Case Studies of Value Added Production and Marketing

Customer Service
Cost Structures
Ultimately, all three markets were built on radically superior customer service. In the case of
Goridto ’ s, they had developed strong relationships with Hispanic retailers partly through direct
interaction, but also by assuring them they would no longer be shorted pork products.
Nahunta and The Egg & I Pork Farm rely heavily on their owners’ personality and personal
touch to connect with customers. This is a two way street as they learn more about what their
customers want, and the customers feel like they are important to the owners. This may be a
significant competitive advantage for small scale regional suppliers who help break the
anonymity prevalent in commercial outlets. Clearly there are scale limitations to direct customer
service which limits growth as it provides a potential niche.
In addition to customer service, all three continually evaluated and responded to consumer
demands. Goridto ’ s provides unsplit and lighter weight hog carcasses to Hispanic markets,
which has allowed them to meet preferences as well as differentiate themselves from larger
commercial packers. Goridto ’ s is further serving their retail customers by offering vacuum
packed primals cut to their customers’ specifications. This provides the product desired and
results in a cost savings to the retailers. The Egg & I Pork Farm had a great deal of interaction
with customers and in addition was actually soliciting cooked pork recipes from customers to
provide further custom products. Similarly, they provide custom hams and chops to restaurant
customers on demand. While this results in some merchandising difficulties it helps build a
loyal and reliable customer base. The close interaction of all associates of Nahunta with the
customers and the entire production base naturally results in strong feedback directly from customers
to processing. This is evidenced by Nahunta’s ability to meet demand at any given
time by altering slaughter and processing. This assures that customers will always find a reliable
variety of fresh pork products.
As reported by each of the firms, their costs of slaughter are remarkably consistent. Goridto ’ s
reported a slaughter cost of between $20 and $25/head which was similar to Nahunta’s figure
of a direct cost of approximately $20/head in a similar sized operation. The Egg & I was not
yet slaughtering, but the slaughtering operation was being built partially on the premise that
the $35/head charged for custom slaughter was likely too high.
Nahunta provides the best illustration of processing and retailing costs although they are likely
rough as well. Nahunta attributes about $20/head to processing and cooked products and
another $20/head to the retail packaging and cutting portion. Hence, the total per head cost is
around $60/head from live to the case.
Clearly, these levels are above the levels reported for commercial slaughter firms (Hayenga).
However, each firm compensates for this differential by capturing the retail value of the products
rather than just the wholesale level. From the cases, each emphasized the difficulty in
competing at a level further removed from the customer, since these markets are typically valued
via cost structure, while the consumer market represents costs plus the willingness of consumers
to pay for additional value which can be differentiated.
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