Ok, let me cut immediately to the chase, the premium/boutique products that I am imagining selling to the 1% ers are food and drink based. The first company that I started was funded by a media company and the main lesson that I learned is that people pay without thought for pleasure. Rarely is this an exercise of finding the lowest price, best deal etc.
Apple is a prime example. They, unlike HP, Microsoft, Dell etc sell pleasure, not technology. With Apple, it is a new way to experience music, books, movies, games, applications, manage your pictures, your movies. It is nothing about the underlying technology. It is pure pleasure.
Also, I am not imagining that selling relative raw goods in a farmer’s market is the way to go. That is certainly a very viable approach, but I am thinking that you should integrate much further up the value chain or be part of a vertical value chain. For example, I recently heard a fascinating story on NPR about fast growing product categories and in particular hot sauce. It is clearly a product that has moved up stream from just hot peppers. I have also eaten at Zely and Ritz, an organic tapas restaurant in Raleigh. It happens to be partial owned and supplied by Coon Rock Farms, a local organic farm. Micro-distilling locally grown products is another example. Integrate up the value chain to claim as much value in the end price as possible.
I think that the products need to local and sustainably produced. If you read Michael Pollan’s Omnivore’s Dilemma, you come to understand how much oil goes into producing our current industrial food supply chain. Clearly with oil being a limited commodity, this is not a sustainable supply chain. I think local is also key. There is an essence of community, support those around you. You will pay for it one way or the other, either you help one another achieve success or you pay for other’s lack of success through your tax burden to the state.
Also, I think you have to address scale. I hope you have either read and/or seen the movie, Dr Zuess’, The Lorax. It clearly shows the lesson of bigger is not better. To put it in even more tangible terms, pick up Wendell Berry’s Bringing it to the Table. I recall the chapter contrasting the economics of a farmer who had spent a quarter of a million dollars on one of those awful chicken industrial production facilities, only to net roughly $20K/year. Wendell Berry, who is so articulate about discussing the issues of the food production economy, goes to show that a poultry farmer specializing in heritage breed birds and raising them free range, natural could make the same $20K/year.
One of my bosses once said that profit was the difference between two really big numbers, don’t screw up either of the numbers. The issue in the model of the industrial chicken processing facility was that a major poultry industry was the sole source purchasing the finished product and they were notorious at cranking down on the price paid for the chicken. Would you like be the industrial farmer carrying a lot of debt with no control of one of your really big numbers?
I think another key concept is that it has to be personal. I have bought a lot of wine from various places. Certainly Costco is a place that is convenient and they have quality and good prices. I have toured many of the wineries in California and bought wine.
However, the place I repeatedly buy with almost no thought of the price is from the Scherrer Winery in Sebastopol. The wife and I first met Fred Scherrer right after moving to California. He was the wine maker at Delhinger Winery. At his wine tasting, he was serving Zinfandel from his families vineyards. It has been in three different type of oak barrels for 6 weeks and the taste difference from the aging was amazing.
The next year Fred left Delhinger and embarked on his Scherrer Vineyard endeavor. We went to his first open house. His processing is done in a metal shed outside of Sebastopol. His Mom and Dad were there serving food and wine. His wife, Judi, manned the cash register. His kids played outside. The Zinfandel wines are absolutely fabulous and come from the vines that have been in his family over three generations, vines that are easily over 100 years old. We went back year after year. Our kids played outside with his kids during the tastings and they snuck in for cheese, crackers and olives. Even after we moved to North Carolina, I still have several cases of his wine show up each year. I can email Fred and Judi and they look after us. The wine is such quality, but the reason it is so special is that I know the love and care and pride that they put in every bottle. When we order, they always send their heart felt thanks, for supporting their endeavor, allowing them to make the quality product that they want to produce.
These are some of the concepts around my second pillar, key ideas that are the essence of the products to be made for the 1% ers.