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Growth opportunities to watch for farmers considering diversification

The British public is looking for experiences and holidays in the UK countryside, opening opportunities for farmers to diversify.

 

Alex Black spoke to Savills about the top trends to watch for farmers considering diversification.

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Growth opportunities to watch for farmers considering diversification

Economic and political conditions are supporting the growth of the UK tourism economy, with the industry growing at a rapid pace.

 

The tourism economy in Great Britain is worth about £127 billion, according to Visit Britain, and is predicted to grow annually at 3.8 per cent, which is significantly faster than the overall economy. By 2025, it will be worth about £257bn and will represent almost 10 per cent of GDP.

 

Festivals, camping and glamping, holiday lets, experience events and local food outlets were all growing in popularity.

 

But Savills director Ashley Lilley warned there were two common misconceptions relating to diversification.

 

Assumptions

 

The first was thinking ‘it worked for my neighbours so it must work for me’, with the second assuming that having a diversified enterprise would automatically lead to an increase in the value of property.

 

He emphasised diversification was not a ‘panacea to profit’.

 

He said: “In some cases, it is worth looking at how you can improve existing profitability.”

 

Mr Lilley added it was often better if a new enterprise complemented the existing enterprise.

 

“For example, linking meat production with a cafe or a retail outlet, either physical or web-based.”

 

And he said understanding resources available was crucial, including whether extra staff would be needed.


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Glamping

 

WITH relatively little capital investment required and healthy returns, glamping has become a popular choice for many landowners looking to diversify.

 

Simon Foster, head of Savills commercial heritage consultancy, highlighted there were a number of considerations to take into account before setting up a glamping site.

 

LOCATION

 

■ IDENTIFYING a site which was accessible but in a secluded area with attractive views of the surrounding countryside was essential to creating the right atmosphere and setting, Mr Foster said.

 

“On the edge of woodland or a lake, both work particularly well. It is important to ensure separation between units to give privacy while allowing for access to communal services.”

 

A mains water supply, drainage and electricity via mains or solar power was also required for the site. Infrastructure costs of about £50,000-£100,000 were typical for up to four units, depending on the availability of existing services.

 

PLANNING PERMISSION

 

■ IF the glamping activity occurs for more than 28 days a year, consent will be needed for change of use of the land for temporary or permanent structures.

 

“Planning permission is required to install utilities. It is a good idea to talk to your local council, as many local authorities encourage the development of tourism and support diversification, as well as seeking planning advice.”

 

OPTIONS

 

■ THERE are many options on the market, from yurts and log cabins to geodesic domes and treehouses, so it can be difficult to choose. As it is a competitive market, it was important to differentiate from nearby competitors.

 

Mr Foster said: “Bell tents, yurts and safari tents are seasonal products and will need separate kitchen and bathroom facilities close by, as well as usually requiring a base or decking.”

 

It also means putting them up and taking them down each season and cleaning the canvases. Bell tents cost about £1,000/tent and safari tents can cost up to £20,000 when furnished and equipped.

 

Alternatives included shepherd’s huts, pods and lodges. Mr Foster said: “These offer self-contained facilities and, as they are fully insulated, can be used throughout the year. Log burners, power and WiFi can also be included.”

 

Shepherd’s huts can cost about £20,000-£50,000, while pods typically cost £6,000-£15,000.

 

LUXURY EXTRAS

 

■ MR Foster said a premium product and good quality furnishings were essential to achieving high occupancy rates, and extras such as hot tubs, fire pits, barbecues, bicycles and games rooms will add value to the offer.

 

BUILDING THE BUSINESS

 

■ IT was important to assess the level of investment and likely returns with opportunities to achieve similar prices to holiday cottages at a ‘fraction’ of the investment, Mr Foster said.

 

Achieving a 70 per cent average occupancy rate was common within three years. A phased approach, starting small, was often sensible.

 

Public liability insurance will also be required in case of injury or accidents and a general risk assessment of the whole site will need to be carried out.

Wine production

 

VITICULTURE is one of the fastest growing areas of the British economy and an opportunity for landowners to diversify.

 

Savills said this was a way to diversify with almost any landowner with the right land type and aspect able to get involved, needing only about three hectares to turn a profit.

 

But yields can be unpredictable, with one of the worst years on record in 2012, followed by the best only six years later.

 

Grapes and finances are at the mercy of external factors including weather and politics. Chris Spofforth, head of Savills viticulture services, highlighted five steps to having the best chance of success.

 

1 MARKET: Know your customer and whether the price they are willing to pay delivers a profitable margin above the costs incurred. Export markets, especially to the Far East, were booming, but there was a cost to access.

 

Demand for the product must first be established, which requires strong investment in marketing.

 

2 BUSINESS PLAN: Robust interrogation of the vision for the enterprise will have a significant bearing on all elements of the venture, from site selection to choosing varieties to growing and marketing the product. Having on-site processing units, for example, allows finer tuning of the product, but comes at a high initial cost, and employment of specialist vintners may be necessary.

 

3 SITE: Ideal land for viticulture often means sheltered southfacing slopes away from the coast, but no higher than 100 metres above sea level. Quality of the end product relies heavily upon land choice.

 

Using geographic information systems to find sites that take into account all aspects of the land and climate was essential to ensuring grape growing conditions were optimised.

 

4 EXPERTISE: Informed, precise and regular attention was needed to minimise risk and maximise opportunity due to the sensitivity of vines. Partnering or contracting services from an expert third party could deliver the satisfaction of a new venture while avoiding mistakes.

 

5 ADDED VALUE: Diversification into wine production often provides additional opportunities including tasting, tours and retail.

 

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