Wondering whether to try selling your farm produce wholesale? Selling wholesale is a natural progression for many small farmers as a farm business matures. Plus, the aftermath of the Covid-19 pandemic has created new opportunities for local farmers to expand into wholesale channels.
Consumers are putting the squeeze on grocery outlets, demanding healthy, locally-sourced foods. A fall 2020 survey by State of Local found that consumers are overwhelmingly (93% of them) disappointed that their grocers stock food from industrial giants rather than local producers. Though pre-pandemic wholesale outlets contracted sharply during the chaos of the pandemic, consumers also shifted their buying habits away from grocery chains and toward local farmers and growers. According to Michigan State University, direct farm marketers saw a sales increase of 30 to 50% in 2020 over 2019 sales.
So, what do farms need to do to sell their produce wholesale successfully? They need to:
- Understand the different types of wholesale channels and what drives wholesale buyers seeking ‘local’ food.
- Invest in branding their product or maintaining their “local food” story through the food chain.
- Find and pick the proper wholesale outlet for their farm.
- Price their products to compete while still turning a profit.
- Pack and deliver their farm products to meet accepted wholesale standards.
Wholesale Channels for Locally Grown Food
Locally grown food can be sold through a variety of wholesale channels.
They might include selling directly to a buyer at a near-by grocery store or selling to chefs. Another option is selling via a farm cooperative or a distributor. Cooperatives deliver products from many different farms to wholesale buyers. Regional food distributors typically pick up from farms and warehouse food for delivery to wholesale accounts.
No matter which channel a farm sells through, the main difference between wholesale and direct sales markets is wholesale inserts an intermediary between the farmer growing food and the consumer who eventually buys it. Customers seeking “locally produced” products can be helped or hindered by an intermediary, depending on the amount of transparency and the continuity of branding of products through food chain.
Should You Brand Your Product for Wholesale Sales?
Identifying a product across the food chain as “locally produced” is where branding becomes essential.
Consumer demand drives wholesale buyer’s interests. Make it easy for the wholesale buyer to show the consumer the product was grown locally. If not, the market advantage of being “local food” is lost.
A bag of onions branded with a farm’s logo is a more valuable product on a grocery store shelf than a generic bag of onions that could have come from anywhere. A chef or restaurant may not care what the bag looks like, but they will want to know who the farm was that grew their onions and know that farm’s story, so they can relay that to their customers through the menu or other means.
Either way, it requires investment on the farmer’s end in branding, packaging and telling their farm story — aka marketing. Grocery stores may also appreciate branded labels printed with the farm’s logo. Other good options include photos of the farm or farm flyers placed by the product.
Finding the Right Wholesale Sales Outlets for Your Farm
The first thing farms should consider when thinking about potential wholesale outlets is whether they can deliver and how often.
Farms that don’t have an appropriate (refrigerated) delivery vehicle or the time to make deliveries to wholesale accounts may not be able to establish direct relationships with many wholesale buyers, like a local grocery store or a restaurant. Those establishments require deliveries at least twice a week, if not more.
In that case, farmers should pursue working with local distributors or a regional sales cooperative.
Distributors may be willing to come directly to a farm to pick up — although generally speaking, farms have to be producing a large volume of product to make it worth a distributor’s while to stop. If a distributor is already in a specific region picking up regularly, it is often easier to develop a relationship with them. Alternatively, some distributors may request that the farm drop products at the distributor’s warehouse on a specific schedule.
Sales cooperatives typically consolidate products from many small farms at a regionally located facility. They can work as a good “middle ground” for a direct market farmer without a refrigerated delivery vehicle or the time to make many deliveries. Sales cooperatives typically have a refrigerated warehouse facility, provide delivery services and a sales platform that attracts wholesale buyers.
A sales cooperative’s disadvantage is that farms may be competing with many other farmers selling similar products. Plus, there is typically an additional charge that the cooperative takes for their services.
How to Price Your Farm Products for Wholesale Sales
Direct market farmers often get discouraged about the discrepancy between wholesale (or farmgate) prices versus retail prices of the same product. It can feel like everyone is making money except the farmer!
This may be true if a farmer doesn’t price their products to reflect their costs. But remember, a single sizeable wholesale delivery, even at significantly discounted prices, could equal more profit than many days of sales at a local farmer’s market. Volume sales offer efficiencies.
The first thing a farmer needs to know before they start pricing for wholesale is their products’ cost of goods sold (COGS). Otherwise, farmers risk selling the product at a price that doesn’t cover their costs, or miss out on a wholesale sale because they priced their product far above their expenses.
Once a farmer has a solid idea of their COGS, they should get an idea of what similar products are selling at wholesale in their regional markets. There are several ways to gather this information. Check the local port of entries for listed prices. Request prices from distributors (remember this will show the price distributors are selling to a grocery store, but not the price they are buying that product from farmers). Or, ask a potential wholesale customer what prices are acceptable to them.
Keep in mind, locally-grown product usually has a higher perceived value than non-local products. Organic or other certifications can increase the product value as well.
Package and Deliver Your Farm Product to Accepted Wholesale Standards
Farms need to pack and deliver their products by accepted industry wholesale standards. Become familiar with the accepted “case pack” for products and how it is typically measured.
A case pack generally reflects how many units are in a box. So, for instance, romaine lettuce has a case pack of 24 heads. Instead of selling by unit, the farmer requires a minimum purchase of 24 heads of romaine, which then creates a case pack. The romaine case pack would sell for $22, which comes to 92 cents a head. Other products, such as potatoes, may sell by weight — a ten-pound bag of potatoes, for instance.
Also, farmers should understand grading in products. Potatoes and onions are usually graded by size. Larger ones are cheaper per pound. It is common to see products graded by quality — a “premium” onion versus a standard.
Quality, uniform boxes are important for wholesale deliveries. Selling wholesale may require the purchase of new boxes and packaging materials. While it is not uncommon for small farmers to start their business recycling used boxes for local direct-to-consumer deliveries, wholesale outlets may expect a uniform, not re-used, box for their deliveries.
There are many other things to consider when it comes to selling your farm produce wholesale. Do you have adequate liability insurance? What is your method for creating sales sheets and corresponding with buyers? Can you ensure reliability in your products as far as quality and availability? For more information and a vast list of resources, check out this handy resource page from the UC Davis Sustainable Agriculture Research and Education Program.
Levelling up from direct marketing to wholesale sales can be a challenge in organization, quality control, and requires an investment in marketing and branding. However, for many small farmers, moving into wholesale channels can make the difference between a part-time “hobby” and a viable farm business.
Food4All is a free, online platform built specifically for local food farmers, farmer markets and anyone selling farm and ranch goods, whether it’s fresh food, value-added items, or CSA’s. We offer free tools, technologies and a simple-to-use platform that will bring customers (new and old) to your online farm store and easily collate orders and get you paid.
For more information, check out our website at www.food4all.com.