Community Supported Agriculture (CSA) can be a profitable endeavor for the farmer and a fulfilling experience for the consumer. With national CSA day on the horizon (Friday Feb 22rd), it’s not too late to start thinking about starting a CSA or refining your CSA offering. This article will take a look at the profile of the “average” CSA operator, cover the latest trends in CSA’s, and offer strategies to attract and retain CSA customers.
As input to this article, we’ve reviewed USDA’s report Community Supported Agriculture, New Models For A Changing Market (Woods, 2017). This report is based on a national survey of close to 500 CSA managers across four regions in the country. We also reviewed two studies out of UC Davis (Galt, 2015) that look at farms offering CSA’s and the customers who are buying those CSA’s.
A shifting relationship between farm and consumer
The relationship between farmer and shareholder for community supported agriculture is transforming. When CSA’s started in the 1960’s and 70’s, the overriding concept was the community of shareholders provided a financial safety net to the farmer by pre-purchasing a share of the farmer’s output. In this relationship, the shareholder is sharing the risk alongside the farmer over the course of the farming season. Whether bountiful or lean, shareholders receive a portion of the output of the farm. However, the modern CSA relationship has shifted far more to a shareholder (customer) centric focus by providing more consistency and variety.
Neil Stauffer, General Manager for Penn’s Corner Farm Alliance in Pittsburgh, PA, noted (Woods, 2017) that CSAs have changed from an emphasis on the farmer to the consumer. “When CSAs were first around, it seems like it was more like customers saying, ‘We really believe in you, the farmer, and how can we make this work for you?’” he observed. “Now, it seems like it has shifted and the farmers are saying, ‘How can we make the CSA work better for you, the customer?’”
Recent surveys (Woods, 2017, Galt 2015) reveal that although a majority of farmers feel the shareholder is no longer sharing in the risk of the farm, the vast majority of farmers surveyed believe that CSA’s are profitable. Even more specific, CSA’s are adding to the bottom line of farms overall profitability
This evolution to customer focus is somewhat predictable, as the increased interest in local food has stimulated competition for local food dollars. The increased competition is not all bad, as noted in the study, having a critical mass of local food suppliers increases the visibility of local food and can help to further stimulate demand. In order to compete in an increasingly crowded marketplace, becoming more customer centric ultimately allows farms to cast a wider net into the community. Subsequently, farms are able to attract and retain new customer segments outside of the core CSA customer.
Profile of CSA farms (Woods, 2017)
Looking at the big picture, the average farm selling CSA’s tends to be a small farm that has been in the CSA business for a few years. These farms use CSA’s as one of a few distribution channels to sell farm goods. Interestingly, the average CSA farm is not certified organic, which is a shift from CSA’s origin. As evidence, as recently as 2001, 46% of surveyed CSA’s were certified organic. That number has dropped to 27% certified organic in 2017.
Digging into the profile a bit deeper, we find although the average number of per farm CSA shareholders are increasing (currently at 141 shareholders), the median size of farms selling CSA’s tends to be small – 60 shareholders. The data reveals there are a large number of small farms offering CSA’s, but also a few large operators that have 400 + shareholders which skews the average shareholders size upward.
Looking at length of time a farm has been offering CSA’s, these farms tend to have been selling CSA shares between 3-5 years (37%) and 10 + years (27%). The complexities of offering a successful CSA, including developing the product variety, managing the marketing and logistics, surveyed CSA operators felt that farms would benefit from a few years of experience before entering the CSA market.
A majority of farms surveyed (58%) saw CSA shares contributing about half (53%) of total farms sales, and were doing so profitably. CSA operators were generally optimistic about profits as well as future sales growth.
Other market channels that were consistently reported as contributing to total farms sales included farmer’s markets and restaurants sales. Depending on proximity to large urban areas, on-farm retail and direct sales to grocery stores were the next closest markets. Farms that were closer to urban areas sold more through on-farm retail, while those in or near small towns were more likely to sell direct to grocery stores or schools.
Top Trends in CSA’s
Farmers are experimenting with different CSA strategies with the goal of meeting the needs of consumers, while squeezing the most out of farm output and increasing the bottom line. Specific strategies include (Woods, 2017):
- Seasonal extensions outside of the core season
- Options to add value added items to CSA’s
- Multi farm collaboration
- Using technology
Each of these strategies can be somewhat intertwined. As a point of reference, farms may collaborate in order to provide shareholders with more variety (28% of those surveyed) and to meet the volume needs if an on farm product is running short (21% of those surveyed).
Additionally, filling holes in a consumer’s pantry by offering the add-ons of such as eggs, dairy, meat or value added items is another example of multi-farm collaboration. However it’s noted that too much variety can be a burden to manage for the supplier.
Technology is also enabling farms to grow faster and be more efficient. As evidence, a recent survey concluded that CSAs with an e-commerce orientation were larger and growing at a faster rate (Huntley, 2014). Specifically, CSA operators are using technology to market their offerings. These technologies enable customers to easily sign up and pay online. Technology is also helping farms to increase the efficiency of receiving orders, managing customer as well as communicating with customers. In fact 70% of older CSA’s and 64% of newer CSA’s are increasing their use of technology to sell their CSA’s online (Woods, 2017).
CSA Customer Acquisition Strategies
The number one tool for attracting new customers is a happy customer who will then tell their friends (Galt, 2015). By far this is the most effective way to grow your business.
The second most effective way to attract new customers is to have an online presence – and this trend is growing. Research shows that over 80% of consumers go online to research before purchasing products. A recent report from The Nielsen Company and Food Marketing Institute, found that 23% of American households are buying food online today. And a whopping 72% of shoppers surveyed expect to buy groceries online in the future.
The top three marketing tools for any small business are all online: e-mail marketing, social media and blogging. The good news for farmers is that each of these strategies can be a low cost way of brand building and new customer acquisition. To help navigate the online world, we’ve written a guide for how small farms can use the internet as a low cost sales channel.
The top three reasons (Galt, 2015) why consumers buy into CSA’s are to:
- Obtain high quality, fresh food
- Support alternative/organic agriculture
- Improve my health or my family’s health
Knowing these buying reasons will help you market to prospective customer, guide your CSA offering and hone your marketing messaging.
Customer retention strategies
The percentage of shareholders that sign up year after year is a good indication of how satisfied your customers are with your product. Retaining a customer is far more cost effective than having to go out and find a new customer. As evidence, according to NG Data, it can cost up to seven times more to go out and acquire a new customer than to retain an existing customer. With this in mind, benchmark your CSA retention rate against the average of 63% (Galt, 2015).
The top reasons for customer dissatisfaction with CSA’s are (Galt, 2015):
- Perceived difference in quality expectations
- Quantity and diversity issues
- Logistics – schedules impacting the ability to pick up or receive product.
Below are a few ways you can avoid these CSA shareholder grumbles and increase your customer retention:
E-newsletters are a great way to head off any surprises. These e-mail communications are effective when sent out a day or two before the scheduled pick up or delivery. First, always be educating. A little bit of education goes a long way. An e-mail that has “Here’s what you are getting and here’s what you can do with it” helps the buyer think about what they can do in a new way. One trait of CSA buyers is they like to cook. If each shareholder is getting 10 pounds of beets, possibly for the second week in a row, offer soup, salad, canning and roasting recipes. Spurring creativity on the part of the shareholder can head off a “What am I supposed to do with this?” feeling of disappointment.
Communicate early and often. In order to address perceived quality issues, set expectations. If you have wilted greens, in your weekly shareholder e-newsletter, communicate “Our greens might look a little wilty, but they are still good.” Maybe something bolted – better to explain this and offer insights as to how to use the product before the customer receives the box.
As discussed earlier in this article, consider collaborating with another farm to help supplement with different varieties of product or to complete a week’s meal plan. Can you partner with a local cheese maker to include a cheese option? If your shareholders are able to see you as a source for a majority of their food needs, then you are less likely to lose that customer to the grocery stores. Can you provide a mostly full diet offering? This is the deep end of the pool, and as noted by the USDA study, requiring experience is logistics and distribution. But if you are up for the challenge, you may be rewarded with high customer retention.
If you lose a customer, it’s likely not the end of their experimentation with CSA’s. Interestingly 80% of those who left a CSA indicated they were interested in joining another CSA (Galt, 2015). With this in mind, it’s important to maintain an e-mail list of current and past shareholders. Continued e-mail marketing will enable your business to stay top of mind. A change in your season’s offerings might spur a past share member to re-subscribe.
Good luck with this upcoming CSA season. Contact us if there is anything we can do to help make it more successful.