Are you a farmer wondering how to sell produce wholesale? It can be tricky to sort out insurance, packaging, transport, and breaking into grocery and distributor markets. In this article we hear from three experienced farmers on the subject of selling farm products wholesale.
In spring 2022, the Agriculture Business Advisor program, funded by Columbia Basin Trust and administered by Community Futures, offered a webinar on wholesaling featuring a panel of three farmers and business owners and operators from the region.
The panel discussion was facilitated by Nyree Marsh, the Agriculture & Food Processor Advisor, who provides free, one-to-one, confidential business advisement to agricultural businesses, food producers, and food processing businesses in the Columbia Basin region. Contact email@example.com for any questions about this support.
Read on to learn some of their tips and tricks for getting into the wholesale food market and scaling up your operation!
- Insurance for Selling Wholesale
- Selling to Restaurants
- Delivery and Transport
- Scaling Up
- Selling Meat Wholesale
Matt Carr operates Linden Lane Farms in Krestova, operating a nursery, market garden and orchard on over 6 acres with 10 employees and counting.
Danny Turner operates Just-a-mere Farm in Creston and sells his local fruit products through wholesale markets from local to national levels.
Many grocers will need products to be packaged, so packaging is a big point of discussion when heading into the wholesale market. Matt explains how, taking cucumber as an example, he saves 40 hours in labour using bags, rather than flats with plastic, for snack-size cukes and that taking the time to plastic wrap larger English cukes for retail increases their shelf life by 12-14 days. He uses plastic because sustainable plastic is too expensive for the scale of 1000 cukes per week and because there’s no current option for small scale producers, though he’s always on the lookout for new technologies and products to reduce plastics when and where possible.
Danny’s consideration for his packaging involves how the cardboard is processed, volume purchasing, shelf life and storage. He stresses how important it is to make sure you know what you want before you purchase. In his case, he uses two boxes – a domestic box and export box – and has two consumers – retail managers and end consumers – requiring two types of packaging.
He speaks to the importance of full transparency when opening new accounts or contemplating changing packaging, with one year of notice before shipping the product. He works with the buyer before shipping so that there are no surprises when the product arrives, for example, he sends artwork and there is an initial and sign-off before shipping the product, especially when freighted. It is crucial that the buyer knows what to expect.
Miche needs packaging for her microgreen business, which is busier in winter in the West Kootenays. When talking about veggie farming, it’s way cheaper to use plastic bags but microgreens need a harder clamshell and quality is first and foremost. Miche comments on how many hands there are between the customer and the farmer in the wholesale model and more opportunity for the quality of the product to change, especially with sensitive products like microgreens.
Miche orders 300-500 clamshells through Marinos Wholesale in Trail at a time and their labels are ordered online in the quantity of 50,000 at a time. She mentions that through BuyBC that it’s free to use their logo, which increases product recognition, as they do lots of promotion. You can also apply to use the organic certification checkmark if certified and local logos for groups like Kootenay Organic Growers Society with your associated number on the packaging.
INSURANCE FOR SELLING WHOLESALE
Insurance is an ever-increasing challenge for farmers as prices increase and insurers struggle to keep up with changing needs and times. Danny talks about how he needs $5 million in product liability to sell to big retail chains at the national level, that it’s not cheap. For selling to chains like Loblaws, for example, he needs to have a plan to take on significant additional insurance costs. Insurance is important because once the product leaves the chain of custody and goes into the supply chain, though you’re not responsible for things done by others, you need that insurance. You need to crunch the numbers to know what you need to hit the threshold of volume and you need a business case in each account to make sense to bring insurance to the next level.
Matt leases land and speaks to the struggle to get insurance. He spoke with 3 or 4 different companies to broker insurance. It can take three hours to recover paperwork when there is a recall, especially when someone gets sick. He comments on the “salad mix stigma” and the need for food safety record keeping and Standard Operating Procedures to be solid, with a quick turnaround time for recalls, which he practices every year. Nyree expanded upon this by mentioning Traceability Programs, which can often offer support to set up for necessary recalls, insurance etc.
SELLING TO RESTAURANTS
The question of selling to restaurants as a wholesale channel brings up mixed reactions from farmers, accompanied by different strategies. Miche offers tiered pricing, as chefs don’t order wholesale quantities, with two price points. The bulk price offered to chefs is priced above wholesale. She enjoys working with chefs because they like to work with seasonal products and will take excess so they create a fresh list for chefs every Monday morning. Both Miche and Matt have experienced restaurants naming dishes or claiming they have their farms’ ingredients and after the first order the chef is sourcing from a food distributor but claiming it’s local.
Matt also finds that chefs’ demands aren’t viable; he appreciates bulk orders but with seasonal chefs it’s too inconsistent and potentially high risk when it comes to Net30 payment, menu changes and transparency. Instead of focusing on 100 crops for a chef, he has 10 items for wholesale grown in large quantities in the field and a few fun things brought to market that chefs will like. He invites them to the market to buy directly from there, as the administrative side for direct sales is too challenging.
The farmers have worked around the challenges of working directly with restaurants. Danny won’t allow a chef to say his produce is featured on their menu unless there is a standing order to back it up, for example. Matt has been able to negotiate his payments to a Net14 system, keeping a credit card on file. Cash on Delivery for the first 90 days for new clients was also mentioned.
DELIVERIES AND TRANSPORT
Panel facilitator Nyree Marsh points out that there aren’t a lot of great alternatives for delivery in the Kootenays and in many rural regions in BC and beyond. As a result, farmers have to be innovative and collaborative. One of the biggest areas of discussion for many businesses in rural areas is delivery and transport.
Danny owns two 5 tonne trucks that he only operates about 2 months per year when running to depots. The company uses Clark Transport to get to the coast but that still requires transporting the product to Castlegar and over a mountain pass or ferry. Clark transports by a per pallet price and only ships pallets but is currently not opening new accounts as they are too busy.
Regionally, Kootenay Meadows also ships by the case or unit and can be contacted directly for inquiries and the new Kootenay Farms Regional Food Hub in Creston, part of the BC Food Hub Network, will eventually provide a depot in Creston. A hack that Danny has found for producers working with bigger customers with freight accounts is that you can get the customer to book the freight and take it off the invoice.
Matt has used LTL companies such as Overland West and VanKam, but prefers to have more control by using his own vehicles whenever possible to avoid damage and the extra admin headaches of claim processes. There has been a $100-200 increase per pallet in last the six months with some companies. With a growing population in the Kootenays, the business is looking to going out to more remote areas and wants to control this delivery as much as possible.
Miche also does all their own deliveries. She finds that costs are going through the roof regardless of quantity and things will cost the same amount as filling a whole pallet. She has found that unless you fill a pallet of product, it’s almost not worth it since it costs hundreds of dollars to ship; it’s not feasible or sustainable and it’s logistically complex, she says. Miche has found that carpooling products is a smart idea. Products from Creston come over the pass to the Rossland store in one trip.
SCALING UP TO WHOLESALE
Scaling up to wholesale requires knowing and using past sales data and leveraging current accounts for growth. Danny used to do more mixed farming, but when he focused on commodities and did a margin analysis and channel analysis (wholesale, Farmers Markets, restaurants), he found that berries in the wholesale market delivered the best return. When he looked at channels, he found that he would lose money at Farmers’ Markets, especially when weather is extreme (too rainy, too smoky) and he would need to get a return by getting his product out of the local market.
Danny started to build relationships with bigger stores and used those accounts to leverage larger accounts in bigger cities like Calgary; buyers would talk to Danny once he could show them that he was also selling at the Coop, Ferraros, etc. and turning this much per week. The bigger stores started to talk to him because he presented sales data that they believed and leveraged local sales to go regionally, provincially and nationally. He was eventually picked up by ORGANICS and is now in every grocery store in Western Canada.
Matt now finds himself at a similar crossroads as he looks at what to keep doing and what to drop. When looking at profit in relation to the time it takes to go to Farmers’ Markets, he has started to look at products that bring in the most revenue and compare those to secondary channels, culling 5-10 crops per year based on sales figures.
Danny’s key learning is that producers should take time to do the math and have a plan. His strategy for expansion and finding new markets is all math driven and he has never expanded production until knowing they have a volume committed, because of selling a highly perishable product. Danny is vocally against the motto “grow first, sell second”.
Before moving into wholesale channels, Matt solely focused on Farmers’ Markets for four years, providing him a great introduction to what customers want. For example, Matt moved into wholesale greenhouse cucumber production to fill a gap in the market left by Mad Dog Farms, which used to supply cucumbers to the Coop but isn’t around anymore. Matt has figured out his farm’s cost of production for 100+ crops, which is updated yearly. He built charts before going into wholesale – allowing him to know what he needs to make in relation to input prices, materials, time, goals, expectations with employees etc. With only 5-10% of local produce needs fulfilled through local production, there is much opportunity in Matt’s eyes.
Danny has changed pricing approaches when changing from local to international clients; when half of the selling price goes to the retailer, you won’t find many customers who can grow with you. Matt looks at how he can decrease the farm’s cost of production. For example, if he can’t change transport costs, what other reductions can be made?
Danny provides the example of raspberries; he was unable to produce them at a price that would fit in a viable cost breakdown. Direct labour is the biggest fixed cost that fluctuates and that’s a big part of it. Another example are plums, which were dropped since the reality isn’t that “next year you’ll grow it for less”. For raspberries, it was about productivity in that they need crops that can support transport and that can be harvested enough per hour to make it work financially.
Danny will have a truck going to Invermere and then to the West Kootenay three times per week with a depot partner at the junction to act as a depot and has facilities. Columbia Valley Freight offers transport of frozen pallets, since their license doesn’t include fresh produce, as HACCP handling for fresh products is higher than for frozen.
When negotiating shelf pricing with wholesale clients, you have to know your comparables. Danny explains how he knows the Manufacturer’s Suggested Retail Price for comparables and has done work on the margin analysis to make an offer with 35-40 points of margin. If it’s over the comparable, you’d better have a reason and “local” isn’t good enough.
Miche needs to know the dollar amount per unit to make it worth it from a buyer’s perspective. Miche is a farmer herself and now that she is also buying from farmers, she loves when farmers come with a product list and know exactly what they need to charge. She says she is happy to pay them what they tell her that she should be paying them; the bottom line is that she wants to support them as farmers and understand what their needs are and be proud and confident about what they’re charging.
SELLING MEAT WHOLESALE
For meat producers there are a few big hurdles to get into wholesale. For example, insurance is a big thing that can require 2 million in liability insurance. With competition from Alberta or the coast, it is difficult to hit the right price point with the wholesale meat and poultry market in the Kootenays. It’s a niche – it’s not for everybody but there are people who want local products. Getting into wholesale poultry is prohibitive if you’re paying for processing elsewhere and don’t have your own facility. Wholesale viability comes down to how inputs in your product are controlled and finding a balancing point. Everyone is different and no two growers are the same, says a local meat producer from Creston.
Matt has been trying to crunch numbers in this regard. He expresses how if you don’t have access to hay, or a train for grain, you’re not able to work into a margin. Wholesale meat doesn’t make sense; even at a scale of 15 it doesn’t make sense when having to bring in hay from everywhere else.
Miche’s collective offers meat products from three farms and makes virtually nothing off the meat products but also can’t keep their freezers stocked. She has found that almost no one buys just meat, they also buy eggs, seeds, carrots, soap, herbs – the meat gets people in the store! The value is not from the profit but in the offer to the customer who wants other stuff too.
Miche will buy an entire lamb from a meat farmer and take everything, not just certain cuts, and market the whole animal to their customers. Another way to support meat farmers is to look for buyers and retailers open to buying the whole animal, as profit margins are so small. Miche has filled a niche in their community since there is no local meat at the local grocers since the relationships don’t work. The store is still successful even when meat sales profits are low. Danny knows their retailers need 30-40% profit and only want bacon and tenderloin.
On a closing note, the farmers were asked how they market their products differently in a wholesale environment. Matt uses local comparables to keep expanding and sees an increasing demand from other grocers when they see his farm selling in other local stores. Comparables are driving expansion. Matt asks grocers how much product is moving and how much the selling price is. He says it’s important to be realistic – stores are there to serve their end-use customers, which is where social media can come in, while consumer led purchasing can help, with customers bringing in requests to grocers for specific local product.
Danny finds that social media is not the way to access wholesale buyers. He sends sample packs and meets in-person and comments that there’s “nothing worse for a grocery buyer than to get unsolicited emails”. Miche brings their samples to the buyers and does not come by at busy times. While they get free samples, they also get tips on product use, what they can order, quantities. It’s important to come to a wholesaler face-to-face.
Looking for more? Check out our accompanying article, Beyond the Market: Selling to Retailers.
Stock photos from burst.shopify.com.