Resource Guide: Access to Markets and Marketing
The key to any successful business is to get your product into the hands of enough customers who are willing to pay a price that returns a fair profit to you, the producer. There are many different types of market outlets for selling agricultural products, and each option has benefits and challenges that you need to consider. For many small farms, direct marketing (selling your product directly to the customer) provides a way to increase profitability while developing valuable relationships with customers. However, direct marketing requires the development of some special skills, and it does take time away from production.
If you are just starting out it may be all that you can manage (especially in the first years) just to focus on production and quality. In that case becoming a member in a marketing cooperative may be the right choice for you. This allows you to focus on honing your production and management skills while your coop staff takes care of finding customers and nurturing those relationships on your behalf.
Likewise, if you plan to produce large quantities of product, you may find that planting, growing, harvesting or herd management takes all of your time, and there are no resources left for marketing. In that case a marketing cooperative or a wholesale operation may be the best solution. However, if you truly want to produce products that bring people pleasure and satisfaction, there is no substitute for direct marketing. Selling direct to consumers allows you to develop great communication skills, gets you immediate feedback from your customers and provides you with insight into what additional products your customers might be looking to purchase. The bonus is that direct market outlets allow you to educate consumers regarding the challenges of producing high-quality agricultural products.
What is Marketing?
Marketing encompasses all the management tasks you are responsible for from the time you harvest your product to the time a customer consumes your product and makes the decision to buy it again. Like all management activities, marketing is intricately connected to every other process on the farm, and once your business is up and running you will have precious little time to stop and consider individual activities. Your marketing plan is your opportunity to give some concentrated thought to what you sell, to whom, where and for how much. Some of the areas you’ll need to consider for your marketing plan include the following topics.
• Your Marketing Goals: How much time and money do you have available to invest in the marketing of your product? What percentage of your total income needs is this product going to supply? Is it important to you to have a relationship with your customers? Would you be happier selling many products to a few customers or selling a few products to many customers? Is it important to you that people recognize your farm label on products?
• Customer Profile: Who exactly is your customer? What are the demographics/psychographics of your target customer (i.e. age, gender, education level, income, and household size)? Why would they want your product? How much of your product will they consume in a week or month? Is your product a staple that they will buy frequently or a specialty product that they will only purchase on special occasions? Are consumption trends for your product growing or decreasing? Will you need to educate your customers on your product? (What is it? How is it used?)
• Competition: Who else is already doing what you are proposing to do? What makes your
product unique? Why will customers choose your product over other, similar products in the marketplace? [Note: Your competition is not necessarily local to you – it could be products sold on the internet, through national/international chains, etc.]
• Sales: Will you be selling wholesale or retail? Will you direct market your product (farmers’ markets, restaurants, farm stands, pick-your own operations, etc.)? Or will you entrust the marketing to someone else? Where are your customers located? Will they come to you or will you need to go to them? How many potential customers (i.e. those that fit your customer profile) live within 25 miles of where you live? 50 miles?
• Post-harvest care/Regulatory requirements: What are the regulations governing how your product is cared for? What has to be done to ensure the quality and freshness of your product? Do you have the proper washing, packaging and cooling facilities? If you are raising meat do you know if there are slaughter facilities in your area?
• Packing/Labeling: What will your product require regarding labeling/packaging? What is the shelf-life of your product? Where will you buy the right boxes, cartons, shipping supplies? Have you selected packaging that is consistent with your business/product? Will your product be sold by piece, weight or volume?
• Transportation/Distribution: How will you get your product to the point of sale? Who will be responsible for transporting your product? Does your product need any special care during transit (i.e. will it need to be kept cool? Frozen? Is it a fragile product?) How often will the product be picked up? Is there any processing required? If so, who will do the processing? How/when will you be paid for your product?
• Quality control: Who ensures that your product is well-displayed? Has customer appeal?
What happens to product that doesn’t get sold? Will you need product liability insurance?
• Pricing: What is your pricing strategy? Do you know your breakeven point? What is your payment collection schedule? What is the competition charging for a similar product? Can you make a profit at the price your competition charges? Or is your product better in some way that would justify the higher cost?
• E-Commerce: More and more, the internet is playing a role in marketing. While you might not be interested, or ready, to actually sell products online, you will most likely want to have a website that can help to educate your customers about the unique qualities of your product. At some point you may also want to explore the many social networking tools available. In the process of building and maintaining relationships with your customers, the internet is becoming an increasingly important tool that you will want to explore further.
A Special Note about Marketing and Dairy Farming
Farm gate milk prices are generally regulated by Federal Milk Marketing Orders. Most Vermont dairy farmers belong to a dairy marketing cooperative. Cooperatives are member-owned businesses which are governed by an elected board of directors. Day-to-day operations are managed by staff hired and overseen by the Board. Members wishing to join cooperatives must be approved by the board and sign a contract. Members are also required to invest in the cooperative through cash payments (member equity). When the business is profitable the members (as owners) can either share the profits or agree to reinvest the profits back into the business.
The two largest dairy coops in Vermont are St. Albans Cooperative Creamery and AgriMark (which includes the Cabot product line). Other active cooperatives in Vermont include Dairy Farmers of America (DFA), Dairylea, and National Farmers’ Organization (NFO).
If you choose not to belong to a dairy marketing cooperative, there are two other options available to you. You may choose to sell your milk to a private firm rather than belonging to a cooperative. Some of these private firms include Garelick, Crowley Foods, Monument Farms and Thomas Dairy. The Vermont Agency of Agriculture, Food and Markets maintains current lists of all cooperatives and private milk handlers licensed to do business in the state. Note: Regardless of which marketing strategy you select, have a contract in place before you get started. Not all cooperatives, or all firms, operate in all parts of the state, and sometimes companies are not in a position to take on new farms.
Finally, there are some dairy farms that are processing and selling their own milk. They might be selling bottled milk, yogurt, cheese, ice cream or some other value-added product. Because of the high startup costs associated with processing milk, it is extremely important to do a thorough job on your market research before you make an investment. Keep in mind that milk production is extremely labor intensive, leaving very little time for other activities. If you decide to start on-farm processing, realize the time demand for processing and marketing is often as demanding as milk production.
Another option open to dairy farmers is selling raw milk directly to consumers at the farm. There is a potential market, but be sure to explore your options and potential liabilities. Check with your insurance carrier for liability protection and with the Vermont Agency of Agriculture, Food, and Markets for regulations.
A Special Note about Organic Dairy Farming
Organic dairy farmers have the same basic market outlets as conventional producers. There are marketing cooperatives (i.e. CROPP), private firms (i.e. Horizon) and organic producers selling/processing their own value-added products. The additional requirement for organic producers is that they must be certified by an entity approved to oversee organic production standards (i.e. NOFA-VT). Conventionally managed cows and farmland must be transitioned over a period of 1-3 years before qualifying for organic certification. Therefore, you need to assure you have an organic market before you begin the transition process. See the Northeast Organic Farming Association of Vermont for more information.
Where to Go for Help
A final consideration in selecting the right marketing strategy for your situation has to do with what you enjoy. Some farmers/growers really like the social aspect of direct marketing. They enjoy talking with customers and other growers on a regular basis. Other farmers are perfectly happy staying on the farm and are uncomfortable with the idea of “selling.” It pays to know yourself and be honest about which jobs you like best and which jobs you dread. The following are some resources to help you.
Researching & Writing your Marketing Plan:
• UVM Extension New Farmer Project Classes (Growing Places, Building a Sustainable Business, etc.);
• Small Business Development Centers (SBDCs);
• Northeast Center for Food Entrepreneurship (NECFE);
• New England Agricultural Statistics Service (NASS-USDA);
Regulations (selling food and food products; weights and measures; labeling requirements; processing restrictions, water testing, facility standards, etc.):
• Vermont Agency of Agriculture,
• Vermont Department of Health.
Farmers’ Markets: The Vermont Agency of Agriculture maintains a list of active farmers’ markets.
For questions regarding the operating rules of a specific market, contact the market manager directly. Farmers’ markets are independent organizations, and there is considerable variation in how they operate. For more information about farmers’ markets contact NOFA-VT and the Vermont Farmers’ Market Association.
Community Supported Agriculture (CSA):
Check the VT Agency of Agriculture website for operating CSA’s in your area.
• NOFA-VT also lists information about CSA’s on their website.
• ATTRA (the National Sustainable Agriculture Information Service) has several CSA resources. Go to ATTRA's website and type "CSA" in the search bar.
Vermont Agency of Agriculture (requirements on milking facilities, handling, etc.) Cooperative Membership (Call directly)
Private handlers (Contact directly)
Farmer and Other Professional Associations:
• The North American Farmers’ Direct Marketing Association provides information on all aspects of direct marketing. It also has regional chapters and conferences.
• The Vermont Fresh Network links farmers with chefs and other market outlets.
• NOFA-VT provides technical assistance in marketing organic products.
• NODPA (Northeast Organic Dairy Producers Association)
• VT Farm Bureau (member association for all farmers).
• Vermont Sheep and Goat Association (coordinates some wool/lamb marketing activities).
• Vermont Beef Producers (coordinates some marketing and sales efforts).
Last modified July 05 2011 12:48 PM