Jan 11
14
The Value Pyramid and How It Affects Current Ostrich Farming Practices
The Value Pyramid was used by a speaker from the Klein Karroo Kooperasie (KKK), the largest ostrich farming cooperative in South Africa, during a presentation at the international ostrich industry strategic analysis held in 1997. The speaker was suggesting that it was important to keep the price of the product high in the same manner that DeBeers had maintained the high value of diamonds. They achieved this by very strict control of the supply of product to the consumer. They subsequently found that this does not work so well when ostrich farming.
This discussion related to the value of the ostrich skins. The fear was witnessing ostrich become a high volume, industrial meat production industry where ostrich meat and skins would become commodities and thus have low value.
The Value Pyramid
The area in blue in the pyramid illustrates the Value Pyramid as presented by the National Ostrich Processors of South Africa (NOPSA). It illustrates the high value achieved when volume is low and how value reduces when volumes increase. At the bottom end products are sold as a commodity where any competitor can undercut prices.
The way to increase volume but also maintain value is through differentiating your product to make buyers want to come to you rather than a competitor.
Here are some ways of product differentiation.
Quality Marks and Standards
- welfare schemes e.g. Freedom Food
- certification schemes run by the industry bodies e.g. Beef & Lamb New Zealand
- special standards e.g. Kobe Beef
Country or Region of Origin:
- Red Tractor Scheme assures certain welfare standards as well as guarantee raised in UK
- Canadian Salmon, Cold Water Prawns, whilst not certification schemes, they indicate source of supply.
- Melton Mowbray Pork Pie and Champagne are examples of produce that the region of production has created very specific differentiation with the regional name protected by law when marketing.
Best Practice vs Good Practice
- Best Practice is leading edge thinking, practically applied which brings competitive advantage
- Good Practice is established wisdom, widely applied and often embodied in law, codes of practice or assurance schemes
A practical example in meat production of Good Practice and Best Practice is the introduction of Vitamin E Beef. When this technology was first introduced those that implemented Vitamin E technology to control meat color had the competitive advantage, producing better meat color with a longer shelf life. Today that has become common good practice in beef production. It is available in ostrich production, but not yet implemented as common practice.
There is a cost to implementing these various quality marks and standards, costs that are more easily met when working with sufficient volume to support those costs. However the benefits to all those involved in ostrich farming and the ostrich value chain with access to new markets through product differentiation should aim to cover those costs.
