Market selection: Goat milk farmers

Emilien Klein 2015-05-25

These are my notes on my first market selection: Goat milk farmers. I originally had thought about all milk producers (including cow milk), and that is what the notes below denote, but in practice I have focused exclusively on goat milk farmers.

Selecting a market - Dairy Farmers? In The Netherlands (then Europe, then US)

Criteria Number 1 - The business currently pays for software of some kind.

GYESTIMATE - I can't imagine modern farmers not using software to manage their herd (e.g. animal immunizations), their infrastructure (machines, tractors, land). Not sure under what kind of model (one-time purchase, SaaS - unlikely?) this is done though, will need to figure out while doing IE. "In the nighttime, Landry's telephone sometimes rings with a call from one of the [milking] robots. The machine tells him its ID number and its problem. Landry then heads out, his iPhone strapped like a revolver to his belt, to fix it." - http://www.spiegel.de/international/zeitgeist/dairy-farming-in-europe-effiency-paramount-as-eu-quotas-expire-a-954750.html

Criteria Number 2 - Lucrative industries are preferred

YES and NO - Farming is not highly profitable if compared to other industries. But the agricultural sector's budget in Europe represents a third of the overall budget of the Union (https://en.wikipedia.org/wiki/Economy_of_the_European_Union#Agriculture), and Dairying is one of the most profitable sectors of EU agriculture. Due to the concentration of the market I assume (never assume!) there is a need to improve profitability.

"Dairying is one of the most profitable sectors of EU agriculture. Milk yields per cow have increased steadily in every member state between 1985 and 1997. Overall EU dairy production continues to follow a trend towards increased intensification on a smaller number of larger, more specialised production units." - http://www.sciencedirect.com/science/article/pii/S0093691X02012402
"Last year, some 3,300 dairy farmers gave up. The total number of farms falls by roughly half every 10 years. Only those farms that grow larger, produce more and become as efficient as possible, such as Westrup's, have a hope of surviving." - http://www.spiegel.de/international/zeitgeist/dairy-farming-in-europe-effiency-paramount-as-eu-quotas-expire-a-954750.html
"Over time, he has taken up a few hobbies to fill the time his robots have freed up for him. He plays golf and goes skiing. In the winter, he says, he likes to fly down to Jamaica." - Same source as above

Criteria Number 3 - Profit driven business mindset

YES and NO - Middle/large-scale farming is definitely not a hobby, farmers need to make revenue/profit to survive. However, the role of subsidies makes this more difficult to answer 100% YES. But farmers are definitely hard workers - difficult to imagine working that hard if there was not some kind of profit to be made?

Criteria Number 4 - Roughly 5,000 to 10,000 businesses (or more) in the market industry

YES - There is a large number of Dairy-producing farmers in Europe/the world.

Examples:

"The European Union with its present 27 member countries is the largest milk producer in the world. The largest producers within the EU are Germany and France." - https://en.wikipedia.org/wiki/Dairy_farming#European_Union
From the previous source, The Netherlands is the 6th European producing country with 11,469 10^6 kg/y. (7,5% of the EU's production, while only representing 3,3% of the population of the EU)
"Dairy Farmers of America is a dairy marketing cooperative that is owned by nearly 15,000 dairy farmers" - http://www.dfamilk.com/
31,000 dairy farmers in Wisonsin - https://www.minneapolisfed.org/publications/fedgazette/number-of-dairy-farmers-and-cows-shrinking

Criteria Number 5 - Reachable by phone, e-mail, Facebook, LinkedIn, Twitter, or message boards.

YES - As most independent farmers are small-ish operations (not huge corporation with anonymous headquarters) it should be possible to get in touch with the farmer directly. I haven't tried yet, so this will be confirmed/infirmed soon.

Criteria Number 6 - Can get person with pain point on the phone

YES - Independent farmers don't have secretaries, gate keepers, etc.

Criteria Number 7 -The average successful business earns at least $100k per year in revenue, and ideally profit (guestimate this).

YES

"According to a 2012 study by the U.S. Department of Agriculture, the average dairy farm had a net income of $239,800" - http://work.chron.com/salaries-dairy-farmers-4746.html
"A 2011 survey by the United States Department of Agriculture’s Economic Research Service (USDA/ERS) estimated that the average farm would bring in a net income of $82,800. This represented a 17% gain over the 2010 net income of $71,000 per farm.

The same USDA/ERS earnings report expected a sharp 57% rise in net profits for dairy producers despite rising costs for feed. This spike is primarily due to the steadily increasing gains in wholesale milk prices (at a rate of 20%). This sort of increase might explain SimplyHired.com’s average salary listing of well over $100,000 for dairy farmers." - http://animalcareers.about.com/od/Careers/a/Dairy-Farmer.htm