U.S. Department of Agriculture data reports that Americans consume 700 pounds of fruits and vegetables per year. There is boundless opportunity for Connecticut growers to produce fruits and vegetables as long as they can find the appropriate outlet to market their quality produce at the right price.
Although community supported agriculture (CSA), farmers markets and other direct-to-consumer sales methods can provide growers top value, the vast majority of produce is purchased at grocery and mass market outlets.
The goal of this Connecticut Farm Bureau Association (CFBA) project is to help increase the competitiveness of Connecticut-grown fruits and vegetables by increasing supply chain options to expand distribution into this market. This should also increase access to fresh, locally grown produce for Connecticut consumers.
After conducting interviews with produce managers of large grocery chains and local independent stores, Connecticut Farm Bureau has created this concise overview to assist growers who may be considering this market as an opportunity for growth.
Is wholesale to grocery store a good fit for you?
As a farm manager and business owner, you must examine your profit model and product mix to determine if selling wholesale to grocery stores is right for you.
Grocery stores generally pay wholesale market rate prices for locally grown produce. In addition, they will require that your products be sorted, graded, cleaned, packaged and delivered to their specifications.
Some smaller farms have success using grocery stores to purchase excess products. Other larger farms of greater scale have success with multi-state stores. You will need to evaluate whether this market might fit profitably into your business plan.
This relationship must be nurtured over time to establish, and paperwork may take months to complete.
Develop a relationship
When produce managers begin a new relationship with a farm they consider many factors when deciding if the farm is a good fit for their store. They may consider produce varieties, timing, delivery schedules, pricing, packaging, reliability, harvest schedules, insurance coverage, food safety processes and availability.
While there is little tolerance for less than top quality produce at retail outlets, grocery stores did not express an interest in paying more for high quality. Quality produce is expected from the top to the bottom of every box.
Grocery stores pay market rate for produce regardless of quality, provenance, size or appearance. Even high-end grocery stores expect to make their normal profit margin on locally grown produce.
Many retailers express that although consumers desire to purchase local product, they do not seem willing to pay more for it. Retailers regret that their margin on selling local product is less than on nonlocal product, which limits dollar sales volume.
Contract growing is not common. Growers need to be prepared to watch out for their own bottom line when negotiating prices.
Opportunities for farmers
- Extending the Season All produce buyers expressed an interest in products that are available earlier or later in the season.
- Custom Production Many produce buyers expressed an interest in working closely with farmers to customize produce quantity and variety so they can utilize local products that are unique and not widely available elsewhere.
- Nonproduce Items All produce buyers indicated an interest in increasing the availability of other types of Connecticut grown/processed items including bedding plants, hanging plants, honey, maple syrup, etc.
- Aggregation Aggregation is when produce is combined from several sources to fulfill an order. Buyers appreciate informal and efficient aggregation arrangements that farmers use to ensure a consistent supply. Establishing aggregation partners could open up new opportunities for medium-sized produce farms who might not produce the volume necessary to fill trucks to supply to a chain’s distribution warehouse.
Developing a relationship with a wholesale distributor
Are you prepared to harvest and deliver your produce with reliable transportation and manpower directly to a local grocery outlet? Do you have a way to market your excess produce while it’s fresh?
Establishing a positive relationship with local produce distributors can simplify a farmer’s marketing strategy, and provide a farmer with processing and packaging, but you must understand that you should be prepared to receive less for that produce to compensate for the services the distributor provides.
Many grocery stores use local distributors to source certain produce, and for smaller direct-to-store service. It should be noted, however, that the majority of product goes through retailer distribution centers, so the market for direct-to-stores sales seems limited and intermittent.
Compliance with food safety standards such as GAP certifications is becoming essential to do business with wholesale produce distributors.
To learn more, please contact CFBA at 860-768-1107.