9A -- Testing the Hypothesis, Part 2

Introduction:

I decided to alter my product to target a different market after analyzing the customer base and asking Dr. Pryor about his thoughts on powdered insect protein for human consumption. I think it would be easier to sell the product as a protein source or feed supplement to poultry, aquaculturalists, and ranchers.  There are a number of chicken and fish farms relatively close to my current agricultural operation. Many cattle and hog farmers also mix their own feed, thus buying varying inputs and protein sources to mix together.

Background:

Marketing the product to individual consumers for human consumption in the highly competitive protein powder market would be both risky and expensive.  The market for animal feed is somewhat less competitive and the barriers to entry are much lower.  Low barriers to entry do pose additional risks because farmers may begin producing the insect protein themselves to cut out the middleman (me).

I think the greatest potential for insect protein is in the aquaculture industry because it is a growing industry and applying sustainable feed is the limiting factor.  Contemporary feeds are made of fishmeal, which is typically derived from oil-rich, wild-caught fish species like sardines.  Producing insect protein using low-quality byproducts and/or discarded agricultural products would be a monumental shift. I liken it to discovering how to complete the breeding cycle for a fish stock.  Without that key component, the process is inefficient and unsustainable.  Wild stocks must continue to be sacrificed to satisfy the market.  Once the entire life cycle can be duplicated on a farm, then natural stocks are no longer needed while the food supply can simultaneously increase. It’s amazing! Fish species that have already be domesticated lack the bottle-neck of completing the life cycle, therefore leaving sustainable food the sole limiting factor to explosive market potential.

Table:

Inside the Boundary

I think actual farming operations are the best "who" for my product.  Farmers need better profit margins; that's the essence, the driving force of business decisions.  Poultry and fish farmers need my product because the profit margin is everything in agriculture.  At the end of the day, farmers must make a living to survive and are therefore often looking for a quicker, cheaper way to do things. Insect protein is what they need and I'm going to sell it to them.

Outside the Boundary

I do not think the average consumer can quite wrap their head around voluntarily consuming insects but the incredible amount of added value will likely persuade agriculturalists. Therefore, they are not my target market. The average consumer is more concerned with flavor and aesthetic appeal in food than they are in sustainability and efficiency.  It's simple economics, consumers purchase normal goods when their finances are in check.  Conversely, they only choose inferior goods when they are forced to by some factor other than tastes and preferences. For this product to effectively target the average consumer, a change in tastes and preferences will have to occur.

The best alternative explanation I have found so far is that the cultural notions and status quo are simply too strong to market this product to the general public just yet.  However, millions around the world already consume insect protein and the power of the dollar should not be underestimated.  I think it is only a matter of time before the West will turn towards insect protein instead of away.

Interviews:

I interviewed two agricultural producers; one is a poultry farmer and the other is a cattle rancher. The cattle farmer, Brett, does not think insect protein will be efficient enough to outcompete hay, corn gluten, and corn mix.  It may be a valid additive, especially if it can be obtained at a cheap enough price. The insects will be fed corn and discarded fruits, vegetables, etc.  Since cattle can also consume similar products, the density of the nutrients in insects would be the key factor because it’s much cheaper to send 1 ton of insect protein that is 54% protein than 1 ton of soybeans, which are only 36% protein.  The result is a 15%-20% savings in shipping costs.

The poultry farmer, Jane, was interested because mealworms specifically have many valuable vitamins and nutrients that chickens require.  However, the feed would still lack in a couple key areas, thus requiring additional inputs and mixing equipment.  Those factors would increase the barriers to entry because they increase the overhead costs as well as the initial investment.

I have not been able to contact any aquaculturist yet but I anticipate them being more receptive due to the compounding benefits of insect protein.

I also interviewed three more general consumers.  The interviews confirmed that the average consumer, even those slightly biased towards sustainability, are not entirely thrilled with the concept of eating bugs. While it is not surprising, it is frustrating to know that a more sustainable and thus cheaper product is likely years away from use in America due to cultural notions.  But, the market is never wrong; other market drivers will likely be required to result in a shift of any magnitude. I have since adjusted my plan and am excited to pursue more answers.

As always, thank you for your time and I'd love to hear your thoughts!