Wholesale offers small farms additional revenue stream

by Deborah Jeanne Sergeant

Could wholesale help your fruit and vegetable farm sell more? Michigan State University Extension offered “Wholesale for Beginning Farmers” as a webinar recently. Jae Gerhart, a Michigan State Extension agent specializing in community food systems, presented.

She began showing a photo of a warehouse stacked high with produce in boxes on pallets. “It can be a little overwhelming seeing all this if you’re not part of this world,” Gerhart said. “Wholesale doesn’t have to be overwhelming and there are ways you can integrate wholesale in ways that aren’t overwhelming or scary.”

When considering how many different middlemen work between farmer and consumer, many farmers feel baffled as to why so many people are involved with handling food before it reaches consumers’ kitchens.

Gerhart explained that because produce is pershiable and consumers maintain high expectations for their food, it’s necessary for middlemen to keep food organized, sorted and moving where it needs to go.

She added that it’s important to understand buyers. They can include smaller, farm-to-table restaurants, childcare centers, co-op/specialty grocers, value-based distributors and value-based processors.

Gerhart said farm-to-table restaurants often have flexible menus because their patrons expect seasonal items that are locally available. That’s a big part of the appeal of these restaurants to consumers. They value flavor, quality and local origins – not the same food they could buy at many other restaurants. Some of these restaurants even list the farm and its back story on the menu so diners feel closer to the origins of their food.

Farm-to-table restaurants can accept back-door deliveries from small trucks and pay with a check upon delivery. Often, it’s the owner/chef buying goods.

If you invoice, you can be out the money for 30 days, Gerhart noted. Cashing a check is the easiest but may not be an available option for some.

“A lot of small farms may not have credit card payment options,” Gerhart said, “but as a general Extension educator, I encourage small farms to figure out credit card payments. It’s an easy thing to do.”

While selling to these small eateries may provide your farm with another revenue stream, keep in mind they must purchase at a price lower than at the farmers market so they can meet their budgets.

Other restaurants work with management companies. Growers don’t deal directly with the chef. These eateries have a more stable menu because the management companies work through distributors who help them locate goods as needed by restaurants. While this can help farmers sell more, it may take a while to get paid.

“I’ve heard of a lot of situations where farmers go to these restaurants, the chef is excited about it and the invoice gets lost in the system,” Gerhart said. “It can be a lot more complicated working with them. Because they’re larger, they’re more on the hook for inspections. A lot of times, they’re told by health inspectors they cannot buy directly from farms, but that’s not true.”

Childcare centers also need plenty of produce. Gerhart said they have small to medium volumes, tend to shop at mainstream retail grocers, are highly reliable and also highly flexible.

“I think there’s a lot of opportunity here to sell to childcare centers,” Gerhart said. “There’s no reason they couldn’t get a sales sheet from you or an email as to the food they could buy from you.”

She added that their end users are high risk, however. “You don’t want to get a child sick; that’s the last thing you want to happen,” Gerhart said.

“When we shop in grocery stores, we’re extremely picky and grocery stores go to great lengths to make every unit look perfect,” Gerhart said. “The quality to sell to these customers must be top notch. That’s what you want to stress when talking with these markets.”

Specialty grocery stores also demand top quality. They tend to add on a 35 to 50 percent margin and want organic, uniform produce. Many specialty grocers sell only organic, so growing USDA-labeled organic adds more value to the produce than only using organic growing methods. Their demand is less than a mainstream grocery store, however.

“They are happy to have you submit a food safety plan to show how your farm is food safe,” Gerhart said. “They want that in a county-inspected or state-inspected facility rather than a food safety audit. They’re cooperatively run so there’s a pull for local produce and local products.”

Distributors are a little bigger. “This may not be your first market you look to,” Gerhart said. “Distributors want volume, uniformity, specific packaging and won’t be looking for high prices. They want it on the national and international scale. But there’s room for older and established growers.”

In a similar vein, values-based processors want uniformity. There aren’t as many values-based processors available, but they do want organic, local produce at a lower price point.

“They work directly with farms,” Gerhart said. “They talk about quality, any organic or extra certifications they might have. Processing in general is a missing link in our agricultural economy more and more. Consumers want processed foods … Having scale-appropriate processing is very important. They often need uniformity because of their machines.”

Gerhart also touched on large chain grocers. They’re a tougher market to crack, as they often have their own distribution and their own farms. As a highly consolidated industry, “they buy up other grocery stores,” she said. In addition to buying at low prices from growers, they often charge a shelving fee.

Institutions with food service, such as hospitals, schools, prisons and elder care facilities, have a growing demand for locally sourced goods. Gerhart said their large volume needs, set menus, central procurement departments and high demand for processed items could make them good clients for the right farms. They also use contracts for procurement, which can offer more security to growers.

Gerhart wants more growers to prepare for opportunities to sell by developing a pitch. In 30 seconds, farmers should be able to say who they are, what they do, why they do what they do, what sets them apart and how they can help the potential client solve a problem.

“Keep in mind you must differentiate who you are,” she said. “Have a really good pitch. You only have a couple seconds to sell yourself to that person before they tune out.” Staying concise helps ensure farmers get their points across and makes sure they’re memorable.

“It doesn’t have to go into any real details,” Gerhart said. “I challenge all of you to do this at some time.”

She wants growers to practice on friends and family to build confidence and iron out the pitch. “We may say ‘um’ and ‘like,’ so getting that fine-tuned is really important,” Gerhart said.

Cold calling is likely one of the hardest parts of selling for producers, but it can result in lasting clients. Gerhart said it’s vital to ask to speak with the right person. At a restaurant, that would likely be the chef.

“These folks are professionals and have a higher degree of education, so it’s a sign of respect to say ‘Chef So-and-So,’” Gerhart said.

At any business, if you don’t know who to ask for, it’s okay to say, “‘I’m selling vegetables; I’d like to speak with someone about purchasing them,’” Gerhart added. Ask if they have time to talk to determine their interest in working with a small farm supplier.

Some potential clients may say they’ve had a bad experience buying from a local farm. But there’s no reason the conversation has to end there.

“Say you understand,” Gerhart said. “Tell them why you make sure your customers don’t have a bad experience. Tell a little about your farm.”

After you deliver your pitch, provide a call-to-action. “Offer to send them a sell sheet or schedule a time to talk more in depth,” Gerhart said.

Gerhart said it’s vital to share when each products’ seasons start and how many cases will be harvested weekly. “We are all intimately familiar with when the season starts and when things are ready but not everyone is, especially wholesale buyers that are purchasing from a variety of avenues,” she said. Then, find out how much the client needs weekly.

Many growers stress about arriving at the right price; however, “you can charge the prices you need to stay in business to an extent if you have quality and customer service,” Gerhart said.

Communicating verbally with potential clients may dissuade growers from selling to wholesale markets. Email may seem an easier way, but Gerhart said that direct relationships are better, since emails are often ignored and can seem impersonal.

To keep buyers buying, growers need to implement post-harvest quality control. This starts with cooling produce as soon as possible after picking.

“Don’t put it in the shade, but it in your cooler,” Gerhart said. In two days, your buyer will know if it hasn’t been kept properly.

Growers should invest in the correct size and configuration of packaging to help preserve produce and boost its appeal to buyers. Manufacturers often sell packaging in huge bundles. Small farmers can go in together to buy these bulk packages at a discount.

“Some box suppliers will only ship a semi-load,” Gerhart said. “Often, farms are driving long distances to go get just a handful of boxes. This is why collaboration is very important.”

2019-04-08T13:15:28-05:00April 8, 2019|Grower West|0 Comments

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