What Are Value-Added Products?

Definition & Examples of Value-Added Products

Farmers harvest herbs from their greenhouse

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Value-added products are goods with an enhanced value stemming from some extra process or product. Value-added products are common in agricultural industries—certain farming practices and processing strategies can add value to the end product.

Here are common examples of value-added products and the reasons why they help businesses.

What Are Value-Added Products?

A value-added product can refer to any product that has been subject to additional actions or combined with extra products to raise the overall value of the product. Value-added products may be self-evident (such as a berry harvest that has been processed into jam), or they may need to be marketed (such as organically grown produce).

Value-added products are a major aspect of the agricultural industry. That's because food is often combined with other products and/or processed in some way.

Those in the agricultural industry might also refer to value-added products as niche market crops, specialty crops, or organic products.

The U.S. Department of Agriculture (USDA) lists three characteristics that could define a value-added product. A product could be considered value-added if:

  • There has been a change in the physical state or form.
  • The manner of production enhances value in a way that can be outlined in a business plan.
  • The product is segregated in a way that enhances value.

How Do Value-Added Products Work?

To understand how value-added products work, here's an example breaking down each of the three scenarios outlined by the USDA.

The first one is the most obvious. When there is a change to a product's physical state or form, and that change is made to enhance profits, it's a clear example of a value-added product. Raw meat can become jerky through drying, seasoning, and cutting up the raw meat.

Organic farms build their business around the second USDA example of value-added products. An organic tomato would simply be a tomato, if not for the organic farming process. By applying organic farming production to a tomato, it becomes an organic tomato—a value-added product. A farm that applies this process to all of its products is an organic farm.

Organic farms and organic restaurants also exemplify the third USDA example, because they segregate themselves from other farms and restaurants that don't apply the same organic processes to their products. By separating themselves from the competition, they are adding value to their products.

Additional Perks of Value-Added Products

Value-added products increase profit, but they have other benefits, too.

  • Personal fulfillment: Maybe there's a hobby you've always wanted to pursue or a product you've always wanted to produce. Considering this hobby or this product as something value-added for your business can help you both fulfill that personal dream and make more money.
  • Excitement: Turning berries into jam may not be as exciting as skydiving, but it breaks up the monotony of growing the same crops year after year. Trying new things in the form of value-added products can add diversity and excitement to your work routine.
  • Education: It's fun to try new things, and value-added products can increase your knowledge in a new area.
  • Eco-friendly: Value-added products and opportunities are often eco-friendly because they utilize the resources you already have, minimizing the need for new land use, raw materials, and other potential sources of waste.

Value-Added Products vs. Value-Added Opportunities

Value-Added Products vs. Value-Added Opportunities
Value-Added Products Value-Added Opportunities
Always deals with a physical product May or may not deal with a physical product
Always enhances value May either enhance value or cut costs

You may also hear the term "value-added opportunities," and there is a lot of overlap between these two concepts, but value-added opportunities usually refer to actions that can be taken. For instance, a farm has the opportunity to host tours or educational workshops at the property. This adds value to the business, but not necessarily to a specific product.

A farm tour doesn't create a value-added product, but other value-added opportunities do. For example, a brewery may find value-added opportunities with the byproducts of brewing. Grains used in the brewing process are filtered out of the final product (the beer), but they could still be used to feed livestock, so the brewer could connect with a local farmer and sell the grain. In this value-added opportunity scenario, potential waste becomes a value-added product that enhances profits for the brewery.

Key Takeaways

  • Value-added products are products that have been altered, added to, or otherwise enhanced during the production process to add value to the final product.
  • Value-added products often apply to the agriculture industry.
  • Common examples of value-added products include organic produce.