CASE STUDY:In 2003 Eric and Charlotte Matthews set up their eco farm, a business incorporating artisan food production and eco-tourism accommodation and activities. Now, in a changed marketplace, they have to decide what areas to concentrate on as tourism numbers drop
ERIC MATTHEWS inherited his love of the great outdoors from his parents who were enthusiastic hillwalkers. Eric tried out a variety of sports as a kid and by the time he was in his late teens he was an accomplished rock climber who also loved the tranquillity of the mountains. Eric went on to study law at university in Dublin.
After graduating, he took up a career in corporate banking with one of Ireland’s large banks.
Eric’s career in financial services blossomed. His calm determination honed on challenging rock faces gave him a gritty determination to push deals through. At just 25 years old he was head hunted by a leading merchant bank in London. From there he moved to the company’s office in New York, married an American food scientist, had two sons in quick succession and looked to have put down roots in the US for good.
Then a couple of years later his bachelor uncle died, leaving his farm to his nephew. Eric’s parents assumed he would either sell the 180-acre holding in Waterford’s Suir Valley, lying close to the Comeragh Mountains, or rent out the land. So they were extremely surprised when he announced he had had enough of corporate America and that this represented an opportunity to get back to the land and live up to his long-held but little-expressed green values.
From all that he had read, he was convinced that eco-tourism was emerging as the major growth sector for Ireland and that, if protected and nurtured, Ireland’s traditional countryside could be a major draw into the future for people living in an increasingly crowded Europe.
For sustainability purposes he felt it would be desirable and probably necessary for the farm to be involved in more than one business.
Eric’s success in business had made him wealthy and he and his wife, Charlotte, moved to Ireland in 2003 with a substantial amount of money to invest.
Their plan was to develop the farm as a working unit and to produce artisan foods using as much of its own produce as possible. Along side this, the couple planned to develop self-catering accommodation attractive to eco-minded tourists and a range of activity holidays based around horse riding, hill walking and mountain biking.
Charlotte took the lead in developing a plan for the artisan food side of the business while Eric was responsible for running the farm, leading the activity holidays and looking after the accommodation with help on the housekeeping side of things. In tackling all of this they had the (paid) assistance of a neighbour and long-time friend of their uncle who had his own small holding nearby and proved invaluable in all matters relating to the farm.
Over a nine-month period the Matthews converted two large barns into four luxurious self-catering apartments and turned the old stables into two more. As much as possible they tried to ensure that they remained true to the principles of eco-tourism.
This included installing wind power generation and solar panels, putting wood-burning stoves in all apartments, that burnt timber from the farm, and installing a substantial eco-friendly waste treatment plant. The couple used a hybrid SUV to get around and encouraged their visitors to leave their cars behind and use the bikes provided.
They then turned their attention to livestock and acquired ducks and hens and began building up the existing small herd of Jersey cattle with a view to producing a number of food products, including ice cream. A disused machinery shed to the side of the main yard was rebuilt and fitted out to meet the safety and hygiene requirements for food production and a part-time farm manager was employed to look after the growing herd.
Charlotte’s initial foray into food production was small scale, growing fresh herbs which she sold to local restaurants. From there she moved into making unusual herb-based products such as rocket pesto and herb butters for the food trade.
As the Jersey herd became more established she began making American-style cheesecakes which she also sold to her restaurant customers. She then added a small number of ice creams based around seasonal flavours aimed at top-end restaurants. By the end of its third year Charlotte’s food business was employing three people and making a comfortable profit.
The Matthews had begun their leisure business in 2004 when Irish people were still spending money on breaks away. Domestic business represented about 70 per cent of their throughput with some business coming from the US, through the couple’s contacts there, and a small amount from the UK and mainland Europe. The business naturally had its seasonal highs and lows but special autumn and winter walking breaks had helped even things out.
The farm’s main marketing channel was its website and Eric spent hours following up potential business leads and trying to optimise the website’s potential. He eventually called in online business consultants who made a number of changes to the site which helped. This included launching the site in French, German and Italian and resulted in more European enquiries.
The marketing message was also tweaked for potential overseas visitors with the farm being promoted as an opportunity for visitors to experience the Irish rural way of life in an eco-friendly environment. This seemed to strike a chord with German and Dutch tourists in particular and the 2006 and 2007 seasons were busy.
Eric also realised that he had not capitalised fully on the eco emphasis of the business and set about securing an European Ecolabel for the venture. Verified independently, this is an EU-sponsored programme designed to give recognition to tourist accommodation services that respect the environment.
However, despite all these efforts, the downturn in the Irish economy has had a huge impact on domestic business. The number of US visitors has also fallen dramatically and the accommodation has been rarely fully booked since the middle of 2008.
Given the significant level of investment already made, it is not surprising that this side of the operation is now losing money and the couple have had to dip into their savings to keep it going.
By contrast the food operation is thriving and it has crossed their minds that perhaps this is where their efforts should be solely focused. However, Eric is reluctant to let the tourism product go. That said, he recognises that they need to come up with some smart ideas to start attracting Irish people back to their farm. For example they currently provide food hampers for visitors but not meals and are now wondering if they need to start offering breakfast and dinner to attract a wider customer base.
On her side of the business Charlotte faces a choice between keeping things at their present size or expanding. Demand for her ice creams and speciality herb products is constantly growing and she also needs to decide whether or not to drop the other lines to focus on these two products alone.
Growing the business would also involve either a move to a small industrial premises or applying for permission to build a bigger unit on the farm at some cost. She is reluctant to swap her pleasant rural surroundings for an industrial estate and is worried that her products will lose their artisan touch if the operation is significantly scaled up.
She is also concerned that she does not have sufficient commercial expertise to take the business to the next level. How should Eric and Charlotte progress?
THE EXPERTS' ADVICE
The plan for the farm should include the establishment of an eco-type village resort which would be marketed internationally
FIRST THINGS first, Charlotte should stick with her feelings for small-scale, fresh, local produce and seek permission to build a bigger unit on the farm and not consider moving to an industrial estate. The essence of their success to date is the location and attraction of their real farm.
What visitors purchase now is the "experience" when shopping or spending their hard-earned money.
The idea of breakfast and dinner offers should be acted upon immediately. The closer the supplier is to the location in which the product is consumed has a definite appeal to consumers seeking fresh, locally-sourced products being consumed in relevant surroundings.
Consideration should also be given to establishing a low-fat option in cold desserts.
As Eric's success in business allows him to fund out of reserves a cashflow shortfall in the business, Eric and Charlotte are uniquely positioned not to have to pay interest on borrowed money which gives them a temporary edge over competitors. Eric should consider this as an investment in the business and lifestyle which they opted into.
Eric and Charlotte should also consider dividing 20 acres of the farm into single-acre units, say for a 12-month period. They could then seek 20 urban farmers to lease an acre each for €1,000 a year - encouraging them to grow their own vegetable requirements for the year.
They could offer a free dinner and wine event every eight weeks at the centre to encourage a larger family-type fraternity of supporters.
They should explore the option of constructing an exercise adventure area in the 60-acre wooded section of the farm. Eric could advertise for volunteers - seeking out those with the skillsets required, offering them accommodation in return for 40 hours' labour each week towards the construction of the project.
The medium- to long-term plan for the farm should include the establishment of an eco-type village resort covering 100 acres which would be marketed internationally. This could add to their eco-tourism pitch through Fáilte Ireland's new marketing initiative to attract more visitors to Ireland.
- Des Fahey - chief executive Dublin Business Innovation Centre
ERIC AND Charlotte are in a tough place - like just about everyone involved in the hospitality business in Ireland today. They are operating in a market that is saturated, there are simply not enough customers to go around. This needs to be their starting point in terms of what's next. In any business, there are two ways to go forward: product differentiation or cost leadership.
Clearly, with their niche, model price will never be a unique selling point, nor should it be. This unpromising situation is compounded by a pretty gloomy outlook and they cannot expect an upturn in demand in the short- to medium-term - hotels, B&Bs, restaurants, pubs, etc, all around Ireland the squeeze is set to continue for some time.
However, Eric and Charlotte have a valuable asset in the eco-farm and the concept of sustainable, environmentally-friendly tourism is solid. Furthermore, they have something that thousands of other businesses in the hospitality sector would give anything for: a genuinely unique product.
The philosophy of an "authentic" Irish experience in an ecologically responsible setting - green and greener - is definitely something they can leverage, and it's here they should be concentrating their efforts.
The fact that their food production is going well is certainly an interesting bonus, but is this really where they want to go? Scaling up the business will not change its nature, and will be a costly and time-intensive process. It could end up compromising the core business of the farm. Instead of expanding the food operation, they should invest in more intensive marketing of the farm, with the "Irishness factor" at the heart of their message. They should not rely on online exclusively, but also target trade fairs - at home and abroad - and try to develop contacts with foreign tourist intermediaries who can promote their offering overseas.
Visitor numbers from the US may remain low for some time, but with a clever marketing strategy there are still plenty of French, Dutch, Italian, German and British holiday-makers who would relish the idea of getting to know the real Ireland. The European Ecolabel would help in this respect.
Finally, they must remember the thousands of potential customers who are right on their doorstep. Many people are also more open to holidaying at home, where they would have travelled abroad in the past. So, what would make these people want to visit a farm in the Comeragh mountains? Get that answer right, and they're in business.
- Luke Moriarity - chief executive of the Moriarty Group
ERIC AND CHARLOTTE have a lot of business activities competing for their attention. Taking time out to evaluate what is working and to channel their energies into the areas of greatest potential is a must-do.
For Charlotte, the following points should be considered. Firstly, as she recognises, she needs to develop her commercial expertise. Taking a business from a lifestyle enterprise to a more competitive and faster-paced level will require Charlotte to think about her long-term ambitions for her business. While a lot of commercial skills can be acquired through day-to-day experiences, Charlotte could give herself a head-start by participating on one of the many dedicated commercial and marketing programmes for small food businesses in Ireland.
Offered at local, county or national level, programmes such as Bord Bia's Vantage programme are developed with the needs of owner-managers in mind. For time-pressed individuals, learning online can be a good option. There are many websites in Ireland, the UK and the US which offer practical, tried and tested advice for businesses like Charlotte's - bordbiavantage.ie is one such site.
In relation to commercial expertise, Charlotte should look to develop her own network of food producers and use their shared experience as a sounding board for her business. She could even consider asking a more established producer to act as her mentor and adviser during this crucial phase of development.
Charlotte's second challenge is to evaluate her product range. Many artisan producers look to develop their business through product innovation and range expansion. This does work for some, but can be very complex to manage.
A more streamlined product range that would enable Charlotte to concentrate her energies on expanding the distribution of her products to a wider selection of retail and foodservice outlets could be more profitable. In selecting the lines she wishes to concentrate on, Charlotte should not overlook the seasonal nature of ice-cream sales and ensure that her product portfolio is balanced.
Charlotte's third issue concerns her current premises. Expanding will require a new building, either on the farm or in an industrial unit. There are many artisan producers currently operating from dedicated incubation centres who retain their artisan credentials, so this should not be Charlotte's concern.
Instead she should consider the benefits of a new unit that is ready for production, versus the time required to build or expand on the farm. A lot will depend on whether she has finance to invest in a new farm building and if she is already at maximum capacity in her current location. If she is and she risks losing customers by not fulfilling their orders, a move to the industrial location could be a better option.
- Eileen Bentley - manager small business, Bord Bia
