Everyone who eats knows that the grocery bill is climbing higher and higher, but is there an upside of inflation and rising food prices? There might be a silver lining with better opportunities for local food producers.
Over the last several years, food prices have tracked ever upwards. In 2022, food was even more expensive than in 2020 and 2021. Costs for all food categories increased between 9.5% to 10.5%, and the price of food purchased for home consumption skyrocketed by 12%. For 2023, the USDA is predicting continuing price increases somewhere between 3.5% to 5%.
Traditionally, pricing is the biggest hurdle to local-food grocery sales. When selling direct-to-consumer, producers capture the full retail value of their product. But for grocery store sales, producers must offer a wholesale pricing discount that gives the store enough resell margin to make the transaction profitable. Wholesale pricing margins vary between products but typically range from 20 % to 50% off a producer’s direct-to-consumer retail price.
Developing wholesale pricing competitive with giant international food producers while still maintaining profitability can be difficult for small producers with limited volumes. But with inflation and rising food prices, the price gap between local versus food distributed via the conventional supply chain typically shrinks, meaning new opportunities for local food producers to take a slice of the wholesale grocery market without underscoring their profitability.
Local producers may be uniquely positioned to offer a comparable price point for their product and get shelf space at the store. If you are a producer, and considering selling your product wholesale, check out our “Guide to Selling Your Farm Produce Wholesale.”
But, if you are ready to take the next step and approach a grocery store buyer, what do you need to know first?
6 Key Things to Successfully Sell Local Food to a Grocery Store
#1 Bigger Isn’t Necessarily Better
Working with large chains like Whole Foods, Krogers or Wegmans is tempting, but frequently the best opportunities for local food producers are with smaller regionally-focused grocery chains or independent grocers.
The big stores come with big supply chains and big requirements. That means they have less motivation and flexibility to work with smaller producers. In addition, they may have onerous requirements to sell to them, like specialized packaging or required food safety audits. They also typically have more frequent staff turnover, making it hard to establish a long-term relationship with the primary buyer.
Smaller chains and independent grocers typically have more flexibility and incentive to want to feature local food and local farmers. So even if your eventual goal is to sell to a large chain, working with smaller and independent grocers is an excellent way to develop best practices for grocery store sales before taking steps to go bigger.
#2 Make it Easy
Grocery store buyers are busy! If it is easy and convenient for them to buy from you, they are more likely to do so.
Communicate with them regularly and have precise and reliable order deadlines and delivery dates. Create an easy purchasing system that clearly reflects your products, availability and wholesale pricing structure.
Then, when you do deliver, learn their delivery standards and how to follow their delivery practices (where to leave your boxes, who gets the invoices, etc.).
# 3 Understand Industry Standards
Learn grocery store lingo and standards.
What is a typical case pack of romaine lettuce? Twelve heads to a box or 24? What size of box is standard for romaine lettuce? How big is a standard bunch of beets? What is a typical case pack of bunched beets? How much per package of ground beef?
If your product doesn’t meet the generally-used standards – for instance, your boxes are smaller than the usual case of romaine’ box or your heads are larger than the average standard- that may be acceptable. You just need to be able to communicate what is different about your product so your buyer clearly understands what they are purchasing.
#4 Have a Pricing Strategy
Have a solid pricing strategy before you approach a grocery store buyer. You need to set your price points for this sales outlet based on a number of factors.
How low can you go at what volume and still profit? How will grocery store sales fit into your overall pricing strategy? Is there room in your pricing if the store needs something special – like a UPC sticker on every item, or additional requirements, like higher insurance policy limits or a GAP food certification?
At the end of the day, a grocery store is a business like yours. You both need to profit, so don’t take pricing negotiations personally. Understand where you can bend and where you can’t.
For a deeper dive into creating and setting your pricing strategy, download our free marketing guide for farmers, ranchers and makers.
#5 Meet Their Standards
Understand the store’s standards and how to meet them.
Especially with fresh fruits and vegetables, understand the best harvesting, washing, processing and packaging standards for extended shelf-life.
In addition, your product should look professional at the time of delivery.
For producers that have been getting by packing into re-used and scavenged boxes to save on costs, you’ll need to invest in industry-standard packaging supplies and clear labeling.
If there is a complaint with your product, acknowledge it, issue a refund for lost sales and fix the problem in the future.
#6 Support Their Marketing
When you do make a sale, support their marketing!
Let your customers know they can now find your products in their local grocery store. Ask your buyer if you can provide point of sale materials they can display with your product. Suggest and be willing to participate in any programs they offer to feature their local food vendors, like tasting carts or food vendor days.
For more information on using social media to boost your farm sales, see our post “How Small Farms Can Leverage Social Media.”
How Can Food4All Support Your Grocery Store Sales?
Interested in learning more about how Food4All can support your grocery store sales with our easy-to-use and free online store specific for wholesale sales? Contact Food4All today for a free demo or to talk to one of our friendly staff members.