Wholesale outlets like hospitals and school cafeterias are keen to purchase locally-grown food directly from farmers and ranchers. But to do so requires new technological solutions that overcome the traditional barriers to success in connecting local food and wholesale channels, a Food4All survey has revealed.
More than 82% of wholesale buyers that responded to a recent Food4All survey said they were either interested in buying direct from local producers or they already did buy locally-grown food but desired to increase their purchases. This echoes a growing demand for local food purchasing, predicted to reach more than $30 billion by 2023. Consumers and institutional buyers are shifting their buying habits toward locally grown food, representing a significant opportunity for regional farmers and ranchers to grab a larger share of the wholesale food market.
But why do local producers and wholesale buyers have such difficulty connecting and establishing successful sales relationships?
Food4All conducted a national survey looking at the state of wholesale local food purchasing. We are partnering with private, non-profit and institutional groups working to overcome the barriers to entry and find ways to support more robust connections between growers, processors, buyers, distributors and across the U.S. food supply.
The survey included 344 respondents from 44 states made up of producers, wholesale buyers and distributors. In addition, we conducted 22 interviews of wholesale buyers, distributors, food sales intermediaries and local food producers.
Why Sell Locally-Grown Food Wholesale?
Selling wholesale is one of many sales channels small-scale farmers, ranchers and food producers should consider pursuing.
Wholesale orders offer multiple advantages over direct marketing to consumers, improving a food producer’s sales volume and marketing efficiencies. Wholesale orders are typically much larger than direct sales, and once solid relationships are established, wholesale buyers often become reliably frequent customers. Instead of making many small sales, food producers can make fewer, larger sales by targeting the wholesale marketing channel.
Also, rather than filling up a farmer’s market booth or a farm stand with food that may or may not sell, wholesale orders are packed to order and may even be picked (harvested) to order, improving a farmer or rancher’s product management efficiency.
Wholesale sales can be easily combined with direct sales marketing for an overall marketing strategy. For instance, a farmer might sell mid-week to their wholesale accounts and bring the remainder of the weekly harvest to the local farmer’s market that weekend. Or a cattle rancher might set aside specific cuts for wholesale sales or produce a value-added product, like locally grown beef hot dogs, explicitly targeting potential wholesale outlets.
However, a farmer, rancher or food producer must thoroughly understand their entire business marketing goals and develop a strategic marketing campaign before pursuing wholesale sales channels.
For more tips on developing a local food marketing plan that works for your food market, farm or ranch business, whether selling wholesale, direct to consumers or both, download Food4All’s free marketing guide.
In addition, there are multiple barriers to establishing a successful wholesale marketing strategy, as Food4All’s survey and interviews revealed.
Top 4 Barriers to Selling Local Food Wholesale and How to Solve Them
1) Making the Right Connections
Fifty-four percent of producers ranked getting the buyer’s attention as one of their top three challenges to local wholesale sales. On the other hand, wholesale buyers indicated that they have a hard time finding farmers and ranchers to purchase directly from – their number three biggest challenge to working with local producers is finding them.
The Solution – Get in front of your audience and stay there. Join local, regional or state associations and national directories such as MarketMaker. Attend farm-to-chef events. Create a list of your target customers and institutions and call them. Find out who their food buyer is and how to contact them. Make a pitch. Even if they don’t buy immediately, be persistent, keep them on your networking list and stay in touch.
2) Delivery Logistics
Getting products delivered is also a significant barrier to wholesale sales, ranking as the first challenge for buyers and producers’ second most crucial challenge. Unlike direct marketing to consumers, which typically purchase at a market, farm stand or pick up an order, wholesale buyers usually expect delivery of their ordered product.
The Solution – Offer delivery. Institutional buyers simply are not going to go to a farmer’s market or come to your farm to pick up. Expecting them to do so is an immediate barrier to a sale. Create a delivery schedule and consider targeting particular areas to add new clients to maximize the efficiency of your delivery system. Set an order minimum based on volume or sales amount to encourage larger orders. Consider adding a delivery fee or building delivery costs into your prices to cover gas and labor. If delivering yourself isn’t an option, explore working with a local hub offering delivery services, consolidating with other producers or using a private delivery service contractor.
3) Agreeing on the Price
Agreeing on price was the third most significant challenge for producers and ranked number two for wholesale buyers; more than 43% of buyers indicated local products are too expensive. However, in our interview series, producers stated a willingness to negotiate on pricing, especially when selling directly to a large wholesale buyer like a hospital or school. This suggests that overcoming price barriers can be accomplished with better communication.
The Solution – Price your products to cover costs, but be competitive and don’t take pricing issues personally. Remember that at the end of the day, every buyer has to work within their budget, as do you. A buyer that might find one of your items far too expensive may be perfectly willing to work with something else. Ask your buyers what they usually pay and what they are willing to pay for a product superior to what they typically get. The quality of your product counts; don’t be afraid to push that advantage. If your product lasts longer, reduced food waste and kitchen labor offset a higher price.
Download Food4All’s free marketing guide for more tips on navigating the “price” issue of local food sales!
4) Inefficient Order and Product Management
More than 56% of producers surveyed still use pen and paper to take orders, and 37% use spreadsheets. Less than 11% of small-scale producers use inventory management software. A lack of order and product management processes significantly decreases efficiency, yet producers in our interviews also expressed frustration with too many e-commerce sales platforms and an inability to use a single platform to sell to both wholesale and retail customers.
The Solution – Make placing orders easy and convenient for your buyer by offering an online ordering option. Institutional food buyers are incredibly busy, and chefs often work hectic (late) hours. They need to quickly and easily access an order platform, like Food4All, to purchase what they need, pay and know items in stock. On the other side of order efficiency, make managing orders and product inventory from multiple channels simple and streamlined through an order management system like Food4All.
A Next-Gen Solution to Wholesale Food Marketing
More advanced, next-gen solutions for wholesale farm-to-table food sales are on the horizon.
Although local wholesale food sales were rising before Covid-19, the pandemic and its supply chain disruptions brought home the need for better technology to connect local ranchers, farmers and food makers with wholesale buyers.
As the survey revealed, wholesale buyers are looking for more local food producers. They need an easy way to find and transact with local farmers and ranchers. On the other hand, food producers need an efficient way to manage their orders, product and delivery options, easily attract buyers’ attention and a suitable venue for communication with their buyers to work out any issues (like pricing).
In addition, farmers and ranchers are tired of technology overload and signing up on multiple websites or marketing through many different buying platforms. They want one platform for all their e-commerce sales, whether selling to a wholesale buyer or directly to a consumer, which is precisely the system Food4All is committed to perfecting.
Interested in learning more about how you can use Food4All today to support wholesale sales? Contact us for more information.