Cultivating Direct and Wholesale Market Outlets

Smart business is all about diversification. As the demand for local food grows, small farmers need to consider all the available marketing options for selling farm products. Many small farmers use direct marketing as their only selling strategy, however this can be limiting. For example, the number of farmers’ market visitors can fluctuate during periods of inclement weather often leaving you with excess perishable produce. It makes smart business sense to cultivate other avenues of marketing. Why not consider wholesaling? Wholesaling can save you time and generate profit. The following tips will help you consider the various options available.

Restaurants: This may be a good market to start with to get your feet wet. Restaurants don’t typically buy the large quantities that other wholesalers need. You can generally fetch a price closer to retail from the restaurants, so price-wise it might not be as much of a shock.

1. Never approach a chef during the busy hours, like just before or during breakfast, lunch and dinner time. Instead, go in the restaurant during ‘off hours.’ It is generally a good idea to take samples of your products with you to give to the chef as a gesture of good will so he or she can see the quality of your product.
2. Some chefs like to see a list of produce you can offer them throughout the entire growing season. Before going into the restaurant, type up a list of your produce and when it will be ready for harvest. Leave this with the chef and make sure your contact information is included along with a brief description of your farm. Get them invested in your story.
3. Chefs like interesting foods, but they also need the staples like tomatoes and lettuce greens. Ask them if there is something you can grow for them, but don’t make promises you may not be able to keep.

Grocery stores: This is a market that will demand a lot of product. Before approaching a grocery store it is important to know the structure of the business. Is the store able to make independent buying decisions or are they tied to a regional office and therefore bound to one distributor? Once you find that the grocery store is willing to buy from local growers you can approach either the store manager or the produce manager.

1. Know what the wholesale produce price is when you go in. Know what you want to get for your produce and be flexible during negotiations.
2. Find out how the grocery store wants you to package your product. Do they want greens individually bunched?  How many pounds would they like their tomato cases to be?
3. Be consistent with communication and your product delivery, quality and packaging.

Schools: School districts across the state of Missouri are exploring ways to increase student consumption of produce while also supporting their local economies.

1. Telephone the school district food service director to gauge interest and request a face-to-face meeting. Have a complete product and price list that includes estimated quantities and dates of availability.
2. Children are generally more susceptible to foodborne illnesses so pay extra attention to food safety practices such as product cleanliness, appropriate packaging and chilled transportation.
3. Supplying the school salad bar is a good way to get started because it requires smaller volumes of product.

On-line buying clubs: More and more of these groups are popping up in the United States. Some of them are home delivery services and others distribute at an aggregation point. No matter where they distribute, they are all looking for good quality, locally grown produce.

1. Clean, consistent packaging is key. Build the cost of packaging into your pricing.  If you are certified organic, you need to make sure your packaging fits the protocol.
2. These groups are typically more flexible with the timing of delivery and how the produce makes it to their commissary or distribution point. Sometimes they may even pick it up.
3. You, as a grower, need to have at least a week’s worth of storage on your farm and need to follow the proper postharvest handling guidelines.

Aggregators: Produce brokers, or aggregators, purchase local product and distribute it to other venues. They sell to a variety of markets including restaurants, produce stands, hospitals, nursing homes and schools.

1. Aggregators buy from both farmers who have excess product after their direct market sales, and farmers who have agreed in advance to grow directly for the aggregator. The causal seller needs only to call the aggregator when excess product is ready to move.
2. Time your communication with the aggregator appropriately so that your product makes the supply list that goes out to their buyers.
3. United States Department of Agriculture (USDA) terminal prices are used as guidelines for pricing, which is often tiered based on volume and cost of transportation.

Some general tips:

1. Approach these wholesale markets in the winter when you are planning your crop calendar, ask them what they want, and plan to plant twice the quantity they are asking for.
2. Be consistent with product and communication.
3. Remember that most wholesalers are not cash on trade. You may have to wait for about two weeks before receiving payment.

Working with wholesalers takes a different kind of planning and preparation than direct marketing. However, these two markets have one thing in common; you need to cater to the customer.  Approach these markets in person rather than on the phone. Just like direct marketing you need to build a personal relationship with your wholesale customer. They want to sell your story along with your produce. Combining wholesaling and retailing can provide you with a more reliable and steady income.

Resources:
Post harvest handling decision tool
Containers and Packaging Fruits and Vegetables
USDA quality standards for wholesaling

(By Miranda Duschack and Katie Nixon, Small Farm Specialists with Lincoln University's Small Farm Innovative Outreach Program)