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  A Publication of UVM Extension's Vermont Vegetable and Berry Program

Selling Fresh Produce to Institutions

by Vern Grubinger
Vegetable and Berry Specialist
University of Vermont Extension

Interest in local food is booming, for a variety of reasons--from local economic benefits to the freshness and quality of local food. For fruit and vegetables growers, local markets can reduce transportation costs and may also lead to positive market relationships that can help maintain fair prices and thus farm profitability.

Direct markets are booming. Selling produce directly to the consumer allows buyers and sellers to communicate directly, leading to customer loyalty. It builds awareness about the importance of local food production. It helps keep farms, especially smaller ones, in business. And the good news is that direct sales at roadside stands, farmers’ markets, and community supported agriculture (CSA) have all increased in recent years. The U.S. Census of Agriculture reported sales of agricultural products directly to consumers went up by 120% from 1997 to 2007, compared to an increase of 51% in total agricultural sales. In the Northeast, direct market sales went from $101 million in 1997 to $213 million in 2007. Nationwide, vegetables account for 28% of all direct market sales, even though only 13% of farms grow vegetables.

Beyond direct markets. While direct sales offer many benefits, they are not a silver bullet. For one thing, direct market sales account for just 3% of all agricultural sales, even with the recent increase. And while there’s potential for more growth, direct markets have their limit. I don’t think we are there yet in most locations, but at some point, demand gets saturated and new vendors simply take markets from other growers. In addition, the vast majority of produce that consumers buy still comes through wholesale channels – to supermarkets, restaurants, schools, senior centers, etc.  

In order to keep building the market for locally-grown produce, growers will need to sell more to local businesses and institutions, as well as directly to consumers. Selling fruits and vegetables to local foodservice and institutional markets can be especially beneficial for larger growers that have been ‘price takers’ in commodity markets that compete with produce from all over the western hemisphere.  

Marketing strategies. There are (at least) four different strategies for improving connections to local institutional buyers; they require different levels of investment of both time and money (management, transportation, recordkeeping, etc.). You’ll have to decide which make sense for your farm and your finances.  

1.  You could work with a local or regional produce distributor that already has the necessary infrastructure and relationships with local institutional buyers. This is the lowest cost approach but also leaves you one-step removed from a direct connection to the buyer. 

2. If there are one or two larger institutions in your area, it may be worth approaching them individually to see if you can get a toe in the door by marketing a relatively large volume of a few items. 

3. If there are multiple institutions in your area as well as multiple wholesale growers, it may be feasible to develop a marketing network that aggregates sufficient supply and demand to meet the needs of both parties while covering the cost of ordering, delivery, invoicing, etc. 

4. If you are a rural farmer near a small rural institution it might be worth developing a diversified supply for that customer, like a wholesale CSA.
As you compare these options see if you can work with local food system organizations in your area to assess the market potential within your delivery range. That could be Extension, a local college food studies program, a non-profit food group, or a community economic development agency. Once you decide which way to go, there are some key actions that can help you succeed. These include: telling your farm’s story; identifying a set of products that are most suitable for you to supply; understanding the policies and procedures of the buyer; negotiating pricing; assisting with product promotion; explaining the steps you’ve taken to minimize food safety risks; and setting up ongoing communication.

Telling your story.  A lot of people want to know something about where their food comes from, who grew it, and how. Providing this information helps create trust in you and your products. Create a document that shares the facts about your farm, this could be a simple fact sheet or a glossy brochure. Highlight the following: your farm’s mission (why you do what you do); the history of your farm and length of time your family has been in the community; production practices used on the farm (IPM, organic, ecological, low-spray or whatever you can honestly say about your commitment to stewardship). If possible, include pictures of your family, your facilities, and your products. Describe any special connections your farm has to the community (service on local boards and committees, awards received, festivals you hold).

Identify products you can supply. Have a list of all the crops you grow, and when they’re available over the growing season – and beyond. It may surprise you that institutional buyers are often not aware that many crops are held in storage, or produced using season extension, so that they can be purchased locally even when they are ‘out of season.’  A calendar of availability helps overcome this misunderstanding. Working with other local farms to aggregate product can increase the number of crops offered, their volume and time of availability.

Policies and procedures. Be prepared to ask questions to get the specific information you need to make a decision. What are the requirements to be a vendor to the institution in terms of the application process, insurance coverage, etc?  How will orders be given to you – by phone, FAX, or online? If you can’t fill an order how soon must you tell the buyer, and what type of product substitution is allowed? Are there particular product qualities such as size or color of certain crops that are preferred? What types of packing containers are required for different products?
Discuss the delivery and payment arrangements.  When and where should orders be delivered?  How often are deliveries needed? Where should invoices be sent and how long will it take for payments to be made?

Negotiate pricing. Some buyers will not be receptive to this conversation, but others, especially those looking to increase their purchasing of local foods, may be amenable to agreeing on prices, or at least ranges of prices, ahead of time. It can help this discussion if you know your cost of production for different crops, so that the prices you offer are based on a reasonable expectation of profit, and you can explain that. If you can offer a quality advantage over anonymous wholesale crops, that may help you get a better price, too. Do you emphasize varieties with great flavor? Are you harvesting daily and handling carefully to assure peak freshness?  If so, be sure to explain that.

Assist with product promotion. If an institution is interested in local food, it’s often because they want to address the interest of their customers. Help them tell their customers that they are doing so. If appropriate, provide point-of-purchase materials with your farm name and location; these may be cards, posters, special product labels or containers, or other display enhancements. If you have recipes to help consumers use your product, offer them to the buyer. Identify and work with people within the institution that have the interest and ability to promote local food, such as wellness, nutrition, or farm to school coordinators and committees.

Explain your food safety plan. Food safety is on a lot of buyers’ minds these days, especially with the requirement by some supermarket chains that their growers comply with GAPs (Good Agricultural Practices) which means they develop and implement a food safety plan and pass an annual audit. If you are GAPs certified, let your buyers know. If not, you should still have a food safety plan that addresses the key issues covered by GAPs (For a summary of these issues see  http://www.uvm.edu/vtvegandberry/GAPS%20short%20checklist.pdf ).  This is something that all farms, whatever their markets, will probably need to have in the near future, as consumer awareness of the food safety issue grows, along with regulations and market requirements.

In a nutshell, your food safety plan should describe what your farm does to minimize risk by: training employees on sanitation, testing wash water and irrigation water, proper management of manure, wildlife control efforts, careful produce handling, proper storage conditions, equipment cleanliness, and good recordkeeping.

Keep communications flowing. Ask for feedback and listen carefully to comments from your institutional buyers. Have your products been of satisfactory and consistent quality?  Are there particular crops or varieties that they were especially pleased with? Displeased?  Set up a time to meet during the off-season to review sales information and plan for the coming year, hopefully at a higher volume of sales.

Much of the information presented here comes from Selling to Institutions: An Iowa Farmer’s Guide http://www.law.drake.edu/clinicsCenters/agLaw/docs/agPublications-selling.pdf

Published: December 2010. Revised April 2015.
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