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New markets for producers: selling to retail stores (Research Brief #38)

Posted February 1999

You can find shelves filled with organic produce at natural foods stores and increasingly at supermarkets as well. Who supplies this organic produce? Does it all come from California or is some of it from regional and local farmers? What are the possibilities for farmers who wish to sell to retail markets?

With support from Cooperative Development Services (CDS) and the Center for Integrated Agricultural Systems (CIAS), Laurie Greenberg researched the answers to these questions, along with examining the requirements faced by farmers wishing to sell to retail stores. She found that while many produce managers prefer local organic produce, factors including quality and price can limit their willingness to carry it. Also, growers who collaborate with each other and pay attention to details may fare best in this market.

“Buyers are not a monolith,” Greenberg explains. Produce buyers are a diverse lot, with different needs. That is why a personal relationship between producers and buyers is so important: getting to know a buyer and his or her requirements is critical to successfully selling locally raised organic produce to retail stores.

The study was initiated by a group of certified organic fruit and vegetable growers in southern Wisconsin. The growers were interested in lessening the amount of time they spend on marketing and transportation by working with other growers. Greenberg worked with these growers, CIAS, and the CDS’s Organic Alliance to complete her report Selling Certified Organic Produce to Retail Produce Markets in the Upper Midwest.

In Madison and the Twin Cities, Greenberg interviewed produce buyers from several types of stores: “upscale,” mainstream, and discount supermarkets, natural foods stores and cooperatives, and wholesalers and distributors.

Buyers’ point of view

According to produce buyers, customers like locally raised produce because of its freshness and the opportunity it offers to support local farmers. Buyers also appreciate the fact that local growers can get to market faster than those shipping long distances, resulting in fresher products with longer shelf lives.

The retail produce buyers interviewed raised several issues that are key to their work with growers. Quality was the most important issue cited by all buyers. Consistent quality means a predictable product for customers.

Most buyers of locally raised organic produce felt that it can be of higher quality than conventional or shipped organic produce. “When it comes to quality, many buyers want it all-produce that is shaped and sized consistently and of uniform ripeness and flavor,” Greenberg says. Local growers need to be aware that produce buyers say they can get the quality they want from California. Buyers also felt that products needing specialized post-harvest processing, like fruits that need rapid chilling, are better handled by large-scale California growers with the required facilities.

Price is another key issue identified by the buyers. In season, locally raised organic produce can be less expensive than conventional shipped produce, but it is often more expensive. Even with a higher price, some stores and buyers-such as natural food stores-will purchase it because of its freshness and the fact that customers willingly buy it. Observes Greenberg, “Price is a complex issue. A particular item’s wholesale price will fluctuate based on source, volume, varieties, time of year, and retail price. Buyers tend to review availability or price sheets from growers or wholesalers each week to compare offerings from different sources and make their selections.”

Buyers may use a variety of produce contracts or none at all. A contract with a grower may apply to a specific harvest or crop; it may be set ahead of a growing season for an agreed-upon price; it may be exclusive.

How much of a problem is the seasonal availability of produce? Not much, according to Greenberg. “Many buyers buy locally during the growing season, and supplement with produce from California or elsewhere,” she says. During the off season, buyers typically source produce from California or from outside the U.S.

Buyers rely on delivery at the promised time so they know how much may need to be supplemented to meet demand and so they can schedule workers to handle delivery and display.

Buyers highlighted honesty and integrity of the grower as key to building a relationship. If a grower has a problem meeting a commitment, the buyers want to be notified rather than discovering it on their own. Maintaining good communication results in fewer losses of money and trust for produce buyers. Buyers want to cultivate their relationship with producers. Some visit the farms they buy from to understand more about the operation and strengthen their relationship with growers.

Marketing challenges for growers

Buyers predicted that one of the big challenges for growers who decide to market cooperatively to retail stores is that their products must be consistent. Most buyers want each box and shipment to contain items of the same size and quality. If a customer likes a product, he or she will want to be able to return to the store and buy it again.

Some buyers told Greenberg that growers need to do a better job of grouping produce by size according to USDA standards. Greenberg says, “Standardized sizing is important to buyers, especially from upscale stores, so that their staff can create displays that stay together and are attractive.”

Product standardization goes beyond providing produce of a uniform shape and size. It also includes packaging and labeling. So individual growers and grower cooperatives need to address how they will package their produce to meet individual buyers’ requirements. Some buyers refuse to accept recycled boxes and will not save boxes for growers. Some buyers require that the boxes used for produce delivery be labeled with the farm name, the date of harvest, and the harvester’s name. Growers need to work out these issues with the buyer ahead of time.

Stickers that identify variety and price of the item are often a requirement for buyers from larger retail operations. Cashiers need to be able to distinguish between various types of produce. Some buyers require a price look up (PLU) sticker, which has a numbered code distinguishing kind of product and price, to be provided by the grower. In addition to PLU stickers, farmers can identify their produce in other ways. Producers of certified organic foods can add an “organic” sticker, or have it printed on the product’s label. And some growers add a “Wisconsin” or “home grown” label to their produce as well. This additional information can be key to making a sale.

Most buyers prefer the one-stop shopping convenience offered by cooperatives, allowing them access to a variety of produce with one phone call. A few buyers, especially from natural foods stores, felt that forming a cooperative could make them lose direct contact with growers.

Breaking into the retail market

“There are lots of opportunities for growers to market their produce to local retail stores,” Greenberg says. Growers can explore the marketing arrangements that work best for them. While working with an existing cooperative may work for some growers, others may form a new cooperative or work directly with the buyer. Growers working together will have to put effort into coordinating production to assure they will have the necessary volume and standardized product. They also should appoint a single representative to deal with buyers. This person needs to be knowledgeable about the farms and products, be able to negotiate with buyers, and be able to represent the variety of growers in the cooperative.

Greenberg adds, “While a cooperative exists to serve its members, it will only be a success if it can provide buyers with what they need.” She says that growers should be aware that the market for high-quality organic produce is very competitive. Small growers need to provide buyers with the same level of service larger growers do.

Recommendations for approaching retail buyers

  • Prepare an availability sheet listing products and prices. Make it neat and well-organized, and make sure that there will be enough produce available to back up what is listed.
  • Become knowledgeable about the market by talking to farmers selling to retail stores. Try to find out individual buyers’ expectations of volumes and prices to see if they match your situation before approaching the buyer.
  • Send the availability sheet to buyers whose expectations best match what you have to offer. Buyers often prefer to see this sheet before they talk to a producer. You can fax it to the buyer’s office.
  • Project a professional image through a growers’ manager or representative. This person should be well-informed about production, supply, produce condition, and the farms involved, and should be confident in the cooperatives’ ability to meet the buyers’ needs.
  • Work out the the details of the sale with the buyer, like volume, size, price, delivery dates, and labeling requirements. Some buyers have a set of written requirements for growers.
  • Keep in touch with the buyer. Growers need to keep the buyer informed about potential problems so that buyers can look elsewhere for a product if there is a supply problem.

Cooperative Development Services

CDS is a non-profit organization founded in 1986 which provides professional business consulting for cooperatives and communities throughout the Upper Midwest. Much of CDS’s research and consulting supports value-added agriculture and sustainable food systems. CDS can be reached at 30 West Mifflin St., Suite 401, Madison, WI 53703, (608) 258-4396.

Published as Research Brief #38
February, 1999