S. (2022). Secondary Agriculture.

Nationaal groenfonds. (2024). Investeringsfonds duurzame landbouw. Retrieved from Nationaalgroenfonds: https://www.nationaalgroenfonds.nl/fondsen/investeringsfonds-duurzame-landbouw/

Petra Berkhout, W. d. (2019). Advies opzet monitoring en evaluatie kringlooplandbouw.

Rijksoverheid. (2024). Landbouwsubsidies. Retrieved from Rijksoverheid: https://www.rijksoverheid.nl/onderwerpen/landbouw-en-tuinbouw/landbouwsubsidies

RVO. (2021, November 22). Biobased Economy. Retrieved from Rijksdienst voor Ondernemend Nederland: https://www.rvo.nl/onderwerpen/biobased-economy

Yadav, S. K. (2020). Retrospect and prospect of secodary agriculture and bioprocessing.