We run a relatively large farm in the Eastern part of the United Kingdom, this part of the UK has been recognized as farm land all they way back to the Doomsday book, in the case of our core farm, since the publication of the little doomsday book. Yes, almost a 1,000 years of farming history.
When we decided to "quit" the City nearly a decade ago, we both wanted to return to our family roots, here in Norfolk, where both my family and that of my wife originated. Imagine our surprise when the ancestral property of my wife's family came on the market, we thought it was a sign. However, my wife decided to "commission" a study on UK food production, its pain point, what was profitable and what was not.
First, both end of the food production, which take on most of the risk are the least profitable, farming and distribution to end users, (aka supermarkets) are the least profitable part of the equation. The best example is mince meat, for the farmer its a lost leader, the meat is the cheapest cut, the left over, for the supermarket, the handling is expensive, and mince meat has a very short shelf life. That is only one simple example.
Our dairy operation never sold unprocessed milk, every ounce of our milk is processed into cheese on site. Selling milk to wholesaler would generate a profit of about 5%, and some years that can be zero, milk cow are subject to sickness. Our cheese business generates, year in year out about 20% IRR, which is a lot better...
Our meat production is entirely processed on-site in our own slaughterhouse, which is open to a few local farmers, already we increase our profit potential, we still sell about half the cattle value via wholesalers, mostly to the restaurant trade, because we track every single cattle from birth to the client's chiller... 100% of the less desirable parts of the cattle is sold internally to transformation businesses (aka meat pie business). Our least profitable business in cattle is selling wholesale to high end British restaurants, but it doesn't mean its not valuable, there's also a side business where we retain our prime cuts with direct to consumer sales (its less than 15% of our cattle business).
Our fruit and vegetable business was always driven to the "top of the market" 100% of our crops is grown inside climate controlled greenhouses, and our premium fruits and vegetables are sold. via wholesalers, to the restaurant trade in the UK. The "top of the top" production is sold at a large premium to ordinary fruits and vegetables, the rest of our fruits and vegetables, which are less than prime (discolouration, shape etc) is sold internally to our transformation businesses.
In 2023/24 we increased our greenhouse space by nearly 65%, 90% of this increase in production was to meet the demand our our transformation businesses. If 100% of our fruits and vegetables could be sold as "top of the top" our margins would be around 9%, respectable by any metrics, today we generate nearly 12%, the growth is entirely driven by our "less than perfect fruits and vegetables", which now account for nearly 76% of total production from our greenhouses.
Now, lets be clear, we have huge acreage of land, we are about 82% energy independent because of our biodigestors and methane powered generators. Our farm is not carbon neutral, but its getting close, the extra steps are too expensive to implement, and probably not worth the effort (aka biodiesel). Today in 2025, our "loss leader" business is the high end production, it is our least profitable part of the business.
I want to be clear, our profit margin on the "high end consumers" is still profitable, and we don't intend to change our mix very much. 2024 was a very profitable business for the farm and the other 12 businesses we acquired over the past decade. I've discussed the businesses in general terms before, bottom line we substantial unmet demand already. it's not a happy situation, but to meet the additional demand would require massive capital expenditure and our partners (we own about 65% of the outstanding capital of each company) are not keen on expanding, and since they are the day to day manager we take their concern into our calculations, in addition, my wife and I (especially my wife since she runs the whole show) are not interested in pushing harder anyway.
Now, the games being played in Washington are affecting our business indirectly, as the wealth of our nation are affected by the decision made four thousand miles away. The biggest impact has been on demand for our "top of the top" production, the high end is hurting a bit. But the middle is also hurting, our meat pie business would usually sell out production in three days, now it takes five days to sell as many meat pies, It means that we run out of production more slowly, which means that we are closer to meeting market demand, than in the past. right now, we have bare storage Friday morning instead of Wednesday morning. Yes it could get worse, but we are not yet concerned, we are watching. The baby food business is still on fire, but its a short window for consumers anyway --- a yaar or two at most (its a bit of a joke). In all we have 12 business, and we are seem slowdown in four, but we are still far from being in trouble. At worst we can start shipping products to Europe again, but we are still very far from that situation.
In short, the tariffs do harm our business, more int he planning part than in the production part. We are still confident that we can maintain our margins, but probably not grow the business any further. That has its own challenges.
P.S. I have not mentioned our farm manager for some time, she still doing great work and assuming more and more responsibilities. We just celebrated her second anniversary as the farm manager.
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