Marketing to Independent Retailers
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Written by Debbie Roos, Agricultural Extension Agent.
Contributors: Bill Dow, Farmer, Ayrshire Farm; Stefan Hartmann,
farmer, Black River Organic Farm; Alex Hitt, Farmer, Peregrine Farm;
James Watts, Store Manager, Weaver Street Market, Carrboro
Crop and Variety Selection
- Don’t try and offer something that the buyer already gets locally, unless you are offering it at a time when local supply is low (see below). Carve out a niche for yourself by being the first to offer a new product. Some farmers find it helpful to have a lead product that buyers will know you by – later on you can add products.
- New farmers should look at where and when they can break into the market. Try and provide crops when no one else has them, like at the very beginning or very end of the season, or during the winter. These are times when farmers’ markets are closed and most established farmers take a well-needed break. Instead of trying to compete during the busy spring and summer, look at what you are able to produce during the much less crowded off-season. There are huge opportunities for seasonal cold weather product.
Harvest and Post-Harvest Handling
- The easiest way to remove the field heat from produce is to not have it there in the first place! Pick early in the morning, and take advantage of whatever shade you have. Store product in the shade while you are working in the field. Store in the cooler if it won’t be delivered until the next day.
- Many farmers grow an excellent product but they kill it before they deliver it through improper post-harvest handling and storage. Quality starts in the field and can only decrease after harvest. One of the most common mistakes is over-handling. As one experienced farmer said, “they need to quit messing with the product!” Streamline procedures to decrease handling time. Bunch and pack directly in the field.
- Beginner farmers or any farmer growing a new crop often don’t have a good understanding of “units”. If the buyer asks for 20 bunches of basil, you need to know what a bunch is, and how they want it bunched. Again, communication is extremely important. Work this out in advance with the buyer.
- Communicate with the buyer about packaging requirements and expectations. Ask for their preferences. Make it as convenient as you can for the buyer. Label bags or boxes of produce with the name of the crop and the date of delivery.
- Be familiar with USDA grades for each commodity (e.g., extra fancy, No. 1, etc.). Most consumers want big fruits and small vegetables. Expect the retailer to specify size and grade. Most are looking for top-grade produce. A rule of thumb when assessing the quality of your product is “would I buy this?” Give retailers the best product you have.
- Pack to standard sizes (e.g., 24 heads of lettuce per box). If you don’t know what the standard is, ask. Bring produce in clearly labeled containers that stack and store well (no washtubs).
- Understand the forces at play in the market in terms of labeling. If a buyer has to choose between two similar products and one is labeled and one isn’t, he is going to pick the one with the label. Labeling is one of the ways you can differentiate yourself in the market. You can use farm labels and/or UPC/PLU stickers. Contact the Produce Marketing Association (302-738-7100) for information.
- Small growers generally can’t compete with larger suppliers on price or volume, so you have to compete on quality and service. Price, quality, and service are all important, but you can’t have all three – you can’t provide the best price, the best quality, and the best service. If you have the lowest price, then you are most likely sacrificing quality and service. Provide excellent quality and service at a fair price, and the buyer should have no reason to look for another supplier.
- Like it or not, California is the standard of the industry. If you want to compete with California, your product has to look as good or better since it is so easy for buyers to order from the West coast.
- Retailers are looking for local growers that can provide the quality and value that will excite their customers. Buying from local growers has several advantages for retailers. The product is fresher because it doesn’t go from field to packer to warehouse to distributor to warehouse to store. The producer gets a larger percentage of the final retail price by working directly with retailers. The retailer gets an attractive price to offer consumers, primarily by eliminating distribution expenses such as freight.
- Only deliver products that are market-ready. Leave poor quality product at home. Even if you do manage to make the sale, it may be the last time that retailer buys from you. Customers won’t buy off-grade product.
- Communication is extremely important in establishing and maintaining a good relationship with the buyer. Start off on the right foot and stay on the right foot. Maintain communication during the off-season, letting buyers know what you are planting, and when and how much you expect to have. This can be done by phone. As harvest time approaches, follow-up with more phone calls to remind them of what you have, how much you have, and when it’s coming in.
- If there’s a problem (deer, weather, disease, etc.) and it becomes evident you won’t have as much product as you predicted, give the buyer as much notice as possible. Buyers understand that risks are inherent in crop production, but it’s important to keep the line of communication open – surprises are not welcome! Buyers need a chance to line up another supplier.
- During the growing season, give as much advance notice as possible of when you will have a product and when you expect to run out of a particular item. The more notice you can give, the better, generally 7-10 days. Buyers need to know in advance when your supply will come in so they can stop ordering from their larger suppliers and let their current stock run out. Likewise, they need to know ahead of time when you expect to run out so they can line up another supplier.
- Start establishing a relationship with the produce buyer months in advance; many will not buy product at the back door. New growers can ask buyers to share their expectations for quality, size, varieties, quantities, and prices. You need to have a good idea of what your production capability is before approaching a buyer.
- Most produce buyers do their ordering early in the week on Mondays and Tuesdays. Try and give notice on Mondays of what you will have the following week. Produce buyers in stores are usually there early in the morning and not in the afternoon. Avoid the time right around store opening. For example, if the store opens at 9:00 a.m., call or visit between 6:00-8:00 a.m., or 10:00 a.m.-noon.
- Buyers expect professionalism from farmers. You must think and act like a business person. Call when you say you will, understand pricing, provide a high quality product, show up on time, and be reliable. Use a receipt book, not a scrap of paper or the corner of a box. The importance of professionalism cannot be overstated.
- Don’t promise more than you can deliver. Be conservative in estimating how much product you will have.
- Products that tell a story sell best. Work with the retailer to market your farm, your product, and your special status as a local farmer. You can’t say the words “local farmer” enough to consumers – they want to buy local! Provide materials to the buyer about your farm. This could be photos, a brochure, or just a typed sheet of background information. It doesn’t have to be fancy (but keep it professional). Retailers can use this information for newsletters, signage, promotional materials, etc. It is important for the retailer to communicate with the consumers, so anything you can provide to facilitate this process is welcomed.
- Send a personal invitation to the buyer to come visit your farm. This says you are proud of your operation.
- Do anything you can to make it easier for the retailer to sell your product successfully. Look for ways to add value to your product, especially for convenience.
- Work with retailers to plan promotions. If they are going to sell your zucchini, work with them to plan an introductory feature that tells the customer that you are the supplier. Later, when the season is in full swing, they can run a special price promotion to move the high volume of high quality product.
Price and Payment
- Local growers should get a higher price than California growers because local products have usually been harvested within 24 hours and so have a longer shelf-life, and therefore less “shrink”. Shrink is the amount that is never sold and is thrown away. For example, a box of lettuce has 24 heads. If it was shipped from California to North Carolina, it was harvested a minimum of 4-7 days before arriving at the store or restaurant. The buyer will most likely end up throwing away 6 out of those 24 heads. Buyers may pay more per head for local lettuce but end up with less shrink.
- Some farmers will have an oversupply of something and then drop the price drastically as they scramble to dump it somewhere; you are not doing yourself any favors and you are hurting other farmers. Rarely does a buyer purchase more when you drop the price. It’s better if you plan carefully to avoid oversupply.
- Use a receipt book that produces duplicate copies, and always get someone to sign it when you make a delivery.
- Understand the concepts of mark-up and margin. Mark-up is the amount the retailer adds to the wholesale price. The margin is what the retailer is left with after the customer has purchased the product and they pay the grower. Produce buyers live and die by margins!
- You need to do your homework and know what the going price is for the product. Visit farmers’ markets and produce departments and check selection and prices. Growers often approach buyers with an idea of a price in their head – for example, I want to get $1.00 for each head of lettuce. They are not thinking of what the customer will pay for it. It’s more helpful to find out what the going retail price is for the product, then work backwards, subtracting a 35-40% margin. That’s the wholesale price you should expect to get.
- Understand the price-commodity relationship. Price is highest when supply is most limited (and often quality is poorest). The mid-season, highest quality product will usually get a lower price because supply is so bountiful. Your sales strategy should include both high gross profit items in limited quantity and lower gross profit commodities in huge quantity.
- The first question many produce buyers pose to a farmer is “what do you want a customer to pay for your product”? You need to have done some research to find out two things: the prevailing price as well as the promotional price of your product (how much is it at the height of the season when there’s an oversupply and it’s on sale?).
- Retailers require an invoice at delivery. Larger receipts (a half-page or larger) are preferred because they are less likely to get lost. Excel has invoice templates that work great.
- Read produce magazines like The Packer, Produce Today, Supermarket Today, etc. to find out what’s going on around the country in the produce industry.
- Visit retail stores (Harris Teeter, Wellspring, etc.) regularly to see what people are buying.
This page last updated January 16, 2010.