Shiitake Competitive Market Analysis US

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A Competitive Market Analysis of the UnitedStates Shiitake Mushroom MarketplaceMichael A. Gold 1,2 , Mihaela M. Cernusca 1 , and Larry D. Godsey 1

A DDITIONAL INDEX WORDS . Lentinus edodes , Porters ve forces model, agroforestry,forest farming, log-grown mushrooms

SUMMARY . Shiitake mushrooms ( Lentinus edodes ) have many nutritional andmedicinal benets. The cultivation of log-grown shiitake mushrooms encouragesforest farming and can be an opportunity for farmers interested in developing anadditional enterprise. In 2006, the University of Missouri Center for Agroforestry conducteda nationwide survey of shiitake mushroom producers to analyze theU.S.shiitake mushroom industry by taking into consideration the forces that inuencecompetition based on Porters ve forces model. Shiitake mushrooms are grownprimarily as a side business, especially those produced exclusively outdoors. Indoorproduction on sawdust generates higher income than outdoor production on logs,but log production is more suitable for a small-scale operation in an agroforestry setting. Barriers to entry are created by relationships in the market, economies of scale, and the learning curve effect. Although there are a limited number of spawnsuppliers in the market, they produce quality inoculum and maintain goodrelationships with shiitake mushroom producers. The majority of respondents selltheir shiitake mushrooms locally. Gourmet restaurants, farmers markets, andon-farm outlets are the main markets for shiitake mushrooms. Trends in demandare increasing and prices are high. Shiitake mushrooms can be replaced with othercommon or gourmet mushroom types, but also have their own identity fornumerous nutritional and medicinal properties. Competition for log-grownshiitake mushrooms arises from shiitake mushrooms produced on sawdust andfrom imports. To successfully survive in the market, rms create competitiveadvantages through quality, customer service, and consistent supply. Barriers tosuccess in the shiitake mushroom business include demanding work requirements,the need for a serious commitment to produce and market shiitake mushrooms, a1-year time lag between investment and a return on investment, and insufcient production and marketing information.Grower associations, universities, and stateand federal agencies must join their efforts to fund and support shiitake mushroomresearch and industry development.

T his article presents the resultsof research conducted to de-scribe the shiitake mushroommarket. The research builds uponpreviously reported ndings that shedlight on specic agroforestry marketssuch as redcedar ( Juniperus virgin- iana ) and chestnuts ( Castanea spp.;Gold et al., 2005, 2006). The objec-tive of this study is to analyze the U.S.shiitake mushroom industry from the

producers perspective by taking intoconsideration the forces that inu-ence competition based on Portersve forces model (PFFM; Porter,1980).

Shiitake mushrooms are nativeto Asia and are grown in forests. They are one of the most popular cultivated varieties of specialty mushrooms. Shi-itake mushrooms can be cultivated intwo ways: in an outdoor setting onnatural hardwood logs or in an envi-ronment-controlled building on logsor sawdust blocks. When they are

cultivated outdoors, an agroforestry practice called forest farming is oftenused. In forest farming, high-valuespecialty crops are grown under the

protection of a forest canopy that hasbeen modied to provide the correctshade level. The advantages of out-door production are a minimal capitalinvestment and a better quality prod-uct. The outdoor production of shi-itake mushrooms uses low-quality hardwoods, providing an additionalincome while creating opportunitiesfor timber stand improvement. Thedisadvantages are seasonal produc-tion, dependence on weather, lower yields, longer delays until logs beginproducing, and a heavier workload.The major advantages of producingshiitake mushrooms indoors on logsor sawdust are a constant market sup-ply through year-round production,increased yields, and shorter produc-tion cycles. Disadvantages includehigher initial investment costs, a spe-cialized production process, and alower quality product (MycosourceInc., n.d.; Royse, 2001). Shiitakemushrooms are prized for their taste,nutritional value, and health benets.They are low in calories, glucose, andsodium, and are high in potassium,phosphorus, copper, and zinc. Shi-itake mushrooms contain lentinan, apolysaccharide that is being studiedfor its ability to increase immune sys-tem activity, reduce the potential fortumors, and lower blood pressure.Shiitake mushrooms help the body to produce interferon, an antiviral

substance, as well as ght againstasthma, colds, and u. Shiitake mush-rooms alsocontaineritadenine,whichlowers blood cholesterol (Mattilaet al., 2000; Mycosource Inc., n.d.).

The supply of shiitake mush-rooms in the U.S. is increasing. TheNational Agricultural Statistics Serv-ice of the U.S. Department of Agri-culture (USDA) provides statistics forshiitake mushrooms based on a survey distributed annually to mushroomgrowers across the United States.Based on the published data (USDA,2004, 2006), the number of shiitake

mushroom growers with at least 200logs in production or some commer-cial indoor growing area increasedfrom 132 in 200102, to 134 in

UnitsTo convert U.S. to SI,multiply by U.S unit SI unit

To convert SI to U.S.,multiply by

0.0929 ft2 m2 10.76390.4536 lb kg 2.20461.6093 mile(s) km 0.6214

This work was funded through the University of Missouri Center for Agroforestry under cooperativeagreement AG-02100251 with the USDA-ARS DaleBumpers, Small Farms Research Center, Boonville, AR.

The results presented are the sole responsibility of the principal investigators and/or MU and may notrepresent the policies or positions of the ARS.

We thank Dr. Jim Chamberlain, Virginia Tech Uni- versity, and Dr. Dan Cernusca, University of Missouri,for their review and insightful comments on an earlier version of this manuscript.1Center for Agroforestry, University of Missouri, 203 ABNR Bldg., Columbia, MO 652112Corresponding author. E-mail: [email protected].

JulySeptember 2008 18(3) 489


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200203, to 146 in 200304, to 164in 200405, and to 176 in 200506.Compared with 200405, the pro-duction operation in 200506 mea-sured in number of logs increasedfrom 360,000 to 383,000 logs foroutdoor production and from 62,000to 64,000 logs for undercover andindoor production, whereas the areafor growing media other than logsdecreased from 1,585,000 to1,519,000 ft 2 .

As shown in the following stud-ies, demand forshiitake mushroomsisalso growing in the retail, wholesale,foodservice, and consumer markets.Commercial producers of white but-ton mushrooms [ Agaricus bisporus (white strain)] have diversied intospecialtymushrooms,creatingagrow-ing market for shiitake mushrooms(Beetz and Kustudia, 2004).

A study completed by the Uni- versity of Alabama (Onianwa et al.,2000) analyzed the market potentialfor locally grown shiitake mushroomsat the retail-level in northern Ala-bama. Results revealed that shiitakemushrooms were the third mostretailed mushroom in northern Ala-bama, ranking behind white buttonmushrooms and portabella mush-rooms [ A. bisporus (brown strain)],and before oyster mushrooms ( Pleu- rotus spp.) and enoki mushrooms(Flammulina veluptipes ). Fresh shi-

itake mushrooms were preferred forretail sales. Quality, freshness, andprice were the most important attrib-utes when sourcing shiitake mush-rooms. Previous research performedin Ohio (Pickford, 1989) and in Flor-ida (Degner and Williams, 1991)illustrated wholesalers interest in shi-itake mushrooms to supply the localrestaurant industry.

The North Carolina Departmentof Agriculture and Consumer Servicesperformed a survey (Augostini, 2002)to identify the trends in mushroomdemand for the next 5 years. The

target audience for this survey in-cluded retail and wholesale producebuyers from North Carolina, SouthCarolina, and Virginia. Based on theresults, shiitake mushrooms wereranked third in terms of preferenceby buyers after white button andportabella mushrooms and ahead of oyster mushrooms and maitake mush-rooms ( Grifola frondosa ). Increaseddemand for shiitake mushrooms wasexpected to outpace other types over

the next 5 years. In general, 71% of respondents of the North Carolinasurvey described a growing demandfor specialty mushrooms.

A detailed assessment of oppor-tunities for fresh mushrooms in thefoodservice channel was performed ina study sponsored by the MushroomCouncil (Technomic, 2005). Thisstudy conrmed that shiitake mush-rooms were the third most preferredspecies after white button mush-rooms and portabella mushrooms. According to the results, shiitakemushrooms enjoy signicant usagepenetration (21% of food service rmsuse shiitake mushrooms in theirmenus, 39% use portabella mush-rooms, and 67% use white buttonmushrooms). Over the past 2 years(from 2004 to 2006), net use of shiitake mushrooms in restaurantshas increased by 17%, and use of portabella mushrooms grew by 23%. According to the study, the reason forgrowth is that restaurants are increas-ingly adding specialty mushroomsinto their recipes to add variety anduniqueness, and consumers are in-creasingly adventurous, demandingunique avors and textures that areprovided by specialty mushrooms.

Research on the consumer sideprovided by the USDAs EconomicResearch Service revealed that percapita consumption of mushrooms

(fresh and processed) increased from3.69 lb in 1990 to 4.02 lb in 2006,and per capita consumption of freshmushrooms increased from 1.99 lb in1990 to 2.55 lb in 2006 (USDA,2007a). According to a study thatused data from the USDAs Continu-ing Survey of Food Intake by Indi- viduals, per capita consumption of mushrooms is higher in the westernand midwestern United States and is weakest in the southern UnitedStates. Asian and non-Hispanic whiteconsumers were the strongest con-sumers of mushrooms; per capita

mushroom consumption was posi-tively correlated with income; menand women between 20 and 39 yearsold were the leading mushroom con-sumers, representing about 32% of the population, yet consuming 43%of all mushrooms. According to thesame study, specialty mushrooms, ledby shiitake mushrooms and oystermushrooms, have risen in popularity over the past decade (Lucier et al.,2003).

In a report prepared for theMushroom Council by Arizona StateUniversity, United States fresh mush-room consumption is forecasted toincrease at 1.9% per year, reach-ing 3.21 lb per person by 2012.Meanwhile, processed mushroomconsumption is expected to remainconstant at 1.65 lb per personthrough 2012 (Patterson, 2003).

The University of Missouri Cen-ter for Agroforestry (UMCA) strivesto establish new and protable cropsfor Missouri land and forest ownersto enhance and diversify farm incomeopportunities. In the forest farmingarea, UMCA is conducting researchand demonstration projects to iden-tify the types of mushrooms bestsuited for Missouri soils, as well asthe best production techniques andmanagement practices for cultivationof specialty mushrooms in agrofores-try settings. Along with productionresearch, encouraged by the favorabletrends in supply and demand forshiitake mushrooms, UMCA is devel-oping an understanding of the marketat the national level. Detailed produc-tion and market information will helpsupport widespread adoption of for-est farming as an agroforestry prac-tice. This study will provide marketparticipants with useful decision-making information for developingmarketing strategies and identifying

potential for growth in this market.Materials and methods

Shiitake mushroom producersthroughout the United States wereidentied using information from theinternet (e.g., keyword searches forbusinesses involved in all aspects of shiitake mushroom production anduniversity websites that offered linksto sources of specialtymushroompro-ducts) and a database was created. Thequestionnaire design and administra-tion followed Dillmans (2000) tail-ored design method. A questionnaire

combining yes/no and closed- andopen-ended questions was developedto collect general information aboutthe market participants (i.e., activitiesperformed, specic questions aboutshiitake mushroom production,ques-tions about utilization of brand name,advertising and publicity, size of pro-duction operation, degree of involve-ment in the production of shiitakemushrooms, and type of production)and information specic to each of

490 JulySeptember 2008 18(3)

P RODUCTION AND M ARKETING R EPORTS


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the Porters forces that inuence themarket. Some questions referred toshiitake mushrooms in general andsome were specic for shiitake mush-rooms grown on logs. The survey isavailable online on the UMCA web-site (UMCA, 2008).

The PFFM looks at ve areas of competition that market participantsface: barriers to entry, bargainingpower of suppliers, bargaining powerof buyers, threat of substitute prod-ucts, and rivalry among existing rms(Porter 1980). The inuence of gov-ernmental policies on the market wasadded to the PFFM. Porters modelfocuses on the analysis not only of the actualsituation (bargaining powerof buyers and suppliers and rivalry among existing rms), but also onforeseeable developments (barriers toentry and threat of substitute prod-ucts). By understanding the compet-itive forces within the shiitakemushroom industry, market oppor-tunities and threats can be identiedand successful strategies can bedeveloped.

The questionnaire was tested ontwo growers and a researcher. Ques-tionnaires were mailed to all busi-nesses and individuals identied. Toincrease the sample size, letters weresent to various mushroom growerassociations and publications askingthem to notify shiitake mushroom

growers about the upcoming survey and providing contact informationfor people that have not received aquestionnaire and would like to par-ticipate in the survey. In addition, aquestion in each survey asked fornames and contact information of other participants in the market. As aresult, more names of potentialrespondents to the survey were gen-erated. The newly identied individ-uals and businesses were added to thedatabase and questionnaires weremailed to them.

After the rst mailing, two post-

card remindersand a subsequentmail-ing were sent to each individual onthe list. Using SPSS (SPSS, Chicago),descriptive analysis was performed toanalyze the data.

ResultsOf 104 questionnaires mailed

nationwide to valid addresses of shi-itake mushroom producers, 36 use-able surveys were received andanalyzed (36% response rate).

Responses came from 23 states, espe-cially from the central and easternregions of the United States.

General information about respondents and the industry

T HE PRODUCTION OPERATION .Farming of specialty mushrooms isoften a source of supplemental in-come in the respondents business.For 50% of the respondents, shiitakemushrooms represent less than half of their farming operation, whereas for28% of respondents, shiitake mush-rooms is the predominant product intheir business. Information about theproduction operation such as produc-tion place, growing medium, andother types of specialty mushroomsgrown by respondents in addition toshiitake mushrooms are presented inTable 1.

Concern about growing mush-rooms without the use of pesticidesand herbicides is very high among therespondents. Eighty-eight percent of respondents produce shiitake mush-rooms organically and 40% certiedtheir production under the USDA

National Organic Program or theCertied Naturally Grown program.Organic certication can help inmarketing the products consideringconsumers increased interest inchemical-free products (Mycosource,n.d.).

R E V E N UE G E N E RAT E D B Y SHIITAKE MUSHROOMS . Althoughmore respondents grow shiitakemushrooms on logs, the highest pro-duction volume has been obtainedfrom sawdust-grown shiitake mush-rooms. Respondents reported their2005 production on logs rangingfrom 50 to 7000 lb and productionon sawdust between 100 and370,000 lb. Respondents with exclu-sively outdoor production reportedgross annual sales under $25,000.Returns up to $100,000 were ob-tained by respondents that extendedthe log-grown outdoor operation with indoor production on logs orsupplemented the log-grown produc-tion with indoor production on arti-cial substrates. Respondents thatreported gross sales higher than$100,000 annually produced shiitake

Table1. Information about the production operation (i.e., production placeandmedium, type of spawn used, type of wood used and other species of specialty mushrooms grown besides shiitake mushrooms) of participants in a nationwidesurvey of U.S. shiitake mushroom producers.

Information about the production operation

Proportion of

respondents (%)Production place and medium

Grow shiitake mushrooms outdoors, on logs 42Grow shiitake mushrooms outdoors and indoors, on logs 14Grow shiitake mushrooms outdoors and indoors,

on logs and sawdust 14Grow shiitake mushrooms indoors, on sawdust 30

Type of spawn used z

Sawdust 67Grain spawn 33Dowel spawn 19Thimble spawn 6Stick spawn 3

Type of wood used y Oak (Quercus spp.) 47Maple ( Acer spp.) 22Sweetgum ( Liquidambar styraciua ) 8Others 20

Other species of mushrooms grown by respondents z

Oyster 58Maitake 25Reishi (Ganoderma lucidum ) 19Pom-pom ( Hericium americanum ) 19Stropharia ( Stropharia rugosoannulata ) 11

zPercentages do not add to 100 because respondents had the option to select more than one choice. y Percentages do not add to the percentage of respondents that grow shiitake mushrooms on logs (69%) becauserespondents had the option to list more than one type of wood.



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mushrooms exclusively indoors onsawdust substrate.

L O N G E V I T Y I N S H I I T A K EMUSHROOM PRODUCTION . A numberof shiitake mushroom growers (40%)are new in the business (less than 5 years), whereas one-quarter of therespondents began shiitake mush-room production 11 to 20 yearsago, with the smallest group (17%)producing for 20 years or longer.

PRODUCTS SOLD . Shiitake mush-room growers are involved in variousmarket-related activities (Fig. 1). Shi-itake mushrooms grown outdoors area seasonal product. Some of therespondents that built indoor facili-ties or used articial substrate toproduce shiitake mushrooms (47%of respondents) are able to sell freshshiitake mushrooms year round, andthe others sell on a seasonal basis.

START -UP COSTS . According tothe respondents, the costs to establisha shiitake mushroom business are nothigh. Seventy-two percent of respondents nanced their businessentirely from personal sources. Theremaining 28% supplemented personalsources with bank loans, partnersnances, and grants. Respondentsmentioned low start-up costs as anincentive to start a shiitake mushroombusiness, but also noted that for peo-ple without the necessary capital, thelack of funds can be an obstacle to

business establishment. In addition toinitial start-up costs, labor costs, time,and resources are other considera-tions to take into account when estab-lishing a shiitake mushroom business.

BRANDING . More than half of respondents (58%) recognize theimportance of developing a brandname. Respondents created a brandname to build trust and relationships(58%), encourage repeated purchase(58%), increase awareness of theirproducts (50%), and stimulate wordof mouth advertising (50%). Otherreasons for creating a brand namementioned by respondents are thefact that a brand can be used to effec-tively communicate the local andorganic message and can help sell afamily of products. The more res-pondents added value to their product,from selling fresh shiitake mushroomsin bulk to selling value-added prod-ucts, the higher the percentage thatsell under a brand name (i.e., 73% of respondents that sell value-addedproducts sell under a brand namecompared with 55% of those who sellfresh shiitake mushrooms in bulk). A higher percentage of respondents thatgrow shiitake mushrooms on sawdust(75%) sell under a brand name com-pared with those who grow on logs(54%). More respondents that sell toan upscale store (89%), online (80%),or wholesale (78%) developed a brandname compared with respondentsthat sell to restaurants (56%) or farm-ers markets (54%).

Overall, however, 42% of respondents choose not to develop a

brand name because the volume they sell is too smallor they address a local,direct, and loyal market that recog-nizes the quality of the products with-out the need of a brand name.

Twenty-ve percent of respondentsconsider the possibility of creating abrand name in the future, whereas17% denitely do not consider itnecessary.

M ARKETI NG COMM UNI CAT ION .Information can be transmitted toactual and potentialcustomers through websites, paid advertising, publicity,and direct marketing. Marketingcommunication is a tool used by producers to build bridges to custom-ers and channel partners, and to cre-ate and strengthen relationships.Thirty-six percent of respondentsuse a website to increase awarenessabout the products and servicesoffered.

Fifty-seven percent of respond-ents use different advertising methodsto increase awareness about theirproducts (Table 2). The reasons men-tioned for not advertising weregreater demand than supply, and asmall or beginning production. Nine-teen percent of respondents do notplan to advertise in the future, 33%plan to advertise in the future, and22% are not sure.

Publicity is used more often thanadvertising to increase awarenesstoward shiitake mushroom products(i.e., 83% use a form of publicity compared with 57% that use advertis-ing) to raise awareness, inform, andeducate consumers (Table 2). This

communication method is more costeffective because it uses nonpaidmedia coverage of the rm and itsproducts.

C R I TI C AL R E SO UR C ES F OR A SUCCESSFUL SHIITAKE MUSHROOMBUSINESS . Production skills and pro-duction information were consideredby respondents as the most criticalresources for a successful shiitakemushroom business. Production skillsand knowledge are necessary and areacquired in time through practicalexperience. Market knowledge, toolsand equipment, and business skills

were the next important criticalresources declared by respondents.Other resources mentioned that con-tribute to the success of a shiitakemushroom business were labor avail-ability and nancial resources (Fig. 2).

W H A T A T T R A C T E D T H ERESPONDENTS TO PRODUCE SHIITAKEMUSHROOMS . Respondents to themarket research survey consider shi-itake mushrooms a valuable cropbecause of its uniqueness and

Fig. 1. Range of economic activities performed by participants in a nationwidesurvey of U.S. shiitake mushroom producers and the proportion of respondentsinvolved in each activity (N = 36). Percentages do not add to 100 becauserespondents had the option to select more than one choice.




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popularity for taste, and nutritionaland medicinal properties. Anotherreason for shiitake mushrooms valueis the sustainable impact on the

environment through the productionof shiitake mushrooms on naturallogs. Respondents were motivatedto produce shiitake mushrooms when

resources such as logs, spawn, water,and proper microclimate were avail-able and when information and train-ing were easily accessible. Theproduction of shiitake mushrooms isconsidered a potential source of protby itself or in addition to a largerfarming operation because of low start-up costs and the existence of potential markets (especially restau-rants and farmers markets). Somerespondents were motivated to pro-duce shiitake mushrooms by theirpersonal love forandinterest in mush-rooms. Promotion by state agenciesand the information provided by books and magazines persuadedother respondents to start a shiitakemushroom business.

W HAT KE E PS OT HER PE OPL EFROM STARTING SHIITAKE MUSHROOMPRODUCTION . According to the re-spondents, barriers to success in theshiitake mushroom business includethe fact that it requires hard work anda serious commitment to produce andmarket shiitake mushrooms, the 1- year time lag to obtain a return oninvestment, the lack of start-up funds,and insufcient production and mar-keting information. Respondentsmentioned the long hours and dedi-cation necessary to produce andmarket shiitake mushrooms. They considered shiitake mushroom pro-duction labor intensive. More than

half of respondents (55%) hire peopleto help with farm work. Twenty-eightpercent hire full-time help (from 1 to24 people), 25% hire part time (from1 to 6 people), and 31% hire seasonalhelp (from 1 to 15) for administrativeduties, laboratory work, production,packing, and delivery. A concernexpressed by the respondents wasthe difculty in nding local workers willing to work at competitive wages.

Compared with vegetable farm-ing, growing shiitake mushroomsrequires at least 1 year from inocula-tion to harvest. This issue can dis-

courage people from starting abusiness according to some of therespondents. In addition, somerespondents stated that the incomeis not high enough related to theamount of time invested. Seventeenpercent of respondents indicated thatit took about 2 years to becomeprotable, 22% took between 2 and4 years, and 11% were protable after4 years or more. Seventeen percentof respondents that have been in

Table 2. Marketing communication methods used by participants in anationwide survey of U.S. shiitake mushroom producers and proportion of respondents that use each method. Percentages do not add to 100 becauserespondents had the option to select more than one choice.

Marketing communication methodsProportion of

respondents (%)

AdvertisingNewspapers 19Magazines 19Flyers 17Catalogs 17Radio 8Television 6Billboards 3Others (big signs on trucks, advertising with health food

stores, and eBay) 17Publicity

Free samples 50Festivals and fairs 47Collaborate with charities 33Sponsor community events 28

News releases 8Others (organize workshops, give talks and lectures, organizefarm tours, participate in farmers markets, collaborate withlocal Community Supported Agriculture (CSA) groups,and word of mouth)

47

Fig. 2. Critical resources needed for a shiitake mushroom production business asidentied by participants in a nationwide survey of U.S. shiitake mushroomproducers (N = 36). Values represent proportion of respondents that rankedthe critical resources 1 or 2 on a scale of 1 to 5 (1 being the most important and 5 the least important).



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business for longer than 2 years indi-cated that they are not yet protable.The lack of availability of funds andother resources may deter some peo-ple from starting a shiitake mushroombusiness.

Some people are prevented fromstarting a shiitake mushroom businessbecause of lack of information aboutfunding sources, production, andmarketing. Most information abouthow to grow shiitake mushrooms isobtained by our respondents fromsuppliers (56%) and other growers(53%). Workshops (33%), university researchers (31%), the internet (31%),books (25%), grower associations(22%), magazines (19%), and cooper-ative extension services (17%) areother sources of information men-tioned by respondents.

The fear of competition fromsawdust-grown shiitake mushroomsand foreign producers were mentionedas other factors that may discouragesome individuals from starting a shi-itake mushroom business.

Information about the market SUPPLIERS . There are a limited

number of suppliers of spawn forthe shiitake mushroom industry. Fieldand Forest Company was mentionedas the primary spawn supplier by mostrespondents (42%), followed by Northwest Mycological in Oregon,

Fungi Perfecti in Washington State,North Carolina A&T, and Mush-room People in Tennessee. The qual-ity of spawn available through supply channels is considered to be good by 64% of respondents, readily availableby 53%, and stable by 44%. Unique tothe niche markets is the lack of formalcontracts between producers andsup-pliers. Less than 8% of respondentshave formal contracts with suppliersof spawn, growing medium, tools, orpackaging.

M ARKE T OUTL ETS AND PRIC ESFOR FRESH SHIITAKE MUSHROOMS .

The majority of respondents (81%)sell their shiitake mushrooms locally (within 75 miles radius), 39% sellregionally (between 75 and 200 milesradius), 14% sell nationally, and 3%internationally.

Gourmet restaurants (75%),farmers markets (69%), and on-farmoutlets (61%) are the main marketing venues for the respondents. Less-usedmarket outlets include health foodstores (39%), upscale stores (25%),

wholesalers (25%), and distributors(25%). In spite of the overwhelmingpopularity of the internet as a salestool, only 14% of respondents haveinternet sales (Fig. 3).

For our survey sample, prices varied considerably: fresh shiitakemushrooms brought $5 to $7 perpound wholesale for log-grown shi-itake mushrooms. Customers at

farmers markets were paying $6 to$16 per pound of fresh, log-grownshiitake mushrooms, and chefs werepaying $5.50 to $16 per pound toinclude log-grown shiitake mush-rooms on their menus. Retail storespaid $5.50 to $11 per pound of freshshiitake mushrooms. Some respond-ents sold shiitake mushrooms on-farmfor $5 to $16 per pound (Fig. 4).

Fig. 3. Outlets for fresh shiitake mushroom sales used by participants in anationwide survey of U.S. shiitake mushroom producers and the proportionof respondents that sell in each outlet (N = 36). Percentages do not add to

100 because respondents had the option to select more than one choice.

Fig. 4. Maximum, minimum, and average prices paid by different buyers for freshlog-grown shiitake mushrooms as identied by participants in a nationwidesurvey of U.S. shiitake mushroom producers (N = 36); $1.00/lb = $2.2046/kg.




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At the farm gate, farmers market,restaurant, distributor, wholesale,and upscale store levels, the averageprice received for log-grown shiitakemushrooms was slightly higher thanthe one received for sawdust-grownshiitake mushrooms. Prices differedthe most at the wholesale level($4.40/lb forsawdustcompared witha $6.50/lb average price for log-grown shiitake mushrooms). For thisparticular sample, sawdust-grown shi-itake mushrooms received higher pri-ces when sold online or in health foodstores compared with log-grown shi-itake mushrooms (Fig. 5).

According to survey respond-ents, the price for fresh shiitake mush-rooms remained stable or increasedup to 25% over the past 5 years. Thesame trend is expected for the next 5 years.

Mushrooms are perishable. Tosuccessfully market them, producersneed to ensure that quality remainshigh through the supply channel.Respondents indicated that careshould be provided to insure quality before delivery (refrigerate, deliverfresh, grade carefully, and use cus-tomized boxes). In addition, personal

delivery or assurance that the delivery chain will be able to maintain fresh-ness and high quality standards arenecessary. Continuous communica-tion and education are required alongthe process to ensure quality delivery. A large majority of respondents (81%)deliver direct to market, 22% useshipping companies, 14%use refriger-ated freight, and for 14%, the buyer isresponsible for pick up.

TRENDS IN DEMAND . Based onthe survey results, some respondents(39%) noted an increase in demandduring the past 5 years, and 11%stated that demand for fresh log-grown shiitake mushrooms remainedstable during the past 5 years.

Roughly one-third of therespondents felt that current demandfor fresh log-grown shiitake mush-rooms is steady (36%), 19% think thatdemand is strong, and 6% thatdemand is weak. Aside from I dontknow responses, 29% believe thatcurrent demand is in excess of supply,14% indicate that it is equal to supply,and 14% that it is below supply. Forty-seven percent of respondents statedthat demand for fresh log-grown shi-itake mushrooms will increase over

the next 5 years and 11% indicatedthat demand will remain stable.Importantly, no respondent believedthat demand will decrease over thenext 5 years. Fifty-six percent of re-spondents were able to maintain asteady supply of shiitake mushroomsfrom their own production (47%) orby brokeringforother growers (17%).

The trend for value-added prod-ucts is similar to the trend for freshshiitake mushrooms. Thirty-one per-cent of respondents think thatdemand increased during the last 5 years, 11% that demand remainedstable, and 6% that demand de-creased. Now, demand for value-added shiitake mushroom productsis considered stable by 39% of re-spondents, weak by 11%, and strongby 8% of respondents. Fifty-ve per-cent of respondents do not know what will happen with demand for value-added shiitake mushroom prod-ucts over the next 5 years, but 42%believe that demand will increase.

SU B S TI T U T ES F O R S H I I TA K EMUSHROOMS . In general, the common white button mushroom and othermushrooms such as portabella can besubstituted for shiitake mushrooms ata lower price and higher availability.Oyster mushrooms were mentionedas a same price, quality, and availabil-ity substitute, and chanterelle mush-rooms, maitake mushrooms, morels

(Morchella spp.), porcini mushrooms(Boletus edulis ), or trufes ( Tuber spp.) are potential higher-priced sub-stitutes that are less available thanshiitake mushrooms.

COMPETITORS AND COMPETITIVE ADVANTAGES . Respondents consid-ered the shiitake mushroom industry to be moderately competitive (28%)or noncompetitive (22%). Over thepast 5 years, the number of shiitakemushroom farms remained stableaccording to 30% of respondents,increased for 17%, and decreasedfor 17%. Twenty-two percent of re-

spondents are the only producer of shiitake mushrooms in their area, 36%share the area with one to three otherfarms, and 23% have more than fourpotential competitors in their area.Over the next 5 years, the numberof shiitake mushroom farms is ex-pected to remain stable according to28% of respondents, increase (28%),or decrease (6%).

Quality (75%), customer service(47%), and consistent supply (33%)

Fig. 5. Average prices paid by different buyers for log-grown shiitake mushroomscompared with average prices for sawdust-grown shiitake mushrooms as reportedby participants in a nationwide survey of U.S. shiitake mushroom producers(N = 36); $1.00/lb = $2.2046/kg.



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are the most important competitiveadvantages mentioned by respond-ents. Market knowledge (25%),resources (19%), and skills (17%) arenext followed by quantity (11%) andprice (6%). Some respondents men-tioned locally grown and organic ascompetitive advantages.

DiscussionAnalysis of the forces that drive competition in the shiitake mushroom market

The survey was designed to provide information about the forces thatdrive competition in the shiitakemushroom market. The PFFM servedas a framework for examining the

competitive environment. The resultsof the survey will be discussed foreachof the Porters ve forces plus theimpacts of governmental policy. A descriptive representation of theforces and their inuence on theshiitake mushroom market has beendeveloped (Fig. 6).

B ARRIERS TO ENTRY . Barriers toentry inhibit new rms from enteringthe market, maintaining a higher levelof prot for those already in theindustry. High capital requirements,brand identity and advertising expen-ditures, access to distribution chan-nels, and economies of scale are someof the most common characteristicsthat can create a threat for new

companies trying to enter the market(Porter, 1980).

The start-up and growing costsfor a 4-year production cycle, includ-ing the cost of logs, was estimated in apublication of the University of Ken-tucky Extension (Szymanski et al.,2003) at about $3000. After estab-lishment, the biggest problem is theavailability of affordable and depend-able labor.

Strong relationships and brandidentity can create loyalty to theproducts of incumbent rms, whereastime and money are required for anew rm to create its own relation-ships and a competing brand. Re-spondents that sell value-addedproducts were more likely to create abrand than those who sell fresh shi-itake mushrooms to restaurants orfarmers markets. Incumbent shiitakemushroom producers secure theirposition in the market through mar-keting communication (i.e., advertis-ing and publicity). Consumers areoften unfamiliar with niche agrofor-estry products (i.e., log-grown shi-itake mushrooms), therefore, themore information provided about theproducts benets, the more likely people are to try the product. Com-municating health benets, fresh-ness, local, or small-scaleproduction method can be animportant promotion strategy

(Darby, 2006).In terms of economies of scale,large rms that grow on sawdust andproducemushrooms with higher pro-duction efciency than small rms(i.e., synthetic logs may producethree to four times as many mush-rooms as natural logs in one-tenth of the time; Royse, 2001) can createbarriers to entry. Many large whitebutton mushroom rms diversiedtheir production to include differentkinds of specialty mushrooms, includ-ing shiitake mushrooms. These rmsalready have production facilities and

distributionchannels in place,makingthe production and marketing proc-ess much easier, creating an advantageover small rms (Chen, n.d.).

Another advantage for existingrms is the knowledge about produc-tion and marketing acquired throughpractical experience (i.e., the learningcurve) because mushroom cultivationdemands a level of care and attentionto detail higher than ordinary garden-ing and agriculture (Chen, n.d.).

Fig. 6. Representation of the inuence of the Porters Five Forces (Porter, 1980)on the shiitake mushroom market as resulted from a nationwide survey of the U.S. shiitake mushroom producers (N = 36).




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B A R G A I N I N G P O W E R O FSUPPLIERS . Supplier bargaining poweris high when the market is dominatedby a few large suppliers rather thanmany fragmented sources of supply, when there are no substitutes for theparticular input, and when switchingcosts from one supplier to another arehigh (Porter, 1980).

The limited number of majorspawn suppliers in the market couldbe a sign of strongsupplier bargainingpower, but the fact that suppliersand producers maintain good rela-tionships, coupled with the existenceof alternate suppliers, reduces sup-plier bargaining power. To furtherdecrease the bargaining power of spawn producers, shiitake mushroomgrowers could produce their ownspawn, increase their knowledgeabout different suppliers offers, andnd alternate suppliers.

B ARGAINING POWER OF BUYERS .The bargaining power of buyers ishigh when they buy large volumes, when there is a concentration of buyers, when the product is undiffer-entiated and can be replaced by sub-stitutes, when customers are pricesensitive, and when customers couldproduce the product themselves(Porter, 1980).

The market for log-grown shi-itake mushrooms is still developing.Shiitake mushrooms selling points

that differentiate them from substi-tutes include their aromatic avor,they are rich in proteins, vitaminsand minerals, and low in calories andfat, and they have other health bene-ts (Mattila et al., 2000). Marketprices for fresh shiitake mushrooms vary by season and market outlet. According to National AgriculturalStatistics Service (USDA, 2006), theprice received by shiitake mushroom

growers in 2006 (average price pro-ducers receive at point of rst sale) was $3.24/lb, similar to 2005($3.23/lb). The USDA AgriculturalMarketing Service provides daily reports about wholesale prices at dif-ferent terminal markets. Accordingto the information provided (USDA,2007b), average wholesale prices atthe main terminal markets varied in2006 between $4.00/lb and $5.50/lb (Table 3). For the survey respond-ents, wholesale prices varied between$5/lb and $7/lb, and the highestprices were obtained when selling torestaurants, online, or at the farmgate.

Some publications indicate thatprices should be higher for log-grownshiitake mushrooms because shiitakemushrooms grown on logs are meat-ier, tastier, have a longer shelf life, andhave better medicinal and nutritionalproperties (Bierly, 2001; Myco-source, n.d.). Anecdotal informationfrom a U.S. shiitake mushroomgrower indicates that Japanese con-sumers pay up to 10 times morefor log-grown shiitake mushroomscompared withsawdust-grown mush-rooms (Lost Creek Shiitake Mush-room Farm, 2008). U.S. consumersat the retail level apparently do notknow or appreciate the difference andpay the same price for both categories(Fig. 4).

According to survey results, thebargaining power of buyers is notexcessive. To further reduce theforces impact, producers can createrelationships with buyers and sustainthese relationships by providing goodquality mushrooms, maintainingquality through the supply channel,being dependable, communicating,and educating the buyers. To main-tain a steady supply and to help

market the mushrooms, producerscan create partnerships with otherproducers (i.e., broker for othergrowers or create marketing cooper-atives). The limitation of the study inanalyzing this force is that surveys were not directed toward large-scalegrocers (e.g., Whole Foods Market);therefore, our conclusions are re-stricted mainly to the opinion of producers.

T H R E A T O F S U B S T I T U T EPRODUCTS . A threat of substitutesexists if there are alternative products with lower prices, better quality,nutritional benets, and availability that can be used for the same purpo-ses (Porter, 1980).

There are substitutes for shiitakemushrooms, but this type of mush-room stands out for its avor, nutri-tional properties, and availability,and is experiencing the most rapidincrease in demand among specialty mushrooms. Shiitake mushrooms are well known for high nutritional valuebecause of their high ber contentand for containing medically func-tional antitumor and immunomodu-latingpolysaccharides (Beelman et al.,2003). Further capitalizing on theadditional properties of log-grownshiitake mushrooms (meatier, richeravor, better shelf life, and highernutritional and medicinal value) would encourage consumers to seek

out log-grown shiitake mushrooms.R IVALRY AMONG EXISTING FIRMS .This force describes the intensity of competition between existing busi-nesses in the market. Intense rivalry exists if there are many participantsabout the same size and capacity inthe market or if there are low marketgrowth rates (Porter, 1980).

The shiitake mushroom industry is not considered competitive by the

Table 3. Wholesale prices for shiitake mushrooms at different terminal markets during 2006 (U.S. Department of Agriculture, 2007b).

Terminal market Carton

size (lb) zPrice per carton ($) Avg price

($/lb) y January 2006 April 2006 July 2006 September 2006

California 5 2727.50 2727.50 2727.50 26.5027.50 5.5Indiana 5 21 21 21 21 4.2Pennsylvania 5 21 21 21 21 4.2 Wisconsin 5 21 21 21 21 4.2Illinois 5 1920 1920 1920 2024.85 4.0Pennsylvania 5 26.7527.75 26.7527.75 26.7527.75 2024.50 5.2Pennsylvania 3 12.5013 12.5013 12.5013 12.5013 4.3z1 lb = 0.4536 kg. y $1.00/lb = $2.2046/kg.



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respondents. However, the opinionabout competitiveness is inuencedbythe size ofthe rm and the numberof rms in a given area. Competitionfor log-grown shiitake mushroomsarises, especially in wholesale markets,from shiitake mushrooms producedon sawdust (Royse, 2001) or fromimports. According to the Agricul-tural Marketing Research Center(Burden, 2006), Chinese mushroomproduction and export to the UnitedStates has increased yearly over thelast twodecades andcan provide com-petition to small-scale U.S. growers.To compete, a small-scale start-upproducer may wish to develop a nichemarket for high-quality fresh prod-ucts or produce a value-added prod-uct. High quality standards, excellentservice, and consistent supply willhelp differentiate competitors andcreate strong relationships, especially with local customers.

POLICIES THAT INFLUENCE THEINDUSTRY . Grants and general sup-port offered for small farms and directmarketing were mentioned amongthe policies that help establish a shi-itake mushroom business. Informa-tion and support offered by university specialists and extension agents andprograms like AgriMissouri (a stategovernment program designed topromote Missouri products) werealso helpful.

Some respondents mentioned arecent controversy regarding the useof cheese wax and organic certication

that is affecting their ability to re-main organic. However, a petitionto add cheese wax to the NationalList of Allowed Substances was re-ceived and is being reviewed by theNational Organic Program of theUSDA.

ConclusionShiitake mushrooms are grown

more as a side business than a full-time business, especially by growers who focus exclusively on outdooroperations. Indoor production onsawdust generates higher incomethan outdoor production on logs,but production on logs is more suit-able for small-scale operations in anagroforestry setting.

Shiitake mushroom productionon logs has many positive aspects.Shiitake mushrooms can provideadditional income when using avail-able resources with low capital invest-ment, while increasing the value of the managed woodlot. Log-grownshiitake mushrooms are popular fortheir taste, nutritional and medicinalproperties, and higher quality thansawdust-grown shiitake mushrooms.Trends in demand for shiitake mush-rooms at the retail, foodservice chan-nel, and individual consumptionlevels are increasing and prices arehigh. Local sales to restaurants, farm-ers markets, and on-farm outlets are

promising (Table 4).Some notable barriers to successin the shiitake mushroom business

include the following: strenuous work requirements and a need forserious commitment to produce andmarket shiitake mushrooms; thelearning curve effect that requiresexperience to increase productionand marketing efciency; seasonalproduction dependent on weather;and the need for strong and directrelationships in the market. Com-pared with vegetable growing, thereis a substantial time lag betweeninvestment and a return on invest-ment. There is competition for anew business entering the marketfrom existing log-based producersthat have already created relation-ships with main buyers in the area,from shiitake mushrooms producedon sawdust, and from imports(Table 4).

Respondents increased theirreturn from log-grown shiitakemushrooms by creating indoor facili-ties to extend production times, by producing value-added products (touse the surplus of fresh shiitake mush-rooms and to differentiate from com-petitors), and by selling mushroomsfor other growers to ensure continu-ity in supply. Additional success canbe obtained by capitalizing on thelog-grown properties of shiitakemushrooms in the marketing effort(e.g., meatier, richer avor, bettershelf life, and higher nutritional and

medicinal value), creating strong rela-tionships with buyers, and acquiringand continuously improving produc-tion and marketing skills. Brandingand marketing communication alsohelped strengthen relationships inthe market.

The survey provided valuableinformation about the market. Thisinformation will be disseminated togrowers, grower associations, andmushroom publications. To help themarket grow, grower association,universities, and state and federalagencies must continue production

and market research, organize train-ings, work with produce buyers toensure that only quality products areoffered for sale, and continue to edu-cate consumers about the nutritionaland health benets of shiitakemushrooms.

Literature cited Augostini, N. 2002. Specialty mushroomssurvey. 8 Feb. 2008. < http://www.

Table 4. Strengths and weaknesses of log-grownshiitake mushroom productionsummarized from answers to a nationwide survey of U.S. shiitake mushroomproducers.

Strengths of log-grownshiitake mushroom production

Weaknesses of log-grownshiitake mushroom production

Popularity for taste, and nutritionaland medicinal properties

Hard work and serious commitment

Sustainability 1-year time lag to obtain a returnon investment

Low capital investment Seasonal production Use of available resource Dependence on weather Quality product Competition from sawdust-grown shiitake

mushrooms and imports Provides additional income Issues regarding organic certication Trend in demand is upward Need for strong and direct relationships

in the market Prices are high The learning curve effect Most sales are local Restaurants, farmers markets, and

on-farm outlets are the main venuesto market shiitake mushrooms




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Shiitake Competitive Market Analysis US